Powell et al v. Bank of America, N.A. et al
Filing
80
MEMORANDUM OPINION AND ORDER granting in part and denying in part defendants' 59 MOTION for Summary Judgment; granting as to Counts I, II, and VIII and denied as to Count III; in sum, Counts III, VI, and VII remain. Signed by Judge John T. Copenhaver, Jr. on 4/5/2012. (cc: attys; any unrepresented parties) (cbo)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF WEST VIRGINIA
AT CHARLESTON
SCOTTY POWELL and
REBECCA POWELL,
Plaintiffs,
v.
Civil Action No. 2:11-00335
BANK OF AMERICA, N.A. d/b/a
BANK OF AMERICA HOME LOANS f/k/a
COUNTRYWIDE HOME LOANS, INC.,
BAC HOME LOANS SERVICING, LP and
BANK OF NEW YORK MELLON, N.A.,
Defendants.
MEMORANDUM OPINION AND ORDER
Pending is the motion for summary judgment of the
defendants Bank of America, N.A., (“Countrywide”), BAC Home
Loans Servicing, LP (“BAC”) and Bank of New York Mellon, N.A.
(“Mellon”), filed January 9, 2012.
For the reasons set forth
below, defendants’ motion is granted in part and denied in part.
I.
Background
This action arises out of a consumer credit
transaction entered into by plaintiffs in connection with a deed
of trust loan on residential property located in Boone County,
West Virginia.
The recitation of facts that follows is taken in
the light most favorable to the non-movant.
Around October 2006, plaintiffs sought financing from
defendant Countrywide for the purchase of a new residence at 132
Summit Drive, Madison, West Virginia.
(Second Am. Compl. ¶ 7).
To that end, plaintiffs hired realtor Debbie Peters to help them
find and purchase a home.
(R. Powell dep. 37-38).
Peters
recommended that plaintiffs use Countrywide for financing.
(Id.
at 38).
Plaintiffs applied for a loan over the phone and
discussed its terms with a Countrywide agent, Matthew Barker.
(Id.).
Plaintiffs asked for a loan with principal and interest
payments that ranged between $500 and $630, exclusive of taxes
and insurance.
(S. Powell dep. at 10).
Barker provided
plaintiffs with a loan option that provided for $587.35
principal and interest payments and was “consistent with the
range” plaintiffs requested.
(Id. at 11).
Plaintiffs claim
that, prior to closing, Barker told them that their interest
rate would not be higher than 12.25%, and that they would be
able to refinance in a year as long as plaintiffs “had good
standing term [sic] in [their] payments.”
(Id. at 26).
The closing occurred on November 3, 2006.
Am. Compl. at ¶¶ 12, 13(a)).
(Second
At the closing, which lasted only
2
10 to 15 minutes, the Powells contend that they were instructed
where to sign and initial, and were given “no meaningful
opportunity” to understand the terms of the transaction.
Powell dep. at 15; S. Powell dep. at 20).
(R.
When asked if he
recalled reading the adjustable rate note, Scotty Powell
testified that they were told by their relator, Peters, that
“everything is on [the papers] that you all discussed, just sign
it down where it says to sign.”
(S. Powell dep. at 23).
He
further described the closing as follows: “I glanced down it
because, again, this is how the, the signing went down.
We went
in, we sat down, the Realtor - the Realtor more or less - the
representative give the Realtor the papers and she said we'll
get out of here because we all got places to go.”
(Id.).
Even so, it is undisputed that at the closing,
plaintiffs signed a document titled “ADJUSTABLE RATE NOTE,”
which disclosed that their interest rate was subject to change
after the first two years.
(Def.’s Motion for Summary Judgment,
Ex. C, Adjustable Rate Note (the “Note”)).
The first page of
the Note states in all capital letters, as follows:
THIS NOTE CONTAINS PROVISIONS ALLOWING FOR CHANGES IN
MY INTEREST RATE AND MY MONTHLY PAYMENT. THIS NOTE
LIMITS THE AMOUNT MY INTEREST RATE CAN CHANGE AT ANY
ONE TIME AND THE MAXIMUM RATE I MUST PAY.
3
(Note at 1).
According to the Note, the interest rate would
never be greater than 19.250% or less than 12.250%.
(Id. at ¶
4(D)).
In their deposition testimony, plaintiffs concede that
had they read the various closing documents, including the Note,
they would have understood the adjustable rate provisions.
