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Construcciones Haus Soceidad v. Kennedy Funding Inc.

2008 WL 1882857 (U.S. Dist. Ct. D. N.J. 2008) (Unpublished)

CONSUMER FRAUD ACT; LOANS — Under appropriate circumstances, a mortgage lender who issues a loan commitment can be liable under the New Jersey Consumer Fraud Act because that Act generally protects consumers against unlawful business practices, including prospective borrower.

A prospective borrower sought return of its commitment fee when it and its lender disagreed as to the loan to value formula and the ultimate intended disbursements of the funds. The borrower alleged that the lender had engaged in a bad faith calculation of the loan value ratio and sued, alleging breach of contract, unjust enrichment, and fraud. The lender moved to dismiss for failure to state a claim upon which relief could be granted.

The District Court found that the complaint was sufficiently specific to give the lender notice of the alleged fraud and therefore could survive the motion to dismiss. It noted the complaint alleged that the lender deliberately utilized a valuation expert in order to obtain an artificially low valuation of the collateral so as to relieve the lender of its obligation to loan funds. These facts, the Court also found, sustained the complaint’s cause of action brought under the New Jersey Consumer Fraud Act, which generally protects against unlawful business practices toward consumers. The Court upheld the cause of action against the lender for breach of contract on those facts, but dismissed the claim for unjust enrichment because that cause of action cannot be sustained where a contract exists.

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