US BANK, NA, ETC. VS. DAVID E. WALSH(F-009696-14, SOMERSET COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE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-0063-15T1

U.S. BANK, N.A. as Successor
Trustee for Bank of America as
Trustee for Thornburg Mortgage
Securities Trust 2007-3,

Plaintiff-Respondent,

v.

DAVID E. WALSH and DEBORAH
WALSH,

Defendants-Appellants.
______________________________

Argued November 14, 2017 – Decided November 30, 2017

Before Judges Fasciale and Sumners.

On appeal from Superior Court of New Jersey,
Chancery Division, Somerset County, Docket No.
F-009696-14.

David E. Walsh and Deborah Walsh, appellants,
argued the cause pro se.

Dustin P. Mansoor argued the cause for
respondent (Houser & Allison, APC, attorneys;
Gary N. Smith, on the brief).

PER CURIAM

David and Deborah Walsh (defendants) appeal from a May 8,

2015 order denying their motion to vacate default; and a July 10,
2015 order denying their motion to reconsider or vacate summary

judgment previously entered in favor of U.S. Bank, N.A.

(plaintiff). We affirm.

Defendants executed a promissory note (the note) to Guardhill

Financial Corp. (Guardhill) with an original principal balance of

$1,950,000. Defendants secured the note with a mortgage against

the property, naming Mortgage Electronic Registration Systems,

Inc. (MERS) as nominee for Guardhill, and then recorded the

mortgage. In May 2007, defendants entered into a modification

agreement.

MERS assigned the note and mortgage to TMST Home Loans, Inc.

(TMST). TMST assigned the note and mortgage to Bank of America

as Trustee for Thornburg Mortgage Securities Trust 2007-3 (Bank

of America as Trustee). Bank of America as Trustee assigned the

note and mortgage to plaintiff.

In May 2009, defendants defaulted on the note and mortgage.

In March 2014, plaintiff filed the foreclosure action. In

September 2014, plaintiff filed an amended complaint addressing

the May 2007 modification agreement. Defendants did not accept

service of the amended complaint and the judge entered default.

Although the judge did not vacate the default, the judge later

substantively considered defendants' challenge to plaintiff's

standing to proceed.

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 At the close of extensive discovery, plaintiff moved for

summary judgment. On January 9, 2015, the judge granted

plaintiff's motion for summary judgment and issued a comprehensive

twenty-six page written opinion in which the judge concluded

defendants lacked a meritorious defense to the foreclosure action.

In May 2015, the judge entered final judgment. Defendants then

moved to set aside or reconsider the order granting summary

judgment.

On appeal, defendants argue that they were entitled to relief

under Rule 4:50-1; that they should have the right to challenge

the mortgage and note assignments; and that plaintiff does not

have standing for various reasons including an allegedly

fraudulent allonge.

We begin by addressing defendants' contention that the judge

erred by denying their motion to vacate the order granting

plaintiff summary judgment. On this point, defendants rely on

Rule 4:50-1, which states that

the court may relieve a party or the party's
legal representative from a final judgment or
order for the following reasons: (a) mistake,
inadvertence, surprise, or excusable neglect;
(b) newly discovered evidence which would
probably alter the judgment or order and which
by due diligence could not have been
discovered in time to move for a new trial
under [Rule] 4:49; (c) fraud (whether
heretofore denominated intrinsic or
extrinsic), misrepresentation, or other

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 misconduct of an adverse party; (d) the
judgment or order is void; (e) the judgment
or order has been satisfied, released or
discharged, or a prior judgment or order upon
which it is based has been reversed or
otherwise vacated, or it is no longer
equitable that the judgment or order should
have prospective application; or (f) any other
reason justifying relief from the operation
of the judgment or order.

"The trial court's determination under [Rule 4:50-1] warrants

substantial deference, and should not be reversed unless it results

in a clear abuse of discretion," namely where the "decision is

'made without a rational explanation, inexplicably departed from

established policies, or rested on an impermissible basis.'" US

Bank Nat'l Ass'n v. Guillaume, 209 N.J. 449, 467-68 (2012) (quoting

Iliadis v. Wal-Mart Stores, Inc., 191 N.J. 88, 123 (2007)).

Defendants failed to satisfy this standard as to any subsection

of Rule 4:50-1.

In particular, the most relevant sections applicable to

defendants' contentions are Rule 4:50-1(b), (c), and (f). Under

Rule 4:50-1(b), the newly discovered evidence subsection, "the

party seeking relief must demonstrate 'that the evidence would

probably have changed the result, that it was unobtainable by the

exercise of due diligence for use at the trial, and that the

evidence was not merely cumulative.'" DEG, LLC v. Twp. of

Fairfield, 198 N.J. 242, 264 (2009) (quoting Quick Chek Food Stores

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v. Twp. of Springfield, 83 N.J. 438, 445 (1980)). "Moreover,

'newly discovered evidence' does not include an attempt to remedy

a belated realization of the inaccuracy of an adversary's proofs."

Ibid. (quoting Posta v. Chung-Loy, 306 N.J. Super. 182, 206 (App.

Div. 1997), certif. denied, 154 N.J. 609 (1998)). Rule 4:50-1(c)

provides relief for fraud. Rule 4:50-1(f) is reserved for

"exceptional situations" where "truly exceptional circumstances

are present." Hous. Auth. of Morristown v. Little, 135 N.J. 274,

286 (1994) (citations omitted). Defendants have failed to satisfy

any of these criteria.

