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White v. Santoro


January 19, 2010


On appeal from the Superior Court of New Jersey, Chancery Division, Essex County, Docket No. C-128-007.

Per curiam.


Submitted September 23, 2009

Before Judges Miniman and Waugh.

Plaintiffs Willie M. White and Josephine O. White appeal from the judgment dismissing their complaint with prejudice. We reverse.


We discern the following facts and procedural history from the record. Because the complaint was dismissed at the end of the Whites' case pursuant to Rule 4:37-2(b), we set forth the facts in the manner most favorable to the Whites.


White is approximately eighty-four years old. He completed tenth grade and became a licensed boiler engineer, working for the same company for thirty-eight years. He and Josephine White have been married approximately fifty-eight years. At the time of trial, Josephine White was living in a nursing home.

The Whites purchased a single-family home located on Carnegie Avenue in East Orange in 1955. At some point in the 1980s, they paid off the mortgage on the house. In 2000, because they were experiencing financial difficulties, they borrowed money and gave a mortgage on the house to secure the loan. However, their financial difficulties continued, causing them to default on the mortgage. Despite attempts to resolve their financial problems through bankruptcy, the mortgage went into foreclosure.

The Whites' property was eventually scheduled for a sheriff's sale. Following publication of the notice of sheriff's sale, White received a personalized flyer from defendant Dahan & Associates, Inc. (Dahan Associates). The flyer was headed: "TIME IS OF THE ESSENCE!!!" and attached a copy of the sheriff's sale notice that had been published in the Star Ledger. The relevant portions of the flyer stated:

We can STOP the foreclosure and save your

HOUSE from auction sale!


Let's discuss your options! In Bankruptcy?


It listed "443 Northfield Ave., Suite #300" in West Orange as the location of Dahan Associates' office. The flyer was mailed in an envelope indicating that it had been sent by "Ed Baldwin" at that address.

"Ed Baldwin" is not a real person, but rather a "marketing name" used by Dahan Associates. The flyer was mailed to the Whites by defendant Edward Dahan, who described himself as a "consultant" to Dahan Associates. He and others at Dahan Associates routinely clipped the sheriff's sale notices from the Star Ledger, and mailed a flyer, similar to the one sent to the Whites, to the record owners of the foreclosed properties.

According to Dahan, the notices were sent out so that Dahan Associates could assist people facing foreclosure in getting "restructured" through "refinancing." The refinancing was done through defendant First Choice Mortgage (First Choice), which used the same address and telephone number as Dahan Associates. Dahan testified that he worked with First Choice loan officers to process their loans.

White called the telephone number on the flyer. The call was answered by defendant Daniel S. Bell. Kenneth Dube, an owner of First Choice, testified that Bell was "an employee" of First Choice as a mortgage solicitor. White had known Bell for approximately ten or fifteen years because Bell had once provided legal representation for White's brother. White did not know that Bell had been disbarred in the interim, In re Bell, 162 N.J. 184 (2000); and Bell did not disclose that fact to him.

According to Dahan, Bell "had a location within" Dahan Associates' office on Northfield Avenue. Dahan would "process" all of the loans that Bell "took in" at the office. Dahan had also sold Bell his interest in defendant Bindi Investments (Bindi), an entity that Dahan had "registered." Bindi had its offices at the same location as Dahan Associates and First Choice, and used the same telephone number as both those entities. After selling Bindi to Bell, Dahan engaged in some business transactions with Bindi that involved the purchase of real property.

Following their telephone call, White went to the Northfield Avenue office and met with Bell. According to White, after he explained his situation, Bell told him that "the best thing to do is take [the house] out of [White's] name for one year and after one year they would put everything [back] in [his] name." During this conversation, Bell called Dahan over to his office and asked him if he thought that was "the best thing to do." Dahan agreed and returned to his own office.

According to White, he was given few details of Bell's plan. White understood that he would pay approximately $2,400 per month and continue to live in the house, and after a year he would regain title to the house.

