Summary

On November 4, 2013, the New Jersey Appellate Division in Suser v. Wachovia Mortgage, FSB, et al. affirmed a homeowner’s right to file a prospective quiet title action to affirmatively challenge a bank’s standing to foreclose on a particular piece of property. This ruling may result in additional litigation for banks and lenders because homeowners can affirmatively bring these actions without waiting for a bank or lender to initiate foreclosure.

The plaintiff in Suser initiated this action by filing a quiet title action against Wachovia Mortgage, FSB (“Wachovia”) and Deutsche Bank National Trust Company (“Deutsche Bank”) in the Superior Court of New Jersey. While Plaintiff’s complaint sought to discharge the mortgages held by Wachovia and Deutsche Bank, the main thrust of his argument sought to challenge the defendants’ standing to seek foreclosure of their respective mortgages. Among other things, Plaintiff asserted that the subject mortgage loans were not properly assigned to the defendants and they should be estopped from maintaining their liens under the doctrines of laches and waiver. During discovery, the lower court denied the plaintiff’s discovery requests looking into the circumstances surrounding the assignment of the mortgage allegedly held by Deutsche Bank. The lower court subsequently granted summary judgment in favor of the defendants and dismissed plaintiff’s complaint.

The plaintiff appealed the lower court’s orders granting summary judgment and denying him discovery of the circumstances surrounding the assignment of the mortgage allegedly held by Deutsche Bank. The Appellate Division upheld the order granting summary judgment in favor of Wachovia, but reversed and remanded the lower court’s order granting summary judgment in favor of Deutsche Bank and the order precluding the plaintiff from discovery relating to the subject assignments. The Appellate Division held that in viewing the facts most favorable to the plaintiff, there was a legitimate dispute as to whether Deutsche Bank obtained an effective assignment for the subject loan and as a result, whether it had the right to foreclose or whether such right would reside with the assignor or some other entity.

The Appellate Division also held that the plaintiff was permitted to affirmatively file an action for quiet title because the question of whether Deutsche Bank was the proper holder of the subject mortgage with the right to foreclose is properly adjudicated through a quiet title action. Specifically, one of the purposes 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.” The Appellate Division also held that Deutsche Bank may in the near or distant future seek to foreclose on the subject property and that “could sufficiently enshroud plaintiff’s title” to permit him to file a quiet title action.

The import of this decision is that it permits homeowners to preemptively challenge a bank or lender’s standing to bring a foreclosure action. This finding provides homeowners with another avenue to raise potential foreclosure defenses and may lead to additional litigation on these issues prior to a foreclosure action ever being filed. This decision also reaffirms the importance of ensuring that all appropriate assignments and documents evidencing a proper chain of title are promptly recorded.