Summary
affirming judgment for defendant under NJCFA where court found defendant was a sophisticated property owner with numerous investment properties who did not fall within the "class of consumers" the CFA was intended to protect
Summary of this case from Royce-George & Assocs. v. U.S. BankOpinion
DOCKET NO. A-4652-12T4
12-12-2014
JPMORGAN CHASE BANK, N.A., Plaintiff-Respondent, v. CSABA GASPAR, Defendant-Appellant.
Peter Van Aulen argued the cause for appellant. Lawrence P. Maher argued the cause for respondent (Greenbaum, Rowe, Smith & Davis, LLP, attorneys; Mr. Maher, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Yannotti and Fasciale. On appeal from Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-0008-12. Peter Van Aulen argued the cause for appellant. Lawrence P. Maher argued the cause for respondent (Greenbaum, Rowe, Smith & Davis, LLP, attorneys; Mr. Maher, on the brief). PER CURIAM
After the Chancery Division granted summary judgment to plaintiff JPMorgan Chase Bank ("JPM"), the court permitted defendant Csaba Gaspar to file a counterclaim and transferred the matter to the Law Division. Defendant appeals from an order entered by the court on April 22, 2013, granting summary judgment to plaintiff on the counterclaim. We affirm.
I.
In April 2006, defendant executed a promissory note to Washington Mutual Bank ("WMB"), evidencing a mortgage loan in the amount of $1,380,000. At that time, defendant also executed a mortgage, security agreement, assignment of leases and rents, and fixture filing, as security for the mortgage note. The mortgage was a first mortgage upon two properties in Jersey City.
In August 2008, defendant defaulted on his monthly installment payment, and thereafter failed to make subsequent loan payments. In September 2008, JPM purchased substantially all of WMB's assets, including defendant's mortgage note and mortgage. On April 27, 2009, JPM filed its foreclosure action.
The Chancery Division later granted summary judgment to JPM, but allowed defendant to file a counterclaim. The court entered a final judgment of foreclosure on June 14, 2011. Thereafter, the court transferred the counterclaim to the Law Division. On September 18, 2012, defendant filed an amended counterclaim.
Defendant alleged that: (1) the bank breached the implied covenant of good faith and fair dealing by refusing to honor the mortgage note and refusing to permit assumption of the mortgage by a potential buyer; (2) the bank engaged in unconscionable commercial practices, deception, fraud or misrepresentation in violation of the Consumer Fraud Act ("CFA"), N.J.S.A. 56:8-1 to -195; and (3) the bank acted arbitrarily, capriciously and unreasonably in failing to respond to defendant's request for permission to sell the units as condominiums.
II.
On March 14, 2013, JPM filed a motion for summary judgment. JPM argued that there was no basis to defendant's claim that it breached the covenant of good faith and fair dealing because the bank's actions were authorized by the loan documents and the PNA; there was no evidence to support defendant's predatory lending claim; the CFA did not apply to the transactions; and the bank did not unreasonably fail to respond to defendant's request to sell the units as condominiums. JPM further argued that defendant could not establish his damages without expert testimony, which he had not produced during the time for discovery.
Defendant opposed the motion. He argued that there were genuine issues of material fact which precluded the grant of summary judgment. Defendant claimed that the bank breached the implied covenant of good faith and fair dealing because it did not respond to the request to sell the units in a timely manner. He asserted that the predatory lending claim had merit because he did not have any education, schooling or experience in real estate, and the bank knew that he could only make the required payments if he sold the units as condominiums. In addition, defendant asserted that the bank had violated the CFA.
In a certification dated April 15, 2013, defendant stated that he was seventy years old, and without education or experience in the real estate field, since he had worked as a computer system programmer. Defendant said he had invested his "life earnings" in the properties at issue. Defendant claimed that in 2005, he listed the properties for sale and received offers to purchase both, but was advised to invest in converting and selling his buildings as condominiums.
Defendant withdrew the listing for sale of his properties and began to convert the common elements and empty units to condominiums. He stated that he needed more funds to continue the conversion and, in 2006, obtained the $1,380,000 loan from WMB, which was secured by the mortgage on the properties. Defendant said he made the bank aware of his intention to sell the apartments as condominiums. Defendant asserted that WMB "recognized [his] situation" and "set up a trap" for him.
He noted that WMB had included a provision in the loan agreement, which required that he seek approval from the bank for the condominium conversion. The agreement also required defendant to secure the bank's authorization to sell the individual units as condominiums. Among other provisions, the note stated that the lender would not "unreasonably withhold its consent to a sale, transfer, or other conveyance of the property."
In July 2006, defendant applied to WMB for approval of the condominium conversion. According to defendant, the bank granted the application, and defendant continued with his conversion. Defendant said he used the remainder of the mortgage funds, plus other disposable monies, to renovate the common areas and convert the units. When several of the units were ready for sale, defendant applied to the bank for permission to sell the units as condominiums. Defendant claimed that in the year that followed, he and his attorney did not "get any results" despite making "several dozen" phone calls to the bank.