There are two contracts of sale for the Whites' house in the record, both are signed by defendant Paul M. Santoro, Jr., and the Whites, and both are dated September 12, 2005. One called for a purchase price of $250,000, with a $1,000 deposit and the remaining amount to be paid at closing. The second called for a purchase price of $258,000, with the Whites to "contribute up to $15,480" as a "sellers concession." It also called for them to take back a "second mortgage" from the purchaser for $51,600. Santoro was to be the purchaser under both contracts. It is not clear when the contracts were signed or whether they were signed on the same date or on different dates.

White signed a power of attorney (POA) to Dahan Associates, dated October 8, 2005. According to its terms, the POA was to permit Dahan Associates to "DISPUTE ANY AND ALL DEROGATORY INFORMATION REPORTED AGAINST PRINCIPAL'S PROFILE." There was also an authorization permitting creditors to disclose account information to Dahan Associates and allowing Dahan Associates to settle the Whites' accounts.

By the time these events had transpired, the sheriff's sale had apparently taken place, but the redemption period had not ended. According to White's recollection, a day or so after their first meeting, Bell telephoned him at home and instructed him to go to the Essex County courthouse to get an extension of the redemption period because Bell needed more time to process the papers. White received his first extension on October 13, 2005.

Bell subsequently instructed White to return to court and request a second extension. The General Equity judge apparently requested proof that there was actually going to be a redemption. Dahan sent a letter to the judge's chambers, confirming that the mortgage commitment for the purchase of the property had been extended. The letter, dated October 31, 2005, was on First Choice's letterhead and signed by Dahan as "Manager." The second extension was granted.

A third extension was subsequently requested and received. According to the receipt from the Essex County Sheriff's Office, Dahan redeemed the Whites' property on November 18, 2005, by paying $162,701.11 in principal, interest, costs, and fees. The closing on the sale of the Whites' house to Santoro took place at the Northfield Avenue office. According to the HUD-1, the lender was FGC Commercial Mortgage Finance, doing business as Fremont Mortgage. In addition to the property taxes due, the HUD-1 listed various items as "REDUCTIONS IN AMOUNT DUE SELLER," among which were an "excess deposit" of $12,900 and a "seller held 2nd mortgage" in the amount of $38,700. The amount due to the seller was listed as $5,302.59.

White attended the closing with his wife. Santoro was also present. Bell introduced Santoro to White, but did not explain what role Santoro had at the closing. White had never met him and did not know who he was. Santoro never spoke to White at the closing.

According to White, Bell passed around "a couple of papers" and told White and his wife to sign them. He did not explain any of the documents. Among the documents was a check in the amount of $12,900, dated November 14, 2005, and drawn on Allegiance Community Bank (Allegiance). The check shows Santoro as the "remitter" and White as the payee. The check was endorsed by White and, according to the back of the check, deposited in Bindi's account at Allegiance. According to White, Dahan came into the room after he endorsed the $12,900 check and "grabbed" the check out of Bell's hand.

The Whites never received the $5,302.59 listed on the HUD-1 as being due to the seller at closing. Santoro signed a note to the Whites for the $38,700 mentioned in the HUD-1 as a "seller held 2nd mortgage." He also signed a mortgage related to the note. However, the mortgage was defective, in that it apparently did not properly describe the property Santoro had just purchased from the Whites. It also contained some references to a property located in Montclair that Santoro did not own or have any mortgagable interest in.

Santoro and White signed a lease for the Whites' home on Carnegie Avenue. White agreed to pay $2,400 per month in rent.

On the signature page, the following handwritten language appears: "Tenant has right to buy property back in 1 year or when tenant is able." However, no repurchase price is contained in the lease.

White contends that he made twelve monthly payments on the lease. He generally went to the Northfield Avenue office with his checkbook. Bell would write out the check, payable to Bindi, and White would sign it.

White testified that, at the end of the twelve months he went to Bell and requested that the property be returned to him. Bell told him that it was not possible for him to do so. White stated that he made no additional payments after his request was refused.


