# Rosa v. WELLS FARGO

> United States Bankruptcy Court, D. New Jersey · April 23, 2020

URL: https://www.frixlaw.com/law-library/cases/10459599

## Case

- **Court:** United States Bankruptcy Court, D. New Jersey
- **Decided:** April 23, 2020
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

NOT FOR PUBLICATION

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW JERSEY
---- ---- --- --- --- ---- ---- --X
In re:
DANIELA MARIA ROSA, Chapter 11
Case No. 17-27826(CMG)
Debtor.
---- ---- --- --- --- ---- ---- --X
DANIELA MARIA ROSA, Adv. Pro. No. 17-01664 (CMG)
Plaintiff,
v.
WELLS FARGO,
Defendant.
---- ---- --- --- --- ---- ---- --X
OPINION
APPEARANCES:
LAWOFFICES OFANDYWINCHELL,PC
Andy Winchell, Esq.
Attorney for Plaintiff
REEDSMITH LLP
Ethan R.Buttner, Esq.
Attorneys for Defendant
CHRISTINE M. GRAVELLE, U.S.B.J.
I. Introduction
Daniela Maria Rosa (“Debtor”) moves before this Court for leave to amend her complaint

against Wells Fargo Bank, N.A. (“Wells Fargo”) to include causes of action under the New
Jersey Law Against Discrimination (“LAD”) and the New Jersey Consumer Fraud Act (“CFA”).
The facts giving rise to both the existing counts and the proposed amended counts are the same.
The genesis of the action is Wells Fargo’s denial of a loss mitigation application submitted by
Debtor.
Now, Debtortakes the position that Wells Fargo’s failure to consider the income of her
non-obligor husband, James Rosa (“James”),constitutes “discrimination” under the LAD and an
“unconscionable commercial practice” under the CFA. Because this Court finds that James’s
income does not fall under the purview of the LAD, and because Debtor’s CFA claim is

dependent upon the LAD violation, the proposed amendment is futile and must therefore be
DENIED.

II. Jurisdiction
The Court has jurisdiction over this contested matter under 28 U.S.C. §§ 1334(a) and
157(a) and the Standing Order of the United States District Court dated July 23, 1984, as
amended September 18, 2012, referring all bankruptcy cases to the bankruptcy court. This
matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(A), (C), and (O).
Venue is proper in this Court pursuant to 28 U.S.C. § 1408 and 1409. Pursuant to Fed. R. Bankr.

P. 7052, the Court issues the following findings of fact and conclusions of law.
III. Facts and Procedural History
The underlyingfacts in this action were set forth in this Court’s previous decisionon

Wells Fargo’s Motion to Dismiss, In re Rosa, No. 17-27826 (CMG), 2018 WL 4352168, at *4–5,
2018 Bankr. LEXIS 2424(Bankr. D.N.J. Aug. 9, 2018)(“Rosa I”). Those facts are incorporated
herein. Summarily, Debtor, individually, executed a note and mortgage on her marital residence,
where she resided with James. James did not sign the note or mortgage. It is not clear whether
James is on the deed.
It is uncontested that Debtordefaulted on her obligations under the note and a final
judgment in foreclosure entered against her in 2014. After the judgment was affirmed on appeal,
Debtorsubmitted a loss mitigation application to Wells Fargo. Though the loss mitigation
application listed a gross monthly income of $13,848.50, Wells Fargo denied the application

based upon a gross monthly income of $6,943.00, approximately half of what Debtorclaimed.
The income derived from commissions and other income earned by James, not Debtor. Debtor
appealed the denial. The appeal was also denied.
Debtorfiled her Chapter 11bankruptcy case on August 31, 2017. On October 10, 2017
she filed the present adversary proceeding against Wells Fargo, alleging violations of RESPA
and Regulation X. Wells Fargo filed a Motion to Dismiss the Adversary Proceeding, which this
Court granted in part and denied in part as explained in Rosa I. In the interim,the loan was
transferred and Debtorobtained a loan modification from the new servicer.
Now, 17 months after Rosa I and after extensive mediation, Debtorbrings this motionto
amend her complaint. The amended complaint appended to her motion adds two additional

causes of action. First, she alleges that Wells Fargo violated N.J.S.A. § 10:5-12 (the “Source of
Income Provision”), by “discounting the non-salary, commission portion of theincome by
roughly one hundred percent.” SeeProposed Amended Complaint (“Amended Complaint”),
ECF No. 27-1, a ¶¶ 61-66. Second, she alleges that Wells Fargo violated the CFA by virtue of
its alleged violation of the LAD. Id. at ¶¶ 67-77. Debtorhas added four (4) additional factual
allegations to the Amended Complaint. Paragraph 19 of the proposed Amended Complaint now
alleges that Wells Fargo failed to have different personnel review the matter on appeal. Id.at ¶

