NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-2668-14T3

OCWEN LOAN SERVICES, LLC,

Plaintiff-Respondent,

v.

MARLA WUEBBENS QUINN and

THOMAS QUINN,

Defendants,

and

LOUISA WUEBBENS and

DAVID WUEBBENS,

Defendants-Appellants.

Argued October 6, 2016 – Decided

Before Judges Fuentes, Carroll, and Gooden 

Brown.

On appeal from the Superior Court of New 

Jersey, Chancery Division, Passaic County, 

Docket No. F-27321-09.

Richard A. Herman argued the cause for 

appellants.

Rajan Patel argued the cause for respondent 

(Law Office of Rajan Patel and Blank Rome LLP, 

attorneys; Mr. Patel, on the brief).

October 24, 2016

APPROVED FOR PUBLICATION

JULY 10, 2017

APPELLATE DIVISION
2 A-2668-14T3

The opinion of the court was delivered by

CARROLL, J.A.D.

 Defendants Louisa Wuebbens and David Wuebbens appeal from 

companion orders entered by the Chancery Division on January 5, 

2015, granting partial summary judgment to plaintiff Ocwen Loan 

Servicing, LLC,1 and denying defendants' motion for summary 

judgment. Applying equitable principles recognized by this court 

in Sovereign Bank v. Gillis, 432 N.J. Super. 36 (App. Div. 2013), 

Judge Margaret Mary McVeigh granted plaintiff's mortgage a lien 

priority over defendants' life estates in the mortgaged property. 

We affirm both orders, substantially for the reasons articulated 

by Judge McVeigh in her well-reasoned written opinion of January 

5, 2015. 

 The essential facts are undisputed. By deed dated November 

12, 2004, defendants conveyed their residential property in Little 

Falls to their daughter, Marla Wuebbens Quinn. Defendants retained 

a life estate in the property, and agreed to remain responsible 

for the maintenance and upkeep of the property, to pay all taxes 

assessed upon the property, and to maintain adequate insurance. 

 On December 2, 2005, Marla Wuebbens Quinn, her husband, Thomas 

Francis Quinn, and defendants executed a $260,000 mortgage on the 

 

1 Ocwen Loan Servicing, LLC is at times alternatively referred to 

as Ocwen Loan Services, LLC in some of the pleadings. 
3 A-2668-14T3

property in favor of IndyMac Bank, F.S.B. (the 2005 mortgage). 

The mortgage loan had a thirty-year term through December 2035, 

with an adjustable interest rate initially set at 1.000% and a 

maximum cap not to exceed 9.700%. The mortgage further provided 

that, because the borrowers were initially only making limited 

monthly payments, the addition of unpaid interest could increase 

the principal balance to 110% of the $260,000 loan amount, or 

$286,000. 

 On September 21, 2007, Marla Wuebbens Quinn refinanced the 

existing mortgage loan by executing a $380,000 note and mortgage 

in favor of IndyMac (the 2007 mortgage). Plaintiff alleges, and 

defendants do not dispute, that the title commitment obtained by 

IndyMac did not disclose the recorded life estates held by 

defendants. Consequently, the title commitment did not require 

defendants to execute the 2007 mortgage, and they did not do so. 

The new mortgage loan had a thirty-year term, through October 

2037, and provided for a fixed annual interest rate of 6.625%. 

 Indymac's title commitment did reveal the existence of two 

open mortgages encumbering the property: its own 2005 mortgage, 

and a $60,000 second mortgage executed by the Quinns in 2006 in 

favor of another lender. Both mortgages were satisfied out of the 

proceeds of the 2007 mortgage loan, with Indymac receiving 

$265,269.45 to satisfy the 2005 mortgage, and the second lender 
4 A-2668-14T3

receiving $57,305.59 to discharge its mortgage. As a result, the 

2007 mortgage to Indymac, signed only by Marla Wuebbens Quinn and 

not by defendants, became the sole mortgage lien on the property.

 In May 2009, IndyMac filed a foreclosure action in the 

Chancery Division against the Quinns on the defaulted 2007 

mortgage. Subsequent amendments to the complaint by IndyMac's 

assignees added defendants as parties to the action and, among 

other things, sought to equitably subrogate defendants' life 

estate interests in the property to plaintiff's mortgage. 

