Summary
recognizing supersession of NJLLA
Summary of this case from Jubelt v. United Mortg. Bankers, Ltd.Opinion
DOCKET NO. A-4326-11T3
07-15-2014
PATRICIA MOGAVERO, Plaintiff-Appellant, v. ALLIED HOME MORTGAGE; PAN AM MORTGAGE; and JP MORGAN CHASE as the successor in interest to WASHINGTON MUTUAL BANK, FA, Defendants, and AUGUST HOFFMAN, GATEWAY FUNDING DIVERSIFIED MORTGAGE SERVICES, LP; ROBERT A. SCHANDLER, ESQ.; DIKTAS SCHANDLER GILLEN; and CITIMORTGAGE, INC., Defendants-Respondents.
Joshua W. Denbeaux argued the cause for appellant (Denbeaux & Denbeaux, attorneys; Mr. Denbeaux, on the briefs). Gregg S. Sodini argued the cause for respondent August Hoffman. Kenneth T. Ulrich argued the cause for respondent Gateway Funding Diversified Mortgage Services, LP. Christopher J. Carey argued the cause for respondents Robert A. Schandler, Esq. and Diktas Schandler Gillen (Graham Curtin, attorneys; Mr. Carey, of counsel; Anthony Longo, on the brief). Martin C. Bryce, Jr., argued the cause for respondent CitiMortgage, Inc. (Ballard Spahr LLP, attorneys; Mr. Bryce and Mariah E. Murphy, on the brief).
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges Sapp-Peterson, Maven, and Hoffman.
On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-5640-10.
Joshua W. Denbeaux argued the cause for appellant (Denbeaux & Denbeaux, attorneys; Mr. Denbeaux, on the briefs).
Gregg S. Sodini argued the cause for respondent August Hoffman.
Kenneth T. Ulrich argued the cause for respondent Gateway Funding Diversified Mortgage Services, LP.
Christopher J. Carey argued the cause for respondents Robert A. Schandler, Esq. and Diktas Schandler Gillen (Graham Curtin, attorneys; Mr. Carey, of counsel; Anthony Longo, on the brief).
Martin C. Bryce, Jr., argued the cause for respondent CitiMortgage, Inc. (Ballard Spahr LLP, attorneys; Mr. Bryce and Mariah E. Murphy, on the brief). PER CURIAM
Plaintiff appeals from the trial court order dismissing her claims against various defendants who were the attorney, the law firm, the loan officer, mortgage brokers, and lenders, in connection with a series of loan transactions between 2000 and 2006. Plaintiff alleged defendants violated the Home Ownership Security Act of 2002 (HOSA), N.J.S.A. 46:10B-22 to -35, the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -20, and the Licensed Lenders Act (LLA), which has been superseded by the New Jersey Residential Mortgage Lending Act (NJRMLA), N.J.S.A. 17:11C-51 to -89, which became effective May 4, 2009, and the New Jersey Consumer Finance Licensing Act (NJCFLA), N.J.S.A. 17:11C-1 to -49, which became effective in July 2010. The trial court dismissed the claims asserted against her attorney and the law firm because plaintiff failed to file a timely affidavit of merit (AOM), as required pursuant to N.J.S.A. 2A:53A-27. The court granted summary judgment in favor of the remaining defendants after concluding the issuance of the loans violated no statutes.
On appeal, plaintiff raises the following points for our consideration:
POINT I
THE COURT ERRED IN FINDING THAT PLAINTIFF'S AMENDED COMPLAINT DID NOT PROVIDE THE PLAINTIFF WITH A NEW START DATE FROM WHICH THE STATUTORY PERIOD FOR FILING AN AFFIDAVIT OF MERIT BEGAN.
A. THE REQUIREMENTS OF N.J.S.A. 2A:53A-27.
B. THE EFFECT OF AMENDED PLEADINGS.
POINT II
THE COURT ERRED BY NOT CONDUCTING AN ANALYSIS AS TO WHICH OF PLAINTIFF'S CLAIMS REQUIRE PROOF OF A DEVIATION FROM THE PROFESSIONAL STANDARD OF CONDUCT; AND IT WAS ERROR TO DISMISS ALL OF PLAINTIFF'S CLAIMS AGAINST DEFENDANTS BECAUSE SOME DO NOT FALL UNDER THE AFFIDAVIT OF MERIT STATUTE.
POINT III
THE COURT ERRED IN FINDING THAT PLAINTIFF'S LOAN WAS NOT A HIGH COST LOAN PURSUANT TO THE HOME OWNERSHIP SECURITY ACT OF 2002.
A. THE COURT INCORRECTLY EXCLUDED BROKERAGE FEES FROM THE HOSA ANALYSIS.
B. THE COURT MISCONSTRUED THE RELEVANT STATUTORY LANGUAGE IN EXCLUDING CITY TAXES PLACED IN ESCROW FROM THE HOSA ANALYSIS.
C. THE COURT FAILED TO CORRECTLY APPLY THE SUMMARY JUDGMENT STANDARD IN EXCLUDING THE HAZARD INSURANCE FEE FROM THE HOSA ANALYSIS.
POINT IV
THE COURT ERRED IN FAILING TO PERMIT THE PLAINTIFF AN OPPORTUNITY TO AMEND HER FIRST AMENDED COMPLAINT WITH NEW FACTS RECEIVED FROM DEFENDANT DURING DISCOVERY.
A. THERE IS NO PREJUDICE.
B. THE AMENDMENT IS NOT FUTILE.
POINT V
THE COURT ERRED IN IMMUNIZING DEFENDANTS FROM THE CONSEQUENCES OF THEIR VIOLATIONS OF THE LICENSED LENDER ACT.
