NJ An Unfriendly Place For Sale Leaseback Peddlers As Judge Slams Another Operator With $225K In Triple Damages, $50K+ In Homeowners' Legal Fees

In Bergen County, New Jersey, another foreclosure rescue operator who entered into a sale leaseback arrangement with a financially strapped local couple was found to be on the wrong end of a court ruling in a civil suit.(1)

In finding that the foreclosure rescue operator violated the state Consumer Fraud Act ("CFA"), Judge Ellen Koblitz found that the amount of actual damages suffered by the homeowners was $75,347, which she calculated by taking the $120,000 value of the home equity that the homeowner signed over to the operator, and reducing it by $44,653 worth of improvements to the home (after accounting for collected rents) made by the operator subsequent to the title transfer.

By voiding the conveyance, title in the property remained with the homeowner-couple as if no conveyance took place. In making the award of triple damages, Judge Koblitz made the following statement:

• This Court is bound by the CFA and thus plaintiffs are entitled to treble damages. In granting the equitable relief of returning the property to the plaintiffs, the Court has—in essence—provided the plaintiffs with one third of the treble damages to which they are entitled. The return of the property compensates them for their ascertainable loss and
  makes them whole. The plaintiffs are thus entitled to the remaining two thirds of the treble damage award required by the CFA, in the amount of $150,694, as well as $50,590 in reasonable counsel fees and $1,912 in costs for a total of $203,196.(2)

For the full details of the case, as well as how the court calculated the amount of the homeowners' attorneys fees, the obligation for payment of which was imposed on the operator, see D'Agostino v. Maldonado, Docket No. C-84-09 (N.J. Super. Chancery Div., Bergen County, June 30, 2010) (when link expires, try here).

(1) For past posts on other New Jersey civil court cases involving similarly situated sale leaseback peddlers, see:

• Woman Recovers Home Title Lost In Equity Stripping Scam; Judge Belts Sale Leaseback Peddlers w/ $75K In Punitves, Refers Case To Criminal Prosecutors (involving a case also presided over by Judge Koblitz),
• Foreclosure Rescue Operator, Closing Attorney Found Jointly Liable For $690K+ In Bogus Sale Leaseback, Equity Stripping Ripoff,
• Judge Sticks Sale Leaseback Peddler With Tab For Victim's Interim Attorney's Fee Even Though NJ Consumer Fraud Act Lawsuit Is Still In Discovery,
• Foreclosure Rescue Operator Violated State Consumer Fraud Act By Using Bogus Sale Leasebacks To Strip Equity From Homeowners, Says NJ AG In Civil Suit,
• NJ AG Targets 39 In Suits Alleging Equity Stripping, Sale Leaseback Scams; Involved $13.5M In Bogus Loans & 48 Homeowners Screwed Out Of $3M+, Says AG.

Federal criminal prosecutors in New Jersey have also been getting into the act. See:

• Newark Feds Charge Trio In Alleged Sale Leaseback, Equity Stripping Foreclosure Rescue Ripoff,
• NJ Feds Squeeze Guilty Plea From Brooklyn-Based Foreclosure Rescue Operator; Admits To Role In Peddling Sale Leaseback, Equity Stripping Scams,
• Veteran Fraudster Gets 97 Months For Running Realty Scams; Bogus Sale Leaseback Foreclosure Rescue Deals Among Rackets Resulting In $1M+ In Losses.

(2) Interestingly, Judge Koblitz comes off in her ruling as being somewhat sympathetic towards (and possibly even a bit impressed with) the foreclosure rescue operator (a full-time kitchen remodeling salesman for Sears who had a history of working serious overtime hours for his employer, and who did occasional real estate deals on the side), and who completed only the ninth grade ("Although uneducated, his street sophistication and moxie allowed him to profit, while putting some money into the hands of the distressed homeowners that they may not have had the ability to obtain for themselves").

She also made clear that she wasn't all that impressed with the testimony of the homeowner-couple (for example, the husband, a college graduate who worked on Wall Street for ten years, earning as much as $250,000 a year before getting canned from his job, was described by Judge Koblitz as "an extremely non-responsive witness. He seemed totally unable to respond to a direct question, whether it was posed by his counsel, adversary counsel, or the Court. He cried several times during his testimony and generally bewailed his plight and that of his children.").

Notwithstanding, in reaching her decision, she explained (bold text is my emphasis, not in the original text):

• The CFA mandates, with no discretion permitted, an award of treble damages, as well as reasonable counsel fees, once the claimant has established a CFA violation and an ascertainable loss. Cox v. Sears Roebuck, 138 N.J. 2, 24 (1994).

• In this case, the requisite result imposed by the finding of a violation under the CFA may be harsh, but it is mandated by law.

• Thus although it appears to this Court that Maldonado’s actions were motivated by what he viewed as legitimate profit, rather than an intent to defraud, his actions nonetheless constituted a violation of the CFA, and thus the Court is bound by the statute. See Skeer v. EMK Motors, Inc., 187 N.J. Super. 465, 470 (App. Div. 1982) (“The act is broadly designed to protect the public, even when a merchant acts in good faith.”).

• While Maldonado may have kept up his end of the oral agreement, his written agreements were severely one-sided and unconscionable in that they did not conform to statutory requirements and were contradictory. Additionally, he held out an unlikely prospect of repurchasing the property and thereby obtained an unreasonable profit from the transaction. To hold that Maldonado did not violate the CFA because he was not formally educated, and was seemingly unaware of the legal implications of his behavior, would vitiate the intention of the CFA.

In addition, in finding that the state Consumer Fraud Act applied to the foreclosure rescue operator (even though he was not engaged in the real estate business full time, only doing deals occasionally), Judge Koblitz made this observation (footnotes appearing in original text omitted; bold text is my emphasis, not in the original text):

• While the plain language of the CFA makes the act applicable to all persons involved in the “sale or advertisement of any merchandise or real estate,” courts have held the CFA applicable to professional and part-time merchants as they can be said to be involved in commercial practices. The CFA is not applicable to the casual seller.

• Prior to his involvement with the D’Agostinos, Maldonado had been a party to other real estate transactions involving distressed properties. Each one involved a different situation and no proof was presented that he engaged in other fraudulent transactions, or that the other parties did not believe they were well-served by the transaction.

• Maldonado’s past experience in this area of business, however, is sufficient to bring him under the purview of the CFA. The applicability of the CFA to Maldonado’s business dealings is further supported by the fact that he advertised for his services. It was this advertisement, displayed on the side of his car, which brought Maldonado to the attention of the plaintiffs.