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Budge v. E.M.N. Express Mortgage Nationwide, Inc.

A-1091-09T2 (N.J. Super. App. Div. 2011) (Unpublished)

MORTGAGES; LOANS — Where a mortgage lender fails to honor an obligation to fund a loan, a prospective borrower is only entitled to damages to the extent that it can show that it lost the property it intended to purchase as a result of reliance on the loan; thus, if the borrower cannot prove that had the loan application process been completed, it would have received the loan and closed on the property, it would fail to establish an essential element of its claim.

A buyer sought to purchase a parcel of property. After a number of years, the owner was willing to sell the property at an agreed-upon price. The buyer applied for financing and paid a commitment fee. A purported investor offered to become a partner with the buyer in the purchase. The buyer declined the offer, but the investor ultimately convinced the buyer to allow him to finance the purchase. The buyer told the original lender that he would obtain financing from the investor. With the exception of an application fee, the deposit it gave to the original lender was returned. The buyer prepared a document outlining the financing terms, but the investor never signed it. By the time the closing date arrived, the buyer was unable to contact the investor and the property was sold to a friend of the investor’s.

The buyer sued the lender, the investor and the investor’s friend who purchased the property, claiming common law fraud. All of the buyer’s claims were dismissed by the lower court on summary judgment because the action was governed by the statute of frauds. On appeal, the Appellate Division reversed the summary judgment and remanded the matter for further proceedings. The Court concluded that the buyer’s complaint was an action for damages. On remand, the lender moved for a directed verdict arguing that the buyer did not prove damages, an essential element of the fraud claim. The lower court granted the motion.

The buyer appealed again, arguing that the lower court erred in granting the directed verdict, and that the investor’s misconception of the record, the law, and the constant erroneous objections were prejudicial and improper. The Court first concluded that the buyer showed no evidence that he suffered some loss or injury as a result of the investor’s allegedly fraudulent conduct, and therefore the lower court properly entered a directed verdict for the investor. An essential element of common law fraud is proof of damages by way of detriment. The buyer argued that he suffered the loss of the property as a result of his reliance upon the misrepresentation. However, there was no proof presented that had he completed the loan application process that he would have received the loan from the lender and closed on the property. It was purely speculative and therefore he failed to establish an essential element of fraud.

The Court did not address the buyer’s argument regarding the record and law because they related to evidentiary rulings that did not involve damages. Thus, the lower court’s decision was affirmed.

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