WELLS FARGO BANK, NA VS. ARLINE FRIEDMAN (F-020503-16, MORRIS COUNTY AND STATEWIDE) ( 2020 )

NOT FOR PUBLICATION WITHOUT THE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-3028-18T2
WELLS FARGO BANK, NA,
Plaintiff-Appellant,
v.
ARLINE FRIEDMAN, MILTON
D. FRIEDMAN, and MRS.
MILTON D. FRIEDMAN, his wife,
Defendants-Respondents.
______________________________
Submitted January 13, 2020 – Decided January 29, 2020
Before Judges Fasciale and Mitterhoff.
On appeal from the Superior Court of New Jersey,
Chancery Division, Morris County, Docket No. F-
020503-16.
Reed Smith, LLP, attorneys for appellant (Henry F.
Reichner, of counsel and on the briefs).
Nish & Nish, LLC, attorneys for respondent Milton D.
Friedman (Robert J. Nish, on the brief).
PER CURIAM
In this mortgage foreclosure case, plaintiff appeals a June 22, 2018 order,
which denied its motion to dismiss counts three, four, and five of Milton D.
Friedman's (defendant) counterclaim, and which transferred counts three
through eight of its amended complaint to the Law Division. It also appeals a
January 30, 2019 judgment in defendant's favor, dismissing counts one and two
of the amended complaint seeking foreclosure; and discharging an open-ended
mortgage dated June 27, 2006 on the basis that defendant's signature was forged.
Defendant and co-defendant Arline Friedman, his wife (now estranged),
bought the Property in 1970. In 2001, Arline borrowed money, executed a
mortgage, and secured the loan with the Property. In May 2006, Arline
refinanced the loan by obtaining a loan and mortgage from Wachovia.
Defendant disputes that he signed the May 2006 mortgage. In June 2006,
Wachovia extended a line of credit and encumbered the Property with a new
mortgage (the June 2006 Mortgage), which defendant also disputes signing.
Plaintiff contends that Arline used the line of credit to pay down the May 2006
loan, pay the Property's taxes, and pay defendant's living expenses. In June
2015, Arline defaulted on the June 2006 Mortgage, which is the subject of this
foreclosure action.
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Plaintiff filed its foreclosure complaint on July 26, 2016. In September
2017, plaintiff filed its amended complaint and asserted claims for: (1)
foreclosure of the subject property (count one); (2) possession of the subject
property (count two); (3) an equitable lien based on the loan (count three); (4)
an equitable lien based on property charges paid by plaintiff (count four); (5) an
action on the subject note (count five); (6) an action on the related note against
Arline (count six); (7) equitable subrogation based on the related loan (count
seven); and (8) unjust enrichment (count eight). Defendant answered the
amended complaint, and filed a counterclaim seeking to: (1) discharge the
subject mortgage as void (count one); (2) discharge another mortgage on the
subject property (count two); (3) recover damages for common law fraud (count
three); (4) recover damages under the New Jersey Consumer Fraud Act (count
four); and (5) recover damages for common law fraud (count five).
Plaintiff filed a motion to dismiss counts three through five of defendant's
counterclaims and strike his jury request. Defendant filed a cross-motion to
transfer the matter to the Law Division. The judge conducted a hearing and
entered the orders under review.
Plaintiff raises the following points for this court's consideration:
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POINT I
THE CHANCERY DIVISION ERRED AS A MATTER
OF LAW IN CREDITING THE UNSUPPORTED
TESTIMONY OF [DEFENDANT AND ARLINE].
A. A Notary's Acknowledgement Is Prima Facie
Evidence Of The Due Execution Of An Instrument.
B. To Overcome The Strong Presumption Of Due
Execution, The Proof Of Forgery Must Be So Clear,
Satisfactory, And Convincing As To Enable One To
Come To A Clear Conviction, Without Hesitancy, Of
The Precise Facts.
C. Unsupported Testimony Of Interested Witnesses Is
Insufficient As A Matter Of Law To Overcome The
Strong Presumption Of Due Execution Arising From
Notarization.
POINT II
THE [JUDGE] ERRED IN TRANSFERRING
[PLAINTIFF'S] EQUITABLE LIEN AND UNJUST
ENRICHMENT CLAIMS TO THE LAW DIVISION IN
THAT THE [JUDGE] FAILED TO RECOGNIZE THE
CLAIMS AROSE OUT OF THE MORTGAGE
TRANSACTION AND WERE THUS GERMANE.
