Coleman et al v. Quicken Loans, Inc. et al

Filing 28

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING IN PART QUICKEN LOANS, INC.S AND TITLE SOURCE, INC.S MOTIONS TO DISMISS AND DIRECTING PLAINTIFFS TO FILE A MORE DEFINITE STATEMENT AS TO COUNT III. Re 13 Motion to Dismiss and 15 Motion to Dismiss are GRANTED as to Counts I, II, IV and V and DENIED as to Count III. Plaintiffs are DIRECTED to file a more definite statement as to Count III on or before 11/20/13. Signed by Senior Judge Frederick P. Stamp, Jr on 11/7/13. (cc)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
THOMAS H. FLUHARTY, Trustee of the
Bankruptcy Estate of D. Kevin Coleman
and Diane M. Coleman and
D. KEVIN COLEMAN and DIANE M. COLEMAN,
Plaintiffs,
v.

Civil Action No. 5:13CV68
(STAMP)

QUICKEN LOANS, INC., TITLE SOURCE, INC.
and BANK OF AMERICA, N.A.,
Defendants.
MEMORANDUM OPINION AND ORDER
GRANTING IN PART AND DENYING IN PART
QUICKEN LOANS, INC.’S AND TITLE SOURCE, INC.’S
MOTIONS TO DISMISS AND
DIRECTING PLAINTIFFS TO FILE A MORE
DEFINITE STATEMENT AS TO COUNT III
I.

Background

The plaintiffs filed the original complaint in this action
against defendants, Quicken Loans, Inc. (“Quicken Loans”), Title
Source, Inc. (“Title Source”), and Bank of America, N.A. (“Bank of
America”) alleging claims arising from the execution of two deeds
of trust, one on May 22, 2009 and the other on December 16, 2008 by
plaintiffs,

D.

Kevin

Coleman

plaintiffs”) with Quicken Loans.

and

Diane

M.

Coleman

(“Coleman

The Coleman plaintiffs executed

the deeds of trust to secure the payment of loans provided to them
by Quicken Loans on the same dates.

The deeds of trust granted

security interests in the residence of the Coleman plaintiffs.

Prior to the defendants filing any responsive pleadings, the
plaintiffs filed an amended complaint, which seems to only add a
page to the complaint that was previously missing from the original
complaint.

In the amended complaint, the plaintiffs allege six

claims based on the West Virginia Residential Mortgage Lender,
Broker, and Servicer Act (“WVRMBSA”), W. Va. Code § 31-17-1, et
seq., and the West Virginia Consumer Protection Act (“WVCPA”), W.
Va. Code § 46 A-1-101, et seq.

As relief, the plaintiffs seek to

recover damages, including punitive damages, to cancel loans, to
have deeds of trust declared of no further force and effect, and
the plaintiffs seek attorneys’ fees and costs.
Count I of the amended complaint alleges that the plaintiffs
were not provided with signed documents, in violation of the
WVRMBSA.

Count II alleges that because Quicken Loans and Title

Source are each owned by the same parent corporation, any payment
made by Title Source in connection with the transactions was not a
payment to an “unrelated third party” and thus, such payments were
prohibited by the WVRMBSA.

Count III alleges that Quicken Loans’

and Title Source’s actions rendered the transaction with the
plaintiffs unconscionable.

Count IV alleges that Quicken Loans’

and Title Source’s actions created a false impression that the fees
were lawful in violation of the WVCPA.
Quicken

Loans’

and

Title

Source’s

Count V alleges that

failure

to

disclose

their

relationship was a deceptive practice and unlawful within the

2

meaning of the WVCPA.

