SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0653-15T3

U.S. BANK NATIONAL ASSOCIATION, 

AS TRUSTEE FOR CITIGROUP 

MORTGAGE LOAN TRUST 2006-WFHE3, 

ASSET-BACKED PASS-THROUGH 

CERTIFICATES, SERIES 2006-WFHE3,

Plaintiff-Respondent,

v.

SILVANA SOTILLO,

Defendant-Appellant,

and 

MR. SOTILLO HUSBAND OF 

SILVANA SOTILLO, and FOXCHASE 

TOWNHOME CONDOMINIUM,

Defendants.

________________________________________

Argued December 20, 2016 – Decided 

Before Judges Leone and Vernoia.

On appeal from Superior Court of New Jersey, 

Chancery Division, Monmouth County, Docket No. 

F-4359-14.

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

This opinion shall not "constitute precedent or be binding upon any court." 

Although it is posted on the internet, this opinion is binding only on the 

parties in the case and its use in other cases is limited. R.1:36-3.

June 5, 2017
2 A-0653-15T3

Lyndsay M. Ganz argued the cause for appellant 

(Law Offices of Lawrence W. Luttrell, 

attorneys; Ms. Ganz, on the briefs).

Henry F. Reichner (Reed Smith, LLP) argued the 

cause for respondent. 

PER CURIAM

Defendant Silvana Sotillo appeals the September 1, 2015 final 

judgment of foreclosure was entered in favor of plaintiff, U.S. 

Bank National Association. Defendant challenges the June 20, 2014 

dismissal of her counterclaims, and the August 21, 2015 denial of 

her motion for reconsideration. We affirm.

I.

Defendant's certification and the loan documentation indicate 

the following. On July 31, 2006, defendant executed a purchasemoney mortgage and an adjustable-rate note for $279,000 from The 

Loan Tree Corp. The mortgage and note were used to purchase a 

home in Tinton Falls. The note had an initial interest rate of 

8.625%, which would increase on the first change date of August 

1, 2008, and thereafter could change up or down by a maximum of 

1% every six months, with a cap of 14.625%. On August 11, 2006, 

the mortgage was assigned to Wells Fargo, N.A. 

Late in 2008, defendant contacted Wells Fargo about a loan 

modification, claiming the adjusted interest rates on her original 

note had become unaffordable, with the interest rate reaching 
3 A-0653-15T3

11.75% and her monthly payment increased to $2289. Wells Fargo 

informed her she would have to be delinquent on the loan for more 

than 30 days before it could be modified. Accordingly, she ceased 

making payments on the loan. On February 5, 2009, she received a 

letter from Wells Fargo stating she was denied a repayment 

agreement because her monthly income was less than her calculated 

monthly expenses. 

On April 10, 2009, Wells Fargo told defendant she was being 

considered for a loan modification plan. On April 13, 2009, she 

received a letter from Wells Fargo requesting more financial 

information and documents, which defendant provided. On April 27, 

2009, Wells Fargo sent defendant another letter stating she failed 

to submit the requested documents. She informed Wells Fargo she 

previously submitted the required documentation. On October 14, 

2009, Wells Fargo approved defendant's first loan modification

agreement ("2009 Modification"). Beginning January 1, 2010, her 

new monthly payment would be $1982.61 with a reduced interest rate 

of 5.125%. On October 16, 2009, she agreed to the 2009 

Modification. 

Meanwhile, on September 22, 2009, Wells Fargo sent defendant 

a letter stating she may be eligible for a trial modification plan 

under the federal government's Home Affordable Modification 

Program (HAMP), with an estimated monthly payment of $2145. She 
4 A-0653-15T3

was required to enter a three-month trial payment plan (TPP), 

wherein she would make three monthly payments of $1185.55. 

Defendant signed the HAMP TPP agreement on October 26, 2009, and 

timely made the three required monthly payments of $1185.55. She 

made a fourth payment as suggested by Wells Fargo over the phone. 

On April 14, 2010, Wells Fargo informed defendant her HAMP 

application was denied because of her failure to make the required 

trial-period payments. She told Wells Fargo she had in fact made 

the payments. 

