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One West Bank, FSB v. Capo

F-5952-09 (N.J. Super. Ch. Div. 2010) (Unpublished)

MORTGAGES; DEEDS; FRAUD — A company commits fraud when it presents a homeowner with documents that intentionally misrepresent an agreement to assist the homeowner in keeping a home, and the homeowner reasonably relies on the representations made at and before signing.

A financial service company purported to offer assistance in keeping her home to a homeowner in a particularly vulnerable financial situation. The financial service company advised that, for a fee, the company could fix the homeowner’s credit so that she could obtain a better mortgage rate. Until then, in order to qualify for refinancing, the company would obtain the mortgage through the name of another person who had favorable credit. After a refinance, the homeowner could supposedly live in the house without making any payments until her credit was repaired, after which point the unnamed individual would be removed from the mortgage.

While the homeowner was in the hospital, the financial service company presented her with numerous legal documents, which she signed. The documents included a contract of sale, a deed, and a power of attorney. The effect of the documents was to cause the homeowner to convey the property to the company at a substantially discounted price, with the promise of a buyback that appeared impossible. A closing took place later that day.

The homeowner claimed common law fraud resulting from the home’s sale. The Court found that the company intentionally led the homeowner to believe that the documents presented to her in the hospital solidified the transaction discussed at all prior meetings. As had been explained, she was to retain title to her home and the company would obtain help for her is refinancing her mortgage and improving her credit. However, the documents signed from the hospital bed transferred title of the home to a stranger and committed the homeowner to an impossible buyback agreement. The Court found that the company intentionally misrepresented the substance of the documents. Given the rapport previously developed, the homeowner reasonably relied on the representations made. As a result, the homeowner sold the home for considerably less than its value.

Because the fraud here was in the factum, the negotiable instruments obtained as a result were void ab initio. Thus, a mortgage obtained from a bank by the company was void. However, the Court awarded the bank an equitable mortgage in the name of the homeowner, to whom title was restored. Further, the Court awarded the homeowner punitive damages in the amount of three times the profit that the company’s principal realized. Lastly, the Court awarded the homeowner compensatory damages for the legal fees incurred as a result of the company’s fraud.

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