D'Agostino v. Maldonado

• Decision Date: 03 October 2013
• Citation: 216 N.J. 168,78 A.3d 527
• Parties: Anthony D'AGOSTINO and Denise D'Agostino, Plaintiffs–Appellants and Cross–Respondents, v. Ricardo MALDONADO, Defendant–Respondent and Cross–Appellant.
• Court: New Jersey Supreme Court

216 N.J. 168

78 A.3d 527

Anthony D'AGOSTINO and Denise D'Agostino, Plaintiffs–Appellants and Cross–Respondents,

v.Ricardo MALDONADO, Defendant–Respondent and Cross–Appellant.

Supreme Court of New Jersey.

Argued Jan. 29, 2013.

Decided Oct. 3, 2013.

Jason L. Bittiger, Garfield, argued the cause for appellants and cross-respondents (Bittiger Triolo, attorneys).

Clifford J. Ramundo, Paramus, argued the cause for respondent and cross-appellant.

Margaret Lambe Jurow argued the cause for amicus curiae Legal Services of New Jersey (Melville D. Miller, Jr., President, attorney; Ms. Jurow, Newark, Mr. Miller, David G. McMillin, and Rebecca Schore, Newark, on the brief).

Madeline L. Houston and Melissa J. Totaro, West Caldwell, submitted a brief on behalf of amicus curiae Consumers League of New Jersey (Houston & Totaro, attorneys).

Linda E. Fisher and Kyle L. Rosenkrans submitted a brief on behalf of amicus curiae Seton Hall University School of Law Center for Social Justice.

Justice PATTERSON delivered the opinion of the Court.

In this case, the Court applies the New Jersey Consumer Fraud Act (CFA), N.J.S.A. 56:8–1 to –20, to a mortgage foreclosure rescue plan. Plaintiffs Anthony and Denise D'Agostino, in default of their residential mortgage obligations, entered into a series of transactions with defendant Ricardo Maldonado. As a result of those transactions, defendant obtained title to plaintiffs' home, valued at $480,000, for ten dollars; plaintiffs were given the option to repurchase their home; and plaintiff Denise D'Agostino continued to be obligated to pay the mortgage.

Plaintiffs filed suit against defendant, asserting a cause of action under the CFA along with other claims. The trial court held that defendant committed an unconscionable commercial practice within the meaning of N.J.S.A. 56:8–2 and that plaintiffs suffered an ascertainable loss. The court combined treble damages under the CFA with an equitable remedy. It voided the transaction by which plaintiffs had conveyed their residence to defendant. The court then calculated damages by determining the equity in the home that plaintiffs lost to defendant, subtracting the value of defendant's improvements to the property, trebling that net amount pursuant to N.J.S.A. 56:8–19, and subtracting the value of the equity returned to plaintiffs from the trebled damages. On the basis of this calculation, the trial court entered judgment in the amount of $150,694, as well as reasonable attorneys' fees and costs, in plaintiffs' favor.

Defendant appealed. The Appellate Division affirmed in part, reversed in part the trial court's determination, and remanded the matter to the trial court. The panel affirmed the trial court's decision that defendant had committed an unconscionable commercial practice contrary to N.J.S.A. 56:8–2. It held, however, that plaintiffs had failed to demonstrate ascertainable loss because the court's equitable remedy had effectively restored to plaintiffs the interest in the property that they had before defendant violated N.J.S.A. 56:8–2. Accordingly, the Appellate Division remanded to the trial court for an amended judgment awarding no damages to plaintiffs. The parties filed cross-petitions for certification in this Court.

We affirm in part and reverse in part the Appellate Division's determination. We concur with the trial court and the Appellate Division that defendant's execution of the transactions at issue gave rise to an unconscionable commercial practice under N.J.S.A. 56:8–2. We reverse, however, the Appellate Division's judgment with respect to the issues of ascertainable loss and the damages sustained. We agree with the trial court that the transfer of plaintiffs' equity in their home to defendant constituted an ascertainable loss for purposes of N.J.S.A. 56:8–19, notwithstanding the trial court's subsequent restoration of that equity to plaintiffs. We also find that the trial court's determination of damages was a proper exercise of its discretion. We further reject defendant's invocation of the principle of equitable estoppel to bar plaintiffs' claim. Accordingly, we reinstate the trial court's judgment in plaintiffs' favor.

I.

In 1993, plaintiff Anthony D'Agostino inherited from his grandmother an unencumbered property in Garfield, New Jersey, designated as Lot 24 and the southern half of Lot 25, Block O, Saddle River Township (the “Property”). There were two buildings on the Property. The Property consisted of several residential units, which Anthony D'Agostino rented out and managed. Plaintiffs resided with their three children in one of the residential units.

