Opinion
DOCKET NO. A-1586-13T3
04-08-2015
HSBC BANK USA, NATIONAL ASSOCIATION AS TRUSTEE FOR SEQUOIA MORTGAGE TRUST 2007-3, Plaintiff-Respondent, v. MADHUBALA AGARWAL, A MARRIED WOMAN, Defendant-Appellant, and STATE OF NEW JERSEY and JANNETTE JACKSON, Defendants.
Anthony F. Gralewski argued the cause for appellant. Stephanie L. Soondar argued the cause for respondent (Shapiro & DeNardo, LLC, attorneys; Ms. Soondar, of counsel and on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Ostrer and Hayden. On appeal from the Superior Court of New Jersey, Chancery Division, Hudson County, Docket No. F-14409-12. Anthony F. Gralewski argued the cause for appellant. Stephanie L. Soondar argued the cause for respondent (Shapiro & DeNardo, LLC, attorneys; Ms. Soondar, of counsel and on the brief). PER CURIAM
Defendant Madhubala Agarwal appeals from two orders denying relief from a judgment of foreclosure. Having considered defendant's arguments in light of the record and applicable legal principles, we affirm.
Plaintiff HSBC Bank USA, NA, as trustee for Sequoia Mortgage Trust 2007-3 (HSBC), filed its original foreclosure complaint in July 2012. HSBC alleged defendant defaulted, beginning in July 2010, on a $185,000 note she executed in March 2005. The note was secured by a mortgage on an investment residential property in her name in Jersey City. Defendant and her husband apparently resided in Bergen County.
The mortgage note had an adjustable interest rate, a twenty-five year term, and required interest-only payments for the first ten years. According to the November 2011 notice of intention to foreclose (NOI), the amount needed to cure the default was over $20,000. In December 2010, the original mortgagee, Ameriquest Mortgage Company, assigned the note and mortgage to HSBC. Once HSBC determined that the residential property was tenant-occupied, it dismissed its claim against defendant's husband, Anil Agarwal.
Incongruously, the NOI stated that the mortgage was twenty-seven months past due, which would mean the default began in 2009, not 2010 as alleged in the complaint.
We refer to Madhubala Agarwal as defendant, and for convenience, refer to her husband by his first name, and mean no disrespect in doing so. HSBC omitted Anil as a party in an amended complaint in October 2012, and filed a formal dismissal in March 2013.
In a timely-filed pro se answer and counterclaim, joined by Anil who was still a party, defendant questioned HSBC's standing, denied that adequate notice of default was served, and alleged various forms of tortious and unlawful acts in connection with the loan's origination. Defendant claimed inaccurate accounting of her payments. She also asserted third-party claims against various mortgage servicers, governmental entities, and HSBC's attorneys.
In January 2013, an assistant vice president for PHH Mortgage Corporation (PHH Mortgage), HSBC's servicing agent, certified that $216,535.06 was due as of November 1, 2012, including principal of $184,832.02; unpaid interest of $11,353.69; and over $20,000 in advances for real estate taxes, plus $270 for inspections. In February 2013, defendant's answer was stricken, and her counterclaims and third-party claims dismissed with prejudice after she failed to appear at a mandatory pre-trial conference. The court directed HSBC to proceed with default against defendant.
The record before us does not clearly document the procedural steps that immediately followed. However, it appears the court vacated the order striking defendant's answer. Thereafter, HSBC moved for summary judgment. Defendant did not file opposition. In April 2013, the court granted HSBC requested relief, and struck defendant's answer, entered default, and permitted HSBC to proceed to enter judgment in an uncontested manner. In an order the following month, the court dismissed with prejudice defendant's counterclaim and third-party complaint.
HSBC then sought entry of final judgment. In support, HSBC served an affidavit of amount due of $206,661.98 as of March 20, 2013. The amount of unpaid principal was unchanged from October 31, 2012; unpaid interest had risen to $13,318.36; but net advances for taxes, insurance and other items dropped to $8,501.50. Final judgment was entered on June 13, 2013, along with a writ of execution.
On September 16, 2013, defendant filed an application "to stop scheduled Sale of Property." Apparently submitted by counsel, the motion largely repeated the allegations in defendant's pro se 2012 answer to HSBC's original complaint. Defendant and Anil also apparently questioned the crediting of their payments, although their allegation is difficult to decipher. Attached was a six-page spreadsheet, which indicated what defendant apparently alleged were monthly payments from January 2010 to March 2013, ranging from $884 to $980. According to PHH Mortgage statements subsequently submitted to the court, the adjustable monthly interest due was less than $400 a month. Beginning in late March 2013, and up to September 5, 2013, defendant listed what she apparently alleged were monthly payments ranging between $981 and $1040, which were repeatedly remitted but refused by the mortgagee. The spreadsheet indicated sixty attempted payments between March 25, 2013 and September 5, 2013; all but eleven were refused. The spreadsheet was unaccompanied by an authenticating certification.
