Court Opinion

ID: 6316681
Source: CourtListenerOpinion
Date Created: 2022-02-23 15:07:08.799284+00
Date Added: 2024-06-11T09:00:30.241602
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE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.

                                                        SUPERIOR COURT OF NEW JERSEY
                                                        APPELLATE DIVISION
                                                        DOCKET NO. A-0140-20

U.S. BANK NATIONAL
ASSOCIATION, not in its
individual capacity but
solely as trustee of NRZ
PASSTHROUGH TRUST II,

          Plaintiff-Respondent,

v.

DAVID D'AMBROSIA,

          Defendant-Appellant,

and

SUSAN D'AMBROSIA,
MRS. DAVID D'AMBROSIA,
his wife, MR. D'AMBROSIA,
husband of SUSAN D'AMBROSIA,
UNITED STATES OF AMERICA,
STATE OF NEW JERSEY,
DISCOVER BANK,
JACKSON CAPITAL, INC.,
MIDLAND FUNDING, LLC, and
NEW JERSEY NATURAL GAS,

          Defendants.
            Submitted January 11, 2022 – Decided February 23, 2022

            Before Judges Currier and Smith.

            On appeal from the Superior Court of New Jersey,
            Chancery Division, Ocean County, Docket No.
            F-024069-16.

            Joseph Albanese, attorney for appellant.

            Knuckles, Komosinski & Manfro, LLP, attorneys for
            respondent (John E. Brigandi, on the brief).

PER CURIAM

      In this foreclosure action, defendant appeals from the grant of summary

judgment for plaintiff and the subsequent denial of defendant's motion for

reconsideration, contending he was entitled to rescind the mortgage by

recoupment because the original mortgage company failed to accurately disclose

certain charges and he was permitted to raise a rescission defense at any time

during the foreclosure proceedings. We disagree and affirm.

      In 2004, defendant and his wife executed a promissory note in the amount

of $375,000 to Intervale Mortgage Company (IMC). Defendant secured the note

by executing a mortgage against a property located in Jackson, New Jersey , to

Mortgage Electronic Registration Systems (MERS) as nominee for IMC.

Defendant defaulted on the mortgage in 2009.

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      In 2010, MERS assigned its rights under the note and mortgage to

Household Finance Corporation III (HFC).            Thereafter, HFC initiated

foreclosure proceedings against defendant.

      In late 2012, defendant and HFC executed a consent order prohibiting

HFC from proceeding to a sheriff's sale before December 1, 2012 and requiring

HFC to "mediate in good faith." If HFC failed to comply with the terms of the

order, the trial court would permit defendant to reinstate his contesting answer.

The parties proceeded to mediation in 2014.

      On December 3, 2014, HFC offered defendant a loan modification. If

defendant made a $9326.19 partial reinstatement payment by January 1, 2015,

HFC would reduce his monthly principal and interest for the next sixty months.

Defendant did not make the payment.

      Six months later, defendant inquired about the loan modification. HFC

informed defendant he was previously approved for a sixty-month modification

with a decreased monthly principal and interest payment, but, because he had

failed to make the required payment, he no longer qualified for the modification

and foreclosure proceedings would continue against him.         For reasons not

disclosed in the record, there was no final judgment entered on this foreclosure

complaint.

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        In August 2015, HFC assigned its rights under the note and mortgage to

plaintiff's predecessor—Wilmington Savings Fund Society (WSF). A year later,

WSF filed a foreclosure complaint. In response to plaintiff's subsequent motion

for summary judgment, defendant opposed the motion and moved for leave to

file a second amended answer and counterclaims.

        Following oral argument, the judge issued an oral decision on April 27,

2018.    He noted defendant did not dispute that he executed the mortgage

documents and defaulted on the mortgage, and he did not challenge the amount

owed.     Therefore, the court found WSF had established standing through

"possession of the note prior to the filing of the foreclosure action and . . . a

valid assignment."

        The court then turned to defendant's proposed counterclaims. Although

defendant raised a number of counterclaims and the court addressed each in turn,

we only discuss the two that are at issue in this appeal.

        Defendant asserted that plaintiff did not put all of the essential terms of

the loan modification offer in writing—a violation of Regulation X of the Real

Estate Settlement Procedures Act (RESPA), 12 C.F.R. § 1024.41(c)(1)(ii). He

sought money damages as his remedy. The judge found Regulation X was not

a defense to a foreclosure complaint because even if defendant could prove a

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violation, he was only entitled to money damages.       The regulation did not

prevent plaintiff from foreclosing on the property.

      Defendant also contended he was entitled to a rescission of the mortgage

under the Truth in Lending Act (TILA), 15 U.S.C. § 1601 to -1667f, because the

original lender failed to include a mortgage brokerage fee in the HUD-1 closing

statement. The judge rejected this defense, finding the TILA rescission remedy

had a three-year statute of limitations which had long expired. Therefore, the

judge denied defendant's motion to amend, finding any amendment would be

futile. The court granted summary judgment to plaintiff.

      Defendant moved for reconsideration. In an oral decision, the judge

denied the motion, finding the rescission claim was "barred by the three-year

statute of limitations." The judge issued a written statement of reasons with the

accompanying order on July 20, 2018. He explained why defendant's reliance

on Beneficial Fin. Co. of Atl. City v. Swaggerty, 86 N.J. 602, 604-05 (1981),

for the proposition that recoupment—and thus rescission by recoupment—was

always available as a remedy was misplaced. The judge noted that the Supreme

Court in Beach v. Ocwen Fed. Bank, 523 U.S. 410, 417 (1998), "distinguished

TILA claims for damages (such as those in Swaggerty) from claims for

rescission and found" that no right to rescind existed beyond the three-year

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period set forth in 15 U.S.C. § 1635. Thus, he found Swaggerty was "not

applicable to the facts in this case."