On April 27, 2010, Wells Fargo offered defendant a second 

loan modification agreement ("2010 Modification") which required 

monthly payments of $2032.05 at an interest rate of 7%. She signed 

the 2010 Modification on April 30, 2010. 

On May 4, 2010, Wells Fargo sent defendant a letter stating 

she received "an incorrect ineligibility reason" due to a system 

error. In an attached letter, Wells Fargo told defendant she did 

not qualify for a modification pursuant to HAMP because her housing 

expense was not greater than 31% of her gross monthly income. 

Defendant continued to make monthly payments on her loan 

based on the 2010 Modification until she defaulted on the loan on 

March 1, 2012. Wells Fargo assigned the note and mortgage to 

plaintiff on May 7, 2012. 
5 A-0653-15T3

On February 5, 2014, plaintiff filed a foreclosure complaint. 

Defendant filed an answer and asserted affirmative defenses and 

counterclaims. Plaintiff filed a motion to strike defendant's 

answer, affirmative defenses, and counterclaims. The trial court 

heard oral arguments and granted plaintiff's motion on June 20, 

2014. 

On April 20, 2015, after plaintiff moved for entry of final 

judgment, defendant moved for reconsideration of the June 20, 2014 

order. Reconsideration was denied on August 21, 2015. A final 

judgment of foreclosure was entered on September 1, 2015.

II.

Plaintiff's motion to strike defendant's counterclaims did 

not indicate the Rule on which it was based. The trial court 

referred to Rule 4:6-2(e), governing dismissal for failure to 

state a claim. "We review a grant of a motion to dismiss a 

complaint for failure to state a cause of action de novo, applying 

the same standard under Rule 4:6-2(e) that governed the motion 

court." Wreden v. Township of Lafayette, 436 N.J. Super. 117, 124 

(App. Div. 2014). Thus, we are "limited to examining the legal 

sufficiency of the facts alleged on the face of the complaint." 

Nostrame v. Santiago, 213 N.J. 109, 127 (2013) (quoting Printing

Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989)). 

We are required to "'search[] the complaint in depth and with 
6 A-0653-15T3

liberality to ascertain whether the fundament of a cause of action 

may be gleaned even from an obscure statement of claim, opportunity 

being given to amend if necessary.'" Printing Mart-Morristown, 

supra, 116 N.J. at 746 (citation omitted). The same standard 

applies to counterclaims.

However, plaintiff sought dismissal with prejudice and 

attached certifications and documents, some of which were not 

referred to in the complaint. Defendant responded with a 

certification alleging numerous additional facts and attaching 

many documents not referred to in the pleadings. "If, on a motion 

to dismiss based on [Rule 4:6-2(e)], matters outside the pleading 

are presented to and not excluded by the court, the motion shall 

be treated as one for summary judgment and disposed of as provided 

by R. 4:46[.]" R. 4:6-2; see, e.g., Roa v. Roa, 200 N.J. 555, 562 

(2010) (applying the summary judgment standard where "the motion 

was based upon evidence, including certifications, outside of the 

pleadings"); Cheng Lin Wang v. Allstate Ins. Co., 125 N.J. 2, 9, 

14-15 (1991) (applying the summary judgment standard where the 

response to the motion included a certification and documents). 

"Because [defendant] presented factual material in opposition to 

the Rule 4:6-2 dismissal motion and the judge did not exclude it, 

the motion became one for summary judgment." Albrecht v. Corr.

Med. Servs., 422 N.J. Super. 265, 268 (App. Div. 2011). Moreover, 
7 A-0653-15T3

the trial court granted dismissal with prejudice, and later 

referred to its June 20, 2014 ruling as "an order for summary 

judgment." 

"[W]e review the trial court's grant of summary judgment de 

novo under the same standard as the trial court." Templo Fuente 

De Vida Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 224 N.J.