19. The proposed Amended Complaint also alleges that a portion of Debtor’s monthly income is
derived from her husband’s sales commissions rather than from a salary, and that New Jersey
law prohibits discrimination based upon the source oflawful income. Id.at ¶¶ 24, 25. Finally,
Debtornow alleges that Wells Fargo has a “pattern and practice” of discriminating against
borrowers whose income derives from commission. Id. at ¶ 27.
Wells Fargo has opposed the motion on the basis that the proposed amendment is futile.
It bases its objection on two main theories: (1) that the Amended Complaint fails to state a claim
under the LAD; and (2) that the LAD claim is barred by the statute of limitations. Because the
CFA claims flows from the LAD claim, Wells Fargo contends that count must also be dismissed.

Debtorfiled a thorough response to Well Fargo’s objections, and the Court conducted oral
argument on March 10, 2020.

IV. Legal Standard
Fed. R. Bankr. P. 7015 makes Fed. R. Civ. P. 15 applicable in adversary proceedings.
The rule provides that “a party may amend its pleading only with the opposing party’s written
consent or the court’s leave. The court should freely give leave when justice so requires.” Fed.
R. Civ. P. 15(a)(2). The Supreme Court interpreted the rule in Foman v. Davis, 371 U.S. 178,
182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962):
Rule 15(a) declares that leave to amend ‘shall be freely given when justice
so requires'; this mandate is to be heeded. See generally, 3 Moore, Federal
Practice (2d ed.1948), ¶¶ 15.08, 15.10. If the underlying facts or
circumstances relied upon by a plaintiff may be a proper subject of relief,
he ought to be afforded an opportunity to test his claim on the merits. In
the absence of any apparent or declared reason-such as undue delay, bad
faith or dilatory motive on the part of the movant, repeated failure to cure
deficiencies by amendments previously allowed, undue prejudice to the
opposing party by virtue of allowance of the amendment, futility of
amendment, etc.-the leave sought should, as the rules require, be ‘freely
given.’ Of course, the grant or denial of an opportunity to amend is within
the discretion of the District Court, but outright refusal to grant the leave
without any justifying reason appearing for the denial is not an exercise of
discretion; it is merely abuse of that discretion and inconsistent with the
spirit of the Federal Rules.
Futility is grounds for denial of leave to amend if the proposed amendment cannot state a
claim on which relief can be granted or withstand a motion to dismiss under Fed. R. Civ. P.
12(b)(6). In re Burlington Coat Factory Sec. Litig., 114F.3d 1410, 1434 (3d Cir. 1997).
“Futility” is therefore assessed under the Rule 12(b)(6) standard. Id.
To survive a motion to dismiss brought under Rule 12(b)(6) a complaint must contain
enough factual matter to suggest the required cause of action. SeePhillips v. County of
Allegheny, 515 F.3d 224, 234 (3d Cir. 2008). There is no requirement that the court find a
likelihood of success at the pleading stage, “but instead [must find] enough facts to raise a
reasonable expectation that discovery will reveal evidence of the necessary element” for
recovery. Id. When reviewing a motion to dismiss brought pursuant to Rule 12(b)(6), the court
evaluates the merits of the claims by accepting all allegations in the complaint as true, viewing
them in the light most favorable to the plaintiffs, and determining whether they state a claim as a
matter of law. Gould Elecs., Inc. v. United States, 220 F.3d 169, 178 (3d Cir. 2000). The
defendant bears the burden of showing no claim has been stated. Id.
V. Analysis
A. Statute of Limitations

