Farah v. LaSalle Bank N.A.

JAMES FARAH, Plaintiff, v. LASALLE BANK NATIONAL ASSOCIATION, as Trustee for theWAMU Mortgage Pass-Through Certificates Series 2006-AR7 Trust;JPMORGAN CHASE BANK, N.A. as a Servicer;MORTGAGE ELECTRONIC REGISTRATION SYSTEM; and JOHN DOES 1-10, inclusive, Defendants.

Civ. No. 15-cv-2602 (KM)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY

May 18, 2020

OPINION

KEVIN MCNULTY, U.S.D.J.:

James Farah brings this action against Defendants JPMorgan Chase Bank, N.A. ("Chase"), and LaSalle Bank National Association, as Trustee for the WaMu Mortgage Pass-Through Certificates Series 2006-AR7 Trust ("LaSalle as Trustee"),¹ and Mortgage Electronic Registration System ("MERS") (together, the "Defendants"), arising from their allegedly fraudulent conduct in connection with his mortgage loan. These Defendants move for summary judgment on multiple grounds. (DE 168)

The primary issue discussed in this Opinion is the res judicata effect of a final judgment in a parallel state-court mortgage foreclosure proceeding. The foreclosure was based on the following facts, as to which there was nosubstantial, evidence-backed dispute. Farah took out a loan, secured by a recorded mortgage, with Washington Mutual Bank, FA ("WaMu") in 2006. Farah refinanced that loan with WaMu in 2008. That 2006 loan was satisfied and discharged in connection with the 2008 refinancing. When WaMu failed, its assets were taken over by the FDIC. The FDIC assigned WaMu's loan assets, including the 2008 Farah loan, to Chase. Farah defaulted in 2010, and has made no monthly payments for nearly ten years. For part of this period he occupied the property, and for part of the period he rented out the property for $5300 per month.

I find that the state court's final judgment of foreclosure in favor of Chase is fatal to Farah's claims of "fraud" in this action. See Section III.A, infra. In the alternative, I briefly discuss Defendants' other proffered grounds for summary judgment. See Section III.B, infra.

For the reasons stated herein, the Defendants' motion for summary judgment is GRANTED.

I. Background and Procedural History²

Facts common to the various actions described in this section, either established by uncontradicted documents or admitted by the plaintiff, are as follows.

Mr. Farah and his spouse, Julia Farah, are the owners of a residential property at 522A Green Village Road, Green Village, County of Morris, NJ. (See Amended Complaint ("AC") ¶ 1.) (For convenience, I refer to them together as "Farah".) On April 26, 2006, Farah entered into a residential loan (the "2006loan"), evidenced by a note and secured by a mortgage with Washington Mutual Bank, FA ("WaMu").

On January 17, 2008, Farah paid off the 2006 loan in connection with refinancing the mortgage with WaMu (the "2008 loan"). (Gregada Cert. ¶¶ 3, 4; see also Berg Decl. ¶ 4.) On September 25, 2008, Chase purchased assets of WaMu, including this loan, out of FDIC receivership. (DE 13-8 at 4; see also Gregada Cert. ¶¶ 5, 12, AC ¶¶ 17-21.) Farah admittedly has made no monthly payments on the mortgage since 2010, despite operating the premises as a rental property for some part of that time.

A. State Mortgage Foreclosure Actions (Background)

1. 2014 Foreclosure Action

On February 27, 2014, JP Morgan commenced a mortgage foreclosure proceeding (the "2014 foreclosure action") in the Superior Court of New Jersey, Morris County (No. F-7425-14). Farah filed a contesting answer and counterclaims. (Berg Decl. ¶ 5.)

On October 27, 2014, the state court awarded summary judgment, struck the answer, and deemed the foreclosure action uncontested. (Berg Decl. ¶ 6.) Judge Stephan C. Hansbury ordered, in accordance with state procedure, that the action be transferred to the foreclosure unit to proceed to final judgment as an uncontested matter.³ For reasons that are unclear, theforeclosure action was thereafter administratively terminated without prejudice, for want of prosecution.⁴

In April-May 2016, JP Morgan moved to reinstate the 2014 foreclosure action. Mr. Farah then filed a notice of removal of the foreclosure action to this Court. See Civ. No. 16-cv-3056. By order and opinion dated December 16, 2016, I found that there was no basis for federal jurisdiction and remanded the foreclosure to the State court. On February 1, 2018, however, Chase voluntarily discontinued the 2014 foreclosure action without prejudice. (Berg Decl. ¶ 7)

2. 2018 Foreclosure Action and Summary Judgment Decision

Shortly thereafter, on May 23, 2018, Chase filed a new foreclosure action (the "2018 foreclosure action") in the Superior Court of New Jersey, Morris County (No. F-001096-18). Despite the prior remand for lack of jurisdiction, Mr. Farah again filed a notice of removal of the foreclosure action to this Court. On February 27, 2019, I adopted the Report and Recommendation of Magistrate Judge Hammer that removal was procedurally defective, and in the alternative that federal jurisdiction was lacking, and I again remanded the foreclosure case to state court. (18cv13946 DE 16; Berg Decl. ¶ 11)