On April 2, 2007, a complaint for eviction in Santoro's name was filed against White in the Essex County Special Civil Part. On April 27, 2007, the Whites filed a complaint in the General Equity Part, seeking to quiet title to the Carnegie Avenue property. In addition, the complaint contained allegations of common law fraud; civil conspiracy; violation of the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1 to -106; violations of N.J.S.A. 17:10B-2, which prohibits certain practices by loan brokers; and improper conduct by a notary public. Bell, Santoro, First Choice, Dahan Associates, Fremont Mortgage, Edward and Stewart Dahan, and Bindi, among others, were named as defendants in the complaint.*fn1

In June 2007, the tenancy action was transferred to the General Equity Part to be consolidated with the quiet title action. Answers were filed by Santoro, Dahan Associates, both Dahans, and First Choice. Bell and Bindi failed to answer. The Whites eventually settled with Fremont Mortgage.

After discovery and several pretrial conferences, the answering defendants moved for summary judgment. On April 25, 2008, summary judgment was granted to two defendants not involved in this appeal, but denied as to the remaining defendants. The motion judge explained his reasons as follows:

First Choice moves for summary judgment stating that its only involvement in these transactions is as a mortgage broker securing financing from Freemont for Santoro to purchase the Whites' house. It argues that it never had any contact with the Whites so it could not be liable for any fraud perpetrated by the other parties on the Whites.

However, the admission that it brokered the loan to Santoro is a fact that together with other undisputed facts leads to the drawing of inferences in favor of plaintiffs with regard to First Choice's involvement in the alleged scheme.

That's because the inference can be drawn that the loan to Santoro was a necessary element in that scheme, that it was arranged out of First Choice offices, and that it was arranged by one or more of the defendants acting either directly on behalf of First Choice as an employee or employees or through apparent authority permitted by First Choice.

Even if a person is not an actual agent he or she may be an agent by virtue of apparent authority based on manifestations of that authority by the principal. Of particular importance is whether a third-party has relied on the agent's apparent authority to act for a principal.

Moreover, direct control of principal over agent is not absolutely necessary. A Court must examine the totality of the circumstances to determine whether an agency relationship existed even though the principal did not have direct control over the agent.

Given the circumstances of this case and the inferences that could be drawn in favor of plaintiffs, First Choice could be found to have been a participant in the commission of a common law fraud.

The representation of the nature of the transaction itself could be shown to be an intentional material misrepresentation with the intent that plaintiffs rely on it.

Furthermore, although Whites' home had already been sold at sheriff's sale, his reliance on the misrepresentations of defendants could be shown to have caused him additional damages in various forms, including the additional monetary loss of the rent paid to Bell and Bindi over the period of a year.

Moreover, based on the undisputed facts this Court cannot say at this point that plaintiffs will be unable to prove fraud by clear and convincing evidence.

As it relates to actual authority or apparent authority, it is noteworthy that First Choice does not deny that Bell, Stewart Dahan, Childs, and Baldwin were employees at their West Orange office nor has it taken issue with the fact that Bell, Stewart Dahan, and Childs were licensed by the State of New Jersey Department of Banking & Insurance as mortgage solicitors for First Choice.

Moreover, significantly, Edward Dahan, Stewart's brother and an associate in Dahan and Associates, admits that in furtherance of the transaction with the Whites he personally called the chambers of Judge Harriet Klein to seek an extension of the time for redemption of the White -- Whites' property and followed up with a confirming letter which letter purported to be on First Choice stationery and exhibited a return address of First Choice Mortgage Corp., 443 Northfield Avenue, Suite 300, West Orange, New Jersey, 07052.

While Kenneth Dube,... owner and president of First Choice, certifies that First Choice consistently used letterhead with a logo completely different [than] the letter purportedly offered by Dahan and that Dahan was never an employee of First Choice and was never authorized to issue a letter on behalf of First Choice, the fact of the matter is that he did make the call and send the letter and was in a position to do so because he operated out of the First Choice office, presumably with the knowledge and approval of First Choice employees who may themselves have been involved in a conspiracy to commit fraud.

In that regard Dube also certifies that First Choice "closed its branch office in West Orange, New Jersey, during the third quarter of 2005 and that it also terminated its relationship with Stewart Dahan, the brother of Ed Dahan during the third quarter of 2005."

