## Facts

- Body Max, Inc., a fitness business organized as a corporation, borrowed $550,000 from First Union National Bank (Wells Fargo Bank, N.A. later became the successor lender).
- The loan proceeds were deposited into Body Max’s corporate account and were used for business purposes.
- Salvatore Lopresti, Body Max’s president, personally guaranteed the loan; Salvatore and Margaret Lopresti also granted the lender a mortgage on their primary residence as collateral for the guaranty.
- The promissory note included a prepayment charge if the debt was paid before it was due (initially stated as a 1% prepayment fee), and the parties later executed a modification that used a “breakage fee” (yield-maintenance-type) calculation.
- In 2010, Body Max refinanced through TD Bank Commercial Lending. TD Bank obtained a payoff statement from Wells Fargo and paid the loan in full, including a $48,306.41 prepayment charge, in order to obtain release of the lien.
- The Loprestis sued Wells Fargo, alleging that collecting the prepayment charge violated New Jersey’s Prepayment Law (N.J.S.A. 46:10B-1 to -11.1) and also constituted unlawful conduct under the New Jersey Consumer Fraud Act.
- The Law Division granted Wells Fargo summary judgment and dismissed the complaint, reasoning that the Prepayment Law did not apply to this commercial loan and also stating that the Loprestis lacked standing because the payoff funds came from the corporate refinancing.
- The Loprestis appealed.

## Issues

1. Whether individual guarantors whose residence secured a commercial corporate loan have standing to challenge a prepayment charge that was paid at a refinancing closing.
2. Whether New Jersey’s Prepayment Law applies to a commercial loan made to a corporate borrower when the loan is supported by a guaranty secured by the guarantors’ primary residence.
3. If the Prepayment Law does not apply, whether the prepayment charge was nonetheless unlawful or unenforceable (including under the New Jersey Consumer Fraud Act).

## Decision

- The Appellate Division held the Loprestis had standing because, as guarantors whose home secured the obligation, they had a real financial interest in the payoff and release of the mortgage.
- The court affirmed summary judgment for Wells Fargo on the merits, holding the New Jersey Prepayment Law did not apply to this transaction because it was a commercial loan to a corporate borrower, and the statutory protections were directed at consumer mortgage lending as defined by the statute.
- The court rejected the argument that the residential mortgage securing the guaranty converted the underlying commercial loan into a covered “mortgage loan” under the Prepayment Law.
- Because the prepayment charge was not barred by the Prepayment Law and was authorized by the parties’ agreements, the court also rejected the Consumer Fraud Act theory and the claim that the fee was unlawful on the record presented.
- Disposition: summary judgment for Wells Fargo was affirmed.

## Legal Principles

- Standing exists where a plaintiff has a sufficient financial stake in the outcome; guarantors whose personal residence secures the debt may challenge charges required to obtain release of that lien, even if payoff funds were transmitted by a refinancing lender.
- New Jersey’s Prepayment Law applies only to a covered “mortgage loan” and a covered “mortgagor” as defined by statute; the statute’s definition of mortgagor excludes corporations, and the statute is aimed at consumer, not business, borrowing.
- A commercial loan to a corporate borrower does not become a statutory consumer mortgage loan merely because individual guarantors provide additional collateral in the form of a mortgage on their residence.
- A Consumer Fraud Act claim requires unlawful conduct and an ascertainable loss; where a lender collects a contractually authorized charge in a non-covered commercial transaction, the statutory consumer claim fails absent additional wrongful conduct.

## Conclusion

The Appellate Division affirmed dismissal of the Loprestis’ complaint, holding that although the individual guarantors had standing to sue, New Jersey’s Prepayment Law did not prohibit a prepayment charge on a commercial loan to a corporate borrower, even when the guaranty was secured by a mortgage on the guarantors’ primary residence, and the related Consumer Fraud Act claim likewise failed on the record.


Lopresti v. Wells Fargo Bank, N.A., 435 N.J.Super. 311, 88 A.3d 944 (2014)