Last week, I wrote about an exception to the strict liability normally imposed on dog owners under New Jersey's dog bite statute. (A short time before that, I wrote about yet another exception to strict liability under the dog bite statute, so the exceptions are obviously more interesting than the rule.) This post is about a different dog bite case, Ward v. Ochoa, with a similar result even though it was not decided under the dog bite statute. Ward involved a home inspector who was attacked and severely injured while performing a home inspection. She sued the dog owners (who eventually settled) along with the real estate agency and real estate agent who were selling the house. Like the dog groomer in last week's post, however, the home inspector's claims were dismissed.
A recent decision from the Appellate Division drives home (1) the duty of sellers at sheriff's sales to announce all material information about the property being sold at the sale, (2) the duty of bidders at sheriff's sales to perform independent due diligence about the property notwithstanding that announcement, and (3) the flexibility of Chancery Division courts to fashion remedies when both fail to fully satisfy their obligations.
In Wells Fargo Bank Bank, N.A. v. Torney, plaintiff foreclosed on property owned by defendant, obtained final judgment against defendant, and proceeded to sheriff's sale. In advance of the sheriff's sale, plaintiff submitted its "sheriff's sale package" to the Camden County Sheriff. Included in the package was a short form property description (required under N.J.S.A. 2A:61-1), which, among other things, disclosed that the property was subject to a $94,000 first mortgage. The existence of this prior mortgage was also disclosed in the conditions of sale attached to the short form property description, and in the Affidavit of Consideration submitted by plaintiff in connection with the foreclosure. Finally, the short form property description also contained the following disclaimer: "all interested parties are to conduct and rely upon their own independent investigation to ascertain whether or not any outstanding interest remain[s] of record and/or have priority over the lien being foreclosed and, if so[,] the correct amount due thereon."
Edward Shuman, who would eventually be the winning bidder at the sheriff' sale, learned about the sale through the sheriff's website, which did not mention the prior mortgage. Also, at the sheriff's sale, plaintiff did not announce, as part of its "general announcements," that the property was subject to a prior mortgage. And, on the "printed condition of sale, the box next to 'subject to a first mortgage' was not checked." Shuman claims that he did not know about the prior mortgage when he placed his winning bid on the property, and did not learn about it until later that day when he inquired about the existence of any tax liens on the property. Once he learned about the mortgage, he contacted plaintiff and requested that the sale be vacated and his deposit returned. When plaintiff refused, Shuman filed a motion seeking the same relief.
The SEC announced yesterday that JPMorgan Securities LLC agreed to pay $153.6 million to settle SEC charges that the company "misled investors in a complex mortgage securities transaction just as the housing market was starting to plummet." Pursuant to the settlement, "harmed investors will receive all of their money back.” Just like it did with Goldman Sachs and its now infamous ABACUS 2007-1 deal, the SEC alleged that JPMorgan allowed a hedge fund manager to pick the assets that went into its (equally obscurely named) Squared CDO 2007-1 deal without disclosing that the hedge fund chose the worst assets it could find because it planned to short the offering. You know how this story ended – investors lost their shirts, the hedge fund got rich(er).
The settlement has been widely reported in the media, with some interesting takes on the meaning of the settlement to the overall prosecution (by the SEC, private investors, attorneys general, and the DOJ) of the banks for their role in the crisis. Among the more interesting pieces:
"Is JPMorgan's Settlement The End Of Subprime Claims?" (Reuters) (arguing that that the settlement was a win for JPMorgan but that it does not mark the end of the pain for the bank or its competitors who all face dozens of pending investor lawsuits)
"JPMorgan Settlement Suggests More Pain Ahead For Wall Street" (WSJ – Law Blog) (predicting increased pressure by the SEC on other banks for similar settlements and including the most bizarre and disturbing quote from an email that the JPMorgan employee in charge of selling the Squared CDO 2007-1 deal wrote to his sales team: “We are soooo pregnant with this deal, we need a wheel-barrow to move around . . . Let’s schedule the Cesarean please!”)
"JPMorgan Settlement With SEC Recalls Case Against Goldman Sachs" (providing more detailed reporting on the story and less commentary than the others)
Several years after the start of the financial crisis, and the mortgage meltdown that caused it, only one individual, Fabrice Toure – a/k/a “Fabulous Fab,” his self-imposed moniker — has been sued by the SEC for selling the mortgage backed securities that created, or at the very least exacerbated, the crisis. According to a recent piece in the New York Times,"SEC Case Stands Out Because It Stands Alone," Toure was an obscure trader for Goldman Sachs who was thrust into the national spotlight in 2010 when the SEC sued him for his role in creating and marketing Abacus, one of the many mortgage backed securities created by Goldman during the irrational exuberance of the early to mid 2000s. (Abacus is interesting in its own right because it is one of the securities that was devised with the help of John Paulson, the hedge fund manager who famously made billions shorting mortgage backed securities like Abacus.) As the article notes, the question many have raised is why Toure and why only Toure?
According to at least one former co-worker, Toure was a “junior” and “insignificant” member of a larger team at Goldman responsible for developing mortgage backed securities. In their response to the SEC, Toure’s lawyers emphasized this point, identifying all of the other members of the team, and arguing that “singling Mr. Toure out for criticism regarding the content of this clearly collaborative effort is unreasonable.” For its part, the SEC has not explained why it focused on just one member of one team at one bank, and further on just one deal created by that bank. However, as the article notes, recent increased interest from other regulators, including New York’s attorney general, indicates that this may not be the case for long, and the banks may soon be called upon to answer for their role in the crisis.
Finally, as interesting as Toure’s story is, equally interesting is the story behind how many of the documents that tell the story – including Toure’s non-public response to the SEC lawsuit – came to light. The Times received them from an artist and filmmaker named Nancy Cohen who found the materials on a laptop given to her by a friend in 2006. The friend told her that he found the laptop in a garbage can downtown. Apparently, emails to Tourre continued “streaming into the device.” While Cohen ignored them for years, she began paying attention when she learned about the SEC’s lawsuit, and subsequently gave the documents to the Times.