POINT VI
THE COURT ERRED IN FINDING THAT THE PLAINTIFF'S CLAIMS UNDER THE CONSUMER FRAUD ACT WERE BARRED BY THE STATUTE OF LIMITATIONS.
I.
Plaintiff and her late husband bought their marital home in 1978 for $30,000, and paid off the mortgage before 2000. In 2000, plaintiff's husband became ill and she stopped working in order to care for him. Because of mounting medical bills as well as other financial obligations, plaintiff and her husband mortgaged their home. Defendant August Hoffman, a loan officer with defendant mortgage broker, Pan Am Mortgage (Pan Am), procured a $50,000 loan for the couple, secured by a thirty-year mortgage on their home. The terms of the loan called for the couple to pay a monthly mortgage amount of $4 00.
Plaintiff's spouse died, and she returned to work as a cashier, earning $2000 per month. Tn early 2003, through Hoffman, plaintiff refinanced a new loan with defendant Gateway Funding Diversified Mortgage Services, LP (Gateway), obtaining $69,000. With this loan, plaintiff paid off her prior loan and received a cash payment of $12,7 32. The annual percentage rate (APR) for the loan was 7.0391%. Plaintiff's monthly payment was $445.02, and Hoffman earned $1,552.44 in commission fees.
A few months later, plaintiff contacted Hoffman about securing a new loan. On June 5, 2003, she closed on the new loan with Gateway. The total loan was for $104,000. This loan also included the payoff of her prior loan, with a cash payment to plaintiff of $30,159, and a monthly payment of $631. The APR was 6.25%.
In February 2004, Hoffman once again arranged for Gateway to refinance plaintiff's loan. The total loan amount was $150,000, which included $21,467 for plaintiff, as well as satisfaction of her prior loan. The APR was 5.875%. Eight months later, however, plaintiff asked Hoffman to arrange yet another loan. Hoffman was able to secure a loan for $190,000 from Washington Mutual Bank, F.A. (WaMu). With these funds, plaintiff paid off the February 2004 loan. This loan, however, was a "negative amortization" loan, which meant that the initial payments were low but would be increased each year for five years. Thus, under the terms of the loan, the starting APR was 3.722%, but it could balloon to 9.95%. According to Hoffman, whose deposition was taken during discovery, plaintiff planned to sell her home and therefore was not concerned with future balloon payment obligations.
On September 7, 2006, at plaintiff's request, Hoffman arranged a $220,000 loan for plaintiff with defendant, CitiMortgage, Inc. (CitiMortgage). This loan included $17,193.02 for plaintiff, and a payoff of her prior loan. At this point, Hoffman was employed by defendant Allied Home Mortgage (Allied). The APR for the loan was 6.721%. This loan included the following fees totaling $5031: loan discount (charged by the broker to process the loan), $3,689.73; assumption fee, $590; application fee, $495; broker discount, $132; Federal Express, $75; and preparation and filing of notice of settlement, $50. Tn addition, there was a broker fee of $4138 paid by CitiMortgage to Allied, and an escrow fee of $557 for two months of city property taxes. According to Hoffman, plaintiff never defaulted on any of her loans. Hoffman explained that his $5900 commission for this loan was calculated through a combination of funds paid to defendant Allied, a mortgage broker, by plaintiff, and by defendant CitiMortgage, a lender, minus certain fees that were paid by Hoffman to Allied, as well as to CitiMortgage. For example, the $3,689.73 loan discount fee paid by plaintiff and the $4,138.20 mortgage broker fee paid by CitiMortgage were added, for a sum of $7,827.93. Subtracted from that amount was approximately $2000 in fees, including the commitment and the rate extension fees paid to CitiMortgage, and $660 in points paid to Allied.
On June 2, 2010, plaintiff filed a complaint against: Hoffman; the two mortgage brokers, Allied and Pan Am; the lenders with which she dealt between 2000 and 2006, Gateway, CitiMortgage, WaMu, and J.P. Morgan Chase (Chase), the successor in interest to WaMu; Schandler, her closing attorney in various refinancings; and his law firm, Diktas Schandler Gillen (the "law firm") (collectively with Schandler, the "Schandler defendants"). Plaintiff alleged violations of HOSA, the CFA, and the LLA, and claimed that the Schandler defendants breached their fiduciary duty, all in connection with several refinance loans plaintiff secured.
On December 21, 2010, plaintiff filed an amended complaint. The amended complaint included claims of conspiracy to commit a tort, aiding the commission of a tort, attorney malpractice, and broker malpractice. The Schandler defendants did not respond to plaintiff's amended complaint, but instead, on February 1, 2011, filed a motion to dismiss plaintiff's claims against them because plaintiff failed to file a timely AOM. Following oral argument on the motion, the court dismissed plaintiff's complaint as to the Schandler defendants on the basis that the AOM had not been timely filed. Plaintiff subsequently sought leave before this court to appeal the trial court's interlocutory order. We denied leave to appeal.
Thereafter, plaintiff filed a motion seeking leave to file a second amended complaint adding a claim that the Schandler defendants had a conflict of interest at the time they represented her in connection with the various closings because they represented both plaintiff and defendants. The court denied the motion, concluding to permit an amendment at that juncture would be prejudicial to the Schandler defendants.
Plaintiff does not challenge this determination on appeal.