Count VI alleges that Bank of America

acquired whatever interest existed in the purported loan and deed
of trust subject to the plaintiffs’ claims and, as a result, the
plaintiffs’ claims against Quicken Loans, with respect to the
validity of the loan and deed of trust, will bind Bank of America.
After

the

plaintiffs

filed

the

amended

defendants filed separate responsive pleadings.

complaint,

the

Bank of America

filed an answer in response to the amended complaint, whereas
defendants
dismiss.1

Quicken

Loans

and

Title

Source

filed

motions

to

In the moving defendants’ motion to dismiss, they argue

that: (1) Count I must be dismissed because it is time-barred, and
because the cited code section of the WVRMBSA does not require the
provision of signed copies; (2) Count II must be dismissed because
it is time-barred, and because the cited code section of the
WVRMBSA does not prohibit the types of payments allegedly made by
Quicken Loans to Title Source; (3) Count III must be dismissed
because

the

plaintiffs

failed

to

allege

both

procedural

and

substantive unconscionability; (4) Count IV must be dismissed
because the code section only applies to debt collectors, and the
plaintiffs do not allege that moving defendants engaged in any debt

1

While both Quicken Loans and Title Source filed separate
motions to dismiss, Title Source’s motion merely states that it
joins in Quicken Loans’ motion.
Thus, the parties do not make
separate arguments for dismissal and this Court will therefore,
discuss the motions as one. Further, this Court will hereinafter
refer to Quicken Loans and Title Source as the “moving defendants.”
3

collection activity that would put the cited code section of the
WVCPA at issue; and (5) Count V must be dismissed because the cited
code section of the WVCPA does not apply to the moving defendants,
and even if it did, the plaintiffs have not pled that they met the
statutory prerequisites for their claim.
The plaintiffs responded to the motions to dismiss contesting
moving defendants’ arguments as to Counts I, II and III of the
amended complaint.

The plaintiffs, however, state that they are

willing to have Counts IV and V of the amended complaint dismissed
on the basis that the code sections of the WVCPA alleged to have
been

violated

defendants.

in
The

those
moving

counts,

do

defendants

not

apply

filed

a

to

the

timely

moving

reply

to

plaintiffs’ response reiterating their arguments as to why these
remaining counts should be dismissed.

Accordingly, the moving

defendants’ motions to dismiss are fully briefed and ripe for
review.
For the reasons stated below, this Court grants the moving
defendants’ motions to dismiss the amended complaint as to Counts
I, II, IV and V but denies the motions to dismiss as to Count III.
II.

Applicable Law

Rule 12(b)(6) of the Federal Rules of Civil Procedure allows
a defendant to raise the defense of “failure to state a claim upon
which

relief

can

be

granted”

as

a

motion

in

response

plaintiff’s complaint before filing a responsive pleading.

4

to

a

In assessing a motion to dismiss for failure to state a claim
under Rule 12(b)(6), a court must accept the factual allegations
contained in the complaint as true.

Advanced Health-Care Servs.,

Inc. v. Radford Cmty. Hosp., 910 F.2d 139, 143 (4th Cir. 1990).
Dismissal is appropriate only if “‘it appears to be a certainty
that the plaintiff would be entitled to no relief under any state
of facts which could be proven in support of its claim.’”

Id. at

143-44 (quoting Johnson v. Mueller, 415 F.2d 354, 355 (4th Cir.
1969)); see also Rogers v. Jefferson-Pilot Life Ins. Co., 883 F.2d
324, 325 (4th Cir. 1989).
A motion to dismiss for failure to state a claim under Rule
12(b)(6) should be granted only in very limited circumstances, as
the pleading requirements of Federal Rule of Civil Procedure
8(a)(2) only mandate “a short and plain statement of a claim
showing that the pleader is entitled to relief.” Conley v. Gibson,
355 U.S. 41, 47 (1957).

Still, to survive a motion to dismiss, the

complaint must demonstrate the grounds to entitlement to relief
with “more than labels and conclusions . . . factual allegations
must be enough to raise a right to relief above the speculative
level.”

Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007).
III.

A.

Discussion

Counts I and II
The moving defendants first argue that Counts I and II should

be dismissed because the statute of limitations for bringing claims

5

under the WVRMBSA has expired, and such claims are thus, timebarred.

The moving defendants argue that the applicable two-year

statute of limitations started to run from the dates of execution
of the loans and deeds of trust, which were May 22, 2009 and
December 16, 2008.