Wells Fargo states that in the intervening twenty-seven (27) months between the filing of
the Adversary Complaint and the filing of this motion, the statute of limitations as to any LAD
claims expired. The LAD is subject to the two-year statute of limitations established under
N.J.S.A. 2A:14-2. Montells v. Haynes, 133 N.J. 282, 286(1993); Anjelino v. New York Times
Co., 200 F.3d 73, 97 (3d Cir. 2000). Here, Wells Fargoissued its final response to the loss
mitigation packet on August 3, 2017. The present motion to amend, which contains the LAD
claim, was not filed until January 6,2020, outside of the two-year window.
Fed. R. Civ. P.15(c) allows relation back ofamendments to the date of the original
pleading when “the amendment asserts a claim or defense that arose out of the conduct,

transaction, or occurrence set out –or attempted to be set out –in the original pleading.” Fed. R.
Civ. P. 15(c)(1)(B). “In accordance with the general theory of liberalized pleading in the federal
system, Rule 15(c) is premised on the notion that a party is not entitled to the protection of the
statute of limitations based upon the later assertion by amendment of a claim or defense that
arises out of the same conduct, transaction, or occurrence set forth in the timely filed original
pleading.” Bensel v. Allied Pilots Ass’n, 387F.3d 298, 310 (3d Cir. 2004).
Relation back is not proper or permitted “where the original pleading does not give a
defendant ‘fair notice of what the plaintiff’s [amended] claim is and the grounds upon which it
rests.’” Glover v. FDIC, 698 F.3d 139, 146(3d Cir. 2012) quotingBaldwin City. Welcome Ctr.
v. Brown, 466 U.S. 147, 149n.3 (1984). In particular, amendments “that significantly alter the

nature of aproceeding by injecting new and unanticipated claims are treated far more
cautiously.” Id.
In this case the facts all relate back to the same occurrence,the evaluation and denial of
the loss mitigation application. The original complaint alleged error, incompetence, and a failure
to reasonably investigate, all largely based on Debtor’s allegation that Wells Fargo failed to
credit her with her husband’s income. The amended complaint alleges anintentional act of
discrimination, which gives rise to an entirely new claim. The Court questions whether the

original complaint gave adequate notice of Debtor’s allegation that Wells Fargo violatedNew
Jersey’s LAD.
Nevertheless, the language of Fed. R. Civ. P. 15(c) allows for relation back where the
claim arises of the conduct in the original pleading. Based upon that, and the liberality of
allowing for amended pleadings, this Court finds that the LAD claim relates back to the original
filing, and the statute of limitations does not apply.

B. Failure to State a Claim

(i) NJ Law Against Discrimination
The LAD is a comprehensive civil rights statute that protects individuals from
discrimination in such areas as housing, employment, lending, labor, public accommodation, and
general financial transactions. The Source of Income Provision makes it unlawful in the State of
New Jersey:

(i)For any person, bank, banking organization, mortgage company,
insurance company or other financial institution, lender or credit
institution involved in the making or purchasing of any loan or extension
of credit, for whatever purpose, whether secured by residential real estate
or not, including but not limited to financial assistance for the purchase,
acquisition, construction, rehabilitation, repair or maintenance of any real
property or part or portion thereof or any agent or employee thereof…
(4) To discriminate against any person or group of persons because
of the source of any lawful income received by the person or the
source of any lawful rent payment to be paid for the real property.”
N.J.S.A. § 10:5-12. Remedies for a violation of the LAD include, “[a]ll remedies available in
common law tort actions . . . in addition to any provided by this act or any other statute.”
N.J.S.A. § 10:5-13.
The 1981 predecessor to the Source of Income Provision, N.J.S.A.§ 2A:42-100 (enacted
in 1981 as P.L. 1981, c. 323 and repealed by P.L. 2002, c. 82, § 7), was enacted with the purpose
of, in the words of Governor Byrne“protect[ing] from housing discrimination welfare recipients,
spouses dependent on alimony and child support payments and tenants receiving governmental
rental assistance.” Office of the Governorof New Jersey, News Release at 1 (Dec. 9, 1981), as
quoted in Franklin Tower One, LLC v. N.M., 157 N.J. 602, 725 A.2d 1104 (1999).
In Franklin Tower One, a landlord refused to accept Section 8 housing vouchers for use
in the payment of rent, due to the fact that the landlord had chosen not to participate in that
federal program. The New Jersey Supreme Court rejected the landlord’s position. The Franklin

