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First American Title Insurance Co. v. Leonardo


January 17, 2008


On appeal from Superior Court of New Jersey, Chancery Division, Middlesex County, Docket Nos. C-292-04 and C-39-06.

Per curiam.


Argued November 8, 2007

Before Judges Cuff and Simonelli.

This matter involves defendant's default on two mortgage notes. Plaintiff originally filed a complaint in the Law Division, Bergen County. The case was transferred to Middlesex County Chancery Division, assigned Docket No. C-39-06, and consolidated with a Chancery action entitled First Am. Ins. Co. v. Danilo E. Azcuidiaz, et als., Docket No. C-292-04.

Defendant appeals from the order of September 22, 2006, entered under Docket No. C-39-06, denying his motion for reconsideration of the order of July 28, 2006, granting summary judgment to plaintiff and entering judgment against him in the amount of $912,476.92. By order of December 8, 2006, Judge Chambers certified the judgment as final. This appeal followed. We affirm.


Defendant and his wife (the Leonardos) have purchased real estate in New Jersey and Washington, D.C., and have been involved in financing and refinancing their properties. Defendant is employed as a telecommunications engineer, and his wife was previously employed as a loan processor for a mortgage company, and a home equity coordinator, loan servicing coordinator and commercial loan processor for a bank.

The Leonardos were interested in investing in additional real estate. They met Danilo Azcuidiaz, a principal of Quantum Title Agency, Inc., who advised them he was a real estate investor and had a list of properties for purchase. The Leonardos agreed to invest their money with Azcuidiaz. In return, the Leonardos would receive fifty percent of the net proceeds from the sale of the properties. The parties also agreed that if the Leonardos allowed Azcuidiaz to use their name and good credit to obtain financing to purchase the properties, Azcuidiaz would pay them $5000 upon the closing of each purchase.

On or about November 10, 2004, Azcuidiaz asked defendant if he could use defendant's name and good credit to purchase property located at 71 West Saddle River Road, Saddle River (the property). Defendant agreed. To obtain financing for the purchase, on November 15, 2004, defendant signed a Uniform Residential Loan Application with Real Estate Mortgage Network, Inc. (REM) for $776,000. The application contains the following pre-printed language:

Each of the undersigned represents to Lender . . . and agrees and acknowledges that: (1) the information provided in this application is true and correct as of the date set forth opposite my signature and that any intentional or negligent misrepresentation of this information contained in this application may result in civil liability, including monetary damages, to any person who may suffer any loss due to reliance upon any misrepresentation that I have made on this application, and/or in criminal penalties including, but not limited to, fine or imprisonment or both under the provisions of Title 18, United States Code, Sec. 1001, et seq.; . . . (4) all statements made in this application are made for the purpose of obtaining a residential mortgage loan; (5) the property will be occupied as indicated herein; . . . (7) the Lender . . . may continuously rely on the information contained in the application, and I am obligated to amend and/or supplement the Information provided in this application If any of the material facts that I have represented herein should change prior to the closing of the Loan. . . .

Defendant also signed a Note and Mortgagee to REM for $776,000. The Mortgage contains the following pre-printed language:

1. Payment of Principal, Interest, Escrow Items, Prepayment Charges, and Late Charges. Borrower shall pay when due the principal of, and interest on, the debt evidenced by the Note and any prepayment charges and late charges due under the Note. . . . .

6. Occupancy. Borrower shall occupy, establish, and use the Property as Borrower's principal residence within 60 days after the execution of this Security Instrument and shall continue to occupy the Property as Borrower's principal residence for at least one year after the date of occupancy. . . . . . . .

8. Borrower's Loan Application. Borrower shall be in default if, during the Loan application process, Borrower . . . gave materially false, misleading, or inaccurate information or statements to Lender (or failed to provide Lender with material information) in connection with the Loan. Material misrepresentations include, but are not limited to, representations concerning Borrower's occupancy of the Property as Borrower's principal residence.

Defendant also signed a Secondary Mortgage Loan to REM for $97,000, which contains the following pre-printed language:


In return for a loan that I have received, I promise to pay U.S. $97,000.00 . . . plus interest, to the order of the Lender. . . . . Read this promissory note before you sign.

Do not sign this promissory note if it contains blank spaces.

This promissory note is secured by a secondary mortgage on your real property.

Defendant also signed HUD-1 Settlement Statements for both loans, which contain the following pre-printed language:

I have carefully reviewed the HUD-1 Settlement Statement and to the best of my knowledge and belief, it is a true and accurate statement of all receipts and disbursements made on my account or by me in this transaction. I further certify that I have received a copy of the HUD-1 Settlement Statement.

Defendant also signed a Federal Truth-In-Lending Disclosure Statement, which contains the following pre-printed language:

"The undersigned hereby acknowledge receiving and reading a completed copy of this disclosure along with copies of the documents provided."

Defendant also signed a Borrower's Certification and Authorization, which contains the following pre-printed language:

I/We have not been induced by the Lender, or any of its employees to leave answers blank or conceal or misrepresent, in any way, information to be provided on the loan application.

Defendant also signed an Occupancy Declaration, declaring, under penalty of perjury, that he would occupy the property.