A. The Entire Controversy Doctrine Requires A Liberal
Rather Than A Narrow Approach To The Question Of
What Issues Are Germane; Germane Claims Are
Claims Arising Out Of The Mortgage Transaction.
B. The Equitable Lien And Unjust Enrichment Claims
Arose Out Of The Mortgage Transaction And Are Thus
Germane.
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Plaintiff raises the following argument in its reply brief, which we have
renumbered:
POINT III
THE RULES REQUIRE THAT ACTIONS IN WHICH
THE PRINCIPAL RELIEF SOUGHT IS EQUITABLE
IN NATURE "SHALL BE FILED AND HEARD IN THE
CHANCERY DIVISION."
After the judge conducted a hearing and took testimony from defendant and
Arline, he made findings of fact and conclusions of law. This court reviews a trial
judge's factual findings for an abuse of discretion. Cumberland Farms, Inc. v. N.J.
Dep't of Envtl. Prot., 447 N.J. Super. 423, 437 (App. Div. 2016). "The general rule
is that findings by the trial [judge] are binding on appeal when supported by
adequate, substantial, credible evidence. Deference is especially appropriate when
the evidence is largely testimonial and involves questions of creditability." Ibid.
(quoting Seidman v. Clifton Sav. Bank, S.L.A., 205 N.J. 150, 169 (2011)). This
court "should not disturb the factual findings and legal conclusions of the trial judge
unless [we are] convinced that they are so manifestly unsupported by or inconsistent
with the competent, relevant and reasonably credible evidence as to offend the
interests of justice." Id. at 437-38 (alteration in original) (quoting Seidman, 205 N.J.
at 169). However, this court reviews issues of law de novo. Id. at 438 (citing State
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v. Parker, 212 N.J. 269, 278 (2012)). The review of mixed questions of law and fact
is de novo. In re Malone, 381 N.J. Super. 344, 349 (App. Div. 2005).
The judge determined that defendant's signature on the June 2006 mortgage
was forged. We reject plaintiff's first contention that the judge erred as a matter of
law when he credited defendant and Arline's testimonies. Plaintiff argues there was
insufficient evidence for the judge to find the signature was forged. Specifically,
plaintiff contends their testimonies were "insufficient as a matter of law to overcome
the strong presumption of due execution arising from notarization," given that this
was defendant's only evidence of forgery and such testimony was from "interested
witnesses."
A notary's acknowledgement is prima facie evidence of the due execution
of an instrument. See Dencer v. Erb, 142 N.J. Eq. 422, 426 (Ch. 1948). N.J.S.A.
2A:82-17 provides:
If any instrument heretofore made and executed . . .
shall have been acknowledged, by any party who shall
have executed it . . . and, when a certificate of such
acknowledgement or proof shall be written upon or
under, or be annexed to such instrument and signed by
such officer in the manner prescribed by law, such
certificate of acknowledgement or proof shall be and
constitute prima facie evidence of the due execution of
such instrument by such party.
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Forgery is an avenue to overcome the strong presumption of due execution. See
Dencer, 142 N.J. Eq. at 426. However, like fraud, forgery must be established
by clear and convincing evidence. Ibid.; see also Stochastic Decisions, Inc. v.
DiDomenico, 236 N.J. Super. 388, 395 (App. Div. 1989). Clear and convincing
evidence is evidence that is "so clear, direct and weighty and convincing as to
enable [the judge] to come to a clear conviction, without hesitancy, of the truth
of the precise facts in issue." In re Boardwalk Regency Casino License
Application, 180 N.J. Super. 324, 339 (App. Div. 1981) (citation omitted). The
judge's factual determination that defendant established forgery is entitled to
deference when supported by "adequate, substantial, credible evidence."
Cumberland Farms, 447 N.J. at 437 (internal quotation marks and citation
omitted); see also In re Adoption of Child of Indian Heritage, 111 N.J. 155, 185
(1988) (reviewing a judge's determination on fraud claim for an abuse of
discretion).
The judge found defendant and Arline credible. Arline, who at the time
was in the middle of divorce proceedings with defendant, testified that the
signatures on the June 2006 mortgage and line of credit documents were not
defendant's. Defendant also testified that he did not sign the documents.
Plaintiff's representative testified that she was not present when the documents
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were signed. The judge had the opportunity to view the signatures on the
documents and made credibility findings. We see no abuse of his discretion.