The plaintiffs argue that the statute of

limitations in this instance does not accrue for purposes of the
asserted violations until the last payment is due or made on the
loans in question.

While the plaintiffs do not provide this Court

with the due date of the last payments, this Court assumes that
such payments were not yet due and thus, have not yet been made.
The West Virginia Code does not provide for a specific statute
of limitations for claims brought under the WVRMBSA.
Code § 31-17-1, et seq.

See W. Va.

Therefore, the statute of limitations is

either one or two years pursuant to the West Virginia “catch-all”
statute

of

§ 55-2-12.2

limitations

for

personal

actions.

W.

Va.

Code

The parties do not dispute the applicability of

2

West Virginia Code § 55-2-12 provides: Every personal action
for which no limitation is otherwise prescribed shall be brought:
(a) Within two years next after the right to bring the same shall
have accrued, if it be for damage to property; (b) within two years
next after the right to bring the same shall have accrued if it be
for damages for personal injuries; and (c) within one year next
after the right to bring the same shall have accrued if it be for
any other matter of such nature that, in case a party die, it could
not have been brought at common law by or against his personal
representative.
6

§

55-2-12.3

Thus,

the

issue

is

when

the

one

or

two

year

limitations period begins to run.
Under West Virginia law,
[t]he statute of limitations in a tort action begins to
run ordinarily from the date of the injury, and the mere
lack of knowledge of the actionable wrong ordinarily does
not suspend the running of the statute of limitations,
nor does the silence of the wrongdoer, unless he or she
has done something to prevent discovery of the wrong.
Sattler

v.

Bailey,

400

S.E.2d

220,

227

(W

Va.

1990).

The

plaintiffs, however, assert that based on Snodgrass v. Sisson’s
Mobile Home Sales, Inc., 244 S.E.2d 321 (W. Va. 1978), the statute
of limitations in this matter does not run until one year after the
last payment is due or made on the loan.

In Snodgrass, the West

Virginia Supreme Court found that a party may institute an action
to collect a usury penalty under West Virginia Code § 47-6-6 “at
any time until one year after the last payment is due or made on
the usurious contract.”

Id. at 327.

It seems that the court in

Snodgrass based its decision on three factors.

First, it stated

that the West Virginia Supreme Court “has historically construed
usury statutes in favor of the debtor, upon the premise that usury
is against public policy.”

Id. at 326.

Second, it found that

based on a reading of the statute “that an action could be brought

3

The plaintiffs state that the one year limitations period in
West Virginia Code § 55-2-12(c) applies, while the defendants state
that the two year limitations period found in West Virginia Code
§ 55-2-12(a)-(b) applies. For this Court’s analysis, it does not
matter whether the one year or the two year limitations period
applies. Thus, this Court declines to address this issue.
7

as long as payments were being made on the contract without regard
to when it was executed.”

Id.

Third, it found that the provision

of the usury statute that allowed for the defense of a bona fide
error, which allows a creditor to rectify its error within 15 days
after

receiving

notice

of

such

error,

militated

against

the

commencement of the one-year statute at the time of execution. Id.
The plaintiff argues that the statute in question, which is
part of the WVRMBSA, operates similarly to the usury statute. This
Court finds that the WVRMBSA does have a provision similar to the
bona fide error defense provided for in usury statute.

See W. Va.

Code § 37-17-17(d). Other than this similarity, however, the other
factors that the court in Snodgrass used in determining when the
statute of limitations starts to run are inapplicable to the
statute at issue.

There is nothing in either of the provisions of

the WVRMBSA that seems to indicate that an action can be brought
without regard to when the loan was executed. Further, in the case
of usury, an individual is continually harmed by the repeated
payment of interest beyond the lawful amount. The injuries alleged
in this instance, concerning the provisions at issue occurred
during the time of the loan closing.
Plaintiffs allegation in Count I alleges a violation of West
Virginia Code § 37-17-8(j)(6) of the WVRMBSA.

This provision

states that “[a] borrower must be given a copy of every signed
document executed by the borrower at the time of closing.”

8

W. Va.

Code § 37-17-8(j)(6).