Tower Onedecision triggered the enactment of the current Source of Income Provision. The
legislative statement accompanying the bill stated:
The bill follows the decision of Franklin Tower One L.L.C. v. N.M., 157
N.J. 602 (1999) in which the NewJersey Supreme Court held that New
Jersey law requires a landlord to accept a federal Section 8 voucher from
anexisting tenant who obtains one during the course of his or her tenancy.
A landlord, therefore, cannot refuse torent to families or individuals
solely because they will beusing a Section 8 voucher to help pay the rent.
The bill would also prohibit discrimination by lending institutions or
others to persons holding Section 8 vouchers who areeligible for the new
federal Section 8 home ownershipprogram.
Statement to Assembly, No.710 (Feb. 21, 2002). The focus of the legislative history is on
discrimination against people utilizing public assistance to obtain rental housing. But Governor
Byrne’s statement references non-public assistance income, specifically alimony and child
support payments. And the legislative statement specifically references home ownership versus
solely rental housing.
Debtor notes that the broad reach of the statute, without the limits to only rental housing
or public assistance, is reinforced by its language when compared with other similar statutes.
Massachusetts, for example, limits the protection to recipients of public assistance:
It shall be an unlawful practice...For any person furnishing credit, services
or rental accommodations to discriminate against any individual who is a
recipient of federal, state, or local public assistance, including medical
assistance, or who is a tenant receiving federal, state, or local housing
subsidies, including rental assistance or rental supplements, because the
individual is such a recipient, or because of any requirement of such
public assistance, rental assistance, or housing subsidy program.
ALM GL ch. 151B, § 410). The District of Columbia has a similar provision: “[t]he monetary
assistance provided to an owner of a housing accommodation under section 8 of the United
States Housing Act of 1937, approved August 22, 1974 (88 Stat. 662; 42 U.S.C. § 1437f), either
directly or through a tenant, shall be considered a source of income under this section.” D.C.
Code § 2-1402.21 (a), (e). Maine also has a prohibition on housing discrimination source of
income that is limited to recipients of public assistance that makes it unlawful “[fJor any person
furnishing rental premises or public accommodations to refuse to rent or impose different terms
of tenancy to any individual who is a recipient of federal, state or local public assistance,
including medical assistance and housing subsidies, primarily because of the individual's status
as recipient." 5 M.R.S. § 4581-A(4).
Debtor posits that any analysis of the legislative history of the LAD is largely
superfluous. The plain language of the statute holds that a lender may not discriminate against a
borrower based on “‘the source of any lawful income.” Therefore, Wells Fargo may not

discriminate against James’s commission-based income as a source. She submits that accounting
for the structure and legislative history of the law only reinforces this notion.
To begin, this Court notes that it appears the primary purpose of the law is to help less
fortunate members of society obtain housing. It is not apparent that Debtor and James are among
the group the law was meant to protect. Here, in 2005 Debtorobtaineda loan secured by a note

and mortgage issued in her name alone. Only she has a legal obligationto repay the note. James
is under no legal obligation to either pay the note directly or to contribute to the payment of his
wife’s mortgage debt. Because James did not sign the note, his income is not subject to direct
collection attempts made by Wells Fargo.
Debtor now seeks a modification of the note, apparently relying only on James’s income.
Shenow cries foul when, after a substantial default, her bank refuses to fully credit the income of
a person who has no liability for repayment of the notewhen considering her request for a
modification of the original loan. This scenario is vastly different from the scenario in Franklin
Tower One.

Wells Fargo presents three primary arguments as to why the Source of Income Provision
does not apply: (1) a loss mitigation application for a loan in default does not involve an
extension of credit; (2) the income was that of the Debtor’s non-borrower husband; and (3)
variable commission income does not fall within the sweep of the Source of Income Provision.
Each argument will be addressed in turn.

(a) Loss Mitigationas Extension of Credit
The LAD prohibits discrimination “in the making or purchasing of any loan or extension
of credit.” SeeN.J.S.A. § 10:5-12(i). Wells Fargo argues that the LAD does not apply because a
loss mitigation application for a loan in default does not involve an extension of credit. In
support, Wells Fargo string cites to a series of unpublished, out of district opinions. See, e.g.,
Carter v. Bank of Am., N.A., No. EDCV 15-1474- MWF(DTBx), 2015 WL 12732427, *4, 2015
U.S. Dist. LEXIS 186910 (C.D. Cal. Oct. 22, 2015) (finding loan modification neither a
refinancing nor an extension of new credit in context of allegation of TILA violation); Johnson v.

