EDGAR AND ELVIN CHUA v. CERTIFICATE HOLDERS OF MORGAN STANLEY ABS CAPITAL INC TRUST 2004 NC3 MORTGAGE PASS THROUGH CERTIFICATES SERIES 2004 N3 COUNTRYWIDE HOME LOANS BANK OF AMERICA AND BALBOA INSURANCE CO (2013)

Plaintiffs Edgar and Elvin Chua appeal from June 21, 2012 Law Division orders dismissing their complaint against defendants Balboa Insurance Company (Balboa) and Deutsche Bank National Trust Company (Deutsche Bank).   For the reasons that follow, we affirm.

I

This case has its genesis in an action that Deutsche Bank filed on January 27, 2010 to foreclose on the mortgage on plaintiffs' single-family home in Bernardsville.   Plaintiffs contested the foreclosure and asserted that they were unable to pay their mortgage because mold infestation rendered their home uninhabitable.   Plaintiffs filed a third-party complaint against Balboa seeking to recover on a lender-placed insurance policy issued on March 4, 2009, one year after plaintiffs defaulted on their loan.

Balboa moved to dismiss the third-party complaint as non-germane to the foreclosure action, but the Chancery judge denied the motion and the claim proceeded.   Balboa then moved for summary judgment on the basis that plaintiffs lacked standing to sue for coverage under the policy, and on the separate ground that mold damage was not covered under the terms of the policy.   The judge agreed on both issues, and dismissed the third-party complaint.   On that date, the judge advised plaintiffs on the record that “if you think I'm wrong, you have a right of appeal but ․ you don't have a right of appeal until the case is finally over, and because this is a foreclosure, it's not finally over.”   Plaintiffs moved for reconsideration, which was denied.   The judge further informed plaintiffs that if they wanted to try and appeal immediately, they could file for leave to appeal, or file a motion in the Chancery Division for an order certifying her decision as final so they could appeal as of right.

Plaintiffs did not seek leave to appeal from the dismissal of their third-party complaint, nor did they move for an order to have the dismissal certified as final.   Instead, on March 27, 2012 they filed the Law Division action under review, and asserted the same insurance issues litigated in the foreclosure action.   They also alleged that defendants violated the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C.A. §§ 2601 to –2617, including violations related to the lender-placed insurance.   Both defendants moved to dismiss plaintiffs' complaint in lieu of filing an answer, pursuant to Rule 4:6–2(e).

The Law Division judge granted defendants' motion to dismiss based on both collateral estoppel and entire controversy grounds, noting that plaintiffs “unsuccessfully litigated the insurance coverage issues in the [f]oreclosure [a]ction,” and thus were improperly “seeking ․ a second bite at the apple.”   The judge further indicated that plaintiffs' claims for RESPA violations “cannot be sustained as a matter of law as they were previously litigated in the underlying foreclosure action.”   In fact, the Chancery judge expressly indicated, in denying plaintiffs' motion for reconsideration in the foreclosure proceeding, “[a]s to RESPA allegations against Balboa, no such claims [were] pled in this third-party action.”

This appeal followed, with plaintiffs principally arguing that the Law Division judge erred in dismissing their complaint based upon his mistaken belief that the Chancery judge had ruled on their RESPA claims.

II

“Our review of a motion to dismiss for failure to state a cause of action [under Rule 4:6–2(e) ] is governed by the same standard as that applied by the trial court.”  Donato v. Moldow, 374 N.J.Super. 475, 483 (App.Div.2005) (citing Seidenberg v. Summit Bank, 348 N.J.Super. 243, 250 (App.Div.2002)).   We limit our inquiry to “examining the legal sufficiency of the facts alleged on the face of the complaint.”  Printing Mart–Morristown v. Sharp Elecs.   Corp., 116 N.J. 739, 746 (1989) (citing Rieder v. Dep't of Transp., 221 N.J.Super. 547, 552 (App.Div.1987)).   The test for determining the adequacy of a pleading is whether a cause of action is “suggested” by the facts.  Ibid. (citing Velantzas v. Colgate–Palmolive Co., 109 N.J. 189, 192 (1988)).

“The entire controversy doctrine embodies the principle that the adjudication of a legal controversy should occur in one litigation in only one court [.]”  Cogdell v. Hosp. Ctr. at Orange, 116 N.J. 7, 15 (1989).   It was “judicially created as a reflection of ․ the unification of the state courts in light of our Constitution's recognition of the value in resolving related claims in one adjudication so that all matters in controversy between parties may be completely determined.”  Higgins v. Thurber, 413 N.J.Super. 1, 11–12 (App.Div.2010), certif. denied, 205 N.J. 227 (2011) (internal quotation marks and citations omitted).   The doctrine's objectives “include the needs of economy and the avoidance of waste, efficiency and the reduction of delay, fairness to parties, and the need for complete and final disposition through the avoidance of ‘piecemeal decisions.’ ”  Cogdell, supra, 116 N.J. at 15 (internal quotation marks and citation omitted).

Consistent with these objectives, Rule 4:30A provides that “[n]on-joinder of claims required to be joined by the entire controversy doctrine shall result in the preclusion of the omitted claims to the extent required by the entire controversy doctrine[.]”  The rule “encompasses ‘virtually all causes, claims, and defenses relating to a controversy[,]’ ” Oliver v. Ambrose, 152 N.J. 383, 394 (1998) (quoting Cogdell, supra, 116 N.J. at 16), and requires all parties in an action to raise all transactionally-related claims or risk preclusion.  K–Land Corp. No. 28 v. Landis Sewerage, 173 N.J. 59, 69–71 (2002);  R. 4:30A.