(R.
Powell dep. at 26; 44-45; S. Powell dep. at 20, 25; id. at 23
(“So I knowed it was adjustable, yes, sir, I did.
I knowed it
was adjustable but it wasn’t supposed to go up, it was supposed
to go down then we could refinance after a year.”)).
In this
connection, plaintiffs testified that at the closing, their
realtor, Peters, represented that their interest rate could
change but that it would never go over 12.25%.
(Id. at 23).
Yet, at the closing, plaintiffs executed an Adjustable Rate
Rider to the Deed of Trust (the “Rider”), disclosing that
plaintiffs’ interest rate under the Note could adjust upwards.
(Rider at 1-2).
The Loan Application signed by plaintiffs lists the
monthly payment breakdown, including principal and interest
payments, as well as other expenses.
(Loan Application at 2).
The Powells reviewed it prior to signing the Loan Application
4
and knew and understood that, in addition to the monthly
payments of principal and interest, they would be responsible
for paying hazard insurance premiums and real estate taxes.
(R.
Powell dep. at 45; S. Powell dep. at 12).
Under the Deed of Trust, which plaintiffs executed at
closing, they are responsible for paying “all taxes,
assessments, charges, fines, and impositions attributable to the
Property” and shall maintain hazard insurance coverage.
of Trust ¶¶ 4-5).
(Deed
The Deed of Trust further provides that if
plaintiffs fail to supply the lender with evidence of hazard
insurance, “Lender may purchase insurance at Borrower’s expense
to protect its interest in Borrower’s Property.”
(Id. at ¶ 29).
In accordance with these provisions, plaintiffs obtained a
hazard insurance policy and began making payments on it.
Powell dep. at 12).
(S.
Also at closing, plaintiffs signed a HUD-1
Settlement Statement disclosing all of the origination and
closing fees.
(HUD-1 Settlement Statement).
Nine months after closing, on August 10, 2007,
Countrywide informed plaintiffs in writing that their fixed
interest rate was extended from two years to five years, that
is, until August 10, 2012.
(Fixed Interest Extension Letter).
5
Plaintiffs do not doubt that they received this letter and do
not dispute that the letter again disclosed that their interest
rate could adjust.
(R. Powell dep. 60-61).
In 2007, plaintiffs fell behind on their mortgage
payments.
(R. Powell dep at 48; S. Powell dep at 7; Deloney
dep. at 17).
Moreover, plaintiffs failed to produce any proof
of hazard insurance coverage after November 3, 2007, despite
their ongoing duty to provide evidence of such insurance to the
lender as required by the Deed of Trust.
5).
(Deed of Trust ¶¶ 4-
Consequently, Countrywide had to purchase lender-placed
hazard insurance to protect its security interest in the
Property on or around October 27, 2007.
at 13).
(S. Premabhandra dep.
Countrywide also had to pay the real estate taxes on
the Property.
(S. Powell dep. at 15).
As a result of the missed principal and interest
payments, hazard insurance premiums and real estate taxes,
plaintiffs’ total monthly payments increased from $587 to $658.
(Deloney dep. at 17; S. Powell dep. at 53).
Plaintiffs
subsequently defaulted on these monthly payments.
dep. at 56-57).
6
(R. Powell
Around July 2008, plaintiffs sought a reduction of the
interest rate, but were refused.
(Second Am. Compl. at ¶ 14).
Plaintiffs then applied for a loan modification around the same
time period.
(Id. ¶ 17).
BAC approved plaintiffs’ loan
modification request and on September 30, 2009, plaintiffs
entered into a loan modification agreement (the “Modification”).
Pursuant to the terms of the Modification, BAC brought the Loan
current, helped plaintiffs to avoid foreclosure, and reduced the
interest rate to a fixed rate of 11.25%, a substantial decrease
from the original adjustable rate of 12.25% - 19.25%.
(Modification at ¶¶ 1-4; Deloney dep. at 30, 40).
The
Modification did not alter any other terms of the Note and Deed
of Trust, including plaintiff’s obligation to pay hazard
insurance premiums or real estate taxes.
(Modification at ¶
10).
Enclosed in the mailing that contained the
Modification was a disclosure stating that the new monthly
payment of $628.11 did not include any escrow items, such as
hazard insurance premiums or real estate taxes for which
plaintiffs remained responsible under the loan documents.
(Def.’s Mem., Ex. M, Disclosure).