 On cross-motions for summary judgment, plaintiff sought an 

adjudication that defendants' life estates in the property were 

subject and subordinate to the lien of plaintiff's 2007 mortgage, 

plus taxes and insurance advanced by plaintiff and its predecessors 

while the loan was in default. In turn, defendants sought 

dismissal of the foreclosure complaint against them on the grounds 

that they did not sign the 2007 mortgage nor pledge their life 

estates in connection with the 2007 loan refinancing. 

 Applying the "equitable principles of Gillis" and the 

principles of replacement and modification recognized in the 

Restatement (Third) of Property – Mortgages (1997) ("the Third 

Restatement"), Judge McVeigh granted plaintiff's motion and denied 

defendants' motion. Specifically, the judge permitted plaintiff 

to step into the shoes of its prior mortgage which its own funds 
5 A-2668-14T3

satisfied. However, the judge "capped" the amount of plaintiff's 

priority at $260,000, and ruled that "[t]o the extent that the 

[2007] refinance exceeds the value of the [2005] mortgage, such a 

portion of the refinance does not maintain priority" over 

defendants' life estates. 

 Judge McVeigh rejected defendants' argument that a life 

estate is a prior property interest that is not subject to 

principles of equitable subrogation. The judge reasoned: 

 A life estate has recognizable value.

See U.S.C.A. §1396p(c)(1)(J) (referring to the 

purchase of a life estate as an asset). The 

same equitable princip[les] that allow one 

mortgage to take the place of another in 

priority are applicable when deciding priority 

between a life estate and the mortgage. Just 

as equity is concerned with the prejudice to 

the lenders of mortgages, here too we look at 

the prejudice to the parties. 

 [Defendants] signed a mortgage in the 

amount of $260,000 as possessors of a life 

estate. While [defendants] may have signed 

the mortgage as an act of kindness and love 

to their daughter, the fact remains 

[defendants] were parties to the 2005 mortgage 

and thus subjected their life estate to this 

foreclosure action. This [c]ourt sees no 

procedural or substantive defect which would 

challenge the validity of the 2005 mortgage. 

 At the time Marla Wuebbens Quinn signed 

the refinance with IndyMac, $265,269.45 was 

used to pay down the original $260,000 

mortgage. [Defendants] are not prejudiced by 

having the refinanced mortgage take the place 

of the original mortgage, as they acknowledged 

that note and mortgage. Enforcing the 
6 A-2668-14T3

refinanced mortgage against [defendants] puts 

them in the same position they were in as 

signers of the original mortgage. The life 

estates of [defendants] are subject to the 

refinance because of their participation in 

the signing of the original mortgage. 

 Additionally, the judge determined that defendants' life 

estates in the property were subject and subordinate to an 

additional $43,019.85 in taxes and insurance advanced by the 

various lenders in accordance with the terms of the mortgage 

documents. This appeal followed. 

 Our scope of review is limited. Decisions as to the 

application of an equitable doctrine are left to the sound 

discretion of the trial judge, and we will not substitute our 

judgment for that of the trial judge in the absence of a clear 

abuse of discretion. Kurzke v. Nissan Motor Corp. in U.S.A., 164 

N.J. 159, 165 (2000). 

 On appeal, defendants argue that the trial court erred in 

subordinating their life estates to plaintiff's mortgage lien, 

thus allowing for the foreclosure of their life estates. 

Alternatively, they argue that the trial court erred in not 

conducting a hearing on the validity of the 2005 mortgage. We 

disagree. We have considered defendants' arguments and find them 

without merit. R. 2:11-3(e)(1)(E). We affirm substantially for 
7 A-2668-14T3

the reasons expressed in Judge McVeigh's cogent written opinion. 

We add the following comments. 

 Under the doctrine of equitable subrogation, "[a] refinancing 

lender whose security turns out to be defective is subrogated by 

equitable assignment 'to the position of the lender whose lien is 

discharged by the proceeds of the later loan, there being no 

prejudice to or justified reliance by a party in adverse 

interest.'" Equity Sav. and Loan Ass'n v. Chicago Title Ins. Co., 

190 N.J. Super. 340, 342 (App. Div. 1983) (quoting Kaplan v. 

Walker, 164 N.J. Super. 130, 138 (App. Div. 1978)). Equitable 

subrogation is a remedy "'highly favored in the law.'" First Fid. 

