JACKSON v. MULTI-SOLUTIONS, INC. et al

Filing 99

OPINION filed. Signed by Judge Anne E. Thompson on 8/22/2011. (mmh)

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

Anthony JOHNSON,
Plaintiff,
v.

Civil No. 08-5134 (AET)

MULTI-SOLUTIONS, INC.; Victor WEXLER
and Larry BLOUGH, d/b/a MULTISOLUTIONS; James DANIELS; GATEWAY
HOME EQUITY, INC. d/b/a GATEWAY
FUNDING DIVERSIFIED MORTGAGE
SERVICES d/b/a IVY MORTGAGE.; Carl
GENSIB; and BANK OF AMERICA f/k/a
COUNTRYWIDE HOME LOANS, INC.,

OPINION

Defendants.

THOMPSON, U.S.D.J.
I. INTRODUCTION
This matter has come before the Court upon the Motions for Summary Judgment filed by
Defendants Countrywide Home Loans, Inc. (―Countrywide‖) and Gateway Home Equity, Inc.
(―Gateway‖) [docket # 91, 92]. The Court has decided the motions upon the submissions of the
parties and without oral argument, pursuant to Fed. R. Civ. P. 78(b). For the reasons stated below,
the Defendants‘ motions are granted.

II. BACKGROUND
This case involves a sale-leaseback agreement entered into by Plaintiff Anthony Johnson
and Multi-Solutions, Inc. Plaintiff now claims that this transaction was a foreclosure rescue scam.
He therefore seeks to have the property restored to his ownership and requests damages for

-1-

various statutory claims.
In 2004, Plaintiff inherited a residence located at 854 Greenwood Avenue, Trenton, NJ
08609 (the ―Property‖). (Gateway Br. in Supp. Ex. A, Anthony Johnson Dep. 9:15-23, 10:2411:2) [91]. The same year, Plaintiff obtained a $60,000 mortgage on the property through
Ameriquest Mortgage Company (―AMC‖). (Id. at 11:9-17.) In 2006, Plaintiff defaulted on his
mortgage payments. (Id. at 52:4-8.) After the Property was listed for sheriff‘s sale, Victor Wexler
and Larry Blough from Multi-Solutions Inc. (―MSI‖) sent Plaintiff a letter offering to help him
avoid foreclosure. (Id. at 13:3-22.) Plaintiff signed an ―exclusivity agreement‖ indicating that he
would deal solely with MSI in attempting to avoid foreclosure. (Id. at 15:10-20.) Plaintiff
apparently understood MSI‘s solution to be a ―lease/buy-back,‖ whereby he would add an
investor to his deed, pay that investor $1,300 monthly mortgage payments for one year, take the
investor off the deed at the end of the year, and proceed with a new mortgage in Plaintiff‘s name
alone. (Id. at 16:16-17:2.) However, the actual agreements signed by Plaintiff resulted in
Plaintiff‘s wholesale transfer of the property and Plaintiff‘s obligation to pay monthly rent to the
new owner. (Id. at 28:20-24); (see also Johnson Dep. Ex. 9). Specifically, Plaintiff deeded the
Property to investor James Daniels, (Johnson Dep. Ex. 2, Deed), and Daniels then leased the
Property back to Plaintiff, (see Johnson Dep. Ex. 9, Letter Agreement Re: Lease of Property – 854
Greenwood Avenue, Trenton, NJ 08609 (―Lease‖)). In carrying out this transaction, closing agent
Carl Gensib produced two HUD-1 settlement statements: one fraudulently indicating that Plaintiff
had received $88,148.67 as proceeds of sale,1 (see Johnson Dep. Ex. 3, HUD-1 Uniform
Settlement Statement), and the other memorializing the ―true intent of the parties‖—namely, that
Daniels would use the sale proceeds to pay off Plaintiff‘s previous mortgage, (Johnson Dep. 33:634:5); (see also Johnson Dep. Ex. 9, Lease). Daniels executed a new mortgage on the Property in
1

Gensib admitted in his deposition that he did not issue Plaintiff the proceeds of sale amount and that Plaintiff did
not otherwise receive this money per the sale-leaseback arrangement. (Gateway Br. in Supp. Ex. C, Carl Gensib
Dep. 66:18-67:11.)