189, 199 (2016). Summary judgment must be granted if the court 

determines "that there is no genuine issue as to any material fact 

challenged and that the moving party is entitled to a judgement 

or order as a matter of law." R. 4:46-2(c). The court must 

"consider whether the competent evidential materials presented, 

when viewed in the light most favorable to the non-moving party

in consideration of the applicable evidentiary standard, are 

sufficient to permit a rational factfinder to resolve the alleged 

disputed issue in favor of the non-moving party." Brill v. 

Guardian Life Ins. Co. of Am., 142 N.J. 520, 523 (1995). We must 

hew to that standard of review.

III.

"[T]he only issues in a foreclosure action are the validity 

of the mortgage, the amount of the indebtedness, and the right of 

the mortgagee to resort to the mortgaged premises." U.S. Bank 

Nat. Ass'n v. Curcio, 444 N.J. Super. 94, 112-13 (App. Div. 2016) 

(quoting Sun NLF Ltd. P'ship v. Sasso, 313 N.J. Super. 546, 550 
8 A-0653-15T3

(App. Div.), certif. denied, 156 N.J. 424 (1998)). A foreclosure 

action will be deemed uncontested if the responsive pleadings 

"have been stricken" or do not "contest the validity or priority 

of the mortgage or lien being foreclosed or create an issue with 

respect to plaintiff's right to foreclose it." R. 4:64-1(c)(2), 

(3). 

Defendant only challenges the striking of her counterclaims.1 

"Only germane counterclaims and cross-claims may be pleaded in 

foreclosure actions without leave of court." R. 4:64-5. To be 

germane, "the counterclaim must be for a claim arising out of the 

mortgage foreclosed." Joan Ryno, Inc. v. First Nat'l Bank of S. 

Jersey, 208 N.J. Super. 562, 570 (App. Div. 1986). A counterclaim 

is germane if it contests "the validity of the mortgage, the amount 

of the indebtedness, and the right of the mortgagee to resort to 

the mortgaged premises." Sun NLF, supra, 313 N.J. Super. at 550; 

see 30A Weinstein, New Jersey Practice: Law of Mortgages § 30.8 

at 14 (2d ed. 2000). It is undisputed defendant's counterclaims 

were germane. See, e.g., Assocs. Home Equity Servs., Inc. v. 

 

1 Defendant asks for the reinstatement of her answer and 

affirmative defenses as well, but she makes no argument why the 

court should not have stricken her unsupported affirmative 

defenses of estoppel, waiver, accord and satisfaction, unclean 

hands, standing, or violation of the Fair Foreclosure Act, N.J.S.A.

2A:50-53 to -68, and the Truth in Lending Act, 15 U.S.C.A. §§ 

1601-1667F. Her defense of equitable recoupment depends on the 

viability of her counterclaims. 
9 A-0653-15T3

Troup, 343 N.J. Super. 254, 271-73 & n.5 (App. Div. 2001) (finding 

defendants' statutory claims "germane" because "[a] successful 

recoupment defense acts to reduce the amount the plaintiff can 

recover on the claim for the debt when the counterclaim arises 

from the same transaction").

Instead, the trial court struck defendant's counterclaims 

because they lacked merit. See, e.g., Borden v. Cadles of Grassy 

Meadows II, LLC, 412 N.J. Super. 567, 570 (App. Div. 2010). Thus, 

we examine the merits of defendant's counterclaims in turn. 

Defendant's Count One claimed the 2006 issuance of the 

mortgage loan was the result of predatory lending. Count One, 

filed in 2014, was untimely under the six-year statute of 

limitations, and defendant makes no argument otherwise. N.J.S.A.

2A:14-1. We do not need to reach whether there is such a cause 

of action in New Jersey, or whether it can be brought against 

plaintiff, which did not originate the loan.

Defendant's Count Two claimed plaintiff breached an implied 

covenant of good faith and fair dealing from 2009 through 2013 by 

denying her loan modifications for which she qualified. Again, 

it was Wells Fargo which dealt with defendant concerning her loan 

modifications, before plaintiff was assigned the loan in May 2012. 

In any event, defendant alleges only one denial of a loan 

modification, namely the denial of a HAMP modification in 2010. 
10 A-0653-15T3

Wells Fargo's April 14, 2010 denial letter was based on the 

mistaken belief that she did not make the trial-period payments. 

