DEUTSCHE BANK NATIONAL TRUSTEE COMPANY, ETC. VS. ALLEN KLINGER (F-022415-15, BERGEN COUNTY AND STATEWIDE) ( 2019 )

NOT FOR PUBLICATION WITHOUT THE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-5863-17T1
DEUTSCHE BANK NATIONAL
TRUSTEE COMPANY AS TRUSTEE
FOR FIRST FRANKLIN MORTGAGE
LOAN TRUST 2006-FF9, MORTGAGE
PASS-THROUGH CERTIFICATES,
SERIES 2006-FF9,
Plaintiff-Respondent,
v.
ALLEN KLINGER and GERI
KLINGER, Husband and Wife,
Tenants/Occupants, and WHITE
PINE HOLDINGS, LLC,
Defendants,
and
JR FACTORS, INC.,
Defendant-Appellant.
_________________________________
Submitted April 1, 2019 – Decided June 26, 2019
Before Judges Sumners and Mitterhoff.
On appeal from the Superior Court of New Jersey,
Chancery Division, Bergen County, Docket No. F-
022415-15.
Schwartz & Schwartz, attorneys for appellant (Richard
J. Schwartz, on the briefs).
Pluese Becker & Saltzman, LLC, attorneys for
respondent (Stuart H. West, on the brief).
PER CURIAM
Defendant JR Factors, Inc., appeals from the trial court's order granting
summary judgment to plaintiff Deutsche Bank National Trust Company
("Deutsche Bank") in a mortgage priority dispute. In that regard, defendant
contends he should not have been estopped from relitigating the issue of priority
that had been resolved on summary judgment in a prior foreclosure action.
Defendant also disputes the trial court's calculation of the amount due a s a final
judgment. For the reasons that follow, we affirm.
This case arises from two mortgage foreclosure actions that involved the
same property and identical parties. Between April 2003 and October 2005,
Allen and Geri Klinger ("the Klingers") executed three mortgages in favor of
Wachovia Bank, N.A., and totaling $1,037,385. All three mortgages were
secured by the Klingers' property located in the Borough of Franklin Lakes ("the
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subject property"). All three mortgages were recorded on or before October 31,
2005.
On December 29, 2005, the Klingers executed a note and mortgage in
favor of defendant JR Factors in the amount of $400,000, which was likewise
secured by the subject property. Defendant's mortgage was recorded on January
14, 2006. Therefore, it is indisputable that at the time of defendant's loan, there
were three mortgages to Wachovia Bank, totaling $1,037,385, that had priority
over defendant's mortgage. 1
On February 15, 2006, the Klingers executed a note and mortgage in favor
of First Franklin, a Division of National City Bank of Indiana ("First Franklin"),
in the amount of $1,250,000 ("the subject mortgage"). The mortgagee was
Mortgage Electronic Registration Systems, Inc. ("MERS") as nominee for First
Franklin. This loan paid off the three prior Wachovia mortgages in full, in the
amount of $885,367.93. The Klingers also cashed out $354,357.93. The subject
mortgage was recorded on March 3, 2006.
1
On March 17, 2007, the Klingers executed another note and mortgage in favor
of JR Factors, secured by the subject property, in the amount of $100,000. It is
undisputed that this mortgage was junior to plaintiff's and it is therefore not at
issue in this appeal.
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On February 1, 2008, MERS as nominee for First Franklin executed an
assignment of mortgage to Deutsche Bank as trustee for First Franklin Mortgage
Loan Trust 2006-FF9, Mortgage Pass-Through Certificates, Series 2006-FF9.
The assignment was recorded on April 16, 2008.
On December 1, 2007, the Klingers defaulted on their obligation to
maintain payments pursuant to the note and subject mortgage. Accordingly,
plaintiff Deutsche Bank filed a foreclosure complaint ("the first foreclosure") on
April 8, 2008. The defendants in that action were the Klingers, White Pine
Holdings, LLC (holder of a UCC Financing Statement), and current defendant
JR Factors. Only JR Factors filed a contesting answer, alleging its December
2005 mortgage in the amount of $400,000, had priority over plaintiff's February
2006 mortgage.