-2-

favor of Gateway. In connection with the mortgage, Gateway received the fraudulent HUD-1
settlement statement. (See Joseph Alvini Aff. ¶ 2.) Gateway‘s loan file does not contain any
record of a sale-leaseback between Plaintiff and Daniels, nor does it contain the true and accurate
HUD-1 settlement statement. (See id. at ¶ 6.) Gateway later assigned the loan to Countrywide.
After Daniels defaulted, Countrywide scheduled foreclosure proceedings and a sheriff‘s sale.
(William T. Marshall Decl. Ex. 8, Laura Scurko Decl. ¶ 3.) Countrywide assigned its bid for the
sheriff‘s sale to the Federal National Mortgage Association (―Fannie Mae‖), which bid
successfully and thereby obtained title to the property. (Id. at ¶ 5.)
On October 20, 2008, Plaintiff filed a Complaint [1] against Defendants MSI, Daniels,
Gateway, and Gensib, alleging claims under the Truth in Lending Act (―TILA‖), the Home
Ownership and Equity Protection Act (―HOEPA‖), the Credit Repair Organizations Act
(―CROA‖), the Real Estate Settlement Procedures Act (―RESPA‖), and the New Jersey Consumer
Fraud Act (―NJCFA‖). Plaintiff later filed the First Amended Complaint [17] on February 9,
2009. Defendant Gateway filed a motion to dismiss Plaintiff‘s First Amended Complaint, which
we denied because Defendant had failed to address Plaintiff‘s ―implied borrower‖ theory or the
equitable tolling issue. (See Mem. & Order, July 20, 2009, at 3–5) [31]. In the same order, we
granted Plaintiff leave to amend to clarify certain causes of action and to add Countrywide as a
Defendant, given that Countrywide is the assignee of the Daniels-Gateway loan. (Id. at 5.)
Plaintiff subsequently filed the Second Amended Complaint (―SAC‖) on October 15, 2009 [40].
Like the previous complaints, Plaintiff‘s SAC brings claims based on TILA, HOEPA, RESPA,
and the NJCFA.2 (SAC ¶¶ 97–109.) Defendants Countrywide and Gateway now move for
summary judgment as to all claims against them [91, 92].

2

Plaintiff‘s CROA claim is pleaded solely against MSI, (see SAC ¶¶ 105–107), and therefore we do not address it
in this Opinion.

-3-

III. ANALYSIS
A. Legal Standard for Summary Judgment
Summary judgment is appropriate if the record shows ―that there is no genuine issue as to
any material fact and that the movant is entitled to judgment as a matter of law.‖ Fed. R. Civ. P.
56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). In deciding whether summary
judgment should be granted, a district court considers the facts drawn from ―the pleadings, the
discovery and disclosure materials, and any affidavits‖ and must ―view the inferences to be drawn
from the underlying facts in the light most favorable to the party opposing the motion.‖ Fed. R.
Civ. P. 56(c); Curley v. Klem, 298 F.3d 271, 276–77 (3d Cir. 2002) (internal quotations omitted).
In resolving a motion for summary judgment, the Court must determine ―whether the evidence
presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that
one party must prevail as a matter of law.‖ Anderson v. Liberty Lobby, 477 U.S. 242, 251–52
(1986). Specifically, summary judgment should be granted if the evidence available would not
support a jury verdict in favor of the nonmoving party. Id. at 248–49.
B. Summary Judgment as to Gateway
1. Standing Under TILA and HOEPA
In order to assert a claim under TILA and HOEPA, Plaintiff must be a ―consumer of
credit.‖ Johnson v. Novastar Mortg., Inc., 698 F. Supp. 2d 463, 468 (D.N.J. 2010); see 15 U.S.C.
§ 1601(a) (stating that TILA‘s purpose is ―to assure a meaningful disclosure of credit terms so
that the consumer will be able to compare more readily the various credit terms available to him
and avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair
credit billing and credit card practices‖); id. § 1602(aa) (stating that HOEPA governs ―a consumer
credit transaction that is secured by the consumer‘s principal dwelling, other than a residential
mortgage transaction, a reverse mortgage transaction, or a transaction under an open end credit