However, that mistake was soon corrected on May 4, 2010, when 

Wells Fargo reported she did not qualify for a HAMP modification 

because her mortgage expenses did not exceed 31% of her monthly 

gross income. One of the criteria for HAMP eligibility was that 

"[t]he borrower has a monthly mortgage payment ratio of greater 

than 31 percent." U.S. Dept. of Treasury, HAMP Supplemental 

Directive No. 09-01: Introduction of the Home Affordable 

Modification Program at 2 (Apr. 6, 2009).2 "The 'monthly mortgage 

payment ratio' is the ratio of the borrower’s current monthly 

mortgage payment to the borrower's monthly gross income[.]" Id.

at 6. It is undisputed defendant did not meet this HAMP 

eligibility criterion.

Further, the HAMP application defendant signed stated: 

I understand that the Plan is not a 

modification of the Loan Documents and that 

the Loan Documents will not be modified unless 

and until (i) I meet all the conditions 

requested for modification, [and] (ii) I 

receive a fully executed copy of a 

Modification Agreement . . . . I further 

understand and agree that the Lender will not 

be obligated or bound to make any modification 

of the Loan Documents if I fail to meet any 

one of the requirements under this Plan.

 

2 Available at https://www.hmpadmin.com/portal/programs/docs/

hamp_servicer/sd0901.pdf.
11 A-0653-15T3

[(emphasis added)].

Thus, defendant knew the HAMP application was not a binding 

final agreement, and was contingent on meeting the qualifications 

for HAMP, which she failed to do. Therefore, Wells Fargo did not 

commit a breach of the duty of good faith and fair dealing. Arias 

v. Elite Mortg. Grp., Inc., 439 N.J. Super. 273, 280-81 (App. Div. 

2015). "[A] borrower may not sue when a lender denies a loan 

modification because the borrower failed to meet HAMP's 

guidelines[.]" Miller v. Bank of Am. Home Loan Servicing, L.P., 

439 N.J. Super. 540, 549 (App. Div.), certif. denied, 221 N.J. 567 

(2015). Thus, Count Two was properly dismissed. 

Defendant's Count Three claimed plaintiff breached the 2009 

Modification by refusing to follow its terms and by coercing her 

to apply for and enter into the less favorable 2010 Modification. 

Again, defendant entered into both agreements with Wells Fargo, 

and she alleged no misconduct by plaintiff. 

In any event, neither defendant's counterclaim nor her 

certification alleged any term of the 2009 Modification which 

Wells Fargo failed to follow. Rather, defendant alleged she agreed 

to seek a HAMP modification, did not qualify for a HAMP 

modification, and then entered into the 2010 Modification. Our 

review shows nothing in the 2009 Modification that barred Wells 
12 A-0653-15T3

Fargo from offering, or defendant from accepting, another loan 

modification opportunity. Thus, we see no breach of contract.

Defendant's Count Four alleged plaintiff's conduct in 

servicing the mortgage violated the Consumer Fraud Act (CFA), 

N.J.S.A. 56:8-1 to -20. Count Four incorporated her earlier 

allegations of coercion and breach of the implied covenant of good 

faith and fair dealing, but did not otherwise allege any particular 

unlawful practices. "Because a claim under the CFA is essentially 

a fraud claim, the rule requires that such claims be pled with 

specificity to the extent practicable." Hoffman v. Hampshire Labs 

Inc., 405 N.J. Super. 105, 112 (App. Div. 2009); see R. 4:5–8(a)

("[i]n all allegations of misrepresentation, fraud, mistake,

breach of trust, willful default or undue influence, particulars 

of the wrong, with dates and items if necessary, shall be stated 

insofar as practicable."). As the trial court found, defendant's 

complaint failed to meet this standard. Miller, supra, 439 N.J. 

Super. at 553. 

