Standing is Not Jurisdictional in New Jersey State Court

Deutsche Bank Nat’l Trust Co. v. Russo, 429 N.J. Super. 91 (App. Div. 2012). This was another mortgage foreclosure case in which defendants belatedly asserted that plaintiff lacked standing because plaintiff was not in possession of the note when the foreclosure complaint was filed. Defendants had not responded to the foreclosure complaint, and judgment of foreclosure was entered. Foreclosure itself was adjourned seventeen times. Finally, about three and one-half years after the judgment had been entered, defendants took action for the first time. They moved to stay the foreclosure sale and vacate the judgment under Rule 4:50-1(d) and (f). Rule 4:50-1(d) allows relief from a judgment if that judgment is “void,” while Rule 4:50-1(f) is a “catchall” provision.

The Chancery Division ruled that defendants had waited too long to file their motion. Moreover, that court accepted plaintiff’s proofs that plaintiff had been in possession of the note when the foreclosure complaint was filed. Defendants appealed. Writing for the Appellate Division, Judge Reisner affirmed the decision below, applying the abuse of discretion standard applicable to Rule 4:50-1 issues.

Motions under Rule 4:50-1(d) must be made within a “reasonable time” and require a showing of excusable neglect. Defendants claimed that their delay was reasonable, and their neglect excusable, because plaintiff had represented that no foreclosure would occur while the parties were working toward a mortgage modification. But Judge Reisner found that there was no evidence in the record to support that alleged representation.

Moreover, defendants’ motion required a “meritorious defense.” Defendants had no such defenses. They had not denied the validity of the note or denied their default. The evidence supported plaintiff’s contention that it possessed the note when the foreclosure complaint was filed. But even if that had not been so, the judgment would not have been “void,” as required by Rule 4:50-1(d). Judge Reisner observed that “standing is not a jurisdictional issue in our State court system and, therefore, a foreclosure judgment obtained by a party that lacked standing is not ‘void’ within the meaning of Rule 4:50-1(d).” In the federal system, Article III of the Constitution limits the jurisdiction of courts to “case[s] or controvers[ies]” and thereby gives rise to a mandatory standing requirement. In New Jersey, however, the courts are courts of general jurisdiction under the New Jersey Constitution, and thus “the requirement that a party have standing is a matter of judicial policy not constitutional command.” As a result, even a lack of standing would not have made the judgment “void.”