Defendant and Anil alleged: "It is specifically stated that Merrill Lynch received JULY 2010 payment on 7/15/2010 via electronic transfer from Defendant's Bank. (Exhibit 4 — the Bank statement copy along with proof of payments from TD Bank letter from plaintiff attorney dated 8/26/2013 that still payments are being researched.)"
In response, on October 2, 2013, HSBC provided the court and defendant with a statement of the amount needed through October 23, 2013 to cure the default. It totaled $50,669.20, consisting of forty delinquent monthly payments, totaling $46,622.88, and various fees and costs associated with the foreclosure. Also provided was a payoff amount of $222,498.70.
HSBC did not itemize the payoff amount between principal and overdue interest.
Defendant's motion to stay the sheriff's sale was heard October 11, 2013, in advance of the scheduled October 24, 2013 sale. Defendant's counsel stated that he was unaware that many of the allegations asserted had been previously presented to the court. He stated that his client was unable to pay the amounts stated to cure the default or payoff the mortgage. He did not challenge the correctness of the amounts.
A sale scheduled for September 26, 2013 was adjourned pursuant to N.J.S.A. 2A:17-36.
The court denied defendant's motion noting that defendant had essentially refiled her answer, counterclaim, and third-party complaint that had previously been dismissed.
A week later, defendant sought relief from the judgment and the imminent sheriff's sale by a proposed order to show cause. The application for relief was supported by an affidavit of Anil, who alleged that "there is only a balance of $6,786.62 outstanding on the mortgage and note." He alleged that he made the monthly payments on the note, often paying several hundred dollars more than the interest due, in order to reduce the principal. He referred to a "print out from my Bank T.D. Bank"; however, it was not accompanied by any authentication from the bank, it did not bear the bank's logo, and it included a misspelling that raises questions about its authenticity as a bank document.
According to the spreadsheet, and without explanation, zero interest was charged on the loan after October 2005, and all the alleged payments were allocated to principal. This reduction in principal is also belied by statements from PHH Mortgage, noted above, which Anil attached to his affidavit. Statements from 2005, 2006, 2011, and 2013 reflected that the principal due was never less than $184,832.02. They also reflected that although monthly interest-only payments fell to $385.07 as of the statements dated March 7, 2011, and September 5, 2013, the interest due never dropped to zero.
HSBC opposed the order to show cause. HSBC urged the court to reject Anil's claim regarding the payment status of the loan, noting that HSBC had certified to the amounts due, which were embodied in the final judgment of foreclosure without opposition. HSBC also contended that Anil lacked standing, and there was no good cause to stay the sheriff's sale.
The court declined to enter the order to show cause. Without oral argument, the court held that defendant had not filed an appropriate motion to vacate or modify the final judgment, apparently referring to Rule 4:50-1, and that an order to show cause was not the proper means to secure relief from the judgment. The court noted that if defendant claimed the amount due was incorrect, she should have raised the issue when she received the notice of application for final judgment. The court also stated that Anil was not a party and should not have provided a certification in support of the motion.
This appeal followed. Defendant's sole point on appeal is: "COURTS OF EQUITY ARE REQUIRED TO TAKE EXTRAORDINARY MEASURES IN ASSURING EQUITY AND FAIRNESS TO BE DONE." Defendant contends the court erred in denying relief on October 11, 2013, and October 23, 2013. She renews her argument that she made "substantial payments on the mortgage but received no credit for some," and she contends the court should have delayed the sheriff's sale to allow for a brief period of discovery, to test her claim of payments.
Well-settled principles govern defendant's appeal. Relief from a judgment may be sought pursuant to Rule 4:50-1, upon motion with briefs. The decision whether to grant a motion to vacate a judgment pursuant to Rule 4:50-1 "is left to the sound discretion of the trial court, and will not be disturbed absent an abuse of discretion." Mancini v. EDS ex rel. N.J. Auto. Full Ins. Underwriting Ass'n, 132 N.J. 330, 334 (1993). See also US Bank Nat'l Ass'n v. Guillaume, 209 N.J. 449, 467 (2012) (stating decision on motion to vacate default judgment "should not be reversed unless it results in a clear abuse of discretion"). Relief should be granted "sparingly, in exceptional situations . . . to provide relief from judgments in situations in which, were it not applied, a grave injustice would occur." Hous. Auth. of Morristown v. Little, 135 N.J. 274, 289 (1994).