However, defendant's submission of her certification, which 

was not excluded by the trial court, requires us to consider 

whether summary judgment was appropriate. See R. 4:6-2. In her 

certification, she claims she was defrauded as follows. Wells 

Fargo offered her the chance to apply for a HAMP modification 

after she entered into the 2009 Modification. She made only the 
13 A-0653-15T3

low HAMP trial-period payments rather than the higher payments 

under the 2009 Modification. As a result, she became in arrears 

under the 2009 Modification. When her HAMP application was denied, 

Wells Fargo did not tell her she could revive the 2009 Modification 

by paying the arrearage of about $2800. Instead, it offered her 

the less favorable 2010 Modification as the only way she could 

save her home. 

Whatever the merit of these allegations, defendant brought 

Count Four against the wrong party. The CFA provides "[t]he act, 

use or employment by any person of any unconscionable commercial 

practice, deception, fraud, false pretense, false promise, 

misrepresentation, or the knowing, concealment, suppression, or 

omission of any material fact with intent that others rely upon 

such concealment, suppression or omission . . . is declared to be 

an unlawful practice." N.J.S.A. 56:8-2 (emphasis added). "Any 

person who suffers any ascertainable loss of moneys or property, 

real or personal, as a result of the use or employment by another 

person of any method, act, or practice declared unlawful under 

this act . . . may bring an action or assert a counterclaim 

therefor[.]" N.J.S.A. 56:8-19 (emphasis added). Defendant 

claimed Wells Fargo was the "person" using unlawful practices, but 

she brought her counterclaim only against plaintiff. 
14 A-0653-15T3

The CFA defines a "person" to include a "corporation" and 

"any agent, employee, salesman, partner, officer, director, 

member, stockholder, associate, trustee or cestuis que trustent 

thereof." N.J.S.A. 56:8-1. It does not define it to include an 

assignee. Thus, plaintiff has no direct liability under the CFA 

for Wells Fargo's alleged unlawful conduct. Plaintiff is merely 

the assignee of the mortgage and note.3 

We have held "an assignee of a [contract] can be held liable 

under the CFA, for its own unconscionable commercial activities 

in the subsequent performance of the assigned contract." Jefferson 

Loan Co., Inc. v. Session, 397 N.J. Super. 520, 533 (App. Div. 

2008). We made clear "[o]ur holding is limited to an assignee's 

own unconscionable commercial practices . . . , not an assignee's 

derivative liability for the actions of the assignor of the 

[contract]." Id. at 538.4 

 

3 Wells Fargo assigned plaintiff the mortgage on defendant's 

property, "together with the note(s) and obligations therein 

described and the money due and to become due thereon, with 

interest, and all rights accrued or to accrue under such Mortgage."

4 See Gonzalez v. Wilshire Credit Corp., 207 N.J. 557, 578 (2011) 

(noting Jefferson held the CFA applied "to the unconscionable 

loan-collection activities of an assignee"); Psensky v. Am. Honda 

Fin. Corp., 378 N.J. Super. 221, 231 (App. Div. 2005) (indicating 

a plaintiff can bring a CFA claim "where the assignee's fraud was 

active and direct"). 
15 A-0653-15T3

We thus examine whether defendant can claim plaintiff has 

derivative liability for the actions of Wells Fargo. "Generally 

speaking, the assignee at common law was subject to the equities 

and defenses which the account debtor could have asserted against 

the assignor prior to the assignment," including set-offs and 

discounts. James Talcott, Inc. v. H. Corenzwit & Co., 76 N.J.

305, 310 (1978). That rule remains in place for non-negotiable 

instruments. N.J.S.A. 12A:9-404(a) ("the rights of an assignee 

are subject to . . . any defense or claim in recoupment arising 

from the transaction that gave rise to the contract; and [] any 

other defense or claim of the account debtor against the 

assignor"); N.J.S.A. 46:9-9 ("in any [foreclosure] action by the 

assignee [of a mortgage], there shall be allowed all just set-offs 

and other defenses against the assignor that would have been 

allowed in any action brought by the assignor"); see Gotlib v. 

Gotlib, 399 N.J. Super. 295, 313 (App. Div. 2008). 

