NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1356-12T3

SALVATORE LOPRESTI and MARGARET 

LOPRESTI,

Plaintiffs-Appellants,

v.

WELLS FARGO BANK, N.A., successor

in interest to Wachovia Bank and

First Union,

Defendant-Respondent.

__________________________________

Argued March 10, 2014 - Decided 

Before Judges Parrillo, Kennedy1 and 

Guadagno.

On appeal from the Superior Court of New 

Jersey, Law Division, Gloucester County, 

Docket No. L-792-11.

Lewis G. Adler argued the cause for 

appellant.

Jessica A. Goldfinger argued the cause for 

respondent (Greenbaum, Rowe, Smith & Davis, 

LLP, attorneys; John D. North, on the brief; 

Ms. Goldfinger, on the brief).

The opinion of the court was delivered by 

PARRILLO, P.J.A.D.

 

1 Judge Kennedy did not participate in oral argument. He joins 

the opinion with counsels' consent for the purpose of 

disposition.

APPROVED FOR PUBLICATION

April 8, 2014

APPELLATE DIVISION

April 8, 2014
2 A-1356-12T3

The underlying action was instituted by plaintiffs 

Salvatore and Margaret Lopresti against defendant Wells Fargo 

Bank, N.A., successor to Wachovia Bank, N.A. and First Union 

National Bank (Wells Fargo), alleging the Bank wrongly collected 

a prepayment penalty on a commercial loan to their business, 

Body Max, Inc. (Body Max), which plaintiffs personally 

guaranteed and secured by a mortgage on their primary residence. 

On defendant's motion for summary judgment, the trial judge 

dismissed plaintiffs' complaint, finding that the proscription 

against such a charge in the New Jersey Prepayment Law, N.J.S.A.

46:10B-1 to -11.1, does not apply to commercial transactions 

like the one involved here. Plaintiffs appeal and argue, 

alternatively, that if the fee is allowed, it is excessive.

The facts are not in dispute. On March 1, 2002, Body Max 

executed and delivered a Promissory Note to defendant's 

predecessor, First Union, as evidence of a $550,000 loan. The 

terms of this note included an interest rate of 6.75% and 

required Body Max to make "consecutive monthly payments of 

principal and interest in the amount of $4,898.00 commencing on 

April 1, 2002 and continuing on the same day of each month 

thereafter until fully paid." The total principal and interest 

accrued on the loan was "due and payable on March 1, 2007." In 

addition, this original note contained a prepayment provision 
3 A-1356-12T3

setting a fee of 1% in the event Body Max paid the loan prior to 

the termination date:

PREPAYMENT COMPENSATION. Principal may be 

prepaid in whole or in part at any time; 

provided, however, if principal is paid 

before it is due under this Note, whether 

voluntary, mandatory, upon acceleration or 

otherwise, such prepayment shall include a 

fee equal to 1% of the amount prepaid.

Any prepayment in whole or in part shall 

include accrued interest and all other sums 

then due under any of the Loan Documents. 

No partial prepayment shall affect the 

obligation of Borrower to make any payment 

of principal or interest due under this Note 

on the due dates specified.

This note was executed by Salvatore Lopresti (Lopresti) in his 

capacity as President of Body Max. 

In order to secure payment of its obligations under the 

original note, Body Max executed a Mortgage and Absolute 

Assignment of Leases dated March 1, 2002 to First Union. This 

mortgage covered Body Max's principal place of business, a 

gymnasium located on Delsea Drive in Washington Township. This 

document was also executed by Lopresti as President of Body Max. 

Additionally, on March 1, 2002, Lopresti executed and 

delivered to First Union an Unconditional Guaranty to provide 

assurance that Body Max would fulfill its obligations under the 

original note. To secure payment and performance of the 

guaranty, plaintiffs executed and delivered a Mortgage and 
4 A-1356-12T3

Absolute Assignment Agreement of Leases to First Union, covering 

the premises where their primary residence was located, also in 

Washington Township. 

Pursuant to the loan transaction of March 1, 2002, First 

Union advanced the full $550,000 loan proceeds to Body Max. 

Body Max then transferred the funds to TD Bank in order to pay 

off a prior loan borrowed by Body Max. Plaintiffs did not 

personally receive any of the loan proceeds. 