Plaintiff next contends the judge erred in transferring three of plaintiff's
amended complaint claims. 1 Plaintiff is challenging the transfer of its equitable
lien claim based on the loan, its equitable lien based on property charges paid
by plaintiff, and the unjust enrichment claim. Plaintiff argues that these claims
arose out of the mortgage transaction, establishing that they were "germane,"
which would bar transfer to the Law Division.
Plaintiff argues the equitable lien and unjust enrichment claims arose out
of the June 2006 Mortgage transaction. Plaintiff points to the judge's statements
acknowledging that its claims were an alternative cause of action in this
foreclosure action. Likewise, plaintiff argues the entire controversy doctrine
requires the entire matter be tried in the Chancery Division.
The entire controversy doctrine is codified in Rule 4:30A, which
specifically has an exception to foreclosure actions: "[N]on-joinder of claims
1
Plaintiff does not challenge the transfer of counts five and six of its amended
complaint. This is likely because Arline did not own the Property when the bank
issued the May 2006 mortgage and the June 2006 line of credit. Defendant
testified that Arline transferred the Property to him in 1988. Arline no longer
owned the Property—and therefore could not encumber it without defendant's
consent.
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required to be joined by the entire controversy doctrine shall result in the
preclusion of the omitted claims to the extent required by the entire controversy
doctrine, except as otherwise provided by R[ule] 4:64-5 (foreclosure actions)[.]"
"[T]he entire controversy doctrine does not apply to non-germane claims since
they may not be joined in the foreclosure action." Pressler & Verniero, Current
N.J. Court Rules, cmt. 1 on R. 4:64-5 (2020).
Rule 4:64-5 provides:
Unless the court otherwise orders on notice and for
good cause shown, claims for foreclosure of mortgages
shall not be joined with non-germane claims against the
mortgagor or other persons liable on the debt. Only
germane counterclaims and cross-claims may be
pleaded in foreclosure actions without leave of court.
Non-germane claims shall include, but not be limited
to, claims on the instrument of obligation evidencing
the mortgage debt, assumption agreements and
guarantees.
To determine if a claim is germane, "a liberal rather than a narrow approach"
should be used. Leisure Tech.-Ne, Inc. v. Klingbeil Holding Co., 137 N.J.
Super. 353, 358 (App. Div. 1975). This court reviews a judge's decision relating
to germane claims de novo, as it is a legal question. See Joan Ryno, Inc. v. First
Nat'l Bank, 208 N.J. Super. 562, 570 (App. Div. 1986) (applying a de novo
standard of review); Assocs. Home Equity Servs., Inc. v. Troup, 343 N.J. Super.
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254, 273 (App. Div. 2001); Family First Fed. Sav. Bank v. DeVincentis, 284
N.J. Super. 503, 508-09 (App. Div. 1995).
This court addressed whether a claim is germane in Sun NLF Limited
Partnership v. Sasso, 313 N.J. Super. 546 (App. Div. 1998), in which the
defendant developer borrowed money from a savings and loan association to
finance a development project in a series of transactions. In the foreclosure
proceeding, the trial judge granted the plaintiff's motion for summary judgment
and dismissed the defendant's fraud and breach of contract counterclaims as non-
germane. Id. at 549-51. On appeal, this court reversed the grant of summary
judgment, stating that "[h]ad the foreclosure action been brought by the bank
itself, the claims and defenses arising out of the breach of the . . . contract would
have been properly before the court." Id. at 50 (citing Leisure Tech.-Ne, 137
N.J. Super. at 358 (stating that germane claims are those that arise out of the
mortgage transaction)).
As to plaintiff's equitable lien claims, such liens may be created:
[W]hen unjust enrichment or an express agreement to
grant a lien against a specific property is shown.
Additionally, an equitable lien can be imposed, if based
on the dictates of equity and conscience . . . a contract
of reimbursement could be implied at law.
[EnviroFinance Grp., LLC v. Envtl. Barrier Co., 440
N.J. Super. 325, 350 (App. Div. 2015) (second
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alteration in original) (internal quotation marks and
citation omitted).]
Generally, the theory of equitable liens requires an ultimate foundation in
contracts, either express or implied. See ibid. The grant of an equitable lien
entitles its holder to a security interest on the property if the property is sold.
See Resolution Tr. Corp. v. Griffin, 290 N.J. Super. 88, 93-94 (Ch. Div. 1994);
Bergen Cty. Welfare Bd. v. Gross, 96 N.J. Super. 472, 477 (Ch. Div. 1967)
(showing there is priority for equitable lien holders under a recording statute).