However, "'the assignee does not thereby, without more, 

assume the liabilities of the assignor.'" James Talcott, Inc., 

supra, 76 N.J. at 310 (quoting Falkenstern v. Herman Kussy Co., 

137 N.J.L. 200, 202 (E. & A. 1948) (citation omitted)). "The 

general rule" is that "affirmative claims against an assignee 

based on the assignor's conduct are prohibited." 29 Weinstein, 

New Jersey Practice: Law of Mortgages § 11.4 at 245 (2d ed. Supp. 
16 A-0653-15T3

2016-17). "[R]ecovery and judgment on a counterclaim or setoff 

against an assignee, where based on a demand against the assignor, 

cannot be affirmative; it can be defensive only." Pargman v. 

Maguth, 2 N.J. Super. 33, 38 (App. Div. 1949).

Moreover, even defensive use of such a counterclaim may be 

barred if the note and mortgage were negotiable instruments. 

Carnegie Bank v. Shalleck, 256 N.J. Super. 23, 44 (App. Div. 1992) 

("N.J.S.A. 46:9-9 was always intended to be limited to nonnegotiable instruments, such as a mortgage bond, rather than 

negotiable instruments, such as a promissory note."). Here, the 

note is a negotiable instrument under New Jersey's Uniform 

Commercial Code (UCC), N.J.S.A. 12A:1-101 to 12A:10-106. The note 

is "an unconditional promise or order to pay a fixed amount of 

money, with or without interest," "is payable on demand or at a 

definite time" to the "order" of the lender, and "does not state 

any other undertaking or instruction by the person promising or 

ordering payment to do any act in addition to the payment of 

money." N.J.S.A. 12A:3-104(a). The same is true of the loan 

modifications.

We follow "the great weight of authority in other 

jurisdictions" that a mortgage on such a note is negotiable: 

When a mortgage secures a negotiable 

instrument, . . . a transfer of the negotiable 

instrument to a holder in due course to whom 
17 A-0653-15T3

the mortgage is also assigned will enable the 

assignee to enforce the mortgage (as well as 

the negotiable instrument) according to its 

terms, free and clear of any personal defenses 

the mortgagor may have against the assignor. 

This results from the view that the mortgage 

is mere "incident" or "accessory" to the debt 

and when the debt is embodied in a negotiable 

instrument the quality of negotiability is 

necessarily imparted to the accompanying 

mortgage. 

[Carnegie Bank, supra, 256 N.J. Super. at 45 

(quoting 29 N.J. Practice, Law of Mortgages, 

§ 124, at 567-68 (Roger A. Cunningham & Saul 

Tischler) (1st ed. 1975)).]

The UCC confirms a holder in due course takes such a 

negotiable instrument free of personal defenses. N.J.S.A. 12A:3-

305(b) provides: 

The right of a holder in due course to enforce 

the obligation of a party to pay the 

instrument is subject to defenses of the 

obligor stated in paragraph (1) of subsection 

a. of this section, but is not subject to 

defenses of the obligor stated in paragraph 

(2) of subsection a. of this section or claims 

in recoupment stated in paragraph (3) of 

subsection a. of this section against a person 

other than the holder.

N.J.S.A. 12A:3-305(a) in turn provides such an obligor may assert 

real defenses, namely

(1) a defense of the obligor based on infancy 

of the obligor to the extent it is a defense 

to a simple contract, duress, lack of legal 

capacity, or illegality of the transaction 

which, under other law, nullifies the 

obligation of the obligor, fraud that induced 

the obligor to sign the instrument with 
18 A-0653-15T3

neither knowledge nor reasonable opportunity 

to learn of its character or its essential 

terms, or discharge of the obligor in 

insolvency proceedings[,]

but may not assert personal defenses or recoupment:

(2) a defense of the obligor stated in another 

section of this chapter or a defense of the 

obligor that would be available if the person 

entitled to enforce the instrument were 

enforcing a right to payment under a simple 

contract; [or] 

(3) a claim in recoupment of the obligor 

against the original payee of the instrument 

if the claim arose from the transaction that 

gave rise to the instrument[.]