-4-

plan . . . .‖). Specifically, in order to show an injury under TILA and HOEPA, ―‗Plaintiff must
have been doing business with Defendant.‘‖ Novastar, 698 F. Supp. at 468 (quoting Talley v.
Deutsche Bank Trust Co., No. 07-4984, 2008 WL 4606302, at *2 (D.N.J. Oct. 15, 2008)). Where
the parties have entered into a sale-leaseback arrangement rather than a formal credit agreement,
courts have characterized the transaction as an equitable mortgage in order to apply TILA or
HOEPA. See, e.g., id. at 468–470; Scott v. Demarco REI, Inc., No. 10-3822, 2011 WL 1327873,
at *3 (D.N.J. Apr. 6, 2011); In re O’Brien, 423 B.R. 477, 489 (Bankr. D.N.J. 2010).
In this case, however, we need not engage in a lengthy analysis of whether the saleleaseback constituted an equitable mortgage. Even assuming arguendo that an equitable
mortgage existed between Plaintiff and Daniels, there was no transaction between Plaintiff and
Gateway. See Scott, 2011 WL 1327873, at *3. Plaintiff conceded in his deposition testimony that
he never borrowed any money from Gateway. (Johnson Dep. 132:10-16 (―Q: . . . At the closing
on October 20th, 2006, did you borrow any money from Gateway Funding? A: Never. I never
even— Q: Just answer my question. A: No.‖).) The only party to whom Gateway loaned money
in this case was Daniels, the investor to whom Plaintiff had transferred the Property. (See Alvini
Aff. ¶ 2.) Because Plaintiff was not a party to the mortgage agreement between Daniels and
Gateway, Plaintiff cannot maintain TILA or HOEPA claims based on that agreement, and he
therefore fails to qualify as a ―consumer of credit.‖
Plaintiff asserts that Gateway is nonetheless subject to TILA and HOEPA because it had
constructive knowledge that Plaintiff was the ―intended and thus implied borrower‖ through its
employee Joseph Zicaro, a loan officer who was aware of MSI‘s foreclosure rescue business.
(Mem. in Opp‘n to Gateway‘s Mot. for Summ. J. 4, 12–13) [94]. Although this district has not
addressed whether agency principles apply to TILA claims, we will presume that agency
principles do apply in light of TILA‘s broad construction as a remedial statute, see Roberts v.

-5-

Fleet Bank, 342 F.3d 260, 266 (3d Cir. 2003), as well as the fact that other districts have found
that these principles do apply. See, e.g., Consumer Solutions REO, LLC v. Hillery, No. 08-4357,
2010 WL 1222739, at *4 (N.D. Cal. Mar. 24, 2010); Roach v. Option One Mortg. Corp., 598 F.
Supp. 2d 741, 753 (E.D. Va. 2009); In re Bumpers, No. 03-111, 2003 WL 22119929, at *7–9
(N.D. Ill. Sept. 11, 2003). However, even applying agency principles, we are unable to conclude
that Gateway had constructive knowledge of the specific facts suggested by Plaintiff.
The Third Circuit has adopted the Restatement (Third) of Agency (―Restatement‖) in
determining whether to impute an agent‘s knowledge of particular facts to the agent‘s principal.
See Huston v. Procter & Gamble Paper Prods. Corp., 568 F.3d 100, 106 (3d Cir. 2009). Under
the Restatement, ―[t]he scope of an agent‘s duties delimits the content of knowledge imputed to
the principal.‖ Restatement § 5.03 cmt. b. Specifically, ―a corporation is not charged with the
legal consequences of an employee‘s knowledge of a fact that lies outside the scope of the
employee‘s duties to the corporation.‖ Huston, 568 F.3d at 107 (citing Restatement § 503 cmt. c).
Furthermore, even if the fact known to the employee lies within the scope of that employee‘s
duties, the employee‘s knowledge is not imputed to the employer unless it is also ―material—i.e.
important or significant—to the employee‘s duties to the employer.‖ Id. (citing Restatement
(Second) of Agency § 272).
Gateway has failed to point to any evidence regarding the scope of Zicaro‘s duties as a
Gateway employee. Zicaro‘s deposition testimony simply indicates that his title was ―branch
manager‖ and that he was a ―mortgage loan officer.‖ (Zicaro Dep. 19:4-6; 11:19-22.) Without
knowing Zicaro‘s precise duties, we cannot say with certainty that Zicaro‘s knowledge that
individuals referred to him by MSI had separately entered into sale-leasebacks would be outside
the scope of his duties or immaterial to those duties. However, even if we were to impute to
Gateway knowledge that MSI was involved with sale-leasebacks, there is no record evidence that

