Investors Bank v. Torres, 243 N.J. 25 (2020). As discussed here, the Appellate Division, in an opinion reported at 457 N.J. Super. 53 (App. Div. 2018), affirmed a summary judgment for plaintiff in this foreclosure action. The Supreme Court granted certification to address the issue phrased as “Can the right to enforce a lost promissory note be transferred to a third party?” Today, in a unanimous opinion by Justice Patterson that applied de novo review, the Court answered “yes” and affirmed the rulings below.
Justice Patterson found that three statutes, each of which she examined exhaustively, as well as common law, combined to support the Court’s result. N.J.S.A. 2A:25-1 states, in pertinent part, that “[a]contracts for the sale and conveyance of real estate … and all choses in action arising on contract shall be assignable, and the assignee may sue thereon in his own name.” The Court found the note to be a chose in action, rejecting the argument of an amicus that it was instead a “chose in possession.” The assignment of the note included “as incident to the chose, all securities and liens held by the assignor as collateral to the claim, and all rights incidental thereto.”
N.J.S.A. 46:9-9 expressly allows mortgages on real estate to be assignable. Like N.J.S.A. 2A;25-1, N.J.S.A. 46:9-9 permits an assignee to “sue thereon in his own name.”
The third statute was the Uniform Commercial Code. The Code, which appears in N.J.S.A. 12A, preserves New Jersey common law and other statutes, unless inconsistent with the Code. And N.J.S.A. 12A;3-301 and 309 allow an assignee to enforce “the rights of a party that was entitled to enforce the negotiable instrument at the moment it disappeared, not those of a party assigned the right to enforce the instrument at a later stage,” Justice Patterson said.
The Court found section 309 sufficiently clear that it was dispositive. Defendant noted that the drafters of the model UCC had amended that section to override Dennis Joslin Co. v. Robinson Broadcasting Corp., 977 F. Supp. 491 (D.D.C. 1997), which had created a more restrictive test for allowing assignees to enforce a lost instrument, but that New Jersey had not adopted tat amendment. Thus, defendant argued, New Jersey’s Legislature must have intended the stricter Joslin test to apply.
Justice Patterson did not agree. Echoing the Appellate Division, she stated that legislative inaction was “a weak read upon which to lean.” The plain language of New Jersey’s section 309, even without the model UCC drafters’ amendment, compelled affirmance. Justice Patterson also agreed with the Appellate Division that a contrary ruling would produce an absurd result, “allowing the defaulted defendant to remain in possession of a house obligation-free.”
In essence, the Court today affirmed on the opinion below, though Justice Patterson offered a lengthier and more detailed analysis in support of the result. The only exception was the Court’s disclaimer of any reliance on principles of unjust enrichment, which formed a part of the Appellate Division’s opinion. That affected only the path to the end that all three courts in this case reached, not the end itself.