In January 2008, defendant sent WMB a written request to sell the units as condominiums. Defendant claimed to have made "hundreds of calls" in an attempt to get the bank to respond. In September 2008, WMB told defendant he had to apply for a mortgage modification. The bank never granted approval to sell the units as condominiums. Defendant claims that he ran out of money and could not make the monthly payments on the note.
In November 2008, defendant spoke to a WMB representative regarding his request to sell the units. He told her he would be out of the state for the weekend. Defendant claimed that, despite having this information, the WMB representative demanded "hundreds of documents" by the following Monday. In March 2009, WMB informed defendant that it was not interested in a mortgage modification and that it wanted to foreclose on the properties.
Defendant claimed that, at this point, his only option was to sell the properties "far below their real market values to save what [he] could." He said the bank made the sales "impossible." He asserted that the bank refused to confirm to potential buyers that the mortgage could be assumed, and later said the mortgage could not be assumed under the circumstances.
WMB took over management of the buildings and, according to defendant, refused to show the properties to "even serious potential buyers." In 2009, JPM, as successor to WMB, commenced the foreclosure proceedings. At that time, the court appointed a manager for the properties.
The judge considered JPM's motion on April 22, 2013, and placed an oral decision on the record the following day. The judge determined that there were no genuine issues of material fact, and JPM was entitled to judgment as a matter of law. The judge stated that there was nothing in the agreements which required the bank to consent to a modification of the mortgage. The judge found that defendant had failed to show that the bank breached the implied covenant of good faith and fair dealing by refusing to approve the conversion.
The judge also determined that defendant had not established a claim of predatory lending. The judge observed that defendant had alleged that the bank knew he intended to convert the units to condominiums, but there was no evidence of predatory lending because defendant appeared to be a knowledgeable individual, who had experience in the real estate market. It also appeared that defendant had the assistance of counsel when he entered into the transaction. The judge stated that it did not appear the bank had engaged in any unconscionable business practice, and the bank did not charge improper rates or impose any onerous loan terms.
In addition, the judge found that the CFA did not apply because the note and mortgage were not part of a consumer transaction. The judge noted that defendant is a sophisticated property owner who had numerous commercial investment properties. Therefore, the judge determined that defendant did not fall within the "class of consumers" the CFA was intended to protect.
The judge further determined that the bank did not unreasonably withhold its consent to the sale or transfer of the units. The judge also found that defendant's claims also failed because expert testimony was required to establish the damages sustained as a result of the alleged wrongdoing on the part of the bank. The judge noted that, to support his damage claims, defendant was relying upon purchase offers and appraisals dating back to 2006. The judge concluded that this evidence was insufficient to establish a claim for damages sustained years later.
The judge entered an order dated April 22, 2013, granting summary judgment to JPM. This appeal followed.
III.
Defendant argues that the judge erred by granting JPM's motion. He contends that the judge: (1) erred by finding that JPM did not breach the implied covenant of good faith and fair dealing; (2) erroneously granted summary judgment to JPM on the predatory lending claim; (3) erred by determining that the subject transaction was not covered by the CFA; (4) erroneously dismissed the third count of the counterclaim in which he alleged that the bank delayed consideration of and arbitrarily denied his request to approve the sale of the units as condominiums; and (5) erred by determining that he could not establish ascertainable damages. We are convinced from our review of the record that defendant's contentions are without merit.
Summary judgment may be granted when, considering the evidence before the court on the motion in a light most favorable to the non-moving party, there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. R. 4:46-2(c); see also Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). When reviewing an order granting summary judgment, we apply the same standards that the trial court applies when ruling on the motion. Oyola v. Xing Lan Liu, 431 N.J. Super. 493, 497 (App. Div.), certif. denied, 216 N.J. 86 (2013).
We are not persuaded by defendant's contention that he presented sufficient evidence to support his claim that the bank breached the covenant of good faith and fair dealing, which is an implied term of every contract in this state. Sons of Thunder, Inc. v. Borden, Inc., 148 N.J. 396, 420 (1997). As the Court explained in Wilson v. Amerada Hess Corp., 168 N.J. 236, 251 (2001):
[A] party exercising its right to use discretion . . . under a contract breaches
the duty of good faith and fair dealing if [1] that party exercises its discretionary authority arbitrarily, unreasonably, or capriciously, [2] with the objective of preventing the other party from receiving its reasonably expected fruits under the contract.
It is assumed that the parties to a contract intend to benefit from it, and that "[t]hey do not reasonably intend that one party would use the powers bestowed on it to destroy unilaterally the other's expectations without legitimate purpose." Ibid. The test recognizes the mutuality of the parties' expectations, and "enforce[s] a party's contractual right to exercise discretion . . . based on its own reasonable beliefs concerning business strategy." Ibid.