The parties participated in the exchange of discovery and, thereafter, summary judgment motions were filed. CitiMortgage moved for summary judgment, contending its 2006 loan to plaintiff violated no statute. The court agreed, and granted summary judgment to CitiMortgage while denying plaintiff's cross-motion. In addition, the court also dismissed plaintiff's complaint against Chase because the purchase and assumption agreement (P & A), Article II, Section 2.5, between Chase and the Federal Deposit Insurance Corporation (FDIC) expressly exempted Chase from assuming any liabilities related to borrower claims of WaMu prior to its failure.
On February 12, 2012, plaintiff filed yet another motion to amend her pleadings. This time, plaintiff sought to include the same claims raised in her initial complaint, as well as additional loans, which had been disclosed during discovery but not included in the original complaint. The court denied the motion, concluding the amendment, at that point, would be prejudicial to defendants.
Finally, on April 4, 2012, the court granted summary judgment in favor of Hoffman and Gateway, concluding these defendants breached no fiduciary duty owed to plaintiff nor violated any statute. By that time, Allied and Pan Am had become defunct and were no longer defendants. The present appeal followed.
II.
In ruling on a summary judgment motion, the motion judge must decide whether there is a genuinely disputed issue of fact to submit to the trier of fact or, instead, whether the moving party is entitled to judgment as a matter of law. R. 4:46-2(c). The motion judge must "consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). The court must give the non-moving party the benefit of all favorable inferences. Id. at 536. However, "when the evidence is so one-sided that one party must prevail as a matter of law, the trial court should not hesitate to grant summary judgment." Id. at 540 (citations and internal quotation marks omitted).
An appellate court reviews a grant of summary judgment de novo using the same standard as the trial court. Turner v. Wong, 363 N.J. Super. 186, 198-99 (App. Div. 2003). Thus, the appellate court must determine whether a genuine issue of material fact is present and, if not, evaluate whether the lower court's ruling on the law was correct. Prudential Prop. & Cas. Ins. Co. v. Boylan, 3 07 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998).
Plaintiff filed her complaint in 2010. Because her claims are subject to the six-year statute of limitations, only the 2006 loan is at issue here. Plaintiff contends, contrary to the court's conclusions, when the fees and points are totaled, more than 4.5% of the 2006 loan is attributable to such fees. Specifically, while plaintiff agrees the fees considered by the court in calculating the total percentage of fees and points were appropriate, plaintiff maintains the court should also have included the mortgage broker fee, the hazard insurance fee, and the tax escrow fee. Adding these fees would have resulted in the percentage of fees and points exceeding the statutory 4.5% under HOSA.
HOSA was enacted in 2002 and became effective in 2003. In enacting this statute, the Legislature declared:
a. Abusive mortgage lending has become an increasing problem in this State, exacerbating the loss of equity in homes and causing an increase in the number of foreclosures in recent years. One of the most common forms of abusive lending is the making of loans that are equity-based, rather than income-based. The financing of points and fees in these loans provides immediate income to the originator and encourages the repeated refinancing of home loans. The lender's ability to sell loans reduces the incentive to ensure that the homeowner can afford the payments of the
loan. As long as there is sufficient equity in the home, an abusive lender benefits even if the borrower is unable to make the payments and is forced to refinance. In addition, the financing of high points and fees causes the loss of precious equity in each refinancing and often leads to foreclosure.
b. Abusive lending has threatened the viability of many communities and caused decreases in home ownership. While the marketplace appears to operate effectively for conventional mortgages, too many homeowners find themselves victims of overreaching lenders who provide loans with unnecessarily high costs and terms that are unnecessary to secure repayment of the loan.
c. As competition and self-regulation have not eliminated the abusive terms from loans secured by a consumer's home, the consumer protection provisions of this act are necessary to encourage lending at reasonable rates with reasonable terms.
[N.J.S.A. 46:10B-23.]
To qualify as a high-cost home loan that violates HOSA, the loan must meet certain thresholds, one of which is that the points and fees payable by the borrower at closing exceed 4.5% of the total loan amount. N.J.S.A. 46:10B-24. The total loan amount is defined as the principal of the loan minus those points and fees that are included in N.J.S.A. 46:10B-24. "Points and fees" under HOSA are defined as:
(1) All items listed in 15 U.S.C. § 1605(a)(1) through (4), except interest or the time-price differential;
(2) All charges listed in 15 U.S.C. § 1605(e);
(3) All compensation paid directly or indirectly to a mortgage broker, including a broker that originates a loan in its own name in a table-funded transaction;
(4) The cost of all premiums financed by the creditor, directly or indirectly for any credit life, credit disability, credit unemployment or credit property insurance, or any other life or health insurance, or any payments financed by the creditor directly or indirectly for any debt cancellation or suspension agreement or contract, except that insurance premiums calculated and paid on a monthly basis shall not be considered financed by the creditor;
(5) The maximum prepayment fees and penalties that may be charged or collected under the terms of the loan documents;
(6) All prepayment fees or penalties that are incurred by the borrower if the loan refinances a previous loan made or currently held by the same creditor or an affiliate of the creditor, except that this paragraph shall not apply to a loan which refinances a previous loan made by the same broker and funded by another creditor; and
(7) For open-end loans, the points and fees are calculated by adding the total points and fees known at or before closing, including the maximum prepayment penalties which may be charged or collected under the terms of the loan documents if prepayment penalties are authorized by law other than by this act, plus the minimum additional fees the borrower would be required to pay to draw down an amount equal to the total credit line.
[N.J.S.A. 46:10B-24.]
