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D’Agostino v. Maldonado

C-84-09 (N.J. Super. Ch. Div. 2010) (Unpublished)

CONSUMER FRAUD ACT; MORTGAGES — A person who advertises that he or she buys distressed real estate and is engaged in several such transactions is not a casual seller, exempt from provisions from the Consumer Fraud Act.

A seller of property, in dire financial straits, entered into a series of arrangements with a buyer. All parties were unsophisticated and without representation. The arrangements were inconsistent with each other and, if read literally, unconscionable. The arrangements purported to transfer $120,000 in equity for $10 with an option for the seller to buy the property back within one year for $400,000.

The seller alleged that the buyer had committed common law fraud by misleading it into thinking the property was being placed in trust for his children. The Court, however, found that the seller’s testimony was contradictory and unreliable. Because a party alleging common law fraud bears the burden of proving the elements of fraud by clear and convincing evidence, the poor testimony failed to establish reliance on a misrepresentation.

However, the Court found a violation of the New Jersey Consumer Fraud Act (CFA). The Court observed that the transaction was comprised of multiple legal documents drafted by a layperson, recording only the obligations of the seller and in contrast with the parties’ understanding of their agreement. The Court found that a transaction using such one-sided and misleading documents is an unconscionable commercial practice under the CFA.

Even though the CFA is not applicable to a casual seller; the buyer in this transaction had been a party to several prior real estate transactions involving other distressed properties. Additionally, the buyer advertised his services with a vehicle advertisement. Such experience and advertisement was sufficient to bring the buyer under the purview of the CFA.

The Court was bound to award treble damages and reasonable counsel fees to the seller, even though it appeared to the Court that the buyer’s actions were motivated by what was viewed as legitimate profit, not an intent to defraud.

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