[Ibid. (emphasis added); see N.J. Mortg. & 

Inv. Corp. v. Berenyi, 140 N.J. Super. 406, 

408-09 (App. Div. 1976) ("Real defenses are 

available against even a holder in due course 

of a negotiable instrument; personal defenses 

are not available against such a holder.").

Fraud in the inducement is a personal defense. "Mere 'fraud 

in the inducement' or 'inception' cannot be asserted against a 

holder in due course, only 'fraud in the factum' — fraud that 

induced the obligor to sign the instrument with neither knowledge 

nor reasonable opportunity to learn of its character or its 

essential terms." 29 Weinstein, New Jersey Practice: Law of 

Mortgages § 11.5 at 777 (2d ed. 2001) (footnote omitted); see N.J.

Mortg. & Inv. Co. v. Dorsey, 33 N.J. 448, 449-51 (1960) (holding 

"fraud in the factum" is a defense against a holder in due course); 

see also Resolution Tr. Corp. v. Assoc. Gulf Contractors, Inc., 
19 A-0653-15T3

263 N.J. Super. 332, 347-48 (App. Div.) (ruling a federal holder 

in due course "takes it free of all 'personal' defenses," including 

fraud in the inducement), certif. denied, 134 N.J. 480 (1993). 

Defendant's Count Four claims fraud in the inducement. She 

does not dispute she signed the 2010 Modification knowing it was 

a loan modification and knowing its terms. Rather, she claims 

Wells Fargo fraudulently induced her to sign the 2010 Modification 

by not telling her she could resurrect the more favorable 2009 

Modification by paying arrears. "But if plaintiff is a holder in 

due course, N.J.S.A. 12A:3-305[(a)](2) would preclude [defendant] 

from asserting h[er] personal defense of fraud during the inception 

of the [2010 Modification]." Carnegie Bank, supra, 256 N.J. Super.

at 32.

The record indicates plaintiff is a holder in due course. 

Plaintiff took assignment of the note and mortgage "for value." 

N.J.S.A. 12A:3-302(a)(2). There is no claim plaintiff was "engaged 

in [the] fraud or illegality affecting the instrument." N.J.S.A.

12A:3-203(b). Wells Fargo's alleged fraud occurred in 2010, but 

plaintiff did not receive the assignment until 2012. It is 

undisputed plaintiff took the assignment "in good faith." N.J.S.A.

12A:3-302(a)(2). Nothing on the face of the mortgage, note, or 

loan modifications gave plaintiff "notice" that any fraud had 

occurred, or that defendant had the "defense or claim in 
20 A-0653-15T3

recoupment" she now raises. Ibid. Defendant does not claim 

plaintiff was "aware of those defenses" at the time of assignment. 

Cf. Wells Fargo Bank, N.A. v. Ford, 418 N.J. Super. 592, 600 (App.

Div. 2011). "'Bad faith, i.e., fraud, not merely suspicious 

circumstances, must be brought home to a holder for value whose 

rights accrued before maturity in order to defeat his recovery on 

a negotiable note upon the ground of fraud in its inception or 

between the parties to it.'" Breslin v. N.J. Inv'rs, Inc., 70 

N.J. 466, 473 (1976) (citations omitted). 

Thus, defendant could not assert her Count Four claim of 

fraud in the inducement by Wells Fargo against plaintiff because 

it was a holder in due course. "'The basic philosophy of the 

holder in due course status is to encourage free negotiability of 

commercial paper by removing certain anxieties of one who takes 

the paper as an innocent purchaser knowing no reason why the paper 

is not as sound as its face would indicate.'" Breslin, supra, 70 

N.J. at 472 (citation omitted). That philosophy applies here. 

Defendant's CFA claim is based on the alleged actions of 

Wells Fargo. Wells Fargo is not a party to this action and we 

express no opinion to whether or not it would have any liability 

to defendant if she brought a CFA claim against it. We rule only 

that Count Four, like defendant's other counterclaims, was 

properly dismissed with prejudice as to plaintiff.
21 A-0653-15T3

For the same reasons, the trial court did not abuse its 

discretion in denying reconsideration. Cummings v. Bahr, 295 N.J. 

Super. 374, 389 (App. Div. 1996). 

Affirmed.