HOSA expressly incorporates provisions of the Home Ownership Equity and Protection Act (HOEPA), formerly known as the Truth in Lending Act, 15 U.S.C.A. § 1601 to -1651, in its definitions of "Points and Fees," specifically, 15 U.S.C.A. § 1605(a)(1) through (4) and (e), and Regulation Z of the Code of Federal Regulations, codified at 112 C.F.R. § 226.1 to -.59 (2010). 15 U.S.C.A. § 1605(a) provides:
(a) "Finance charge" defined. Except as otherwise provided in this section, the amount of the finance charge in connection with any consumer credit transaction shall be determined as the sum of all charges, payable directly or indirectly by the person to whom the credit is extended, and imposed directly or indirectly by the creditor as an incident to the extension of credit. The finance charge does not include charges of a type payable in a comparable cash transaction. The finance charge shall not include fees and amounts imposed by third party closing agents (including settlement agents, attorneys, and escrow and title companies) if the creditor does not require the imposition of the charges or the services provided and does not retain the charges. Examples of charges which are included in the finance charge include any of the following types of charges which are applicable:
(1) Interest, time price differential, and any amount payable under a point, discount, or other system of additional charges.
(2) Service or carrying charge.
(3) Loan fee, finder's fee, or similar charge.
(4) Fee for an investigation or credit report.
15 U.S.C.A. § 1605(e) provides:
(e) Items exempted from computation of finance charge in extensions of credit secured by an interest in real property. The following items, when charged in connection with any extension of credit secured by an interest in real property, shall not be included in the computation of the finance charge with respect to that transaction:
(1) Fees or premiums for title examination, title insurance, or similar purposes.
(2) Fees for preparation of loan-related documents.
(3) Escrows for future payments of taxes and insurance.
(4) Fees for notarizing deeds and other documents.
(5) Appraisal fees, including fees related to any pest infestation or flood hazard inspections conducted prior to closing.
(6) Credit reports.
Whether or not a loan violates HOSA depends on which fees are included in the calculation of points and fees. The starting point for the analysis is that HOSA includes only those points and fees that are "payable by the borrower at or before the loan closing." N.J.S.A. 46:10B-24. HOEPA provides guidance as to what is included in the calculation of HOSA's points and fees. N.J.S.A. 46:10B-24. Regulation Z defines terms used in HOEPA, and provides that the finance charge should include any amount "payable directly or indirectly by the consumer and imposed directly or indirectly by the creditor[.]" 12 C.F.R. § 226.4. In calculating the finance charge, HOEPA includes interest, time price differential, service charge, points, appraisal and credit report fees. Ibid. HOSA also includes the service charge, the loan fee, and the credit report fees, but specifically excludes interest and the time-price differential. N.J.S.A. 46:10B-24.
Both statutory schemes exclude taxes, filing fees, and fees paid to public officials for "perfecting, releasing, or satisfying a security interest." 12 C.F.R. § 226.4; N.J.S.A. 46:10B-24. They also both exclude escrow charges for paying of property taxes. 15 U.S.C.A. § 1605(e)(3); N.J.S.A. 46:10B-24. In addition, HOSA adopts Regulation Z's requirement that hazard insurance premiums may only be excluded from the calculation if there is a disclosure as to the term of the insurance and if the borrower has been given a choice regarding who will provide insurance. 12 C.F.R. § 226.4(d)(2); N.J.S.A. 46:10B-24.
A. Mortgage Broker Fees
As to mortgage broker fees, HOEPA includes in the calculation of the finance charge a broker fee that is either paid by the borrower directly to the broker or is paid to the lender for delivery to the broker. 15 U.S.C.A. § 1605(a)(6). Regulation Z includes a special rule regarding mortgage broker fees:
Fees charged by a mortgage broker (including fees paid by the consumer directly to the broker or to the creditor for delivery to the broker) are finance charges even if the creditor does not require the consumer to use a mortgage broker and even if the creditor does not retain any portion of the charge.
[12 C.F.R. § 226.4(a)(3).]
HOSA has expressly adopted specific sections of HOEPA. With respect to mortgage broker fees, however, the New Jersey Legislature adopted different language from that used in the federal scheme. Thus, HOSA includes in its calculation of points and fees "compensation paid directly or indirectly to a mortgage broker," but does not include the specific HOEPA language of "fees paid by the consumer directly to the broker or to the creditor for delivery to the broker." N.J.S.A. 46:10B-24.
The court determined the mortgage broker fee paid to Allied should not be included in the calculation because HOSA includes only points and fees that are "payable by the borrower," and this fee was not payable by plaintiff, but instead was paid by CitiMortgage to Allied. We disagree.
Under HOSA, "[a]ll compensation paid directly or indirectly to a mortgage broker" is considered points and fees. N.J.S.A. 46:10B-24. HOEPA includes, in its calculation of amounts representing finance charges in consumer credit transactions, borrower-paid mortgage broker fees passed to the broker by the lender as contained in 15 U.S.C.A. § 1605(a)(6). While the language in HOSA does not mirror the language in HOEPA, the intent of both statutes appears to be the same. Payments by the consumer, whether directly or indirectly, that are intended for the broker should be included in the calculation of points and fees paid by the borrower.
In discerning the Legislature's intent, courts consider not only the particular statute in question but also the entire legislative scheme of which it is a part. In re Adoption of a Child by W.P., 163 N.J. 158, 168 (2000). Sources of legislative intent are the language of a statute, the policy behind a statute, concepts of reasonableness and legislative history. Coletti v. Union County Bd. of Chosen Freeholders, 217 N.J. Super. 31, 35 (App. Div. 1987). In construing the words of a statute or other legal provision, courts routinely apply the ordinary meaning ascribed to those words. Soto v. Scaringelli, 189 N.J. 558, 570 (2007). A court must interpret a statute consistently with its plain meaning. Fairway Dodge, L.L.C. v. Decker Dodge, Inc., 191 N.J. 460, 469 (2007). Statutory interpretations leading to "absurd or unreasonable results are to be avoided." Davis v. Heil, 132 N.J. Super. 283, 293 (App. Div.), aff'd, 68 N.J. 423 (1975).
