DEUTSCHE BANK NATIONAL TRUST COMPANY v. ALICIA M. GUERRERO
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APPROVAL OF THE APPELLATE DIVISION
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SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-0105-16T4
DEUTSCHE BANK NATIONAL
TRUST COMPANY, AS TRUSTEE
FOR HOLDERS OF THE GSAA
HOME EQUITY TRUST 2007-5
ASSET-BACKED CERTIFICATES
SERIES 2007-5,
Plaintiff-Respondent,
v.
ALICIA M. GUERRERO and MR. GUERRERO,
husband of Alicia M. Guerrero,
Defendants/Third-Party
Plaintiffs-Appellants,
v.
NATIONSTAR MORTGAGE and BANK OF
AMERICA, N.A., f/k/a Countrywide
Home Loans,
Third-Party Defendants/
Respondents.
_________________________________________
Submitted December 5, 2017 – Decided December 27, 2017
Before Judges Hoffman and Mayer.
On appeal from Superior Court of New Jersey,
Chancery Division, Hudson County, Docket No.
F-014589-14.
Law Offices of Joseph A. Chang, attorneys for
Alicia M. Guerrero and Julian Guerrero (Joseph
A. Chang, of counsel and on the brief; Jeffrey
Zajac, on the brief).
Winston & Strawn, LLP, attorneys for Deutsche
Bank National Trust Company, Bank of America
and Nationstar Mortgage (Heather E. Saydah,
on the brief).
PER CURIAM
Defendants Alicia and Julian Guerrero1 appeal from a July 31,
2015 Chancery Division order granting summary judgment in favor
of plaintiff Deutsche Bank National Trust Company (Deutsche Bank)
and third-party defendant Bank of America (BOA). On appeal,
defendants challenge the motion court's rejection of their claim
that they were the victims of predatory lending, in violation of
the New Jersey Consumer Fraud Act (CFA). We affirm.
I
In 2003, defendants purchased a home on 70th Street in
Guttenburg. In 2006, they contacted Countrywide Home Loans
(Countrywide), n/k/a BOA, regarding their possible purchase of
another home on 71st Street in Guttenburg. Countrywide advised
defendants not to sell the 70th Street home, but to refinance the
1
For ease of reference, we refer to Alicia and Julian Guerrero
collectively as defendants; when referring to them as individuals,
we use Ms. Guerrero and Mr. Guerrero.
2 A-0105-16T4
loan on that home and use the proceeds as a down payment to
purchase the 71st Street home.
In 2007, Ms. Guerrero executed a purchase money mortgage in
favor of Countrywide for $639,000 to purchase the 71st Street
home. Ms. Guerrero signed documents acknowledging her
understanding of the terms of the loan.
Ms. Guerrero alleges in her complaint that Countrywide
subsequently informed her she "would get a high rate of
interest[,] . . . the loan had an adjustable interest rate and it
was an interest only loan." However, she stated during her
deposition that the interest rate she received — 6.875% — was the
only interest rate quoted, and she questioned it because she
thought it was too high. Ms. Guerrero further contends Countrywide
told her she would be able to refinance the loan after one year,
which would lower the payment and switch to a fixed interest rate.
However, Ms. Guerrero failed to apply for refinancing after one
year. She did attempt a modification after two or three years.
Ms. Guerrero signed the loan documents in her own name. At
the time Countrywide issued the loan, Ms. Guerrero earned
approximately $30,000 per year. The 71st Street home contained
three separate units; the unit in which the Guerreros lived, plus
two rental units. Ms. Guerrero believed at the time she bought
the home and took out the loan, she would be able to make the loan
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payments using the rental income. Ms. Guerrero also expected her
husband to help with the loan payments.
Defendants made the loan payments initially, but struggled
when the recession hit, and defaulted in January 2011. Ms.
Guerrero stated she stopped making the payments because of the
recession, a resulting loss of rental income, and a reduction in
her work hours.
In 2014, Deutsche Bank received an assignment of the mortgage
and then filed a foreclosure complaint. Defendants filed an
answer, asserting the CFA violation as a defense against the
Deutsche Bank foreclosure action. Defendants also filed a third-
party complaint against BOA, Countrywide's successor, alleging a
violation of the CFA. The Chancery Division rejected the CFA
claims and granted summary judgment to both BOA and Deutsche Bank.
