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Rickenbach v. Wells Fargo Bank, N.A.

635 F.Supp.2d 389 (D. N.J. 2009)

LOANS; FAIR FORECLOSURE ACT — Neither New Jersey’s Fair Foreclosure Act nor the Rules of New Jersey Courts provide for a private right of action for a claim that a lender was generally engaged in a scheme to inflate its profits by charging various fees not authorized by the loan documents or by law.

A lender filed a foreclosure proceeding against several borrowers. The foreclosure actions were dismissed. The borrowers then paid the remaining balance on the mortgage. The borrowers claimed that the reinstatement and ultimate satisfaction of their mortgages were improperly calculated because the lender included charges that were in excess of the amounts allowed pursuant to the mortgage or applicable New Jersey law. The borrowers accused the lender of having engaged in a scheme to inflate its profits by charging various fees not authorized by the loan documents or by law. The borrowers brought a class action complaint against the lender.

Initially, the lender requested that the case be dismissed because of the common law “voluntary payment” rule which states that where a party, without mistake of fact, or fraud, duress or extortion, voluntarily pays money on demand which is not enforceable against him, he cannot recover it back. The Federal District Court held that it would not entertain a pre-trial motion to dismiss the complaint based on this rule because the complaint did not establish whether the payment was truly voluntary and made without mistake of fact. In addition, the Court ruled that it was evident that the one of the borrowers had brought claims that accrued over six years ago. Therefore, it dismissed, as time-barred, the borrower’s claims of negligence, breach of duty of good faith and fair dealing, unfair and deceptive assessment and collection of fees, and violations of the Fair Foreclosure Act (FFA), New Jersey State Court Rules (Court Rules), New Jersey Consumer Fraud Act, and Truth-in-Consumer Contract, Warranty and Notice Act (Truth-in Consumer Contract Act). Nevertheless, the Court held that the sixteen-year statute of limitations was applicable to that borrower’s contract claim because the statute covered actions under seal. Here, the Court held that the mortgage and note were signed “under seal.”

As to the other borrower’s FFA and Court Rules claims, the Court held that neither the FFA nor the Court rules provided for a private right of action. As to the Truth-in-Lending Act claim, it noted that the act provided that “no … lender … shall offer to any consumer or prospective consumer or enter into any written contract or give any *** notice *** which includes any provision that violates any clearly established legal right of a consumer.” The Court opined that the borrower successfully alleged that its lender, acting through the lender’s attorney-agent, sent “notice” to the borrower. Accordingly, the Court did not dismiss the Truth-in-Lending Act claim.

Finally, the Court held that claims against the lender’s attorneys (with respect to their preparation of “payoff statements”) were barred by the common law litigation privilege. That litigation privilege provides that statements by attorneys made in the course of judicial or quasi-judicial proceedings are absolutely privileged, making the attorneys immune from liability. Here, the attorney’s alleged negligence and breach of good faith stemmed from a letter prepared in response to a request from the borrowers’ counsel and on behalf of lender, all parties in a judicial proceeding. Further, the purpose of the letter was to resolve the foreclosure action and was prepared to achieve the object of the litigation. As the borrowers’ allegations were determined by the Court to have arisen solely from the payoff statement and were made in the course of a judicial proceeding, the Court held that the litigation privilege warranted dismissal of all claims against the lender’s attorneys relating to the payoff statement.

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