Guided by these principles in interpreting HOSA, the Legislature has made clear its intent to address abusive mortgage lending practices in connection with equity-based loans, which the Legislature has concluded "encourages the repeated refinancing of home loans" by homeowners with considerable equity in their homes, irrespective of the homeowner's ability to pay the loan. N.J.S.A. 46:10B-23. On the one hand, HOSA excludes all fees that are not payable by the borrower at closing, but on the other hand it includes fees that are paid directly or indirectly to a mortgage broker. N.J.S.A. 46:10B-24. Given the clear intent of the Legislature in enacting the language, we conclude any ambiguity between the two provisions must be construed so as to include the borrower's payments to the lender that are subsequently passed on to the mortgage broker. This, in our view, furthers the legislative intent underlying HOSA. N.J.S.A. 46:10B-23. Therefore, the broker's fee paid to Allied by CitiMortgage should have been considered a fee paid by plaintiff "indirectly" to Allied.
Including the broker's fee, however, does not result in reversal of the court's order granting summary judgment to defendants. Had the court included the mortgage broker fee of $4138, the total fee would have been $9169. Subtracting $9169 from the loan principal of $220,000 would result in a total loan amount of $210,831. The 4.5% threshold of $210,831 would be $9487. This is still $300 higher than the actual $9169 in points and fees that plaintiff paid. Rule 2:10-2 provides that any error or omission shall be disregarded by the appellate court unless it is of such nature as to have been clearly capable of producing an unjust result. Thus, although the motion judge should have included the mortgage broker fee, the total points and fees would still not have exceeded HOSA's threshold.
B. Tax Escrow Fees
Plaintiff argues that if the tax escrow fee of $557.26 was also included in combination with the mortgage broker fee, the total fees would exceed HOSA's threshold. However, despite plaintiff's argument, 15 U.S.C.A. § 1605(e) clearly provides that escrow for taxes should be excluded from the finance charge calculation, and N.J.S.A. 46:10B-24 specifically references this federal statute. In addition, administrative regulations implementing HOSA, N.J.A.C. 3:30-1.1 to -9.1, in defining escrow, state:
"Escrow" means monies deposited by the borrower for payment of real estate taxes and homeowner's insurance expenses in conjunction with a home loan. Escrow monies shall be passed through dollar for dollar to the tax collector or insurance company or agent and are not a point or fee for the purpose of calculating the total points and fees threshold.Thus, the court correctly excluded consideration of any tax escrow in calculating the total amount of points and fees. Without the addition of the tax escrow fee, the mortgage broker fee standing alone is insufficient to meet the 4.5% threshold according to HOSA.
[N.J.A.C. 3:30-1.3.]
C. Hazard Insurance
Plaintiff also takes issue with the court's exclusion of the hazard insurance fee, because plaintiff asserts defendants failed to comply with statutory requirements in this regard. In her brief, however, plaintiff never discloses the amount of the hazard insurance fee. It is true that the loan documents indicated plaintiff was obligated to pay hazard insurance in the amount of $661 POC (paid outside of closing), for a term of one year. Because the fee was not paid at closing, it would not be included in the total amount of points and fees unless the lender violated the disclosure requirements of 12 C.F.R. § 226.4. Plaintiff argues that she was never informed of her right to choose the insurer from whom the insurance was obtained. The record establishes that CitiMortgage informed plaintiff as follows:
Hazard Insurance - Before [c]losing[,] you shall deliver to us a fully paid original [h]omeowner's [i]nsurance policy, binder or certificate, with the first year's paid receipt showing CitiMortgage, Inc. as first mortgagee. The [i]nsurance must be issued by a company acceptable to us. The [i] nsurance must be satisfactory to us in all respects and must be maintained during the term of the [l]oan. Coverage should be equal to the lesser of (i) the insurable value of the [i]mprovements to the [p]roperty, or (ii) the [l]oan [a]mount, as long as that amount is sufficient to compensate for damage or loss on a replacement cost basis. The deductible may not exceed 5% of the dwelling coverage.
In addition, the closing documents from Allied contained similar language. Although the letters did not utilize the words that plaintiff had the right to choose her hazard insurer, implicit in the letters' direction to her that "the insurance must be issued by a company acceptable to the lender" is that plaintiff had the right to choose the insurance of her choice, but the lender had the right to veto the choice.
Plaintiff claims she was never told that she had a choice regarding hazard insurance, and she points to her certification for proof. In fact, plaintiff's certification does not establish she was uninformed of her right to obtain insurance. Rather, the certification states she was not shown the loan documents "prior" to closing. The only requirement in 12 C.F.R. § 226.4 regarding hazard insurance is that the borrower must be informed of his or her choice of insurers. Here, the commitment letters advised plaintiff that she could select her insurer, subject to the lender's approval in each instance. The record does not support plaintiff's assertion defendants failed to disclose to her the option of selecting her own insurance provider, and her certification does not relate to this claim. Therefore, the court committed no error when it failed to include an amount for hazard insurance in its points and fees analysis.
In short, other than the court's failure to include the broker's fee in its calculation, which failure does not alter the outcome, the court properly calculated all of the appropriate fees that should have been included in its analysis. It also properly excluded those fees which should not have been included.
III.
