NJ Appellate Panel Reverses Foreclosure Because Deutsche Bank Didn't Have Note When It Sued

A bank that sued to foreclose a New Jersey mortgage in 2008 is back on square one after a state appeals court ruling yesterday that its filing was defective because it didn’t prove possession of the note for the loan.

After winning the case on summary judgment and obtaining possession in a sheriff’s sale last year, Deutsche Bank will now have to start the foreclosure process over again from scratch, the Star-Ledger reports.

Under the ruling by the Superior Court Appellate Division, “the lender has to have had the assignment of mortgage and possession of the note before it files a foreclosure action,” attorney Peggy Jurow of Legal Service of New Jersey tells the newspaper. “They can’t fix up that sort of paperwork problem afterwards. They have to dismiss the case and start again.”

A copy of the opinion concerning the two-family Plainfield home owned by Jacqueline Bethea is provided by Leagle.

As the appellate panel explains, the trial court erred in granting summary judgment to the bank because it hadn’t established that it had standing to sue.

“Without evidence that Deutsche Bank possessed the note at the time of filing, and knowing that the complaint was filed prior to the assignment of the mortgage, the trial court nevertheless found that Deutsche Bank had standing. The court found that plaintiff cured the defect of filing the complaint a day before receiving the assignment by filing an amended complaint. The trial court also found that Deutsche Bank was a holder in due course of the mortgage and thus was not subject to any defenses asserted by Bethea because nothing in the transaction would have alerted the original lender or Deutsche Bank to any fraud in the underlying transaction.”

But the trial court erred, the panel says, because “Deutsche Bank did not prove it had standing at the time it filed the original complaint. The assignment was not perfected until after the filing of the complaint, and plaintiff presented no evidence of having possessed the underlying note prior to filing the complaint. If plaintiff did not have the note when it filed the original complaint, it lacked standing to do so, and it could not obtain standing by filing an amended complaint.”

Because standing was not proven, the appeals court didn’t reach the question of whether Deutsche Bank was a holder in due course of the mortgage.

The opinion also notes, although it doesn’t reach this question either, that the proof provided by the bank to support the summary judgment in its favor was inadequate, because attorney and bank employee certifications it submitted weren’t shown to be based on personal knowledge.

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