A motion to vacate a default judgment implicates two often competing goals: the desire to resolve disputes on the merits, and the need to efficiently resolve cases and provide finality and stability to judgments. "The rule is designed to reconcile the strong interests in finality of judgments and judicial efficiency with the equitable notion that courts should have authority to avoid an unjust result in any given case." Manning Eng'g, Inc. v. Hudson Cnty. Park Comm'n, 74 N.J. 113, 120 (1977). A plaintiff suffers prejudice from delay. See Deutsche Bank Trust Co. Ams. v. Angeles, 428 N.J. Super. 315, 320 (App. Div. 2012) (stating that "equity must be applied to plaintiffs as well as defendants").
A defendant claiming excusable neglect under Rule 4:50-1(a) must also demonstrate that he or she has a meritorious defense. Guillaume, supra, 209 N.J. at 469; Mancini, supra, 132 N.J. at 334-35. A meritorious defense must be shown because there is little point in setting aside a judgment, sacrificing interests in repose and burdening a plaintiff and the court with additional litigation, if the ultimate result will inevitably be the same. See Guillaume, supra, 209 N.J. at 469; Schulwitz v. Shuster, 27 N.J. Super. 554, 561 (App. Div. 1953).
Like an order granting relief from a judgment, the grant of a judicial stay of a sheriff's sale is a form of equitable relief, which derives from the court's inherent power to control its own judgments. See Hous. Auth. of Newark v. West, 69 N.J. 293, 300-01 (1976) (addressing stay of warrant of removal); Crane v. Bielski, 15 N.J. 342, 346 (1954) (stating that "[q]uite independent of statute or rule of court, the Court of Chancery has inherent power to order a sale of mortgaged premises and to control its process directed to that end"). In some cases, a party may seek a hardship stay of a sale without questioning the creditor's substantive rights. See Little, supra, 135 N.J. at 289.
However, here, a stay was sought as a form of interim relief pending resolution of a substantive challenge to the underlying judgment. To secure such a stay of another party's adjudicated entitlement to relief, the party requesting the stay must satisfy the standard in Crowe v. De Gioia, 90 N.J. 126 (1982), for injunctive relief. See Garden State Equal. v. Dow, 216 N.J. 314, 320 (2013) (addressing stay pending appeal). That is, a party must establish that relief is needed to prevent irreparable harm, the applicant's claim "rests on settled law and has a reasonable probability of succeeding on the merits[,]" and the balance of hardships favors the grant of relief. Ibid. The grant of a stay is discretionary and we review the trial court's determinations for an abuse of discretion. See Avila v. Retailers & Mfrs. Distribution, 355 N.J. Super. 350, 354 (App. Div. 2002) (discussing stay pending appeal), certif. denied, 176 N.J. 74 (2003).
Applying these principles, we discern no basis to disturb the trial court's orders. We agree with the trial court that it was inappropriate for defendant to seek relief from the judgment by order to show cause. Rule 4:50-1 governs such applications. However, the trial court proceeded to consider the second application on the merits, and did not err.
Defendant based her application for relief on the assertion that plaintiff failed to properly account for payments her husband made on her loan account. Defendant's first application for a stay also included an almost verbatim rehashing of many of the allegations in her answer. However, defendant failed to explain her neglect to present the purported proofs of payment pre-judgment, let alone present an explanation that satisfies the prerequisite excusable neglect.
The trial court determined the second application was not supported by a certification from a party with personal knowledge; Anil was not a party; and he should not have provided a certification. Apparently, the court questioned Anil's personal knowledge of the payments. However, we see no impediment under the rules for a movant to support her request for relief with an affidavit or certification under Rule 1:6-6 by a non-party, if that non-party has personal knowledge of relevant facts that the non-party asserts.
--------
As for a showing of a meritorious defense, a movant must present competent evidence to support her claim, if it is not already of record. See R. 1:6-6. In this case, Anil attached to his affidavit a spreadsheet reflecting purported payments, drawn from his bank account and paid to the mortgagee. However, the spreadsheet lacks a foundation to authenticate it as a business record of Anil's bank. See N.J.R.E. 803(c)(6).
Just as defendant failed to demonstrate a meritorious defense through competent evidence, she failed to establish a likelihood of prevailing on the merits to justify a stay of the sheriff's sale. In considering the balance of the equities, defendant, as the owner of an investment property, also presented a less compelling claim of hardship than a debtor threatened with the loss of his or her primary residence. On the other hand, as noted in Angeles, plaintiff's prejudice from delay cannot be ignored. See Angeles, supra, 428 N.J. Super. at 320.
In sum, the court appropriately exercised its discretion in denying relief from the judgment, and denying a stay of the sheriff's sale.
Affirmed. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION