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U.S. Bank National Association v. Berg

A-4696-08T2 (N.J. Super. App. Div. 2010) (Unpublished)

FORECLOSURE; STANDING — If a foreclosing lender actually possesses a note when it files a foreclosure complaint, it doesn’t matter that it did not possess the note at the time it filed an earlier foreclosure complaint.

Nearly five months after a sheriff’s sale in a foreclosure action, the borrower filed a motion to vacate both the judgment and the sheriff’s sale, to void the deed, and to stay eviction. The borrower argued that the bank lacked standing to file the foreclosure complaint because it did not possess the note at the time it filed the complaint. The lower court denied relief, finding that the bank only had to gain possession of the note before entry of the judgment of foreclosure, which it had done.

Previously, the borrower had filed for protection under Chapter 13 of the Bankruptcy Code and defaulted on his obligations on a note and mortgage. He listed his property as part of his bankruptcy estate and identified the bank’s servicer as a secured creditor. The bank and the borrower entered into a settlement stipulation where the borrower acknowledged the debt’s existence and that he had defaulted on his obligations.

The bank later filed a foreclosure complaint and the borrower did not challenge the bank’s standing. After a sheriff’s sale, the bank purchased the property for the minimum bid and recorded the deed. Five months later, the borrower filed its motion seeking to vacate of the default judgment and the sheriff’s sale. In the action, the Court noted that the issue of standing to initiate a mortgage foreclosure action has emerged as a recent “hot topic.”

The Court, however, declined to reach the standing issue because the bank possessed the note when it filed the complaint, the borrower had acknowledged the validity of the note and mortgage, and had not moved to vacate the judgment and sale within a reasonable time. In fact, the borrower acted at all times as if the judgment was valid. Thus, the Court found the delay in questioning the standing of the bank to file its complaint in foreclosure until five months after the sheriff’s sale was too long.

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