       The judge also addressed defendant's Regulation X contention, noting that

all his "claims [were] addressed to a prior loan servicer," HFC. He found that

"where the violation is not attributable to the assignee mortgagee or to the

original lender, but is instead attributable to some uncontrolled third-party, such

as a broker, a claimant has no standing to sue the assignee mortgagee."

Accordingly, the judge found the damages asserted "should not lie against"

WSF.

       On July 2, 2020, the court entered final judgment for plaintiff. This appeal

followed.

       Our review of a ruling on summary judgment is de novo, applying the

same legal standard as the trial court. Green v. Monmouth Univ., 237 N.J. 516,

529 (2019) (citation omitted). We 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).

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      Our review of issues of law is de novo and we accord no deference to the

trial judge's conclusions on issues of law. Nicholas v. Mynster, 213 N.J. 463,

478 (2013).

      We review a trial court's decision to grant or deny a motion for

reconsideration under an abuse of discretion standard. Cummings v. Bahr, 295

N.J. Super. 374, 384 (App. Div. 1996). A court abuses its discretion "when a

decision is 'made without a rational explanation, inexplicably departed from

established policies, or rested on an impermissible basis.'" Pitney Bowes Bank,

Inc. v. ABC Caging Fulfillment, 440 N.J. Super. 378, 382 (App. Div. 2015)

(quoting Flagg v. Essex Cnty. Prosecutor, 171 N.J. 561, 571 (2002)).

      On appeal, defendant renews his argument that the trial court erred in

rejecting his rescission claim as time-barred and in granting judgment for

plaintiff. He asserts he has a right to rescind the mortgage because of IMC's

"failure to accurately disclose charges," and that this right "could be asserted as

a defense in foreclosure by recoupment at any time."

      Under TILA, mortgage lenders must "provide borrowers with clear and

accurate disclosures of terms dealing with things like finance charges, annual

percentage rates of interest, and the borrower's rights." Beach, 523 U.S. at 412.

If a lender fails to make the required disclosures, "the borrower may rescind the

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loan agreement if the lender fails to deliver certain forms or to disclose

important terms accurately." Id. at 411.

      This right, however, "shall expire three years after the date of

consummation of the transaction or upon the sale of the property, whichever

occurs first . . . ." 15 U.S.C. § 1635(f). The United States Supreme Court has

clarified that this section imposing the three-year limit does not serve as a statute

of limitations, but rather "govern[s] the life of the underlying right ." Beach, 523

U.S. at 417. Therefore, the Court has held that TILA "permits no federal right

to rescind, defensively or otherwise, after the 3-year period of § 1635(f) has

run." Id. at 419. See also Jesinoski v. Countrywide Home Loans, Inc., 574 U.S.

259, 262-63 (2015) (re-affirming Beach's holding that a borrower's right to

rescission expires three years after mortgage origination).

      Here, the original mortgage closed in January 2004. Defendant did not

serve a notice of rescission on plaintiff until April 2018, after plaintiff moved

for summary judgment. That was too late. Under TILA's three-year statute of

limitations, 15 U.S.C. § 1635(f), defendant's right to rescission expired in

January 2007—three years after he executed the note and mortgage.

      Defendant's reliance on Swaggerty, 86 N.J. at 604, for the proposition that

recoupment—and thus rescission by recoupment—is always available as a

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remedy is misplaced. That case did not address a borrower's right to rescission

under §1635; it dealt with recoupment of monetary damages under §1631(a) and

§1639(a)(8). Id. at 605. As the Court in Beach noted, "recoupment of damages

and rescission in the nature of recoupment receive unmistakably different

treatments," reflecting a "deliberate intent on the part of Congress." 523 U.S. at

418.

       Defendant further contends the trial court erred in denying his RESPA

claim because HFC violated 12 C.F.R. § 1024.41 and 1024.38 by "failing to

include the most significant, critical term of the loan modification offer." He

seeks to recover money damages from plaintiff.

       Regulation X requires mortgage servicers to "maintain policies and

procedures that are reasonably designed to achieve" certain objectives. 12

C.F.R. § 1024.38(a). Parties may sue for money damages for a servicer's failure

to comply with its requirements.

       As the judge properly noted, defendant's claim under Regulation X is for

money damages. Even if he could establish a valid claim, it would not impact

plaintiff's ability to foreclose on the property.

       Furthermore, Regulation X is limited in its application to mortgage

servicers and only imposes duties on such entities. 12 C.F.R. § 1024.30 to - .41.

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Plaintiff was not engaged in the origination or servicing of defendant's mortgage

and did not become involved until its predecessor was assigned the mortgage in

August 2015. Because plaintiff was not involved in the loan modification

process, defendant cannot assert his RESPA claims against it. See Great Falls

Bank v. Pardo, 263 N.J. Super. 388, 395 (Ch. Div. 1993), aff'd, 273 N.J. Super.

542 (App. Div. 1994) (holding the fraud claim was "of no moment in this

foreclosure action" where the party could not show that the plaintiff, "as

mortgagee, either participated in or had knowledge of any fraud perpetrated by

the mortgagors"). See also Christiana Tr. v. Riddle, 911 F.3d 799, 804 (5th Cir.

2018) (holding that the regulation's "text squarely settles the issue" because it

only imposes duties on loan servicers, not on the lending bank, thus only

servicers could fail to comply with the regulation and become liable t o

borrowers).

      The trial court did not err in granting summary judgment and denying

reconsideration.

      Affirmed.

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