On March 19, 2010, after extensive discovery including depositions,
Judge Robert P. Contillo granted summary judgment in plaintiff's favor. The
court found that plaintiff's mortgage paid off the outstanding balance of the three
Wachovia mortgages, totaling $885,367.93, each of which was executed and
recorded prior to defendant's $400,000 mortgage. Judge Contillo held that
Deutsche Bank was entitled to equitable subrogation of JR Factors' loan to the
extent of its payment of $885,367.93 to satisfy the loans that were superior to
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defendant's at the time of the payoff. The judge also found that plaintiff's
negligence in not performing due diligence to find out there was a fourth
mortgage did not defeat its entitlement to the remedy. Moreover, the judge held
the equities did not favor defendant, who should have known that a loan was
being made due to the unexplained shift in its priority position, and also because
it sat on its rights by failing to file for foreclosure when the homeowners
defaulted.
Thereafter, an order and judgment, providing that "[a]ll objections in the
Contesting Answer of JR Factors filed in this foreclosure action are hereby
stricken, and the Answer is deemed non-contesting," was recorded with the
Bergen County Clerk.
Because Final Judgment was not entered, however, the 2008 foreclosure
action was eventually administratively dismissed on September 16, 2013. On
February 25, 2015, plaintiff sent new notices of intent to foreclose to the
Klingers.2 Plaintiff elected to exercise its contractual right to accelerate the
balance due under the mortgage and note, and instituted the instant foreclosure
action ("the second foreclosure") on June 24, 2015.
2
The claims against the Klingers were resolved on August 4, 2016, when the
court granted summary judgment in plaintiff's favor.
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Defendant's answer in the second foreclosure again challenged plaintiff's
priority, asserting as it had in the first foreclosure that because JR Factors'
$400,000 mortgage was recorded before the subject mortgage it should be given
priority. On October 13, 2017, Judge Edward A. Jerejian granted plaintiff's
motion for summary judgment, holding that defendant was estopped from
relitigating the priority issue that had been fully litigated and resolved in the
2008 foreclosure case.
The court then entered a final judgment in the amount of $2,214,995.65.
On appeal, defendant challenges the trial court's October 13, 2017 order
of summary judgment. In addition, defendant disputes the amount of the
judgment, claiming it should have been limited to $885,367.93, which was the
extent of the equitable subrogation. We address these issues in turn.
Summary judgment
The standard of review for a grant of summary judgment is de novo.
Conley v. Guerrero, 228 N.J. 339, 346 (2017) (citing Templo Fuente De Vida
Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 224 N.J. 189, 199 (2016)).
[W]hen deciding a motion for summary judgment under
Rule 4:46–2, the determination whether there exists a
genuine issue with respect to a material fact challenged
requires the motion judge to consider whether the
competent evidential materials presented, when viewed
in the light most favorable to the non-moving party in
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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).]
"[S]ummary judgment will be granted if there is no genuine issue of material
fact and 'the moving party is entitled to a judgment or order as a matter of law.'"
Conley, 228 N.J. at 346 (citing Templo Fuente, 224 N.J. at 199 (quoting R. 4:46-
2)(c)).
In reviewing a grant of summary judgment, appellate courts consider
"whether the evidence presents a sufficient disagreement to require submission
to a jury or whether it is so one-sided that one party must prevail as a matter of
law." Brill, 142 N.J. at 536 (quoting Anderson v. Liberty Lobby, 477 U.S. 242,
251-52 (1986)). However, "conclusory and self-serving assertions by one of the
parties are insufficient to overcome [a summary judgment] motion." Puder v.
Buechel, 183 N.J. 428, 440-41 (2005). If there is no issue of fact, appellate
courts give no special deference to the trial court's rulings on matters of law.
Templo Fuente, 224 N.J. at 199 (citing Manalapan Realty, L.P. v. Twp. Comm.
of Manalapan, 140 N.J. 366, 378 (1995)).
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"[W]here the party opposing summary judgment points only to disputed
issues of fact that are 'of an insubstantial nature,' the proper disposition is
summary judgment." Brill, 142 N.J. at 529 (quoting Judson v. Peoples Bank &
Tr. Co. of Westfield, 17 N.J. 67, 75 (1954)). Even if there is a denial of essential
fact, the court should grant a motion for summary judgment if the rest of the
record, viewed most favorably to the party opposing the motion, demonstrates
the absence of a material and genuine factual dispute. See Rankin v. Sowinski,
119 N.J. Super. 393, 399-400 (App. Div. 1972).
"The only material issues in a foreclosure proceeding are the validity of
the mortgage, the amount of indebtedness, and the right of the mortgagee to
resort to the mortgaged property." Great Falls Bank of Pardo, 263 N.J. Super.