Defendant claims the loan application was blank when he signed it, and he never checked the box indicating he intended to occupy the property. Defendant does not claim that any of the other documents he signed were blank when he signed them. He also admitted he understood when he signed the mortgages he became obligated to pay them; he never intended the pay the mortgages or occupy the property; he was lending his name to the transaction to enable Azcuidiaz to obtain financing to purchase the property; and he received $5000 for allowing Azcuidiaz to use his name and good credit for the purchase.*fn1

Azcuidiaz handled the closing on the property. At the closing, which defendant did not attend, Azcuidiaz issued a title insurance policy through plaintiff. Azcuidiaz received the mortgage funds from REM, and absconded with them without paying the seller or the seller's mortgage. When REM discovered this, it filed a declaratory judgment action against plaintiff on plaintiff's title insurance letter. Plaintiff subsequently paid $912,476.92 to satisfy REM's claim and received an assignment of the notes.

Plaintiff filed a complaint against defendant for payment of the notes, and moved for summary judgment. In granting the motion, Judge Chambers found that defendant knew he had signed blank documents that would be used to secure financing for the purchase of the property, knew his name and good credit would be relied upon by REM, but did not intend to occupy the property or make the mortgage payments. The judge determined that defendant's signing of blank documents, and Azcuidiaz's alleged fraud in inducing him to sign them, did not relieve defendant from liability because defendant participated in the fraud. The judge stated, in pertinent part:

[Defendant] perpetuated a fraud upon [REM]. First, he signed loan documents indicating that he was purchasing the property and that he would make the mortgage payments. This was a material misrepresentation since he had no intention of doing so. Second, he knew that the representations set forth in the documents were false. Third, the misrepresentations were made with the intent that [REM] rely on those representations.

[Defendant] understood that [REM] would rely on the fact that he was the purchaser and that he would be making the mortgage payments when deciding whether to make the loan. Fourth, [REM] did in fact rely on the representation that [defendant] was the applicant and would be responsible for the loan since it did in fact make the loan to him. Fifth, [REM] sustained damages since the pre existing mortgage was not paid off, the loan monies were converted, and the mortgage . . . payments were not made.

[Defendant's] participation in that fraud included execution of the notes being sued upon here. As a participant in the fraud, he cannot now claim he was a victim of the fraud and be relieved of the obligations on instruments he knowingly, intentionally, and indeed fraudulently signed.

Judge Chambers also rejected defendant's argument that plaintiff is responsible for Azcuidiaz's conduct under an agency theory. The judge determined that defendant did not deal with Azcuidiaz in his capacity as an agent for plaintiff. Rather, defendant dealt with Azcuidiaz in his capacity as the principal of Quantum Title Agency.


Defendant contends Judge Chambers erred in concluding as a matter of law that he participated in the fraud perpetrated by Azcuidiaz, and preventing him from using Azcuidiaz's fraud as a defense against plaintiff's attempt to recover against him on the notes. We disagree.

In assessing a trial court's decision on a summary judgment motion, we apply the same standard as the trial court, reviewing the record to determine if there are genuine issues of material fact. Liberty Surplus Ins. Co. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007). We must determine "whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational fact-finder 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). However, if there is no such genuine issue of fact, we then must determine if the trial court properly applied the law. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). We will affirm only if the record indicates the moving party is entitled to judgment as a matter of law. R. 4:46-2(c); Brill, supra, 142 N.J. at 540. With these standards in mind, we address defendant's contentions.

"It is the general rule that where a party affixes his signature to a written instrument, such as a release, a conclusive presumption arises that he read, understood and assented to its terms and he will not be heard to complain that he did not comprehend the effect of his act in signing." Peter W. Kero, Inc. v. Terminal Constr. Corp., 6 N.J. 361, 370 (1951); see also Perigot v. Steiker, 18 N.J. Super. 134, 138 (App. Div.) (citing Fivey v. The Pa. R.R. Co., 67 N.J.L. 627, 632 (E. & A. 1902) ("It is the well settled principle that affixing a signature to a contract creates a conclusive presumption, except as against fraud, that the signer read, understood, and assented to its terms.")), certif. denied, 9 N.J. 403 (1952). The fact that parties to a contract did not choose to read it, or the material parts thereof, before signing it, "or did not know its contents at the time cannot, in absence of actual fraud, relieve [such party] of its obligations." Wade v. Park View, Inc., 25 N.J. Super. 433, 440 (Cty. Ct. 1953), aff'd sub nom. Wade v. Six Park View Corp., 27 N.J. Super. 469 (App. Div. 1953).

To prove actual fraud, a party must show: "(1) a material misrepresentation of a patently existing or past fact; (2) knowledge or belief by the defendant of its falsity; (3) an intention that the other person rely on it; (4) reasonable reliance thereon by the other person; and (5) resulting damages." Gennari v. Weichert Co. Realtors, 148 N.J. 582, 610 (1997) (citing Jewish Ctr. of Sussex County v. Whale, 86 N.J. 619, 624-25 (1981)).

Here, there is no evidence of any fraud by REM. REM did not induce defendant to sign the documents, nor did it make any misrepresentations to defendant about them. Although Azcuidiaz may have scammed defendant by absconding with the mortgage money, this has no bearing on defendant's liability under the notes. Even accepting defendant's claim that the loan application was blank when he signed it, as per the pre-printed language in the other documents defendant signed, he represented to REM that he would pay the mortgages and occupy the property. Because defendant admitted he never intended to pay the mortgages or occupy the property, Judge Chambers properly found he perpetuated and participated in a fraud upon REM.

We emphasize that defendant is not an "unwary and foolish" innocent victim. He is a sophisticated real estate investor who has purchased several properties, signed financing and refinancing documents for those other purchases, and whose wife is experienced in the mortgage loan industry.

Based upon our review of the record, we are satisfied Judge Chambers properly granted summary judgment.


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