On July 15, 2019, the Hon. Maritza Berdote-Byrne, P.J. Ch., entered an order and statement of reasons in the 2018 foreclosure action granting Chase's motion for summary judgment, striking Farah's answer, and referring the case to the Office of Foreclosure to proceed as an uncontested matter. (Berg Decl. ¶12 Ex. J, DE 168-12 "2018 SJ Op.") (See p.3 n.3, supra.) Summary judgment was vigorously contested, and Judge Berdote-Byrne memorialized her ruling striking affirmative defenses and counterclaims in a thorough written opinion. (The 2018 SJ Op. is discussed in more detail at Section III.A.1.a, infra.)

In addition, Judge Berdote-Byrne found that Farah, while paying nothing on the mortgage, had been collecting $5300 per month in rent on the mortgaged property. She therefore granted Chase's motion for appointment of a rent receiver, subject to Farah's representation that he soon planned to reoccupy the property himself, which he has apparently done. (2018 SJ Op. at 18-20)

There matters stood, so far as this Court was aware, until a recent status update documenting that the 2018 Foreclosure Action had proceeded to final judgment. See Section I.C, infra.

B. This Federal Court Action (Background)

On April 10, 2015, Farah filed the original complaint in this action. (DE 1) In an opinion and order dated March 23, 2016, I partially granted and partially denied the Defendants' motion to dismiss the original complaint, without prejudice to amendment. (DE 31, 32)

On May 23, 2016, Farah filed the currently operative Amended Complaint. (AC, DE 39). The sixteen causes of action pled in the original complaint are here pared down to a single "CAUSE OF ACTION-FRAUD." (AC ¶¶ 117-18) The factual allegations, though shortened, follow the same general outline as the original. The allegations of the AC are complex and at times hard to follow. In summary form, they are as follows.

The AC describes the 2006 WaMu loan and mortgage, notes that WaMu went out of business, and states that on September 25, 2008, Chase purchased the (2008) WaMu loan from the FDIC. (AC ¶¶ 17-21.) The 2006 note and mortgage were securitized and place in a trust having LaSalle NationalBank as trustee, an arrangement which was "never disclosed" to Farah until after the summary judgment ruling in the 2014 foreclosure action. (AC ¶¶ 26, 29.) Chase "split the note for a second time in 2008." (AC ¶ 27.) WaMu did not exercise due diligence and made a loan to Farah that he could not afford. (AC ¶¶ 33-38.)

The AC then summarizes proceedings in the 2014 foreclosure action. Much of the discussion is devoted to disputes over representation, discovery disputes, the lack of a final judgment, and the inapplicability of Rooker-Feldman. (AC ¶¶ 39-73.) The AC then accuses counsel of "perjury" and raises various other procedural objections to the 2014 foreclosure action and its reinstatement following dismissal. (AC ¶¶ 74-117.) The 2014 action, however, was voluntarily dismissed.

The AC, under the heading "Cause of Action - Fraud," then picks up with a series of allegations about the securitization and assignment of the loan. The thrust of the allegations is that Chase does not own the loan and therefore cannot foreclose on it.

The AC recites that the loan (the 2006 loan, apparently) was securitized three times (in 2006, 2008, and 2010). As part of that process, it was assigned to a REMIC trust, overseen by a trustee, with the income stream from mortgages flowing to investors. That assignment, according to the AC, was defective, particularly under the terms of the Pooling and Servicing Agreement ("PSA"). (AC ¶¶ 118-29.) As a result, "the trust does not hold title on the loan and therefore cannot foreclose." (AC ¶ 127.) (Chase, not the Trust, was the plaintiff in the foreclosure action.)

The AC also cites three alleged assignments of Farah's mortgage (the 2006 loan, apparently) as being fraudulent.⁵

The AC describes "Assignment of Mortgage 1," recorded August 16, 2012, from FDIC to Chase. This assignment, according to the AC, is both belated and defective. During this period, when Farah was attempting to negotiate a short sale with Chase, Chase failed to produce to him the original note. (AC ¶¶ 130-57.)

The AC describes "Assignment of Mortgage 2," recorded June 4, 2014, to Bayview Loan Servicing, LP. This assignment, too, plaintiff alleges, was void; a "REMIC Trust in the LaSalle System," not Chase, owed the loan, and at any rate there "are so many new parties to this loan" that discovery should be granted. (AC ¶¶ 158-71.)

The AC then describes "Assignment of Mortgage 3," recorded June 24, 2014. This, according to plaintiff, duplicates Assignment 2. Plaintiff suggests perjury in that one Cynthia Riley was not an employee of WaMu as claimed when Farah entered into his 2008 loan. He alleges that two separate payments of $315,495 were deposited into his Chase account, a fact which suggests to him that a third...