NOT FOR PUBLICATION WITHOUT THE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.
21 A-0653-15T3