-6-

Zicaro or anyone else knew that MSI was involved with this particular sale-leaseback between
Plaintiff and Daniels. Indeed, Zicaro‘s deposition testimony suggests that he did not know about
the sale-leaseback entered into between Plaintiff and Daniels or even the mortgage agreement
entered into between Daniels and Gateway. (Id. at 9:21-24 (stating ―I don‘t remember Anthony
Johnson as a client of mine‖)); (id. at 24:19-25:1 (―Q: To back up, have you, to the best of your
recollection, ever been involved in a transaction with either a James Daniels or an Anthony
Johnson? A: Not that I remember.‖)); (id. at 43:24-44:5 (―Q: Did you ever prepare any saleleaseback agreements for James Daniels? A: No.‖)). Zicaro indicated in his deposition testimony
that he only recalled working on one foreclosure rescue transaction, which was for an individual
named Karpontinis. (Id. at 48:5-10.) Although Zicaro‘s signature appears on Daniels‘s loan
application,3 Zicaro stated in his deposition testimony that this was not actually his signature and
conjectured that it was forged by the daughter of MSI‘s principal, Victor Wexler, (id. at 21:18-23,
23:7-24:1). But even assuming that Zicaro did sign Daniels‘s loan application, this evidence
demonstrates that Zicaro knew merely of Daniels‘s mortgage, not Daniels‘s previous saleleaseback agreement with Plaintiff. In short, Gateway‘s constructive knowledge that MSI was
involved in the sale-leaseback business could not amount to constructive knowledge that Plaintiff
and Daniels had entered into a sale-leaseback prior to the Daniels-Gateway mortgage agreement.
For this reason, we cannot subject Gateway to TILA and HOEPA liability under an ―implied
borrower‖ theory that Gateway had constructive knowledge of the sale-leaseback.
Having found that Plaintiff lacks standing to sue Gateway under TILA and HOEPA, we
need not address Gateway‘s arguments that purchase-money mortgages do not qualify for
rescission under TILA or HOEPA and that Plaintiff‘s claims are barred by the statute of

3

Plaintiff‘s opposition brief states that ―Zicaro allowed the daughter of MSI‘s principal, felon Victor Wexler, to
sign his name to loan documentation for plaintiff’s loan.‖ (Mem. in Opp‘n to Gateway‘s Mot. for Summ. J. 12
(emphasis added).) However, since Plaintiff never applied for a mortgage loan, we assume Plaintiff meant to refer
to Daniels’s loan application.