Bank of Am., N.A., No. 1:11–CV–42, 2014 WL 6694013, *1, 2014 U.S. Dist. LEXIS 169028
(D. Idaho Sept. 16, 2014) (loan modification was not a refinancing or an extension of credit in
TILA context); De Jose v. EMC Mortg. Corp., No. C–11–00139 JCS, 2011 WL 1539656, *7,
2011 U.S. Dist. LEXIS 57751 (N.D. Cal. 2011) (loan modification does not constitute either an
extension of credit or a refinancing under TILA); Norton-Griffiths v. Wells Fargo Home
Mortgage, No. 10-CV-169, 2011 WL 61609, *6, 2011 U.S. Dist. LEXIS 2348(D. Vt. Jan. 4,
2011) (court analyzed application of TILA and Home Ownership Equity Protection Act of 1994
HOEPA to forbearance agreement and loan modification). No further analysis is provided. The
Court does not find any of the cited cases helpful. Each examines application of the Truth in

Lending Act to loan modifications, not whether loan modifications can be considered extensions
of credit when applying laws against discrimination. In fact, contrary to Wells Fargo contention,
at least one of the decisions cited found in favor of the bank on allegations of violation of
RESPA on factual grounds, implying that it considered RESPA requirements applicable to the
loan modification process, thereby equating loan modification to an extension of credit in that
context. SeeJohnson, 2014 WL 6694013 at *2.
Debtor, on the other hand, cites extensively to guidance from federal and state courts and
agencies. Federal law applicable to loan modifications consider modifications an extension of
credit. For example, the Consumer Finance Protection Bureau (“CFPB”) issued a directive prior
to the current version of RESPA’s Regulation X, which explained that credit rules apply to loan
modification applications, stating that “as the definition of credit includes that right granted by a
creditor to an applicant to defer payment of a debt, a loan modification is itself an extension of
credit and subject to ECOA and Regulation B.” CFPB Laws and Regulations, June 2013, P. 2.
The Federal Reserve Board of Governors issued similar guidance prior to the passage of the

Making Homes Affordable Program, explaining that a loan modification such as HAMP is an
extension of credit. See Federal Reserve Board of Governors, Division of Consumer and
Community Affairs: Mortgage Loan Modifications and Regulation B's Adverse Action
Requirement, December 4, 2009, p. 1-2.
The New Jersey Supreme Court has found that “post-foreclosure judgment
agreements…were both in form and substance an extension of credit to the [borrower]
originating from the original loan.” Gonzalez v.Wilshire Credit Corp., 207 N.J. 557, 564 (2011).
Like the cases cited by Wells Fargo, the authorities cited by Debtor do not reference the
LAD. Nevertheless, this Court finds that the LAD’s definition of “extension of credit” must

include a loan modification. A complete reading of the LAD supports this conclusion. The LAD
casts a wide net over the services it reaches. It specifically refers to loan modifications in section
(i)(1), making it unlawful for financial institutions involved in the making or purchasing of any
loan or extension of credit:
To discriminate … in the granting, withholding, extending, modifying,
renewing, or purchasing, or in the fixing of the rates, terms, conditions or
provisions of any such loan, extension of credit or financial assistance or
purchase thereof or in the extension of services in connection therewith.
N.J.S.A.§ 10:5-12(i)(1), emphasis added. There is no dispute that The LAD prohibits
discrimination in reviewing loan applications. It is nonsensical and contrary to the language of
the LAD to find that the broad reach of services listed in section (i)(1) of the LAD would be
limited in the following subsections.

(b) Treatment of Income of Non-Borrower Husband

The Debtoris correct in urging this Court to begin its interpretation of the statute by first
looking at its plain language. The Third Circuit has labeled this as the “cardinal canon of
statutory interpretation.” See In re Philadelphia Newspapers, LLC, 599 F.3d 298, 304 (3d Cir.
2010). “[C]ourts must presume that a legislature says in a statute what it means and means in a
statute what it says there. When the words of a statute are unambiguous, then this first canon is
also the last: judicial inquiry is complete.” Id.,citingConn. Nat’l Bank v. Germain, 503 U.S.
249, 253-54, 112 S.Ct. 1146 (1992). Where the statutory language is unambiguous, the court
should not consider statutory purpose or legislative history. Id., citingAT&T, Inc. v. F.C.C., 582
F.3d 490, 498 (3d Cir. 2009).