However, the alleged fraudulent scheme in this case began during the third quarter of 2005 and continued thereafter at the same offices.

Additionally, although Dube certifies that First Choice never authorized the website advertising First Choice at the Northfield office, he does not deny... the existence of the website nor does he claim that he... has taken any affirmative steps in his capacity as owner of First Choice to remove such an allegedly false advertisement from the internet.

Although First Choice denies any direct involvement in the alleged fraudulent scheme, the alleged involvement of its employees who may have acted with authority or apparent authority of First Choice at a minimum creates material issues of fact, the resolution of which cannot be avoided through summary judgment.

The above discussion centered on the fraud alleged in the first count of the complaint, however, it applies to the remaining counts in which First Choice is named. Therefore, for the same reasons [the] First Choice motion is denied as it relates to those remaining counts.

With respect to the motions of Santoro, the Dahan brothers, and Dahan Associates, their certifications of Edward and Stewart Dahan and Paul Santoro, as well as their joint statement of undisputed facts, leave more material questions unanswered than answered, requiring the Court to deny their motion for summary judgment.

Santoro filed a certification asserting that he is the victim here in that he gave a mortgage on his property in exchange for a loan that White agreed to pay a monthly payment of $2,400 [and] that White stopped paying that loan. And as a result he has been unable to pay back the loan.

Accordingly, he claims that he has received a notice of intent to foreclose and that his credit score "has dropped substantially." However, once again, the undisputed paper trail and the questions it raises ties Santoro directly to the alleged scheme.

The contract for sale and the deed are inconsistent as to the purchase price. The purchase price appears to have been artificially inflated through the use of the mortgage back to White and seller's concession.

In that regard there is no dispute that Santoro never made a payment to White on the mortgage. Of course the mortgage itself creates a security interest in property that Santoro did not own and had no right to encumber.

Furthermore, the documentation shows that the Whites were persuaded to sign a lease that required [them] to pay $1,000 more per month than the mortgage payments on which they had defaulted.

And the lease stated that the Whites could buy back the property in a year, a statement that to say the least is not entirely consistent with the promise they were allegedly made by Bell concerning the return of ownership to them in a year.

Moreover, one questions why an elderly person facing foreclosure because he cannot afford to make mortgage payments of $1,400 per month would enter into a transaction in which the net result would be a monthly rental payment of $2,400 per month, a little bit less if Santoro had made the payments he was required to make,... and in which... the Whites lose -- loses title to the house... [they] have owned for over 50 years.

Additionally, Santoro does not have a satisfactory explanation for why the mortgage he gave to the Whites was secured by a property he did not own. While he claims a clerical error, he does not state what property he actually intended to encumber.

Moreover, a reasonable trier of the fact could infer that it is more than mere coincidence that the purportedly mistaken address was actually a property owned by co-defendant Kevin Childs, who also allegedly is or was an employee of First Choice at the Northfield office.

Santoro certainly has not met his burden to prevail on a motion for summary judgment. For these reasons his motion will be denied. Given that those reasons are applicable to all counts against Santoro, they are the basis for the denial of his motion with respect to all such counts.

Stewart Dahan certifies that he is not involved with this matter at all, however, he also certifies that it is the normal course of Dahan and Associates' business to send out letters to homeowners such as the Whites who face foreclosure and solicit them into foreclosure rescue schemes.

He also acknowledges that Dahan and Associates did in fact send the Whites such a solicitation. Therefore, he as a principal of Dahan and Associates is tied to one of the initial steps in this alleged fraudulent conspiracy and that is the manner in which the Whites were solicited for alleged victimization.

Moreover, given Dahan and Associates [initial] involvement, the fact that Stewart Dahan's brother Edward was able to use or create First Choice stationary, use First Choice offices, and take actions in furtherance of this alleged scheme on behalf of First Choice could lead one to infer that this was done with Stewart's acquiescence.

In that regard it is also of significance that Stewart Dahan, Edward Dahan, and Dahan and Associates shared office space with other alleged conspirators, including Bell and First Choice, and that the closing took place in those offices.

