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Appellate Division Upholds Quiet Title Action To Contest Validity of Deutsche Bank Assignment

          In Suser v. Deutsche Bank, 2013 N.J. Super. LEXIS 162 (Nov. 4, 2013), a reported appellate decision, the Appellate Division determined that a homeowner could sue an assignee of a mortgage in a Quiet Title action to clear up a defective assignment from Wells Fargo to Deutsche Bank.  The case was on appeal from a dismissal by a Hudson County trial judge.

          At the trial court level, the homeowner moved to remove a Deutsche Bank mortgage because of alleged inadequacies in its assignment.  The loan in question was originally obtained and recorded by William Suser, as the lender on a West New York condominium.  The loan was made to the prior owner on July 29, 2006. The loan had a principal balance of $150,000 and eventually went into default.  In a somewhat unusual twist, Mr. Suser foreclosed on the prior owner, secured a foreclosure judgment, and obtained a sheriff’s deed, bidding $100 on the sale.  Mr. Suser then commenced this action to remove the prior mortgages by World Savings Bank, FSB, on a $200,000 loan taken by the prior owner in 2004, and by WaMu on a $999,999 loan taken by the prior owner in 2004.  Wachovia and Wells Fargo allegedly acquired the $200,000 World Savings FSB loan by merger.  Deutsche Bank National Trust Company, as Trustee WAMU 2005-AR2 allegedly acquired the $999,999 WaMu loan by assignment.

         Mr. Suser claims, in effect, that the failure of the assignees of the two original loans to enforce any rights they might have had in the original foreclosure action bars them from enforcing the lien after sheriff’s sale.  Plaintiff claimed the World Savings and WaMu mortgages:

“[s]hould not be recognized in equity because they have been satisfied, settled, obtained by mistake and/or [sic] improperly encumber the subject premises without legal right or standing to enforce same.”

Id. at *2.  Plaintiff relied on Last v. Audubon Park Assocs., 227 N.J. Super. 602 (App. Div. 1988).  In that case, an owner invested millions in a housing project believing senior mortgage rights had been extinguished at a tax sale, while the other mortgagors waited in the wings, allowing him to invest those funds and “silently observed … from the sidelines” over a period of years. Id. at 608.  Thus, the grounds in Last for extinguishing a mortgage lien altogether, were significantly stronger than in the case at bar.

            The Trial Judge dismissed the Plaintiff’s claims on Summary Judgment without allowing discovery to take place.  The dispute, at face value, was legitimate, and the Appellate Court disagreed with the Trial Court, finding that there was a maintainable quiet-title action premised on the assumption that the assignment failed to validly transfer the mortgage to Deutsche.  The upshot of such a finding, should it be developed and prevail, would not necessarily be an extinguishing of the mortgage lien outright, but would mean that the right to foreclose would reside with the assignor or some other entity that no longer had any interest in the property.

            N.J.S.A. 2A:62-1 permits a person “in the peaceable possession of lands” to bring an action “to clear up all doubts and disputes” concerning some other person’s claim to a “lien or encumbrance thereon.”  In Suser, there was no legitimate dispute about the validity of the WaMu mortgage when executed, but there was a legitimate dispute about whether Deutsche was the proper holder of the WaMu mortgage, which was subject to adjudication in a quiet-title action.  An express purpose of N.J.S.A. 2A:62-1 is to permit a landowner to sue for clarification of the validity or reach of his title in circumstances that otherwise preclude a forum for the resolution of such a dispute. Albro v. Dayton, 50 N.J. Eq. 574 (Ch. 1982).  A Plaintiff in a quiet-title action must show that there is no other forum for an adjudication of the dispute but also that there is no other adequate remedy at law.  Id. at *10-11.  In a footnote, the Court identified that to extinguish the prior liens of World Finance and WaMu would also be necessary to confer completely clean title and to do that there must be some argument about the unenforceability or lack of priority of those liens that was never raised in the instant action.

            The Appellate Division vacated the order denying plaintiff’s motion for summary judgment, vacating the order granting Deutshce’s motion for summary judgment, reversing the protective order in place, and remanding for discovery and further proceedings in conformity with the opinion.