Plaintiffs understood that in
addition to their monthly payments they were responsible for the
7
real estate taxes and insurance.
(R. Powell dep. at 53).
Ultimately, the Powells concede they breached the Modification
by refusing to make any payments pursuant to it.
(Id. at 52-
53).
On at least two occasions, once in or around February
2010 and again in March, plaintiffs allege that a BAC agent
“visited plaintiff’s home” and left them with a note stating
that it was “‘Urgent! Urgent! Urgent! Urgent!’” that plaintiffs
call BAC.
(Id. ¶ 26).
By letter dated February 18, 2010, plaintiffs
requested a copy of their account history, information regarding
the holder of the loan, and informed BAC that they were
represented by counsel, to whom further communication was to be
directed.
(Id. ¶ 27(a)).
February 24, 2010.
BAC received plaintiffs’ letter on
(Id. ¶ 27(b)).
In response to their letter,
plaintiffs received an incomplete payment history and no
information regarding the holder of the loan.
(Id. ¶ 27(c)-
(d)).
Despite being informed that plaintiffs were
represented by counsel, BAC contacted plaintiffs on at least the
8
following four occasions seeking to collect on the loan:
on or
about April 14, 2010, at approximately 8:45 p.m.; on or about
April 24, 2010; on or about May 28, 2010, at approximately 8:02
p.m.; and on or about May 29, 2010.
(Id. ¶ 27(e)).1
On June 28, 2010, plaintiffs filed a complaint in the
Circuit Court of Boone County, West Virginia, against defendants
Countrywide and BAC, and against Hometown Real Estate, Inc.,
Rosanna Trent, and “John Doe Holder.” (Notice of Removal ¶ 1).
On April 13, 2011, plaintiffs filed an amended complaint (“First
Amended Complaint”) against defendants Countrywide, BAC, Zamow,
and “John Doe Holder.”
On May 12, 2011, Countrywide and BAC
filed a notice of removal on diversity grounds.2
On August 24,
2011, the court granted plaintiff’s motion to amend their First
Amended Complaint in which Bank of New York Mellon, N.A., was
1
Plaintiffs do not describe the method by which agents of
defendant BAC allegedly contacted plaintiffs, though one may
presume it was by telephone.
2
In paragraph 5 of the Notice of Removal, defendants aver
that they had not at that time been served with plaintiffs’
amended complaint. Rather, defendants state, on April 29, 2011,
defendants “received a courtesy copy of the Amended Complaint
from Plaintiffs’ counsel via electronic mail.” Notice of
Removal at ¶ 5. Plaintiffs do not challenge that removal was
timely.
9
substituted as a defendant for “John Doe Holder.”
(“Second
Amended Complaint”).
In a memorandum opinion and order dated February 2,
2012, the court, inter alia, dismissed Zamow as a defendant and
dismissed Counts IV and V.
See Powell v. Bank of America, __ F.
Supp. 2d __, 2012 WL 315877 (S.D. W. Va. Feb. 2, 2012).
Of the
remaining counts, defendants now move for summary judgment on
Counts I and II (fraud), III (unconscionable contract), and VIII
(illegal debt collection against BAC).
Counts VI and VII,
alleging illegal debt collection against BAC, remain unaffected
by defendants’ motion.
II.
A.
Motion for Summary Judgment
Governing Standard
A party is entitled to summary judgment “if the
pleadings, the discovery and disclosure materials on file, and
any affidavits show that there is no genuine issue as to any
material fact and that the movant is entitled to judgment as a
matter of law.”
Fed. R. Civ. P. 56(c).
Material facts are
those necessary to establish the elements of a party’s cause of
10
action.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986).
A genuine issue of material fact exists if, in viewing
the record and all reasonable inferences drawn therefrom in a
light most favorable to the non-moving party, a reasonable factfinder could return a verdict for the non-movant. Id.
The
moving party has the burden of showing -- “that is, pointing out
to the district court -- that there is an absence of evidence to
support the nonmoving party’s case.”
477 U.S. 317, 325 (1986).
Celotex Corp. v. Catrett,
If the movant satisfies this burden,
then the non-movant must set forth specific facts as would be
admissible in evidence that demonstrate the existence of a
genuine issue of fact for trial.
322-23.
Fed. R. Civ. P. 56(c); id. at
A party is entitled to summary judgment if the record
as a whole could not lead a rational trier of fact to find in
favor of the non-movant.