This violation occurs at the time of

closing. Every payment made thereafter on the loan does not result
in a continued violation of this provision and thus, an injury to
the plaintiffs. Accordingly, the statute of limitations started to
run from the date of the closings, which were May 22, 2009, and
December 16, 2008. These dates are at least over four years before
the date the complaint in this matter was filed.

Thus, Count I is

clearly barred by either the one or two year statute of limitations
provided for under West Virginia Code § 55-2-12.
In

Count

violated

II,

the

plaintiffs

allege

that

the

defendants

West Virginia Code § 37-17-8(g) of the WVRMBSA.

This

section states that, “[e]xcept for fees for services provided by
unrelated third parties for appraisals, inspections, title searches
and credit reports, no application fee may be allowed whether or
not the mortgage loan is consummated.”

W. Va. Code § 37-17-8(g).

The plaintiffs allege that this section should be read to not allow
application

fees

plaintiffs

assert

to

be

that

paid

to

related

the

moving

parties.

defendants

Thus,

violated

the
this

provision because the moving defendants are related parties, and
Quicken

loans

distributed

“monies”

to

Title

Source,

Inc.

in

connection with the executions of the loans and deeds of trust.
ECF

No.

12

*5.

Again,

assuming

without

deciding

that

the

allegations even amount to a violation of the WVRMBSA, this
violation occurred when the transactions took place on either May

9

22, 2009 or December 16, 2008.

There is no allegation that monies

were thereafter continually distributed by Quicken Loans to Title
Source or that the plaintiffs were in any ways injured with every
payment.

Accordingly, the statute runs from the date of injury,

which here is at the latest May 22, 2009.

Thus, whether the

statute of limitations is one or two years, it has certainly run,
and therefore Count II is also time-barred.
B.

Count III
The moving defendants next argue that Count III, in which the

plaintiffs assert an unconscionability claim, fails because the
plaintiffs have failed to make any allegations that either of the
loans at issue was procedurally or substantively unconscionable.
The plaintiffs, however, assert that they have sufficiently alleged
a claim for unconscionability.
Under West Virginia law, finding a contract unenforceable
based upon unconscionability requires findings of some level of
both procedural and substantive unconscionability and is based upon
a finding of a high degree of “inequities, improprieties, or
unfairness” in both the procedure of the creation of the contract,
and in the contents of the contract itself.

Brown v. Genesis

Healthcare Corp., 729 S.E.2d 217, 226-27 (W. Va. 2012).

The only

allegation contained in the plaintiffs’ complaint concerning their
unconscionability claim is that because the defendants’ actions
were done in violation of the WVRMBSA, these actions rendered the

10

transaction unconscionable.

This Court cannot say at this time

that such statement sufficiently alleges unconscionability under
the above described West Virginia law.

Based on all of the facts

alleged, however, this Court at this time can also not definitively
say that the plaintiffs are not entitled to relief under this
claim. Accordingly, pursuant to Rule 12(e) of the Federal Rules of
Civil Procedure, the plaintiffs are directed to file a more
definite statement as to Count III, which is their claim concerning
unconscionability.

The statement should provide further factual

allegations

why

as

to

the

transactions

were

procedurally

or

substantively unconscionable, or both. The more definite statement
shall be filed on or before November 20, 2013.
C.

Counts IV and V
The

plaintiffs

stated

in

their

response

to

the

moving

defendants’ motions to dismiss that they are willing to have Counts
IV and V of the amended complaint dismissed on the basis that the
code sections of the WVCPA alleged to have been violated in those
counts do not apply to the moving defendants.

Accordingly, this

Court finds that such claims are dismissed with prejudice under
Rule 41(a)(2) of the Federal Rules of Civil Procedure.
IV.
For

the

reasons

stated

Conclusion
above,

Quicken

Loans’

and

Title

Source’s motions to dismiss are GRANTED as to Counts I, II, IV, and
V, and DENIED as to Count III.

11

The plaintiffs, however, are

DIRECTED to file a more definite statement as to Count III on or
before November 20, 2013.
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein.
DATED:

November 7, 2013

/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE

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