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Interchange State Bank v. Fricchione

A-2805-98T5 (N.J. Super. App. Div. 1999) (Unpublished)

MORTGAGES—Absent some special relationship, a lender has no obligation to explain the nature and content of loan documents to its borrower.

In a foreclosure action, one co-owner argued that the lender had an obligation to advise her that she was executing a mortgage on her residence when her former husband requested her to execute various documents at the bank. The Court rejected that contention. During their marriage, the ex-husband operated a business of which the wife was an officer and stockholder, but she had little to do with the operation itself. The business had a long term banking relationship which continued beyond the couple’s divorce. On several occasions, the wife had executed notes, personal guaranties, and a mortgage on the marital home relating to a line of credit from the bank to the business. Even after the divorce, the ex-wife continued in her capacity as an officer and stockholder. A time came when she was advised that she was required to sign papers at the bank’s office. When she was there, the bank officer asked her to sign the documents, but did not explain to her the nature or content of the documents before she signed them. Those documents included a guarantee, affidavit of title, and mortgage on her home securing the line of credit to the business. The lower court held that the lender had no obligation to explain the nature of the documents, particularly because the ex-wife executed similar documents on several occasions in the past and the bank was “entitled to accept what appears to be a perfectly routine and unexceptional transaction at face value without intruding itself into the familial relationship.” Even if her ex-husband had defrauded her by inducing her to execute a mortgage, the lender would not be subject to invalidation of the mortgage unless it could be shown that the lender in some way participated in, or knew of, the fraud. The lender had the right to assume that the borrowers had discussed the nature of the transaction, particularly since the loan was in favor of the business and the ex-wife remained an officer and stockholder of the corporate business. Finally, the document was clearly identified at the top of its first page as a “MORTGAGE.”


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