"The only material issues in a foreclosure proceeding are the

validity of the mortgage, the amount of the indebtedness, and the

right of the mortgagee to resort to the mortgaged premises." Great

Falls Bank v. Pardo, 263 N.J. Super. 388, 394 (Ch. Div. 1993),

aff'd, 273 N.J. Super. 542 (App. Div. 1994). We have held that

"either possession of the note or an assignment of the mortgage

that predated the original complaint confer[s] standing."

Deutsche Bank Tr. Co. Ams. v. Angeles, 428 N.J. Super. 315, 318

(App. Div. 2012) (citing Deutsche Bank Nat'l Tr. Co. v. Mitchell,

422 N.J. Super. 214, 216 (App. Div. 2011)). If a plaintiff cannot

establish it owned or controlled the underlying debt at the time

the complaint is filed, it "lacks standing to proceed with the

foreclosure action and the complaint must be dismissed." Wells

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Fargo Bank, N.A. v. Ford, 418 N.J. Super. 592, 597 (App. Div.

2011). "If a debt is evidenced by a negotiable instrument, such

as the note executed by [a] defendant," whether a plaintiff has

established ownership or control over the note "is governed by

Article III of the Uniform Commercial Code (UCC), N.J.S.A. 12A:3-

101 to -605, in particular N.J.S.A. 12A:3-301." Ibid.

There are "three categories of persons entitled to enforce

negotiable instruments" as described in N.J.S.A. 12A:3-301.

Mitchell, supra, 422 N.J. Super. at 222-23.

N.J.S.A. 12A:3-301 provides:

"Person entitled to enforce" an instrument
means the holder of the instrument, a
nonholder in possession of the instrument who
has the rights of a holder, or a person not
in possession of the instrument who is
entitled to enforce the instrument pursuant
to [N.J.S.A.] 12A:3-309 or subsection d. of
[N.J.S.A.] 12A:3-418. A person may be a
person entitled to enforce the instrument even
though the person is not the owner of the
instrument or is in wrongful possession of the
instrument.

Here, plaintiff had standing to pursue the foreclosure case

against defendants. Plaintiff was in possession of the note before

filing the complaint and the trial court repeatedly addressed and

rejected defendants' standing argument. Plaintiff presented

defendants with the original note and mortgage at a November 2013

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conference and defendants confirmed their signatures on the

instruments.

Defendants allege that they have new evidence that the allonge

was fraudulent, but offer no credible explanation as to why their

due diligence did not uncover such purported evidence sooner, when

they were in possession of the discovery. Furthermore, their so-

called expert report and handwriting analysis, obtained after the

court granted summary judgment to plaintiff, is inconclusive.

Rather, the handwriting analysis reflects that there is

insufficient information to conclude whether the signature was

valid. Furthermore, the Guardhill representative's email stating

that Guardhill does not have an allonge on file does not disprove

plaintiff's standing in this case.

Although defendants recognize they do not have standing under

New Jersey law to challenge a failure to comply with the trust

agreement, they argue that the note and mortgage assignments were

invalid. Defendants are not parties to or beneficiaries of the

trust, and therefore lack standing to assert violations of the

trust, and even if they did have standing, their assertions would

be an insufficient defense to the foreclosure claim. See, e.g.,

Reinagel v. Deutsche Bank Nat'l Tr. Co., 735 F.3d 220, 228 (5th

Cir. 2013) (explaining that even though the trust agreement was

violated, the debtor could not enforce the terms of the trust

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agreement unless the debtor is a third-party beneficiary, and even

then, such an argument does not render the assignment void; it

would just allow the debtor to sue for breach of the trust

agreement).

The judge also appropriately denied defendants relief under

the reconsideration standard. As an appellate court, we review

the denial of a motion for reconsideration to determine whether

the trial court abused its discretionary authority. Cummings v.

Bahr, 295 N.J. Super. 374, 389 (App. Div. 1996). Reconsideration

should only be used "for those cases which fall into that narrow

corridor in which either 1) the [c]ourt has expressed its decision

based upon a palpably incorrect or irrational basis, or 2) it is

obvious that the [c]ourt either did not consider, or failed to

appreciate the significance of probative, competent evidence."

Id. at 384 (quoting D'Atria v. D'Atria, 242 N.J. Super. 392, 401

(Ch. Div. 1990)). Additionally, the decision to deny a motion for

reconsideration falls "within the sound discretion of the [trial

court], to be exercised in the interest of justice." Ibid.

(quoting D'Atria, supra, 242 N.J. Super. at 401).

Although the judge found the motion for reconsideration was

not filed timely, he substantively addressed the motion. The

judge reviewed defendants' submissions, mostly arguing the same

standing issue, and found that defendants' argument was "a search

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for technicalities that ignores the realities of the circumstances

before the [c]ourt. [D]efendants admit they have not paid any

princip[al], interest, real estate tax or insurance payments for

the property since May 1, 2009. . . . [D]efendants admittedly and

unabashedly continue to live in the premises at no charge." The

judge's decision to deny the motion for reconsideration was within

his discretion. He reviewed and analyzed the probative, competent

evidence, along with non-probative and incompetent evidence

presented by defendants. The judge properly denied both the motion

for reconsideration and the motion to set aside summary judgment.

We conclude the remainder of defendants' arguments are

without sufficient merit to warrant discussion in a written

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

Affirmed.

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