But the plain language of the statutesupports the position of Wells Fargo that the Source
of Income Provision of the LAD does not apply where the source of the income is the Debtor’s
non-borrower husband. The LAD prohibits discrimination in reviewing “lawful income received
by the person” applying for a loan or extension of credit. See N.J.S.A. § 10:5-12(i)(4), emphasis
added.
According to theschedules filed in connection with her August 2017 bankruptcy filing,
Debtorhad noincome. On Schedule I, she attributes a gross monthly income in excess of
$17,000.00 to James. She notes that she has been a “self-employed, stay at home mom” for 13
years. She attaches to Schedule I information about two businesses, one of which she lists as
“50% ownership.” But no interest in either of these businesses appears on Schedule A/B and it
does not appear that she receives income from either business. Her monthly reports characterize
her income as “contribution from husband.” That contribution does not appear to be the entirety
of his income. Notably, the total contribution over the 30-month bankruptcy averages out to be
approximately $5,733 per month, an amount less than the amount Wells Fargo credited to Debtor
during the loan modification process. According to Debtor’s bankruptcy filing, James is the

recipient of the income, not Debtor. Since James is not the person applying for the loan or
extension of credit, the LAD does not apply.
In so finding, this Court is aligned with another bankruptcy court in this district that was
presented withfactually analogous circumstances and upon which Wells Fargo heavily relies.
That case held:

[T]he plain language of the statute requires the discrimination to relate to
income attributable to the aggrieved person . . . Here, the income that is
the subject of the Amended Complaint “is derived from her husband’s
sales commissions,” rather than the [d]ebtor. Additionally, the [d]ebtor is
the plaintiff, and [d]ebtor’s husband is not a party to this action.
In re Coppola, 596 B.R.140,167(Bankr. D.N.J. 2018). But Debtorcontends that this reading of
the LAD is incorrect. WhileDebtor advises this Court to conduct a “plain-language” analysis of
the LAD, sheignores her own advice and refers to guidance relating to the LAD from the New
Jersey Attorney General’s Office, whichincludes child support, alimony, and gifts from family
members as “sources of income”contemplated by the LAD. From this guidance,she deducts
that income provided by a spouse must also be included, stating that to do otherwise would give
married couples who live together less protection from civil rights statutes than couples who are
separated or divorced.
The Court first notes the obvious, that awards of alimony and child support trigger legal
obligations to pay. They arise from court orders and can be enforced through legal process. The
“contribution” made by James is not subject to such enforcement. This Court canonly guess
what the Attorney General’s guidance means by “gifts from family members”as sources of
income. Does it mean that monetary gifts to assist a family member with a down payment on a

home purchase should be considered a source of income? Should an annual check placed into a
birthday card by Aunt Mary be considered a source of income for securing housing so as not to
violate the LAD? The Court doubts this could be true. It is just this type of forced conjecture
that the rules of statutory interpretation are designed to avoid.
Returning to the language of the statute, Debtor does not receive James’s income, James
receives James’s income. Because James is not an obligor on the note, he is under no obligation
to pay Wells Fargo. Nor is James obligated to contribute his income to Debtor. Wells Fargo is
well within its rights to decline to consider his incomewithout violating the LAD.
As to Debtor’s argument that married couples should not be treated differently than

separated or divorced individuals, the fact is that bankruptcy law, tax law, and marital law does
treat them differently. The LAD does not supersede or invalidate these laws and their instruction
cannot be ignored.
For example, tax law states that “[t]he filing of joint tax returns does not alter property
rights between husband and wife. In particular, the filing of a joint return does not have the
effect of converting the income of one spouse into the income of another.” Callaway v. Comm’r
of Internal Revenue, 231 F.3d 106, 117 (2d Cir. 2000)(citations omitted). So, the fact that
Debtor and James filed a joint tax return is of no moment.
Debtor may arguethat, for the purposes of the LAD, she “receives” James’s income
pursuant to some general marital right to all joint income. The New JerseySupreme Court has
stated that the institution of marriage, “is a shared enterprise, a joint undertaking, that in many
ways is akin to a partnership.” Rothman v. Rothman, 65 N.J. 219, 229 (1974). It has further
recognized that “each spouse contributes something to the establishment of the marital estate,

