Court Opinion

ID: 4174251
Source: CourtListenerOpinion
Date Created: 2017-06-05 13:12:50.43159+00
Date Added: 2024-06-11T14:12:59.733656
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NOT FOR PUBLICATION WITHOUT THE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-0793-15T1

HSBC BANK USA, NATIONAL
ASSOCIATION AS TRUSTEE FOR
OPTEUM MORTGAGE ACCEPTANCE
CORPORATION, ASSET-BACKED
PASS-THROUGH CERTIFICATES,
SERIES 2005-2,

           Plaintiff-Respondent,

     v.

GERARDO AVALOS and BEATRIZ
AVALOS, HUSBAND AND WIFE,
TENANTS/OCCUPANTS,

           Defendants-Appellants,

     and

WACHOVIA BANK, NATIONAL
ASSOCIATION,

          Defendant.
__________________________________

           Submitted September 27, 2016 – Decided            March 14, 2017

           Before Judges Ostrer and Vernoia.

           On appeal from the Superior Court of New
           Jersey, Chancery Division, Somerset County,
           Docket No. F-8125-12.

           Tomas Espinosa, attorney for appellants.
            Pluese, Becker & Saltzman, LLC, attorneys for
            respondent (Stuart H. West, on the brief).

PER CURIAM

     In this mortgage foreclosure case, defendants Gerardo and

Beatriz Avalos appeal from: (1) the Chancery Division's June 20,

2014 orders granting summary judgment to plaintiff HSBC Bank U.S.,

N.A. (HSBC),1 and denying defendants' motion to dismiss; and (2)

the court's August 17, 2015 final judgment of foreclosure.                      We

affirm.

     In    January   2005,   defendants   executed      a    note   to    Opteum

Financial Services, LLC (Opteum), in the amount of $195,000.                    To

secure payment, defendants executed a mortgage encumbering their

North Plainfield home in favor of Mortgage Electronic Registration

Systems (MERS), as nominee for Opteum.         The loan was later sold

into a pool of assets governed by a pooling and servicing agreement

(PSA), in which HSBC served as trustee.

     On October 1, 2011, defendants stopped making payments under

the 2005 note and mortgage. After the default, an Opteum assistant

vice president endorsed the note in favor of HSBC.                    MERS, as

Opteum's   nominee,   assigned   the    mortgage   to       HSBC,   which    then

recorded it in Somerset County on April 2, 2012.

1
 HSBC sues as trustee for Opteum Mortgage Acceptance Corporation,
Asset-Backed Pass-Through Certificates, Series 2005-2. We refer
to HSBC in its role as trustee.

                                    2                                    A-0793-15T1
     A month later, HSBC filed its foreclosure complaint.         After

successfully vacating a default previously entered, defendants

filed their answer and counterclaim in August 2013.       Defendants

admitted they stopped making payments.     The gist of their defense

was that HSBC lacked standing, did not own the loan, and the trust,

under the pooling agreement, was never validly formed.

     In granting HSBC's motion for summary judgment, and denying

defendants' motion to dismiss, Judge Edward M. Coleman found, in

a written decision, that defendants defaulted under the mortgage

and HSBC had standing to foreclose because it possessed the note

and was assigned the mortgage.    Citing Thorpe v. Floremoore Corp.,

20 N.J. Super. 34, 37 (App. Div. 1952), the judge found that HSBC

had fulfilled the three prerequisites to foreclosure: mortgage

execution,   recording,   and   indebtedness.   Judge   Coleman    also

rejected defendants' contention that HSBC lacked standing because

of a violation of the PSA.      He concluded that, as non-parties to

the PSA, defendants lacked standing to challenge HSBC's compliance

with it. The final judgment of foreclosure established defendants'

total indebtedness as of August 17, 2015, and authorized the

Sheriff's sale of the property.

     On appeal, defendants essentially contend that HSBC violated

terms of the trust that the PSA created.    They argue that they are

intended third-party beneficiaries of the trust and have standing

                                   3                          A-0793-15T1
to enforce its terms.      In particular, they contend defendants'

note and mortgage were not delivered to the trust before its

closing date, as set forth in the PSA; consequently, HSBC lacks

standing to enforce the note and mortgage.

       We review the trial court's grant of summary judgment de

novo, applying the same standard as the trial court.                Henry v.

N.J. Dep't of Human Servs., 204 N.J. 320, 330 (2010).              As did the

trial court, we conclude defendants lack standing to assert a

breach of the PSA.      They were not parties to the agreement, nor

were they intended third-party beneficiaries.               Notably, the PSA

expressly identified certain third-party beneficiaries, including

the master servicer, but omitted mortgagors like defendants.

       Our conclusion that defendants lack standing to enforce the

PSA is consistent with the decisions of multiple courts that have

addressed the issue.      See Correia v. Deutsche Bank Nat'l Trust

Co., 452 B.R. 319, 324-25 (B.A.P. 1st Cir. 2011) (stating that the

debtors lacked standing to object to breaches of the PSA because

they   were   neither   parties   to       the   contract   nor   third-party

beneficiaries); Rajamin v. Deutsche Bank Nat'l Trust Co., 757 F.3d

79, 88-90 (2d Cir. 2014) (holding that the mortgagors lacked

standing to complain of violation of the securitization trust

agreement, and concluding that under § 7-2.4 of New York's Estates,

                                       4                              A-0793-15T1
Powers and Trusts Law (EPTL),2 a trustee's unauthorized acts are

not void, but voidable only at the behest of trust beneficiaries,

which are the certificate-holders, not the mortgagors); Barnett

v. Countrywide Bank, FSB, 60 F. Supp. 3d 379, 386 (E.D.N.Y. 2014)

(finding that the plaintiffs "lack[ed] the requisite standing

. . . to challenge the securitization process, to 'quiet title,'

or to enforce the PSA"); Flores v. EMC Mortg. Co., 997 F. Supp.

2d 1088, 1104-05 (E.D. Cal. 2014) (stating that the borrowers

lacked standing to pursue claims arising from the securitization

agreement); Jenkins v. JP Morgan Chase Bank, NA, 156 Cal. Rptr.

3d 912, 927 (Ct. App. 2013) (stating that the borrower "lack[ed]

standing to enforce . . . the investment trust's pooling and

servicing agreement").

     To the extent not addressed, defendants' remaining arguments

lack sufficient merit to warrant discussion in a written opinion.

R. 2:11-3(e)(1)(E).

     Affirmed.

2
 EPTL § 7-2.4 states: "If the trust is expressed in the instrument
creating the estate of the trustee, every sale, conveyance or
other act of the trustee in contravention of the trust, except as
authorized by this article and by any other provision of law, is
void." We note the PSA is governed by New York law.

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