Issue preclusion, also known as collateral estoppel, arises “[w]hen an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim.”   Restatement (Second) of Judgments § 27 (1982).   To forestall future litigation,

“the party asserting the bar must show that:  (1) the issue to be precluded is identical to the issue decided in the prior proceeding;  (2) the issue was actually litigated in the prior proceeding;  (3) the court in the prior proceeding issued a final judgment on the merits;  (4) the determination of the issue was essential to the prior judgment;  and (5) the party against whom the doctrine is asserted was a party to or in privity with a party to the earlier proceeding.”

[Olivieri v. Y.M.F. Carpet, Inc., 186 N.J. 511, 521 (2006) (quoting In re Estate of Dawson, 136 N.J. 1, 20–21 (1994)).]

III

We concur with the Law Division judge's conclusion that the insurance “coverage issues were germane to the underlying foreclosure action.   Thus, the coverage issues are precluded both on the basis of collateral estoppel and under the entire controversy doctrine in light of their relation to the underlying foreclosure action.” ¹

Although we disagree with the judge's conclusion that the RESPA issues were addressed in the foreclosure proceeding, we are nevertheless satisfied that these claims were time barred, and thus properly dismissed as well.²

Plaintiffs generally allege a RESPA violation because there was a business connection between the lender and the insurer that was never disclosed.   In both their complaint and their appellate brief, plaintiffs fail to specify the RESPA sections they claim defendants violated.   Significantly, the original loan closed in 2003, and the insurance did not apply to the property until 2009, one year after plaintiffs' default.

Claims brought under 12 U.S.C.A. § 2607 are subject to a one-year statute of limitations from the date of the alleged violation.  12 U.S.C.A. § 2614.   The lender-placed insurance policy was purchased on March 4, 2009, and plaintiffs' complaint was filed on March 27, 2012.   To the extent plaintiffs allege violations arising from the origination and closing of the loan, these claims are time barred as well.   Plaintiffs' loan closed on November 10, 2003.   The statute of limitations on any RESPA claim related to the closing of the loan would have expired on November 10, 2004.  Ibid. Because any RESPA claim is barred by the statute of limitations, there was no error in dismissing the claim with prejudice.³

The record clearly indicates that plaintiffs' alleged RESPA claims could have been presented in the previous litigation and that they are otherwise time barred.   Plaintiffs' remaining arguments do not warrant discussion in a written opinion.   R. 2:11–3(e)(1)(E).   The action was correctly dismissed.

Affirmed.

FOOTNOTES

FN1. Plaintiffs were also judicially estopped from arguing to the Law Division that the coverage issues were not germane to the foreclosure action, as they made the complete opposite argument in the Chancery Division.   See State v. Galicia, 210 N.J. 364, 398 (2012) (quoting McCurrie ex rel. Town of Kearny v. Town of Kearny, 174 N.J. 523, 534 (2002)) (“the doctrine of judicial estoppel is ‘designed to protect the integrity of the judicial process by not permitting a litigant to prevail on an issue and then to seek the reversal of that favorable ruling’ ”)..  FN1. Plaintiffs were also judicially estopped from arguing to the Law Division that the coverage issues were not germane to the foreclosure action, as they made the complete opposite argument in the Chancery Division.   See State v. Galicia, 210 N.J. 364, 398 (2012) (quoting McCurrie ex rel. Town of Kearny v. Town of Kearny, 174 N.J. 523, 534 (2002)) (“the doctrine of judicial estoppel is ‘designed to protect the integrity of the judicial process by not permitting a litigant to prevail on an issue and then to seek the reversal of that favorable ruling’ ”).

FN2. “[W]e review orders and not, strictly speaking, reasons that support them.   We have held, in other contexts, that a correct result, even if predicated on an erroneous basis in fact or in law, will not be overturned on appeal.”  El–Sioufi v. St. Peter's University Hosp., 382 N.J.Super. 145, 169 (App.Div.2005)..  FN2. “[W]e review orders and not, strictly speaking, reasons that support them.   We have held, in other contexts, that a correct result, even if predicated on an erroneous basis in fact or in law, will not be overturned on appeal.”  El–Sioufi v. St. Peter's University Hosp., 382 N.J.Super. 145, 169 (App.Div.2005).

FN3. Furthermore, plaintiffs failed to plead causation and damages to support their RESPA claims.   Although plaintiffs' complaint included a demand for “the repair cost and home replacement cost [i]n the amount of $466,000,” they failed to allege a causal link between the alleged violations and the alleged damages.  Jones v. ABN AMRO Mortg.   Group, Inc., 551 F.Supp.2d 400, 409 (E.D.Pa.2008)..  FN3. Furthermore, plaintiffs failed to plead causation and damages to support their RESPA claims.   Although plaintiffs' complaint included a demand for “the repair cost and home replacement cost [i]n the amount of $466,000,” they failed to allege a causal link between the alleged violations and the alleged damages.  Jones v. ABN AMRO Mortg.   Group, Inc., 551 F.Supp.2d 400, 409 (E.D.Pa.2008).

PER CURIAM