In 2005, plaintiffs separated, and Anthony D'Agostino moved from the Property, where his wife and children remained. Later that year, according to Anthony D'Agostino, he lost his job and suffered a series of financial setbacks. In May 2006, in an effort to stabilize his finances, Anthony D'Agostino executed a mortgage on the Property in the amount of $252,000, which he used to stabilize his cash flow and to pay off two previous mortgages, outstandingreal estate taxes, overdue utility bills and substantial credit card debt. According to Anthony D'Agostino, by 2007, plaintiffs had accrued a new series of debts, and the Property was cited by local authorities for housing code violations.

Anticipating that his poor credit rating would make it difficult to secure financing, Anthony D'Agostino persuaded Denise D'Agostinoto apply for a mortgage in her name alone. Thereafter, according to Anthony D'Agostino's testimony, they executed a quitclaim deed adding her name as an owner of the Property. Denise D'Agostino executed a new mortgage in the amount of $325,000 which may have been used to pay off the previous mortgage. That mortgage, according to trial testimony, was recorded on March 27, 2007. Both plaintiffs secured substantial amounts of cash as a result of that transaction. In the first few months of the term of the mortgage, however, Anthony D'Agostino diverted rental payments to pay his personal expenses. The record does not reveal any mortgage payments made by Denise D'Agostino in 2007.

The mortgagee filed a foreclosure complaint on October 20, 2007, and the court entered a default on November 27, 2007. The amount due on the mortgage was $360,000. It is undisputed that in January 2008, the estimated fair market value of the Property was $480,000.

Defendant Ricardo Maldonado, a sales field manager for a major retail chain, maintained a small part-time business purchasing homes from financially distressed homeowners, negotiating with mortgage lenders and other entities with interests in the properties, and repairing the homes and selling them to third parties. At the time of the transaction at issue, defendant's advertising was limited to a magnetic sign on his car that listed his telephone number and stated, “I buy houses.” Between 1997 and 2005, defendant conducted transactions involving six homes, earning a substantial profit.

In January 2008, plaintiff Anthony D'Agostino contacted defendant and, according to trial testimony, requested his assistance. Plaintiff Anthony D'Agostino testified that the parties verbally agreed on a relatively simple transaction: plaintiffs would pay defendant $40,000, and defendant would repair the property and use rental payments from tenants to bring the mortgage on the Property current.

The documents prepared by defendant to memorialize their agreement, however, proposed a transaction far more complex than the proposed basic service agreement that had been discussed. Defendant prepared five documents: a Letter of Agreement, an Agreement and Declaration of Trust, a Warranty Deed to Trustee, an Assignment of Beneficial Interest in Trust and an Option Agreement. By the execution of these documents, a trust was created, with defendant named the sole Trustee. For consideration of ten dollars, plaintiffs conveyed their interest in the Property to defendant in his capacity as Trustee. Although plaintiffs were no longer the property owners, the documents provided that defendant had the authority to collect rents, make repairs, pay the mortgage and pay property taxes, and that Denise D'Agostino would be personally liable to pay the mortgage balance. Defendant's documents gave plaintiffs a one-year option to recover title to the Property by paying defendant $400,000. According to the trial court's findings, plaintiffs signed the papers without reading them or consulting an attorney.

Defendant anticipated substantial profit from rental payments. He negotiated a new payment agreement with the lender holding the mortgage. According to defendant's testimony, however, he soon found that the rental payments were insufficient to cover the increased mortgage payments due under the revised agreement, and he realized that he would have to contribute his own funds to pay the mortgage. On March 28, 2008, defendant prepared a quitclaim deed which transferred full interest in the Property to defendant. Plaintiffs then executed the quitclaim deed. Although the quitclaim deed recited that defendant paid $360,000 for this interest, he did not pay any money to plaintiffs in consideration for the transfer.

Over the following months, defendant made several mortgage payments, satisfied the outstanding property taxes and made repairs on both residential buildings on the Property. According to defendant, he spent $49,615 of his own money on these services.

Plaintiff Anthony D'Agostino contacted defendant and offered to pay $40,000—an amount that plaintiff later admitted at trial that he did not have—to regain title to the Property. Defendant declined and advised plaintiffs that the Property could only be repurchased for $400,000, as required by the option agreement signed by the parties. Plaintiffs did not pay the money demanded by defendant, and this litigation followed.

II.

Plaintiffs filed this action on March 17, 2009.¹ They alleged a violation of...