These facts and circumstances raise a factual issue as to Stewart Dahan's personal involvement in the alleged fraudulent conspiracy and, therefore, summary judgment is denied.

While Edward Dahan characterizes himself merely as "a courier of sorts" his direct involvement in the transaction is clear, particularly in view of the call and letter to Judge Klein to win a further extension of the period of redemption for the Whites.

In that regard, it is significant that in making those communications Edward Dahan was apparently perpetrating a fraud upon the Court as well since he misrepresented his affiliation with First Choice and misrepresented the role of First Choice, stating that it was extending a loan commitment.

Moreover, Ed Dahan was also personally involved when he redeemed the property on November 18, 2005. He accomplished this by Willie White's putative grant of power of attorney on October 8, 2005, to Dahan and Associates.

This clearly indicates that Ed Dahan and Dahan and Associates acted as more than a mere courier. In fact, it shows active participation in the scheme. Accordingly, summary judgment sought by Dahan defendants and Santoro on the first three counts will be denied.

With regard to the loan broker allegations, the New Jersey loan broker statute defines a loan broker as a person who "[f]or [or] in expectation of consideration assists or advises or offers to assist or advise a borrower... in obtaining or attempting to obtain a loan of money." That's from N.J.S.A. 17:10(B)-1(2).

Loan brokers may not at Subparagraph B make or use any false or misleading misrepresentations or omit any material fact in the offer or sale of the services of a loan broker or a lender whether real or purported, in Subsection C, engage directly or indirectly in any act that operates or would operate as fraud or deception upon any person in connection with the offer or sale of the services of a loan broker or lender whether real or purported notwithstanding the absence of reliance by the borrower. That's from [N.J.S.A. 17:10B-2(b) and (c)].

Here for the reasons discussed above that address fraud, conspiracy, and consumer fraud, defendants First Choice, Santoro, and Dahan [and Associates], Stewart Dahan, Ed Dahan, the parties moving for summary judgment on Count 4 could be found to have violated the loan broker statute and in that regard in this Court's judgment the Whites could be deemed to be the borrower of the money necessary to redeem their property and, therefore, to the extent that this statute is a protection for a borrower I find that it could be applicable in this case. Therefore, summary judgment on this count will be denied.

The case was then assigned to another judge for trial, which took place on April 29 and 30, and May 6, 2008. White testified on his own behalf. He also called Dahan, Santoro, Bell, Dube, and Stephen Buraczynski, an employee of Allegiance Community Bank, as witnesses.

Following the close of the Whites' evidence, the participating defendants moved for dismissal pursuant to Rule 4:37-2(b). After outlining the testimony and some applicable law, the trial judge granted the motion finding, in essence, that no evidence had been presented that would support a finding of liability on the claims asserted in the complaint against any of the moving defendants.

The Whites applied for certification of the order dismissing the complaint as to the answering defendants as final pursuant to Rule 4:42-2. The judge denied the application, noting that there were claims pending against the defaulting defendants. The Whites then moved for entry of default judgment against the defaulting parties. The judge held a proof hearing on December 1, 2008. He sua sponte amended the complaint to allege a cause of action for breach of contract and awarded the Whites damages in the amount of $40,000 against the defaulting defendants, including Bell and Bindi, jointly and severally.

The default judgment was entered on December 9, 2008. This appeal, which challenges only the dismissal order related to the trial, followed.*fn2


On this appeal, we apply the same standard as the trial judge. Luczak v. Twp. of Evesham, 311 N.J. Super. 103, 108 (App. Div.), certif. denied, 156 N.J. 407 (1998). Rule 4:37- 2(b) provides that, whether the case is tried with or without a jury, a motion for involuntary dismissal "shall be denied if the evidence, together with the legitimate inferences therefrom, could sustain a judgment in plaintiff's favor." In Dolson v. Anastasia, 55 N.J. 2, 5-6 (1969) (citations omitted), the Supreme Court described the judicial role as follows:

In the case of motions for involuntary dismissal, the test is, as set forth in R. 4:37-2(b) and equally applicable to motions for judgment, whether "the evidence, together with the legitimate inferences therefrom, could sustain a judgment in... favor" of the party opposing the motion, i.e., if, accepting as true all the evidence which supports the position of the party defending against the motion and according him the benefit of all inferences which can reasonably and legitimately be deduced therefrom, reasonable minds could differ, the motion must be denied.... The point is that the judicial function here is quite a mechanical one. The trial court is not concerned with the worth, nature or extent (beyond a scintilla) of the evidence, but only with its existence, viewed most favorably to the party opposing the motion.