388, 394 (Ch. Div. 1993); see also Thorpe v. Floremoore Corp., 20 N.J. Super.
34, 37 (App. Div. 1952). ("Since the execution, recording, and non-payment of
the mortgage was conceded, a prima facie right to foreclose was made out"). If
a defendant's answer fails to challenge the essential elements of the foreclosure
action, a plaintiff is entitled to strike the defendant's answer. Old Republic Ins.
Co. v. Currie, 284 N.J. Super. 571, 574 (Ch. Div. 1995).
In this case, defendant challenged only plaintiff's right to foreclose,
claiming its mortgage had priority over plaintiff's mortgage. As the trial court
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found, however, because the priority issue was fully litigated and resolved in the
first foreclosure, defendant is estopped from relitigating it in this case.
Res judicata is a common law doctrine barring the re-litigation of claims
or issues that have already been adjudicated. See Tarus v. Borough of Pine Hill,
189 N.J. 497, 520 (2007). More specifically, collateral estoppel is "the branch
of the broader law of res judicata which bars re-litigation of any issue which was
actually determined in a prior action, generally between the same parties,
involving a different claim or cause of action." Ibid. (quoting State v. Gonzalez,
75 N.J. 181, 186 (1997)).
In Hennessey v. Winslow Township, the New Jersey Supreme Court set
forth a five-factor test to determine whether collateral estoppel applies to bar a
previously litigated claim:
(1) the issue to be precluded is identical to the issue
decided in the prior proceeding; (2) the issue was
actually litigated in the prior proceeding; (3) the court
in the prior proceeding issued a final judgment on the
merits; (4) the determination of the issues was essential
to the prior judgment; and (5) the party against whom
the doctrine is asserted was a party to, or in privity with
a party to, the earlier proceeding.
[183 N.J. 593, 599 (2005) (citations omitted) (quoting
In Re Estate of Dawson, 136 N.J. 1, 20-21 (1994)).]
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Defendant contends that the trial court erred in estopping the relitigation
of the priority issue, arguing that the third factor of the Hennessy v. Winslow
test was not met, as this case was administratively dismissed for lack of
prosecution by the Office of Foreclosure and thus no final judgment issued. As
did the trial court, we reject defendant's argument.
The primary consideration for a court in determining whether or not to
apply collateral estoppel is whether the parties were granted a full and fair
opportunity to litigate the issue in the prior action. See Winters v. N. Hudson
Reg'l Fire & Rescue, 212 N.J. 67, 85 (2012). The ultimate question is whether
a party "has had his day in court on an issue." McAndrew v. Mularchuk, 38 N.J.
156, 161 (1962). This is a natural result of the doctrine of collateral estoppel
being "guided by the 'fundamental legal principal that . . . once an issue has been
fully and fairly litigated, it ordinarily is not subject to relitigation between the
same parties either in the same or in subsequent litigation.'" State v. K.P.S., 221
N.J. 266, 277 (2015) (alteration in original) (quoting Morris Cnty. Fair Hous.
Council v. Boonton Twp., 209 N.J. Super. 393, 444 n. 16 (Law Div. 1985)). In
this case, as the trial judge found, the issue of priority was fully and fairly
litigated resulting in a judgment in plaintiff's favor on the priority issue .
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We also agree with the trial judge that the lack of a succeeding final
judgment did not bar the application of collateral estoppel. In that regard, the
judge found Section 13 of the Restatement (Second) of Judgments, Requirement
of Finality, "particularly instructive." That section provides:
The rules of res judicata are applicable only when a
final judgment is rendered. However, for purposes of
issue preclusion (as distinguished from merger and
bar), "final judgment" includes any prior adjudication
of an issue in another action that is determined to be
sufficiently firm to be accorded conclusive effect.
[Restatement (Second) of Judgments § 13 (Am. Law
Inst. 1982).]
We agree with the judge's conclusion that the order and decision issued
by Judge Contillo granting summary judgment were "sufficiently firm." The
judgment was "a firm and stable one, the 'last work' of the rendering court – a
'final' judgment." Restatement (Second) of Judgments § 13, cmt. a (Am. Law
Inst. 1997). Defendant's answer had been stricken and the matter was to proceed
as uncontested towards final judgment. There was no thus further opportunity
to litigate the issue at the trial court level.
We reject defendant's complaint that it was deprived of the opportunity to
appeal Judge Contillo's decision because no final judgment was ever entered.
