NOT FOR PUBLICATION WITHOUT THE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.
5 A-0793-15T1
LISA G. STROBEL VS. ROLF STROBEL(FM-15-1200-02, OCEAN COUNTY AND STATEWIDE)
Combined Opinion