Next, plaintiff contends the court erred in not calculating the time period for filing her AOM from the date the Schandler defendants filed an amended answer to the complaint. We deem it unnecessary to address this contention because plaintiff's claims of malpractice are all related to her contention defendants violated HOSA. Because we conclude no such violation occurred, this issue is moot. An issue is "moot" on appeal if "the decision sought in a matter, when rendered, can have no practical effect on the existing controversy." Greenfield v. N.J. Dep't of Corrs., 382 N.J. Super. 254, 258 (App. Div. 2006).
Notwithstanding its mootness, we address the issue. The Affidavit of Merit Statute requires a plaintiff "in any action for damages for personal injuries . . . resulting from an alleged act of malpractice or negligence by a licensed person[,]" to provide an AOM from "an appropriate licensed person that there exists a reasonable probability that the care, skill or knowledge exercised or exhibited in the treatment . . . that is the subject of the complaint, fell outside acceptable professional or occupational standards or treatment practices." N.J.S.A. 2A:53A-27. The AOM is due within sixty days of a defendant's answer, but the time period may be extended for an additional period, not to exceed 60 days, upon a finding of good cause. Ibid. Here, the Shandler defendants filed their answer to plaintiff's complaint on September 2, 2010. Plaintiff's AOM was therefore due no later than November 1, 2010. She failed to file the AOM during that time period and never sought an additional 60 days in which to file the AOM, which would have extended the time period to December 31, 2010.
What plaintiff filed, however, was motion for leave to file an amended complaint, which the court granted, as unopposed, on December 17, 2010. Thereafter she filed her amended complaint on December 28, 2010. In the amended complaint she asserted a claim for legal malpractice (count seven).
In lieu of filing an answer to the amended complaint, defendants moved to dismiss the complaint for non-compliance with the Affidavit of Merit Statute. It was only after this motion was filed did plaintiff file an AOM on February 2, 1011. Thereafter, she filed a modified AOM on February 14, 2011.
She contends the trial court should have calculated the time period in which to file the AOM from the date defendants filed their amended answer. We disagree.
We initially observe, if the critical time period to begin calculating the time period within which to serve the AOM was after an answer to the amended complaint was filed, plaintiff did not wait to do so. Rather, she filed the AOM in early February 2011, after defendants moved to dismiss the complaint for non-compliance with the Affidavit of Merit Statute. Because all of the factual allegations supporting her claim of breach of fiduciary duty pled in the original complaint and legal malpractice pled in the amended complaint, as the motion judge noted, all "relate to the attorney-client relationship established by The Schandler defendants' representation of the plaintiff in her property transactions to refinance her house," an AOM should have been filed in response to defendant's answer to the original complaint, filed on September 2, 2011.
It is not the label placed on the action that is pivotal but the nature of the legal inquiry . . . courts should determine if the claim's underlying factual allegations require proof of a deviation from the professional standard of care applicable to that specific profession. If such proof is required, an affidavit of merit is required for that claim.Therefore, the motion judge did not err when he calculated the time period for filing the AOM, from September 2, 2010, the date defendants filed their answer to the original complaint. Likewise, plaintiff failed to argue any exceptional circumstances for the failing to timely file the AOM. Thus, irrespective of the merits of plaintiff's claims against the Schandler defendants, plaintiff's claims are barred for noncompliance with the Affidavit of Merit Statute.
[Couri v. Gardner, 173 N.J. 328, 340 (2002).]
Plaintiff contends she asserted claims against the Schandler defendants, which did not require proof of deviation from the professional standard. Specifically, plaintiff urges that her claims for violation of the CFA, conspiracy to commit tort and aiding the commission of a tort, required no AOM. We disagree.
An AOM is only necessary in instances where there is a requirement of proof of a deviation from the professional standard of care. Ibid. "An attorney is obligated to exercise that degree of reasonable knowledge and skill that lawyers of ordinary ability and skill possess and exercise." St. Pius X House of Retreats, Salvatorian Fathers v. Diocese of Camden, 88 N.J. 571, 588 (1982) (citations omitted). In representing a client, an attorney impliedly represents that: (1) he or she possesses the requisite degree of learning, skill, and ability which others in the profession ordinarily possess; (2) he or she will use his or her best judgment in representing the client; and (3) he or she will exercise reasonable and ordinary care and diligence. Ibid. (citations omitted).
To support her contention that an AOM is not required to maintain causes of action based upon violation of the CFA and commission of common law torts, plaintiff cites Levinson v. D'Alfonso & Stein, 320 N.J. Super. 312, 315 (App. Div. 2009). There we held the AOM was only necessary to prove claims of malpractice against the attorney, not the claim asserting breach of contract, which was based upon the plaintiff's attorney settling the plaintiff's case without the plaintiff's approval. Ibid. The retainer agreement which the plaintiff had executed expressly required the plaintiff's consent to settle the dispute. Id. at 316. We held the contract disputes which pertained to the retainer agreement did not require an affidavit. Ibid. Here, plaintiff urges that even if the court properly dismissed the professional malpractice claims because the AOM was not timely, the remaining claims in the complaint alleging violation of the CFA, conspiracy to commit a tort, and aiding in the commission of a tort, do not require proof of a deviation from the professional standard of care.
Plaintiff's claims regarding conspiracy to commit tort and aiding the commission of a tort are both premised upon alleged fraudulent or tortious behavior of the Schandler defendants through their representation of her at the closings. This amounts to a claim that the Schandler defendants were derelict in their professional duty to protect plaintiff's interests at the closings, given plaintiff's assertion that the loans violated statutes. Whether plaintiff characterizes her claim as a violation of the CFA, a tort, or malpractice, these claims stem from allegations that the Schandler defendants improperly performed their legal duties at the closings.