Thereafter, on December 20, 2005, Body Max modified the 

terms of its original note with Wachovia Bank, First Union's 

successor and Wells Fargo's immediate predecessor. Lopresti, as 

President of Body Max, executed and delivered the modified note 

of December 20, 2005 in the amount of $460,195.41. The modified 

note stated that it "renew[ed], extend[ed] and/or modifie[d] 

that [Original Note of Mach 1, 2002], evidencing an original 

principal amount of $550,000.00." The terms of the modified 

note included an interest rate of 7.25% and called for 

"consecutive monthly payments of principal and interest in the 

amount of $4,228.19 commencing on January 20, 2006, and 

continuing on the same day of each month thereafter until fully 

paid." All of the principal and interest on this modified note 

were "due and payable on December 20, 2020." Further, the

modified note defined "loan documents" as "all documents 
5 A-1356-12T3

executed in connection with or related to the loan evidenced by 

this Note and any prior notes which evidence all or any portion 

of the loan evidenced by this Note . . . guaranty agreements, 

. . . [and] mortgage instruments . . . ."

The December 20, 2005 modified note also contained a 

prepayment provision, structured to compensate Wachovia for an 

early payoff of the loan, in the event market interest rates had 

fallen. The provision states:

COMPENSATION UPON PREPAYMENT OR 

ACCELERATION.

In addition to principal, interest and any 

other amounts due under this Note, Borrower 

shall on demand pay to Bank any "Breakage 

Fee" due hereunder for any voluntary or 

mandatory prepayment or acceleration, in 

whole or in part, of principal of this Note 

occurring prior to the date such principal 

would, but for that prepayment or 

acceleration, have become due. For any date 

of prepayment or acceleration ("Break 

Date"), a Breakage Fee shall be due if the 

rate under "A" below exceeds the rate under 

"B" below and shall be determined as 

follows:

Breakage Fee = the sum of the products of 

((A-B) x C) for each installment of 

principal being prepaid, where:

A = A rate equal to the sum of (i) the 

bond equivalent yield (bid side) of the 

U.S. Treasury security with a maturity 

closest to the Maturity Date as 

reported by The Wall Street Journal (or 

other published source) on the funding 

date of this Note, plus (ii) 1/2%.
6 A-1356-12T3

B = A rate equal to the bond equivalent 

yield (bid side) of the U.S. Treasury

security with a maturity closest to the 

Maturity Date as reported by The Wall 

Street Journal (or other published 

source) on the Break Date.

C = The principal installment amount 

being prepaid times (the number of days 

remaining until the scheduled due date 

for such installment divided by 360).

"Maturity Date" is the date on which the 

final payment of principal of this Note 

would, but for any prepayment or 

acceleration, have become due.

Breakage Fees are payable as liquidated 

damages, are a reasonable pre-estimate of 

the losses, costs and expenses Bank would 

incur in the event of any prepayment or 

acceleration of this Note, are not a 

penalty, will not require claim for, or 

proof of, actual damages, and Bank's 

determination thereof shall be conclusive 

and binding in the absence of manifest 

error.

Any prepayment in whole or in part shall 

include accrued interest and all other sums 

then due under any of the Loan Documents. 

No partial prepayment shall affect 

Borrower's obligation to make any payment of

principal or interest due under this Note on 

the date specified in the Repayment Terms 

paragraph of this Note until this Note has 

been paid in full.

On May 19, 2010, Body Max attempted to refinance the 

original 2002 loan, as modified by the 2005 loan, in order to 

obtain a lower interest rate and to reduce the prepayment fees 

on the loan. However, about two months later, Wachovia declined 
7 A-1356-12T3

Body Max's request due to the company's "negative equity 

positions and losses." 

Subsequently, Body Max was able to obtain refinancing from 

TD Bank Commercial Lending (TD Bank) and requested a payoff 

amount from Wachovia for the balance of the loan. On July 21, 

2010, Wachovia provided Body Max with a payoff of all amounts 

due on the loan. TD Bank then transferred the total payoff 

amount of $416,838.78 directly to Wells Fargo, which included 

$368,383.99 of principal, $148.38 of accrued interest and 

$48,306.41 in prepayment fees. A Settlement Statement was 

executed by TD Bank and Body Max evidencing the total amount of 

the loan owed to Wells Fargo, including the prepayment fee, that 

was advanced by TD Bank on behalf of Body Max. 

