Court Opinion

ID: 4174256
Source: CourtListenerOpinion
Date Created: 2017-06-05 13:12:52.278184+00
Date Added: 2024-06-11T14:12:59.839203
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NOT FOR PUBLICATION WITHOUT THE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-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 June 5, 2017

              Before Judges Leone and Vernoia.

              On appeal from Superior Court of New Jersey,
              Chancery Division, Monmouth County, Docket No.
              F-4359-14.
          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 purchase-

money 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

                                  2                            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

                                         3                                  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.

                                       4                               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

                                 5                          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,

                                    6                               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

                                       7                                 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.

                                  8                           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.

                                       9                                 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.

                                      10                               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

                                        11                                 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

                                     12                            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.

                                  13                              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").

                                  14                            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.

                                       15                              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 non-

negotiable 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

                                      16                              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

                                   17                                 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.,

                               18                           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

                                    19                            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.

                                   20                            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.

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