II
Summary judgment must be granted if the court determines
"there is no genuine issue as to any material fact challenged and
that the moving party is entitled to a judgment or order as a
matter of law." R. 4:46-2(c). The court must "consider whether
the competent evidential materials presented, when viewed in the
light most favorable to the non-moving party in consideration of
the applicable evidentiary standard, are sufficient to permit a
rational factfinder to resolve the alleged disputed issue in favor
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of the non-moving party." Brill v. Guardian Life Ins. Co. of Am.,
142 N.J. 520, 523 (1995). "[W]e review the trial court's grant
of summary judgment de novo under the same standard as the trial
court." Templo Fuente De Vida Corp. v. Nat'l Union Fire Ins. Co.,
224 N.J. 189, 199 (2016) (citing Mem'l Props., LLC v. Zurich Am.
Ins. Co.,
210 N.J. 512, 524 (2012)).
Our analysis begins by determining whether there are any
material facts in dispute within the record. The determination
of a fact's materiality necessarily involves examining the nature
of the underlying CFA claim itself. The CFA authorizes a suit by
"[a]ny person who suffers any ascertainable loss of moneys or
property, real or personal, as a result of the use or employment
by another person of any method, act, or practice declared unlawful
under this act . . . ."
N.J.S.A. 56:8-19. Thus, "[t]o prevail
on a CFA claim, a plaintiff must establish three elements: '1)
unlawful conduct by defendant; 2) an ascertainable loss by
plaintiff; and 3) a causal relationship between the unlawful
conduct and the ascertainable loss.'" Zaman v. Felton,
219 N.J.
199, 222 (2014) (quoting Bosland v. Warnock Dodge, Inc.,
197 N.J.
543, 557 (2009)).
The CFA defines an "unlawful practice" as "any unconscionable
commercial practice, deception, fraud, false pretense, false
promise, misrepresentation, or the knowing, concealment,
5 A-0105-16T4
suppression, or omission of any material fact with intent that
others rely upon such concealment, suppression or omission, in
connection with the sale or advertisement of any merchandise or
real estate . . . ."
N.J.S.A. 56:8-2. An "unconscionable
commercial practice" suggests a standard of conduct lacking in
"good faith, honesty in fact and observance of fair dealing." Cox
v. Sears Roebuck & Co.,
138 N.J. 2, 18 (1994) (quoting Kugler v.
Romain,
58 N.J. 522, 544 (1971)). "Advertisement" is defined as
"the attempt . . . to induce directly or indirectly any person to
enter or not enter into any obligation or acquire any title or
interest in any merchandise or to increase the consumption thereof
or to make any loan."
N.J.S.A. 56:8-1(a).
Predatory lending may constitute an unconscionable commercial
practice under the CFA. See Assocs. Home Equity Servs., Inc. v.
Troup,
343 N.J. Super. 254, 267, 278-80 (App. Div. 2001).
Predatory lending is:
a mismatch between the needs and capacity of
the borrower . . . . In essence, the loan
does not fit the borrower, either because the
borrower's underlying needs for the loan are
not being met or the terms of the loan are so
disadvantageous to that particular borrower
that there is little likelihood that the
borrower has the capability to repay the loan.
[Nowosleska v. Steele,
400 N.J. Super. 297,
305 (App. Div. 2008) (quoting Troup, 343 N.J.
Super. at 267).]
6 A-0105-16T4
Defendants argue that extending a $639,000 loan to a person
earning $30,000 per year constitutes unconscionable conduct on its
face. However, defendants admit the 71st Street property contains
three units in total, with two units to be rented to pay the loan.
In addition, defendants were able to make the payments for the
first four years before defaulting due to the recession.
BOA's actions were not unconscionable, nor did they
constitute predatory lending. BOA disclosed all loan terms to Ms.
Guerrero, and Ms. Guerrero was aware of the monthly loan payment
and believed she could afford it using rental income. Furthermore,
there was no mismatch between the needs and capacity of the
borrower because defendants were able to make the loan payments
using the rental income for four years. The only possible
unconscionable behavior would be the alleged false promise to
refinance after one year; however, Ms. Guerrero failed to attempt
to refinance after one year. Therefore, defendants failed to
prove unlawful conduct in satisfaction of the first element of the
CFA.
Defendants also argue BOA engaged in the predatory lending
practice of equity stripping. Equity stripping involves "lending
based on the value of the asset securing the loan rather than a
borrower's ability to repay . . . ." Hargraves v. Capital City
Mortg. Corp.,
140 F. Supp. 2d 7, 20 (D.D.C. 2000). The lender
7 A-0105-16T4
profits through obtaining the property when the borrower defaults
rather than through loan payments. Id. at 20-21. Here, although
BOA encouraged defendants to use the equity in the 70th Street
home to purchase the 71st Street home, defendants were able to use
the rental income from the 71st Street home to make the loan
payments. Therefore, BOA loaned defendants the money for the 71st
Street home based on expected rental income, not based on the
equity in that home.
Even if BOA's conduct was unlawful under the CFA, that conduct
did not cause defendants' default. Defendants made the loan
payments for the first four years and testified that the reason
for the default was the economic recession and resulting loss of
rental income, not the terms of the loans. Therefore, defendants
fail to meet the third element of the CFA as well.
Ms. Guerrero was aware of the terms of the loan, believed she
could make the loan payments, and successfully made the loan
payments for four years before defaulting. These facts support
the trial court's conclusion that defendants failed to prove the
first element of the CFA. Accordingly, the motion court correctly
entered summary judgment.
Affirmed.
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