-7-

limitations. (Gateway Br. in Supp. 6–7, 9). Thus, we will grant summary judgment in favor of
Gateway on the TILA and HOEPA claims.
2. RESPA Claim
RESPA requires disclosure of fees and costs involved in residential real estate transactions
in order to prevent ―kickbacks or referral fees‖ and reduce escrow amounts. See 12 U.S.C. §
2601. Here, Johnson has admitted in his deposition testimony that Gateway did not charge him
any fees. (Johnson Dep. 136:3-137:3.) Thus, we will grant summary judgment in favor of
Gateway on the RESPA claim.
3. Vicarious Liability Under NJCFA
To state a NJCFA claim, a plaintiff must show “(1) unlawful conduct by defendant; (2) an
ascertainable loss by plaintiff; and (3) a causal relationship between the unlawful conduct and the
ascertainable loss.” Bonnieview Homeowners Ass’n v. Woodmont Builders, 655 F. Supp. 2d 473,
503 (D.N.J. 2010) (quoting Bosland v. Warnock Dodge, Inc., 964 A.2d 741, 749 (2009)).
Plaintiff claims that Gateway should be held vicariously liable under the NJCFA for the
unlawful conduct of Carl Gensib, the closing agent on the sale-leaseback transaction. (Mem. in
Opp‘n to Gateway‘s Mot. for Summ. J. 14.) Gateway asserts that it is not vicariously liable
because Gensib, as an attorney, was an independent contractor rather than an employee. (Reply
Br. 18 (citing Baldasarre v. Butler, 625 A.2d 458, 465 (N.J. 1993).) However, the parties‘
dispute over whether Gensib was an employee or an independent contractor appears to overlook
the antecedent question of whether Gensib was even working for Gateway. Gensib stated in his
deposition that, as the closing agent, he represented the ―buyer‖—in this case, Daniels. (See
Gensib Dep. 6:19-24 (―Q: . . . What was your position with regard to the Johnson/Daniels
transaction? What was your role? A: I represented the buyer in the closing. Settlement agent.‖).)
Gensib further stated that he did not know whether anyone from Gateway was present at the

-8-

closings, which presumably he would have known if he was Gateway‘s attorney. (Id. at 64:1317.) Because there is no evidence that Gensib had any relationship with Gateway, we cannot find
Gateway vicariously liable for Gensib‘s actions.
Plaintiff asks this Court to apply Sears Mortgage Corporation v. Rose, a case in which the
New Jersey Supreme Court held a title insurance company liable for the intentional, wrongful acts
committed by an attorney who was retained by the purchaser of the land. (See Mem. in Opp‘n 14
(citing Sears Mortg. Corp. v. Rose, 634 A.2d 74, 84 (N.J. 1993)).) However, Sears involved a
practice unique to northern New Jersey whereby title insurers do not use their own title agents to
supervise real-estate closings and instead rely on the purchaser‘s attorney to perform the functions
of a title agent. See Sears, 634 A.2d at 81. The present case is not analogous. Gateway had no
interest in the sale-leaseback between Johnson and Daniels. And Gateway cannot be said to have
relied on Gensib to serve its interests with respect to its mortgage agreement with Daniels, given
that Gensib was representing Daniels.
Thus, absent any agency relationship, we must dismiss the NJCFA claim against Gateway.
C. Summary Judgment as to Countrywide
1. TILA, HOEPA, and RESPA Claims
As stated above, Plaintiff lacks standing to sue Gateway because Plaintiff did not engage
in any credit transaction or equitable mortgage with Gateway, and Plaintiff also cannot rely upon
an ―implied borrower‖ theory based on constructive knowledge. Countrywide is merely the
assignee of the mortgage that Daniels granted Gateway. Accordingly, insofar as Plaintiff‘s TILA,
HOEPA and RESPA claims fail against Gateway, they must also fail against Countrywide. See
Scott v. Demarco REI, Inc., 2011 WL 1327873 at *4 (finding that ―because TILA and HOEPA
claims may not be brought against Gateway, they also may not be brought against Chase as an
assignee‖ (citing 15 U.S.C. § 1461(a)).

-9-

2. NJCFA Claim
Plaintiff concedes dismissal of the NJCFA claim against Countrywide. (See Mem. in
Opp’n to Bank of Am.’s Mot. for Summ. J. 4) [96]. Accordingly, we will grant summary
judgment in favor of Countrywide on this claim.

IV. CONCLUSION
For the reasons stated above, and for good cause shown, the Court grants the motions for
summary judgment filed by Defendant Gateway and Defendant Countrywide. An appropriate
order will follow.

__/s/ Anne E. Thompson_______
ANNE E. THOMPSON, U.S.D.J.
Date:__________8/22/2011___________

-10-