Plaintiff does not state exactly what acts the Schandler defendants committed, which she believes were tortious. The only allegation in her certification regarding the Schandler defendants is that they were the settlement agents for the loans and they did not show her the loan documents prior to the closing. Although it is true that HOEPA includes a requirement that lenders must provide certain borrowers with loan documents three days in advance of the closing, presumably this is so the borrower has a chance to understand the loan terms or hire an attorney to explain them. 12 C.F.R. § 226.31(c). The fact of the deviation from acceptable standards of legal representation is, without more, not enough to sustain a legal malpractice action. Sommers v. McKinney, 287 N.J. Super. 1, 10-11 (App. Div. 1996). There must be a causal connection between the deviation and some resulting harm, which is lacking here. Lieberman v. Employers Ins. of Wausau, 84 N.J. 325, 342 (1980).
IV.
Plaintiff states that the court erred in prohibiting her from amending her first amended complaint to include new allegations based upon the February 2004 loan that was disclosed during discovery. The court prohibited plaintiff from amending her first amended complaint for three reasons. First, the court found plaintiff knew about the loan as early as February 7, 2011, when it was disclosed during discovery. Yet, inexplicably, she did not move to amend her first amended complaint until more than one year later, after discovery had already ended. Next the court found plaintiff failed to allege any facts that would show that the loan violated a statute. Finally, the court found any claim arising out of the 2004 loan transaction was statutorily barred. The court noted the closing date on the 2004 loan was February 26, 2004. Plaintiff's claim of breach of contract would be subject to the six-year statute of limitations governing contract-based claims. N.J.S.A. 2A:14-1.
A motion to amend pleadings pursuant to Rule 4:9-1 should be freely granted by the court so long as no prejudice results to the non-moving party. Zacharias v. Whatman P.L.C., 345 N.J. Super. 218, 226 (App. Div. 2001), certif. denied, 171 N.J. 444 (2002). However, when leave to amend is requested so late that it would prejudice other parties, it should not be granted even if the result is the loss of a cause of action. Wm. Blanchard Co. v. Beach Concrete Co., 150 N.J. Super. 277, 293-94 (App. Div.), certif. denied, 75 N.J. 528 (1977). It is within the discretion of the trial court whether to grant a motion to amend. Fisher v. Yates, 270 N.J. Super. 458, 467 (App. Div. 1994). When the motion is filed late and lacks apparent merit, the court generally denies it. Fox v. Mercedes-Benz Credit Corp., 281 N.J. Super. 476, 483 (App. Div. 1995).
N.J.S.A. 46:10B-27 provides that a HOSA claim must be filed within six years of the loan closing, or at any time during the term of the high-cost loan if the borrower has defaulted or the lender has attempted to foreclose on the loan. Plaintiff timely paid off her earlier loans, and was not in default of the 2006 loan. Thus, the court properly exercised its discretion to prohibit plaintiff from amending her first amended complaint.
For more than a year plaintiff ignored the loan that had been disclosed in discovery, and did not move to amend her pleadings until after the close of discovery and on the eve of trial in April 2012. She gives no reason for the delay. Moreover, in the proposed amendment, plaintiff alleged the same vague statutory violations that the court had already dismissed. Finally, the February 2004 loan was barred by the statute of limitations because plaintiff did not file her complaint until June 2010, while she would have had to have filed the claims by February 2010 in order to timely contest the February 2004 loan.
V.
Next, plaintiff claims that the court erred by finding that the LLA was no longer in effect when she filed her complaint, and, therefore, it was not applicable to her claims. Notwithstanding that the LLA had been superseded by statute, plaintiff urges that her claims should be analyzed under the LLA because she acquired her refinance loans. Plaintiff has not described which provisions of the LLA she believes would support her claims that are no longer in effect.
The court found that when plaintiff filed her complaint, the LLA was no longer in effect, given that it had been superseded by the New Jersey Residential Mortgage Lending Act (NJRMLA), N.J.S.A. 17:11C-51 to -89, which became effective May 4, 2009, and the New Jersey Consumer Finance Licensing Act (NJCFLA), N.J.S.A. 17:11C-1 to -49, which became effective in July 2010. The court determined that the LLA was not applicable to plaintiff's claims because it was not the law in effect at the time she filed her complaint. The court also found that any claim under the LLA would be barred by the six-year statute of limitations contained in N.J.S.A. 2A:14-1. In its November 2011 opinion, the court stated that plaintiff conceded the LLA was not applicable to her claims against CitiMortgage, although the record does not establish why plaintiff believed this to be true.
The LLA governed the licensing of mortgage brokers (formerly codified at N.J.S.A. 17:11C-3 to -19) and rules regarding insurance and advertising (formerly codified at N.J.S.A. 17:11C-20 to -21). It also addressed prohibited practices and governed fees that could be charged by mortgage brokers (formerly codified at N.J.S.A. 17:11C-22 to -23). More specifically, the LLA prohibited mortgage brokers from charging fees other than application fees and discount points (formerly codified at N.J.S.A. 17:11C-23).
In place of the LLA, the Legislature enacted two separate regulatory schemes: the NJRMLA, which was dedicated to mortgage activities, and the NJCFLA, which was concerned with non-mortgage lending. N.J.S.A. 17:11C-2; See L. 2009, c. 53 (effective May 4, 2009). Provisions of N.J.S.A. 17:11C-22 to - 31, which pertained to broker fees, were repealed. L. 2009, c. 53, § 53.
