The United States District Court for the District of New Jersey recently dismissed a complaint arising from a refinancing of a residential mortgage loan against a lender and a closing agent because the statute of limitations had expired.  See Meyer v. PHH Mortg. Corp., 2016 WL 5934691 (D.N.J. Oct. 11, 2016).  The action arises from a December 2007 refinancing of the plaintiffs’ residential mortgage loan.  Before issuing the 2007 loan, the lender informed the plaintiffs that it required that a prior mortgagee be subordinated to the lender’s mortgage.  The plaintiffs allege that the defendants then “confirmed to Plaintiffs that all conditions precedent had been met” before the new loan was issued, and therefore they assumed that the prior mortgage would be subordinated.  In 2010, the plaintiffs attempted to refinance the 2007 mortgage, but the defendant lender denied the plaintiffs’ application and informed the plaintiffs that they should re-apply for another refinance mortgage in a few years.  The plaintiffs attempted to refinance the mortgage in January 2013 for a second time, and the lender advised the plaintiffs that they could not refinance because the prior mortgage had not been subordinated; the plaintiffs allege this was the first time they learned that the existing mortgage was not subordinated of record.  In 2016, the plaintiffs filed the instant lawsuit against the lender and closing agent for their failure to subordinate the prior mortgage, alleging breach of contract, New Jersey Consumer Fraud Act, and negligence claims.  The defendants moved to dismiss, and the court granted the motion.  In granting the  motion, the court found, inter alia, that the plaintiffs’ claims are barred by the six-year statute of limitations, which began to run at the time of the 2007 closing and expired in 2013.  Although the plaintiffs argued that the statute of limitations did not begin to run until 2013, when they discovered that the prior mortgage had not been subordinated, the court agreed with the defendants’ argument that the plaintiffs’ claims arose from matters of public record and that they had constructive notice of the issue as of the time of recording.  Therefore, they cannot show they were “reasonably unaware” of the fact that the existing mortgage was not subordinated of record as of 2007.  The court also found that, even if the claims are timely, all counts must be dismissed for failure to state a claim.  Accordingly, the court dismissed the plaintiffs’ complaint with prejudice, finding that any amendment would be futile.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com.