According to Wells Fargo, plaintiffs did not issue any 

personal checks from any of their personal accounts to pay the 

principal loan or the $48,306.41 prepayment fee due to the Bank. 

Rather, as noted, the prepayment fees were paid by TD Bank 

directly to Wells Fargo out of the proceeds of its loan to Body 

Max. 

As noted, plaintiffs filed a complaint alleging that 

defendant violated both the Prepayment Law and the New Jersey 

Consumer Fraud Act, N.J.S.A. 56:8-1 to -20, by assessing and 

collecting a prepayment charge as provided for in the promissory 
8 A-1356-12T3

note executed in connection with the business loan to Body Max. 

In its summary judgment motion, defendant maintained that 

plaintiffs lacked standing because they did not have a 

sufficient stake in the matter inasmuch as Body Max paid the 

prepayment fee through its refinancing arrangement with TD Bank. 

Substantively, defendant argued that the protection of the 

Prepayment Law allowing for prepayment without penalty to any 

"mortgagor," other than a corporation, simply does not apply to 

commercial loans between sophisticated business parties, such as 

the transaction at issue here. Additionally, defendant 

contended that the formula used to calculate the prepayment fee 

was reasonable and designed to protect the Bank's interests in 

the event that interest rates had fallen prior to the maturity 

of the loan. Finally, defendant maintained that there was no 

evidence of unlawful conduct to support the consumer fraud 

count. 

Plaintiffs countered that they have standing as personal 

guarantors of the bank loan; that the Prepayment Law applies to 

this transaction because the initial loan was secured by their 

personal residence and they were personally liable for the 

obligations under the loan; that the prepayment fee was 

unreasonable because the modification of more than 13% was 

greater than the initial bargained for prepayment fee of 1% and 
9 A-1356-12T3

Wells Fargo failed to provide documentation evidencing how it 

reached the amount charged; and finally that the prepayment 

penalty amounted to a violation of the Consumer Fraud Act.

In granting summary judgment for defendant, dismissing 

plaintiffs' complaint in its entirety, the motion judge held 

that the Prepayment Law did not apply, reasoning:

The corporation willingly negotiated 

the terms of [its] loan with the banks that 

were involved here. . . . There were 

sophisticated parties. Certainly the reason 

why a prepayment penalty cannot be imposed 

on the individual is to protect that 

individual, but it is not felt it was 

necessary when we have a corporation 

involved.

The court further explained "that there was a guaranty executed, 

which did involve the plaintiffs in this matter, but . . . the 

guaranty never came into play, the individuals never came into 

play in this matter, [because] there was no default."

 The judge also found no Consumer Fraud Act violation:

When we're dealing with the New Jersey 

Consumer Fraud Act, . . . a plaintiff must 

allege three elements under the Consumer 

Fraud Act. One, unlawful conduct by the 

defendant, and then we go on to an 

ascertainable loss and a causal 

relationship. . . .

I find that the plaintiff in this 

matter is unable to provide the [c]ourt with 

any evidence whatsoever of unlawful conduct 

by the defendant in this matter and, 

therefore, that cause of action cannot be 

sustained either in this instance. They 
10 A-1356-12T3

have failed on the first prong of the threepart test under the Act.

 This appeal by plaintiffs followed.

As a threshold matter, we must determine whether plaintiffs 

had standing to bring this action against Wells Fargo. In order 

to have standing, "a party must have 'a sufficient stake and 

real adverseness with respect to the subject matter of the 

litigation.'" Triffin v. Somerset Valley Bank, 343 N.J. Super.

73, 81 (App. Div. 2001) (quoting In re Adoption of Baby T., 160 

N.J. 332, 340 (1999)). Also, "'[a] substantial likelihood of 

some harm visited upon the plaintiff in the event of an 

unfavorable decision is needed for the purposes of standing.'" 

Ibid. (quoting In re Adoption of Baby T., supra, 160 N.J. at 

340). "Standing has been broadly construed in New Jersey as 

'our courts have considered the threshold for standing to be 

fairly low.'" Ibid. (quoting Reaves v. Egg Harbor Twp., 277 

N.J. Super. 360, 366 (Ch. Div. 1994)). "A financial interest in 

the outcome ordinarily is sufficient to confer standing." 

Strulowitz v. Provident Life & Cas. Ins. Co., 357 N.J. Super.

454, 459 (App. Div.), certif. denied, 177 N.J. 220 (2003); 

Courier-Post Newspaper v. Cnty. of Camden, 413 N.J. Super. 372, 

381 (App. Div. 2010). 

In our view, although inchoate and contingent, plaintiffs 

have a real and genuine financial interest in the transaction at 
11 A-1356-12T3

hand by virtue of their unconditional personal guarantees of the 

original Wells Fargo loan and the later TD Bank refinance loan. 

Although sufficient, in our view, to confer standing upon them 

to bring this action, it does not qualify them for the 

protection against prepayment fees embodied in our Prepayment 

Law.

Pursuant to N.J.S.A. 46:10B-2, "[p]repayment of a mortgage 

loan may be made by or on behalf of a mortgagor at any time 

without penalty." Consequently, "[a]ny holder of a mortgage 

loan . . . who shall knowingly demand and receive prepayment 

fees . . . shall be liable to the mortgagor for the return of 

the whole amount of the prepayment fees so received, plus 

interest . . . ." N.J.S.A. 46:10B-5.

Thus, the Prepayment Law prohibits the charging of a 

prepayment fee on a "mortgage loan," which is defined as "a loan 

secured by an interest in real property consisting of land upon 

which is erected or to be erected, in whole or in part with the 

proceeds of such loan, a structure containing . . . dwelling 

units . . . ." N.J.S.A. 46:10B-1(a) (emphasis added). 

Moreover, a "mortgagor" is defined as "any person other than a 

corporation liable for the payment of a mortgage loan, and the 

owner of the real property which secures the payment of a 

mortgage loan[.]" N.J.S.A. 46:10B-1(b) (emphasis added).
12 A-1356-12T3

The Prepayment Law applies to individual consumers, not 

commercial mortgagors, as the Legislature clearly "intended to 

protect individual mortgagors from being locked into long-term 

mortgages with excessive interest rates, but felt that more 

sophisticated commercial mortgagors needed no such protection." 

Shinn v. Encore Mortg. Servs., Inc., 96 F. Supp. 2d 419, 422 

(D.N.J. 2000). Indeed, we have upheld the use of prepayment 

fees negotiated on commercial loans between sophisticated 

parties. See e.g., Westmark Commercial Mortg. Fund IV v. 

Teenform Assocs., L.P., 362 N.J. Super. 336, 347-48 (App. Div. 

2003) (holding that the prepayment premium on a commercial loan 

was permissible where the debtor freely entered into the 

contract, the terms of the contract were clear and unambiguous, 

and the parties were experienced and sophisticated); Mony Life 

Ins. Co. v. Paramus Parkway Building, Ltd., 364 N.J. Super. 92, 

105 (App. Div. 2003) (holding that a clear and unambiguous 

prepayment premium clause was "valid and enforceable under New 

Jersey law[]"). 

In Westmark, supra, the debtor challenged the prepayment 

premiums that were charged after the creditor accelerated the 

payout under the loan contract. 362 N.J. Super. at 343. We 

noted, at the outset, that "[a] borrower does not have the 

right, under New Jersey law, to prepay a commercial loan, unless 
13 A-1356-12T3

the documents afford that right." Id. at 343-44 (citing Norwest 

Bank Minnesota v. Blair Road Assocs., 252 F. Supp. 2d 86, 97 

(D.N.J. 2003)). Thus, "'[s]ince a lender has the right not to 

have the loan prepaid but rely on collecting the interest 

contracted for, the lender is entitled to charge a penalty to 

the borrower for the privilege of the prepayment.'" Id. at 344 

(quoting Norwest, supra, 252 F. Supp. 2d at 97). Further, we 

determined that prepayment clauses were "designed to protect a 

lender against potential losses it may incur if a loan is paid 

earlier than contracted for." Ibid. (citing United States v. 

Harris, 246 F.3d 566, 573 (6th Cir. 2001)). 

In holding that the prepayment fee in Westmark, supra, was 

enforceable, we relied, in part, on the Restatement (Third) of 

Property: Mortgages § 6.2 (1997). Id. at 347. Specifically, 

the Restatement notes that "if the borrower fully understood and 

had the opportunity to bargain over the clause, either with the 

assistance of counsel or by virtue of the borrower's own 

experience and expertise, the clause will ordinarily be 

enforced." Restatement (Third), supra, § 6.2 comment c. In 

addition, we reasoned that "to deem the [prepayment] clause 

unenforceable[] . . . would be providing defendants with a 

better contract than they were able to negotiate for themselves 
14 A-1356-12T3

. . . ." Id. at 347; see also Karl's Sales & Serv. v. Gimbel 

Bros., Inc., 249 N.J. Super. 487, 493 (App. Div.) (finding that 

courts may not "remake a better contract for the parties than 

they themselves have seen fit to enter into, or to alter it for 

the benefit of one party and to the detriment of the other[]"), 

certif. denied, 127 N.J. 548 (1991).

Here, it is undisputed that the subject matter of 

plaintiffs' complaint involves a commercial loan to a business, 

and the loan proceeds were used for business, and not personal, 

much less residential home, purposes. Plaintiffs offer no proof 

to the contrary.

Nevertheless, plaintiffs argue that they fall within the 

Prepayment Law's definition of "mortgagor" because they are "any 

person other than a corporation" and they were liable for 

payment of the loan in the event Body Max defaulted. 

Specifically, they point to the guaranty executed as part of the 

initial promissory note, which provided their residential 

property as collateral security in the event Body Max defaulted 

on the loan. Plaintiffs' statutory interpretation is simply 

wrong.

On March 1, 2002, Body Max executed and delivered a 

Promissory Note to First Union as evidence of a $550,000 loan. 

Signifcantly, the borrower under the promissory note was not 
15 A-1356-12T3

plaintiffs but their business, Body Max. In fact, the 2002 and 

2005 loan documents that contained the prepayment provisions 

explicitly designate Body Max as the borrower.

Just as significant, the full amount of the loan was 

advanced to Body Max under the original note. In other words, 

Wells Fargo transferred the loan proceeds directly to Body Max's 

corporate account, not to plaintiffs' personal accounts, and the 

proceeds were not used in connection with plaintiffs' real 

property. Also, to secure the amounts advanced under the 

original note, Body Max executed and delivered a mortgage on the 

commercial property where the corporation conducts business.

Even more fatal to plaintiffs' position, the mortgage 

referred to in their complaint, although it covers their 

residence, does not secure a personal loan, since, as noted, the 

loan proceeds were not used in connection with plaintiffs' real 

property. Rather, the mortgage secures plaintiffs' personal 

guarantee of the obligations of their business, Body Max, under 

the Wells Fargo commercial loan. As such, because the loan 

proceeds from the bank were not used in connection with 

plaintiffs' real property, their residential mortgage is not a 

"mortgage loan" within the definition of N.J.S.A. 46:10B-1(a), 

and therefore Wells Fargo is not the "holder of a mortgage loan" 
16 A-1356-12T3

subject to the protections against prepayment fees in the 

Prepayment Law.

In fact, neither plaintiffs' guarantee nor the mortgage on 

their residence provide for a prepayment fee, and plaintiffs did 

not pay the prepayment fee in this matter. Rather, the 

prepayment fee is expressly provided for in the note executed by 

Body Max and naming Body Max as the borrower. Pursuant to that 

contractual provision, it was Body Max that was charged the 

prepayment fee, and Body Max that paid all accounts owed to 

Wells Fargo, including the prepayment fee, when Body Max 

refinanced the loan with TD Bank.

To reiterate then, Body Max was the actual borrower and 

"mortgagor" under the Wells Fargo loan. The 2002 initial loan 

and the 2005 loan modification were both executed by Body Max 

and required the corporation to fulfill the loan obligations, 

including the prepayment fee. And to that end, Body Max 

fulfilled its obligations to Wells Fargo, including payment of 

the contractual prepayment fee, through its refinanced loan with 

TD Bank. And because of Body Max's corporate status, Wells 

Fargo, as holder of the mortgage loan, was exempted from the 

Prepayment Law's proscription against charging such a fee. 

N.J.S.A. 46:10B-1(b). Thus, we concur with the motion judge's 
17 A-1356-12T3

holding that the Prepayment Law is inapplicable to the instant 

transaction.

We are therefore left with plaintiffs' alternative 

contention that the prepayment fee in the 2005 modified loan was 

excessive. Specifically, plaintiffs argue that the modified 

prepayment provision, which increased the 1% fee to over 13%,

was unreasonable, and that the $48,306.41 prepayment charge 

amounted to an unlawful penalty or stipulated damage clause.2

Defendant maintains that the "breakage fee" formula used to 

calculate the prepayment charge was structured to do nothing 

more than compensate the Bank for the investment value lost in 

the event Body Max paid the loan off early at a time when 

interest rates had fallen. Specifically, Wells Fargo contends 

that if the interest rates at the time of refinancing were 

higher than the interest rates when Body Max received funding 

for the loan, there would have been no prepayment fee. Thus, 

Wells Fargo asserts that the formula was not an arbitrary 

penalty, but rather a mechanism to protect its investment. We 

agree.

In asserting that the prepayment charge was unreasonable, 

plaintiffs rely exclusively on MetLife Capital Financial 

 

2 It appears that the motion judge never addressed this issue; 

however, because the issue has been fully briefed on appeal, and 

the record allows for resolution, we have elected to address it. 
18 A-1356-12T3

Corporation v. Washington Avenue Associates L.P., 159 N.J. 484, 

495-501 (1998), which addressed the reasonableness of a 5% late 

fee on a commercial loan. At the outset, the Court determined 

that "liquidated damages provisions in a commercial contract 

between sophisticated parties are presumptively reasonable and 

the party challenging the clause bears the burden of proving its 

unreasonableness." Id. at 496. The Court found that the 

reasonableness of a stipulated damages provision requires a 

review of the totality of the circumstances. Id. at 495. After 

considering several factors regarding this late fee, including 

(1) the normal industry standard; (2) the use of the fee to 

compensate the lender for administrative costs; (3) the fact 

that the "loan involved an arms-length, fully negotiated 

transaction between two sophisticated commercial parties, each 

represented by counsel[,]"; and (4) the absence of fraud, duress 

or unconscionability on the part of the lender, the Court 

concluded that the borrower was unable to overcome the 

presumptive reasonableness of the fee. Id. at 500.

Here, too, plaintiffs have not overcome the presumptive 

reasonableness of the prepayment fee. As the trial court noted, 

the loan transaction involved sophisticated parties, who freely 

negotiated the terms of the loan, and the prepayment provision 

was "clearly spelled out" in the 2005 loan modification. In 
19 A-1356-12T3

addition, as Wells Fargo asserts, the "breakage fee" was not an 

arbitrary penalty, but rather a carefully constructed formula 

used to protect the Bank's loan investment in the event interest 

rates dropped prior to the termination date. The formula sought 

to protect Wells Fargo's investment by accounting for the market 

interest rates at the time of prepayment in comparison to the 

interest rates at the time the loan was first advanced.3 

According to this formula, if the interest rates at the time 

Body Max prematurely paid the loan were higher than when it 

first received the loan, then there would have been no 

prepayment fee. Thus, the totality of the circumstances 

concerning the prepayment provision, including the 

sophistication of the parties involved, the use of the fee to 

compensate Wells Fargo, and considering that the formula used to 

calculate the breakage fee was "clearly spelled out," 

demonstrate that the charge was neither excessive nor 

unreasonable.

 

3 For each monthly installment payment due on the loan, the 

breakage fee was calculated as the difference between the yield 

on Treasuries with the same maturity as the loan, as of the date 

the loan was originally funded, and the yield on Treasuries as 

of the date the loan was prepaid. The result is a measure of 

the difference in the investment value of funds on the date of 

the loan and the date of the prepayment. This figure was then 

multiplied by the amount of each principal installment being 

prepaid times the number of days remaining until the scheduled 

due date for such installment divided by 360.
20 A-1356-12T3

Finally, having found no violation by defendant of the 

Prepayment Law, and therefore no unlawful conduct or 

unconscionable commercial practice, plaintiffs simply have not 

established a viable, valid claim under the Consumer Fraud Act. 

Therefore, the dismissal of this count of plaintiffs' complaint 

was also proper.

Affirmed.