More recently, the Court held that "[a] motion for involuntary dismissal only should be granted where no rational juror could conclude that the plaintiff marshaled sufficient evidence to satisfy each prima facie element of a cause of action." Godfrey v. Princeton Theological Seminary, 196 N.J. 178, 197 (2008).

In this case, the trial judge, applying the same standard as the judge who had denied summary judgment a few weeks earlier, reached the opposite result on essentially the same facts. Such a determination is not consistent with the doctrine of law of the case, which "is a non-binding discretionary rule intended... to avoid relitigation before the same court of the same issue in the same controversy." Pressler, Current N.J. Court Rules, comment 4 on R. 1:36-3 (2009); see also Monaco v. Hartz Mt. Corp., 178 N.J. 401, 413 (2004). Generally speaking,

"[a] court of equal jurisdiction ha[s] no right to 'reconsider' [a legal issue] in the absence of substantially different evidence at a subsequent trial, new controlling authority, or specific findings regarding why the judgment was clearly erroneous." Monaco, supra, 178 N.J. at 413 (citing Underwood v. Atl. City Racing Ass'n, 295 N.J. Super. 335, 340 (App. Div. 1996), certif. denied, 149 N.J. 140 (1997)). As to the latter, "the law of the case doctrine does not obligate a judge to slavishly follow an erroneous or uncertain interlocutory ruling." Gonzalez v. Ideal Tile Importing Co. Inc., 371 N.J. Super. 349, 356 (App. Div. 2004), aff'd, 184 N.J. 415 (2005).

The defense strategy in this case was to blame everything on Bell, who had defaulted, and to claim non-involvement in what one defense opening statement described as Bell's "trickery."

It appears to us that the trial judge took the denials made by Dahan, Santoro, and Dube at face value. There were, however, facts, and reasonably available favorable inferences, from which the trial judge could well have concluded that Dahan, Santoro, and Dube were not truthful in their denials of complicity. At the time he granted the motion dismissing the case, he did not make, and was not permitted to make, credibility determinations or findings of disputed fact.

For example, Dahan denied that he ever recommended sale and lease-back transactions, yet both White and Bell testified that Dahan participated in Bell's decision to structure a sale and lease-back transaction for White. Dube testified that Dahan did not work for First Choice, yet Dahan had signing authority for First Choice checks, one of which was written to Bindi, and represented himself to one of the General Equity judges as the "manager" of First Choice's Northfield Avenue office in West Orange. Dube testified that First Choice had severed its relationship with the Dahans and Bell prior to the institution of the present litigation, yet Dahan and Bell testified that they were, at least at times, still working together with respect to First Choice transactions at the time of trial.

A case such as this, in which most of the plaintiffs' case must be proved through the testimony of adverse witnesses, is particularly inappropriate for dismissal on the basis of denials by defendants whose credibility is not being assessed by the trial judge at that stage of the proceedings. See McBarron v. Kipling Woods, L.L.C., 365 N.J. Super. 114, 117 (App. Div. 2004) ("The cases are legion that caution against the use of summary judgment to decide a case that turns on the intent and credibility of the parties."). Having reviewed the transcript of the trial in light of the General Equity judge's reasons for denying the motion for summary judgment brought by Dahan Associates, First Choice, the Dahans and Santoro, we conclude that the motion for involuntary dismissal should have been denied for the same reasons, that the trial judge should have completed the trial, and that the case should have been decided on the basis of findings of fact informed by his credibility determinations.

We reverse and remand for a new trial before a different judge.


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