The NJRMLA imposed new obligations for licensing, which included more comprehensive educational requirements and written examinations. N.J.S.A. 17:11C-53 to -68. As in the LLA, however, the NJRMLA permitted the charging of discount points and application fees by mortgage brokers. N.J.S.A. 17:11C-74. However, the NJRMLA also permitted lenders to charge additional fees, including those paid for credit reports, appraisals, applications, commitments and discount points. Ibid. The language of the NJRMLA indicates that the new scheme was intended to give consumers greater protections than under the LLA. However, the Legislature never indicated whether the new regulatory schemes were meant to be applied retroactively. Notwithstanding the provisions of any other law, mortgage brokers and lenders were only permitted to charge fees that were expressly authorized by the NJRMLA or by the Commissioner. N.J.S.A. 17:11C-75.
Legislation operates prospectively unless its terms clearly manifest that it is to be applied retroactively. S. Hamilton Assocs. v. Morristown, 99 N.J. 437, 444-45 (1985). However, in order for a statute to be applied retroactively, it must not interfere with any contract or vested rights. Ibid. When legislation has a rational public purpose that is connected to protection of public health, safety and welfare, it may be applied retroactively if it is reasonable and not arbitrary to do so. Ibid. For example, under certain circumstances, a rent control ordinance could be applied retroactively where exorbitant rents were creating hardships and adversely affecting the health and welfare of New Jersey citizens. Ibid.
A court decides an appeal with reference to the state of the law at the time of resolution of the appeal. Walker v. N.J. Dep't of Insts. & Agencies, Div. of Pub. Welfare, 147 N.J. Super. 485, 489 (App. Div. 1977). When considering whether a statute should be applied prospectively or retroactively, a court must ascertain the intention of the Legislature. State, Dep't of Envtl. Prot. v. Ventron Corp., 94 N.J. 473, 498 (1983). Plaintiff argues defendants should have been liable for their illegal acts that took place while the LLA was still in effect, and that to hold otherwise amounts to the court imposing a "reverse ex post facto" rule of law. Plaintiff never clarifies which of defendants' acts she considers to be illegal under the LLA, although perhaps she is protesting the charging of a mortgage broker fee which was paid by CitiMortgage to Allied. The LLA prohibited mortgage brokers from charging borrowers any fees other than discount points and application fees. (See provision formerly codified at N.J.S.A. 17:11C-23.) However, as noted, the mortgage broker fee paid by CitiMortgage was not charged to plaintiff.
In support of her argument that defendants should be held accountable for violations of the LLA, plaintiff cites a Michigan criminal case wherein the defendant had illegally grown marijuana. Specifically, after already illegally growing the plant, the defendant had obtained a doctor's note permitting him to grow it legally. People v. Reed, 294 Mich. App. 78, 80 (Mich. Ct. App. 2011). The Michigan court held that the defendant could not avoid punishment for his illegal act by "ex post facto" finding a way to make the act legal. Ibid.
A Michigan criminal case, however, provides no guidance to the court on an ordinary procedural question of New Jersey law. Moreover, any protections afforded plaintiff under the LLA related to mortgage broker fees were also provided by the NJRMLA.
VI.
Finally, plaintiff contends the court erred by finding defendants had not violated the CFA. Plaintiff has only alleged CFA violations regarding the loans processed by Gateway. The court found that all loans made by Gateway were obtained by plaintiff prior to June 2004 and were therefore barred by the CFA's six-year statute of limitations. We agree.
The six-year statute of limitations contained in N.J.S.A. 2A:14-1 applies to CFA claims. Mirra v. Holland Am. Line, 331 N.J. Super. 86, 90 (App. Div. 2000). Statutes of limitation are designed to induce the injured party to institute proceedings "within a reasonable time so that the charged party has a fair opportunity to defend." Tevis v. Tevis, 79 N.J. 422, 430 (1979). The discovery rule tolls the statute until the "injured party discovers, or by an exercise of reasonable diligence and intelligence should have discovered," that there is an actionable claim. Lopez v. Swyer, 62 N.J. 267, 272 (1973). The discovery rule does not require that the injured party produce absolute proof of the claim, but rather that the injured party had a reasonable ability to know that there was a claim. Burd v. N.J. Tel. Co., 76 N.J. 284, 293 (1978).
Plaintiff cites Drier Co., Inc. v. Unitronix Corp., 218 N.J. Super. 260, 273 (App. Div. 1986), for the proposition that an unconscionable commercial practice extends to subsequent performance of the transaction. Thus, plaintiff believes that the time for tolling of the statute of limitations should begin when the Gateway loan was paid in October 2004, because as long as the payments were being collected, the fraudulent behavior continued.
We conclude Drier is distinguishable. There, the court was concerned with the sale of a computer system for which the defendant had supplied hardware and software components over a period of years. Id. at 266. Here, when plaintiff signed the closing documents, the transaction was completed and she had a reasonable ability to know what fees were being charged and whether she had a claim. Thus, plaintiff's claim accrued at the time of the closing, not when she made her monthly mortgage payments. Lopez, supra, 62 N.J. at 272. Therefore, the court properly concluded that Gateway's collection of mortgage payments from plaintiff until October 2004 did not extend the statute of limitations for CFA purposes. Plaintiff does not disclose why she did not know that she had a claim at the time of the closing. Moreover, because we conclude plaintiff failed to establish a violation of HOSA, she cannot establish a prima facie case of a CFA violation because she cannot prove any unlawful behavior. Bosland v. Warnock Dodge, Inc., 197 N.J. 543, 557 (2009).
The remaining arguments advanced by plaintiff, which have not been specifically addressed in this opinion are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
Affirmed.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION