Be Aware: Proper Authentication of Documents Required in New Jersey Foreclosure Actions

March 2011Newsletters In the Zone

In last month’s issue, we reported on an unpublished decision issued by the Superior Court of New Jersey, Chancery Division, Bergen County, which held that a foreclosing lender, under the facts of that case, was not required to possess the original note evidencing the underlying loan obligation at the time the complaint was filed. That decision, while constituting persuasive authority, is not binding on similarly situated courts throughout the State. In fact, other lower courts have held to the contrary. More recently, in a opinion approved for publication on Jan. 28, 2011, Presiding Judge Stephen Skillman, writing for the Appellate Division in Wells Fargo Bank, N.A. v. Ford, held that Wells Fargo, as the foreclosing lender, failed to present adequate evidence that it was entitled to prosecute the foreclosure action. This opinion constitutes binding authority.

Wells Fargo took an assignment of a note and mortgage from Ford’s initial lender, but the assignment was not recorded at the time of the filing of the amended complaint. Wells Fargo moved for summary judgment, supported by a certification from an individual, ostensibly familiar with the underlying transaction documents, in which he stated that he had knowledge of the amount due, that Wells Fargo was the holder and owner of the note and mortgage, and that the documents attached to his certification were “true copies.” Ford, who represented herself, challenged the motion, asserting among other things that certain documents relating to her mortgage application constituted forgeries.

In reversing the trial court’s grant of summary judgment in favor of Wells Fargo, the Appellate Division focused on the question of whether Wells Fargo established that it subsequently acquired ownership or control of the note from the initial lender. In discussing the three categories of parties under the Uniform Commercial Code which have the right to enforce a negotiable instrument and, consequently, if the instrument is secured by a mortgage, have standing to maintain a foreclosure action, Judge Skillman concluded Wells Fargo failed to present adequate evidence it was a “nonholder in possession of the instrument who has the rights of the holder,” the only one of the three categories of parties within which Wells Fargo could fit.

In focusing on the certification submitted in support of the motion, the Appellate Division agreed that, if properly authenticated, the documents could be found sufficient to establish Wells Fargo as a party entitled to maintain the foreclosure action. However, the court found that the certification failed to allege that the author had personal knowledge, that Wells Fargo was the holder and owner of the note and, in fact, gave no indication as to how the author obtained that alleged knowledge. The certification also failed to indicate the source of the author’s alleged knowledge that the mortgage and note were “true copies.” Furthermore, the purported assignment of the mortgage, which an assignee must produce to maintain a foreclosure action, was not authenticated in any manner; it was simply attached to a reply brief. In short, the trial court should not have considered the document, absent actual authentication based on personal knowledge.

The case also presents some interesting discussion regarding Wells Fargo’s holder in due course defense to Ford’s counterclaim. Those issues will not be discussed here. Suffice to say, in response to the investigation regarding “robo-signing” of foreclosure pleadings, the courts are taking lenders to task to assure their pleadings comply with the requirements of the Rules of Court.

For more information, please contact John L. Grossman at 609.572.2322 or [email protected].