Defendant could have, but did not, pursue an interlocutory appeal or move to
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have the case restored when it obtained notice of the administrative dismissal.
Instead, defendant did nothing to preserve its right to further judicial review in
the five years between Judge Contillo's 2010 entry of summary judgment and
the 2015 filing of the second foreclosure.
Nor are we swayed by defendant's argument that the diminution of the
property's value is a basis to reweigh the equities to give defendant priority.
First, as the trial court found, that argument is barred by collateral estoppel as
discussed above. Second, as reasoned by Judge Contillo, the mortgage priority
in the instant matter is a reflection of First Franklin, predecessor in interest to
Deutsche Bank, paying off the earlier Wachovia mortgages and the inequity that
would result if JR Factors were to benefit from these payments by being
undeservedly vaulted into first place. We agree with the trial judge that any the
diminution in value that may or may not have occurred since 2008 is in no way
grounds for upsetting the established mortgage priority in this matter.
Calculation of the amount due
We also reject defendant's challenge to the trial judge's determination of
the amount of the judgment. In response to defendant's objection to the
correctness of plaintiff's affidavit pursuant to Rule 4:64-1(d)(3), plaintiff
supplemented its submissions to the Office of Foreclosure with copies of its
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business records and invoices to support its calculations of the amounts due.
Plaintiff also submitted proofs to the court in compliance with R. 4:64-2. The
judge found that plaintiff's original submission to the Office of Foreclosure and
the supplemental documentation demonstrated the following:
1) The unpaid principal balance as of December 1,
2007 was $1,224,205.14.
2) Interest from November 1, 2007 to March 21, 2018
was $837,235.36.
3) Real estate taxes through March 21, 2018 total $144,
402.15.
4) Home owners insurance through March 21, 2018
totals $4,518.00.
5) Property inspection costs total $320.00
6) Property preservation costs total $4,315.00
7) Late charges through April 10, 2017 total $0.
The court found that these advances, when added to the principal, equaled
$2,214,995.65. Moreover, the judge noted that defendant did not dispute the
calculation of the amounts due. Rather, defendant's contention was that
plaintiff's first lien position is only as to the amount plaintiff expended to pay
off the Wachovia loans, that is, $885,367.93.
We conclude that the trial judge correctly calculated the amount due as a
final judgment. We note that there is a distinction between the total amount due
as a final judgment and the total amount as to which plaintiff has priority. The
judge in this case did not specifically fix the amount as to which plaintiff had
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priority over defendant, which would be based upon the subrogated amount of
$885,367.93, rather than the full unpaid balance of $1,224,205.14, plus interest
on the subrogated amount and the amount paid in real estate taxes and
insurance.3
To limit plaintiff's overall damages to the subrogated amount would
ignore its payment of real estate taxes and insurance since 2008. In that regard,
"[t]he right of subrogation is recognized to the extent that the money advanced
is actually applied to the payment of senior liens, plus interest on the amount so
applied." UPS Capital v. Abbey, 408 N.J. Super. 524, 529-30 (Ch. Div. 2009);
see also Reibman v. Myers, 451 N.J. Super. 32, 40, 47-48 (App. Div. 2017)
(affirming the trial court's holding that a bank's interest equitably subrogated to
the mortgage it paid off, as well as real estate taxes, insurance, interest and other
carrying costs). Moreover, had the foreclosed property retained substantial
value, after payment of the subrogated amount, defendant could collect up to the
full amount of its loan, with plaintiff having no ability to collect remaining funds
3
Plaintiff asserts that the interest on the subrogated amount is $605,917.24, and
the real estate taxes and insurance it paid totals $148,920.15. Thus, according
to plaintiff, the amount of its priority over defendant is $1,640,205.32. We do
not, and the trial court did not, make a finding as to the accuracy of these
calculations. We merely note these figures to highlight that the amount of
plaintiff's final judgment is different from, and substantially higher, than the
amount of plaintiff's priority over defendant.
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after defendant's loan was satisfied. Thus, the trial court correctly entered a
properly calculated final judgment. After plaintiff collects the subrogated
amount plus interest on the subrogated amount and the amount paid in real estate
taxes and insurance, defendant will have an opportunity to collect the full
amount of its loan, should the property retain sufficient value. After that, if
there is any remaining equity in the property, plaintiff would have the
opportunity to collect up the full amount of its judgment.
Affirmed.
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