even though one or the other may actually acquire the particular property.” Chalmers v.
Chalmers, 65 N.J. 186, 194 (1974). But the New JerseySupreme Court also recognizes that:
[T]he equitable distribution statute does not authorize the distribution of
marital assets except upon the divorce of the parties. By the plain terms of
the statute, a spouse's right to share in marital property by virtue of
equitable distribution arises when “a judgment of divorce ... is entered.”
The Court has consistently interpreted the statute to authorize a
distribution of marital assets only on the condition that the marriage of the
parties has been terminated by divorce.
Carr v. Carr, 120 N.J. 336, 342 (1990)(citations omitted). To the extent James’s income can be
considered a marital asset,should he choose to divert it away from the marriage “partnership,”
Debtorwould have little recourse outside of a matrimonial proceeding. A divorce mayobligate
James to make support payments,which could fall underthe purview of the LAD. That is not
the case for Debtor here.
Succinctly, Debtorhas no legal right to James’s income, and therefore she is not
receiving it as per the Source of Income Provision. Notably, despite Debtorhaving no right to
the income, Wells Fargo nevertheless credited Debtorwith half of James’s income in the loss
mitigation process. The Court accepts this as fair and equitable. Debtor cannot choose to sign a
note and mortgage on her own yet demand that Wells Fargo look beyond her own ability to pay
when considering her request that the loan bemodified. This is patently unfair, and unsupported
by the LAD.
(c) Treatment of Commission Income
Wells Fargo’s final contention is that commission income does not fall within the sweep

of the Source of Income Provision. It makes the distinction between discrimination based upon
the “source” of income versus the “form” of income. Wells Fargo interprets the LAD to forbid
discrimination as to the source, for example public assistance or alimony, but not as to theform,
for example, straight salary versus commission.
The In re Coppola court addressed this issue, noting that the bank has a right to evaluate
the quality or consistency of an applicant’s income irrespective of its source. In re Coppola, 596
B.R. at 167-68. The Coppolacourt held:

In sum, if a Bank chooses to discount –or even reduce tozero –
commission income, that is not discrimination butthe exercise of
necessary discretion in evaluating whetherto extend credit or offer a loan
modification. To takeaway this necessary discretion based on NJLAD
wouldsweep too broadly….Finally, reading NJLAD as broadlyas the
Debtor suggests would indirectly allow the Debtor to do what RESPA and
Regulation X say you cannot do –claim a violation of those laws and
regulations based on alender’s discretionary determination not to grant a
loanmodification.
Id. at 168 (emphasis in original). This Court agrees with In re Coppola. The intention of the
LAD cannot be to legislate generally accepted business principles used by financial institutions
to determine whether to make a loan. The LAD requires financial institutions to consider any
and all income received from any legal source. It prohibits the application of non-economic
valuejudgments as to whether the source is an acceptablesource. It is not meant to usurp the
ability of the financial institution to make an appropriate business decision applying traditional
economic factors. Receipt of income from sales commissions may be less consistent and reliable
than income received from a monthlysocial security or welfare check. The LAD does not require
financial institutions to ignore reality.
(ii) New Jersey Consumer Fraud Act
The sole basis for the Debtor’s CFA claim in the Amended Complaint is Wells Fargo’s

alleged violations of the LAD as an unconscionable commercial practice. Wells Fargo submits
that without a violation of the LAD, the CFA claim must also necessarily fail. Debtorhas not
made any argument to the contrary. Because this Court has found that the Debtoris unable to
sustain a claim under the LAD, the CFA claim has no basis.

VI. Conclusion

Debtor’s motion to amend the complaint is denied because the amendment would be
futile. First, the Court finds that the LAD applies to loan modifications like the Debtor is
seeking herein. Second, the Court finds that the LAD does not require consideration of income
received by a non-borrower spouse in a loan modification application. This finding instructs

denial of Debtor’s motion to amend the complaint.
Even if the Court were to conclude the opposite, the facts of this case would still support
denial of the motion. In this case, Wells Fargo considered the income received by Debtor’s non-
borrower spouse. Debtor argues that Wells Fargo violated the LAD in the method it used to
evaluate her non-borrower spouse’s income. But the Court finds that the LAD does not prevent
a financial institution from weighing the consistency and reliability of a legal income source.
The LAD does not supplant the business judgment of a financial institution. This third finding
also supports denial of her motion.
Finally, absent grounds for a finding that Wells Fargo violated the LAD, Debtor alleges
no basis to support afinding that Wells Fargo violatedthe Consumer Fraud Act.
For all of these reasons, the motion to amend is denied.

/s/Christine M. Gravelle
Dated: April 23, 2020 United States Bankruptcy Judge

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10459599. Public record. Not legal advice.