As to plaintiff's unjust enrichment claim, "[t]he doctrine of unjust
enrichment . . . rests on the equitable principle that a person shall not be allowed
to enrich himself unjustly at the expense of another." Inv'rs Bank v. Torres, 457
N.J. Super. 53, 62 (App. Div. 2018) (second alteration in original) (citation
omitted). "A cause of action for unjust enrichment requires proof that '[a]
[party] received a benefit and that retention of that benefit without payment
would be unjust.'" Ibid. (first alteration in original) (citation omitted); see also
VRG Corp., v. GKN Realty Corp., 135 N.J. 539, 548 (1994). Again, the doctrine
allows a judge to fashion a remedy that is fair and just under the circumstances.
Here, the judge stated that plaintiff's equitable lien and unjust enrichment
claims were non-germane, thus severing those claims and transferring them to
the Law Division. The judge stated: "All of these claims seek . . . not to
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establish the bank's interest in the [P]roperty, [but] rather . . . to establish sums
due and owing under various theories."
Generally, "[f]or an equitable lien to arise there must be a debt owing from
one person to another, specific property to which the debt attaches, and an intent,
expressed or implied, that the property will serve as security for the payment of
the debt." Highland Lakes Country Club & Cmty. Ass'n v. Franzino, 186 N.J.
99, 111-12 (2006) (alteration in original) (citation omitted). The right to
foreclosure is the main inquiry in a foreclosure action. See Old Republic Ins.
Co. v. Currie, 284 N.J. Super. 571, 574 (Ch. Div. 1995). The main elements of
the forclosure action are execution, recording, and default of the mortgage. See
Great Falls Bank v. Pardo, 263 N.J. Super. 388, 394 (Ch. Div. 1993), aff'd, 273
N.J. Super. 542 (App. Div. 1994).
The judge correctly noted that these claims were non-germane as they do
not arise out of the right to foreclose—the claims do not go to the execution,
recording, nor default. Also, plaintiff's equitable lien claims cannot be a basis
to foreclose on the Property. Rather, such an equitable lien would give
plaintiff—at best—a security interest in the Property. As such, the judge
properly determined that these equitable lien claims were non-germane to the
foreclosure action.
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Furthermore, a claim for unjust enrichment allows the court to fashion an
equitable remedy. In its complaint, plaintiff states it is seeking "the amount . . .
of [defendant and Arline's] unjust enrichment." In its merits brief, plaintiff
further states it is seeking an equitable lien rather than money. However, an
equitable lien would not be a basis to foreclose on the Property; rather it would
result in a money judgment. Because the equitable lien and unjust enrichment
claims do not give plaintiff a right to foreclose, the judge properly severed them
from the foreclosure action pursuant to Rule 4:64-5.
Finally, plaintiff argues that court rules require its equitable claims be
heard in the Chancery Division. It cites to Rule 4:3-1 to support this argument,
which states: "Actions in which the plaintiff's primary right or the principal
relief sought is equitable in nature . . . shall be filed and heard in the Chancery
Division[.]" Equitable lien and unjust enrichment claims are equitable in nature.
See Goldsmith v. Camden Cty. Surrogate's Office, 408 N.J. Super. 376, 382
(App. Div. 2009). Although equitable claims should remain in the Chancery
Division, Rule 4:64-5 specifically allows non-germane claims in a foreclosure
action to be dismissed or severed.
The judge had discretion to transfer claims from the Chancery Division to
the Law Division. O'Neill v. Vreeland, 6 N.J. 158, 166-68 (1951); Steiner v.
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Stein, 2 N.J. 367, 377-78 (1949). This court will review such a transfer for an
abuse of discretion. See O'Neill, 6 N.J. at 166-68. "[T]he Law Division can
adjudicate equitable issues and grant equitable relief not only in actions which,
though primarily legal, involve equitable issues, but also in certain actions
which are primarily or wholly equitable." Id. at 167; see Boardwalk Props., Inc.
v. BPHC Acquisition, Inc., 253 N.J. Super. 515, 526 (App. Div. 1991).
Plaintiff's equitable lien and unjust enrichment claims are non-germane
because they do not arise out of the mortgage—they do not give plaintiff the
right to foreclose on the June 2006 mortgage documents and line of credit.
Because these claims are non-germane, the judge properly severed them from
the foreclosure action pursuant to Rule 4:64-5. Although such claims are
equitable in nature, the Law Division has the authority to hear plaintiff's claims.
See BPHC Acquisition, 253 N.J. Super. at 526.
Affirmed.
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