Here, the motion judge correctly determined that defendant failed to present sufficient evidence to support his claim of breach of the implied covenant of good faith and fair dealing. Although defendant alleges that the bank's failure to approve the sale of the units as condominiums caused him to default on the loan, defendant presented no evidence showing that he was prepared to sell the individual condominium units. As JPM points out, defendant never established a "condominium regime" in accordance with the New Jersey Condominium Act (the "Condominium Act"), N.J.S.A. 46:8B-1 to -38, and therefore was not legally authorized to sell the units as condominium units.
Moreover, section 4.13(c) of the mortgage provides in pertinent part that the bank would not "unreasonably withhold its consent to a sale, transfer, or other conveyance of the Property" provided no default had occurred. Here, defendant had defaulted and, under the terms of the note and mortgage, the bank had no legal obligation to agree to sale of the units while default was continuing.
Defendant further argues that he presented sufficient evidence to support a claim of predatory lending. We do not agree.
Predatory lending has been described as 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.
[Assocs. Home Equity Servs., Inc. v. Troup, 343 N.J. Super. 254, 267 (App. Div. 2001) (citation omitted).]
As the motion judge observed, the terms of the note and mortgage were not commercially unreasonable. Indeed, defendant was able to make the monthly installment payments for several years before he defaulted. In addition, defendant understood the terms of the loan and mortgage when he entered the transaction. The record indicates that defendant may have had the advice of counsel when he made the loan. Defendant also was aware that he could not sell the units as condominiums without the bank's approval. There is no evidence to support defendant's claim that the bank structured the transaction with the expectation that defendant would default on the loan payments.
In addition, defendant argues that he presented sufficient evidence to support a claim against the bank under the CFA. Again, we disagree. While interpreted broadly, the CFA does not apply to every sale in the marketplace. Papergraphics Int'l, Inc. v. Correa, 389 N.J. Super. 8, 12-13 (App. Div. 2006). "Rather, CFA applicability hinges on the nature of a transaction, requiring a case by case analysis." Id. at 13.
As stated previously, defendant was not an unsophisticated consumer, and the transaction involved a loan of $1,380,000, secured by a mortgage on two properties. Defendant had experience in commercial real estate investments, there was no inequality of bargaining power between the contracting parties, and the transaction was not the result of any fraudulent or deceptive practices. The motion judge correctly found that the CFA did not apply to this transaction.
Defendant additionally argues that the motion judge erred by dismissing the third count of the counterclaim, in which he alleged that the bank unreasonably delayed its consideration of his request to approve the sale of the units as condominiums, and later wrongfully withheld its consent to those sales. The contention is without merit.
The record shows that on July 10, 2006, WMB issued a document to defendant that outlined its requirements for considering a request for consent to a condominium conversion. The requirements included payment of a processing fee and submission of certain materials within thirty days. Defendant did not comply with these requirements. In addition, defendant had not established the "condominium regime" for the conversion in accordance with the Condominium Act.
Defendant asserts that in January 2008, he made another request to the bank for approval to sell the units as condominiums. He says it took the bank several months to respond and he was eventually told he had to seek a mortgage modification. However, as JPM points out, the bank was not obligated under the agreements to approve the sale of the units as condominiums or agree to a modification of the loan documents.
Defendant further argues that the motion judge erroneously determined that his claims failed because he failed to present competent evidence to establish the damages he allegedly sustained as a result of the foreclosure. Again, we disagree. In response to interrogatories, defendant claimed that his damages were based on the "minimum value of the properties as condos."
Expert testimony is required for the purpose of establishing the value of real property. See N.J. Highway Auth. v. Rue, 41 N.J. Super. 385, 389-90, 52 (App. Div.), certif. denied, 22 N.J. 340 (1956); see also Jacobitti v. Jacobitti, 263 N.J. Super. 608, 613 (App. Div. 1993), aff'd, 135 N.J. 571 (1994). In discovery, defendant failed to produce an expert report establishing the "minimum value" of the subject properties "as condos."
Defendant nevertheless argues that, at trial, he would have been able to show losses of "at least two million dollars." He states that when he applied to WMB for the loan in 2006, he had an offer to purchase one property for $1,350,000 and an offer on the other property for $725,000. He also says he would have testified that he had forty-two offers for the properties in 2010-2011.
However, there is no indication that the offers in 2006 were a fair measure of the value of the properties "as condos" in 2011, when they were lost in foreclosure. Moreover, defendant presented no evidence to the motion judge concerning the alleged forty-two offers to which he refers. Defendant's statements regarding the offers were not an adequate substitute for the opinion of an expert as to the value of the properties. The judge correctly found that such evidence was required here to support defendant's damage claim.
Affirmed. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION