Delta Funding Corp. v. Harris

[David A. Szwak]

Delta Funding Corp. v. Harris
189 N.J. 28, 912 A.2d 104
N.J.,2006.
August 09, 2006

Justice LaVECCHIA delivered the opinion of the Court.
*35 This matter presents a question of law certified and submitted by the United States Court of Appeals for the Third Circuit pursuant to the procedures set forth in Rule 2:12A. We have been asked whether an arbitration agreement found in a consumer loan contract is unconscionable, in whole or in part, under New Jersey contract law. Because many of the agreement's provisions are ambiguous, interpretation of the contract by an arbitrator is necessary before there can be a final resolution of this dispute. However, to the extent that the procedural posture of this matter permits, we hold that several parts of the arbitration agreement may be unenforceable based on unconscionability doctrine if interpreted by an arbitrator unfavorably to the consumer as described herein.



I.

[1] We begin with the facts as presented by the federal court, although we acknowledge the presence of factual disputes between the parties. R. 2:12A-4. The purpose of the certification process is to answer the question of law submitted pursuant to Rule 2:12A, not to resolve those factual differences. See R. 2:12A-1.

Plaintiff Delta Funding Corp. (Delta) is a New York mortgage lender that extends loans primarily to borrowers in the sub-prime lending market. In December 1999, Delta entered into a mortgage loan contract with defendant Alberta Harris, a seventy-eight-year-old woman with only a sixth-grade education and little financial sophistication. The $37,700 loan was secured by a mortgage on Harris's home in Newark.FN1 The loan had an annual percentage *36 rate of fourteen percent. At the time, Harris owned her home outright and had lived in it for more than thirty years. Delta subsequently assigned the loan to Wells Fargo as trustee.


FN1. Harris and the amici who support her in this matter contend that there was substantial procedural unconscionability in this contract's formation. They assert that Harris was presented with the arbitration agreement as part of many pages of mortgage documents that were brought to her home for signature at ten o'clock one evening. We do not attempt to resolve this or other factual disputes between the parties.


The loan contains an arbitration agreement that allows either party to elect binding arbitration as the forum to resolve covered claims. The agreement excludes from arbitration “any action to effect a judicial or non-judicial foreclosure or to establish a deficiency judgment,â€