Bank, Nat. Ass'n, S. v. Travelers Mortg. Servs., Inc., 300 N.J. 

Super. 559, 564 (App. Div. 1997) (internal citations omitted). As 

it is an equitable doctrine, it is applied only in the exercise 

of the court's equitable discretion. Metrobank for Sav., FSB v. 

Nat'l Cmty. Bank, 262 N.J. Super. 133, 144 (App. Div. 1993). 

Hence, "[e]quitable subrogation may only be imposed 'if the cause 

is just and enforcement is consonant with right and justice.'"

Feigenbaum v. Guaracini, 402 N.J. Super. 7, 20 (App. Div. 2008) 

(quoting Standard Acc. Ins. Co. v. Pellechia, 15 N.J. 162, 173 

(1954)). 

 In the context of mortgages, we have previously described the 

equitable subrogation doctrine as follows: 
8 A-2668-14T3

Generally, a new mortgage is subrogated to the 

priority rights of an old mortgage by either 

agreement or assignment. In the absence of 

such an agreement or assignment, a mortgagee 

who accepts a mortgage whose proceeds are used 

to pay off an older mortgage is equitably 

subrogated to the extent of the loan so long 

as the new mortgagee lacks knowledge of the 

other encumbrances. Metrobank[, supra, 262 

N.J. Super. at 143-44]. In that situation, 

the new mortgagee by virtue of its subrogated 

status can enjoy the priority afforded the old 

mortgage. Ibid. Equitable subrogation may 

still be afforded even though lack of 

knowledge on the part of the new mortgagee 

occurs as a result of negligence. Kaplan[, 

supra, 164 N.J. Super. at 138]. On the other 

hand, the new lender is not entitled to 

subrogation, absent an agreement or formal 

assignment, if it possesses actual knowledge 

of the prior encumbrance. Metrobank, supra, 

262 N.J. Super. at 143-44. 

[First Union Nat'l Bank v. Nelkin, 354 N.J. 

Super. 557, 565-66 (App. Div. 2002).] 

 In Gillis, we relied on principles of "replacement" and 

"modification" that are technically distinguishable from the 

traditional application of equitable subrogation. Gillis, supra, 

432 N.J. Super. at 46-49. There, we determined that, if a lender 

who holds a priority lien replaces it with a new mortgage via a 

refinancing, this replacement lien is given priority regardless 

of the lender's knowledge of other encumbrances. Id. at 47. 

Adopting "the Third Restatement's alternative approach, [we 

determined that] the pertinent limiting factor is not the new 

lender's knowledge, but instead whether there has been 'material 
9 A-2668-14T3

prejudice' to the intervening lienor." Ibid. (citing Third 

Restatement at § 7.6(b)(4)). Accordingly, we noted: 

 We regard this as a sound approach. A 

proper judicial analysis of material prejudice 

will examine such aspects as the respective 

loan amounts involved, the interest rates, 

and, potentially, the loan terms. Actual or 

constructive knowledge by the refinancing 

lender, if it is the same original lender or 

it's corporate successor, should be 

irrelevant. 

[Id. at 51 (footnote omitted).] 

 In the present case, defendants' interest in the property 

takes the form of a life estate rather than a mortgage. Like 

Judge McVeigh, we do not view this as a meaningful distinction. 

Rather, we view Judge McVeigh's analysis, which centered on the 

presence or absence of material prejudice to defendants, as a 

logical extension of our holding in Gillis. We conclude, like 

Judge McVeigh, that the replacement of the 2005 mortgage lien with 

the 2007 mortgage did not prejudice defendants in any meaningful 

way. It is without doubt that defendants agreed to subordinate 

their life estate to the lien of plaintiff's 2005 mortgage. The 

trial court correctly "capped" plaintiff's mortgage priority at 

$260,000, and preserved the priority of defendants' life estates 

on the portion of the 2007 mortgage loan that exceeded that amount. 

Although capped at $260,000, the lien of plaintiff's 2005 mortgage 

over time could have risen to $286,000, and its interest rate 
10 A-2668-14T3

could have swelled to 9.700%. In contrast, the 2007 mortgage had 

a fixed interest rate of 6.625%, and extended the maturity rate 

an additional two years. As a result, we concur with Judge McVeigh 

that enforcing the 2007 mortgage against defendants puts them in 

the same position they were in as when they signed the 2005 

mortgage. 

 Affirmed.