Williams v. Griffin, 952 F.2d 820, 823
(4th Cir. 1991).
Conversely, summary judgment is inappropriate if the
evidence is sufficient for a reasonable fact-finder to return a
verdict in favor of the non-moving party.
248.
Anderson, 477 U.S. at
Even if there is no dispute as to the evidentiary facts,
11
summary judgment is also not appropriate where the ultimate
factual conclusions to be drawn are in dispute.
Overstreet v.
Ky. Cent. Life Ins. Co., 950 F.2d 931, 937 (4th Cir. 1991).
A court must neither resolve disputed facts nor weigh
the evidence, Russell v. Microdyne Corp., 65 F.3d 1229, 1239
(4th Cir. 1995), nor make determinations of credibility.
Sosebee v. Murphy, 797 F.2d 179, 182 (4th Cir. 1986).
Rather,
the party opposing the motion is entitled to have his or her
version of the facts accepted as true and, moreover, to have all
internal conflicts resolved in his or her favor.
Charbonnages
de France v. Smith, 597 F.2d 406, 414 (4th Cir. 1979).
Inferences that are “drawn from the underlying facts . . . must
be viewed in the light most favorable to the party opposing the
motion.”
United States v. Diebold, Inc., 369 U.S. 654, 655
(1962).
B.
Counts I and II: Fraud
Defendants principally contend that plaintiffs’ fraud
claims are time-barred by the two-year statute of limitations,
West Virginia Code § 55-2-12, and the doctrine of laches.
12
Defendants also assert that, to the extent plaintiffs invoke the
discovery rule, it is inapplicable.
In Count I, plaintiffs allege that defendants
“suppressed from the Plaintiffs material terms” of the loan,
including an “adjustable rate mortgage” and further
“misrepresented that Plaintiffs’ payments and interest rate
would not increase.”
(Second Amend. Compl. at ¶¶ 30-31).
They
seek only damages for the conduct alleged.3
The statute of limitations begins to run, pursuant to
the discovery rule,
when the plaintiff knows, or by the exercise of
reasonable diligence, should know (1) that the
plaintiff has been injured, (2) the identity of the
entity who owed the plaintiff a duty to act with due
care, and who may have engaged in conduct that
breached that duty, and (3) that the conduct of that
entity has a causal relation to the injury.
Syl. pt. 3, Dunn v. Rockwell, 689 S.E.2d 255, 258 (W. Va. 2009)
(quoting Syl. pt. 4, Gaither v. City Hospital, Inc., 487 S.E.2d
901 (W. Va. 1997)).
“[W]hether a plaintiff ‘knows of’ or
‘discovered’ a cause of action is an objective test.”
3
Syl. pt.
Inasmuch as the Count I fraud claim requests only damages
-- a legal remedy -- the two-year statute of limitations period
set forth in W. Va. Code § 55-2-12 governs. See Brown v. Cmty.
Moving & Storage, Inc., 455 S.E.2d 545, 547 n. 3 (W. Va. 1995).
13
4, in part, id. at 258.
That is, “the plaintiff is charged with
knowledge of the factual, rather than the legal, basis for the
action.
This objective test focuses upon whether a reasonable
prudent person would have known, or by the exercise of
reasonable diligence should have known, of the elements of a
possible cause of action.”
Id.
In this case, the alleged misrepresentations and acts
of suppression occurred prior to closing.
That is, over the
course of several telephone calls, an agent of Countrywide is
said to have explained to Mr. Powell that the loan interest rate
would only adjust down and would never go up.
at 8; 20).
(R. Powell dep.
Even assuming the truth of these assertions, several
loan documents signed by plaintiffs at closing on November 3,
2006, conspicuously disclosed that the interest rate could
adjust upwards.
The Note, which plaintiffs executed at closing,
states in all capital letters and bold font on the face of the
document that the interest rate and payments can change, and
further discloses in lower case letters and regular font that
the interest rate can range between 12.25% and 19.25%.
Note at 1-2).
(See
Plaintiffs also signed the Rider, which includes
the following phrase in all capital letters and bold font: “This
note contains provisions allowing for changes in the interest
14
rate and monthly payments.”
(Rider at 1).4
Plaintiffs thus
should have been aware of their Count I fraud claim at closing,
well over three and a half years prior to the commencement of
this action in June 2010.
The Count I fraud claim is barred by
the statute of limitations.
Plaintiffs nevertheless assert that summary judgment
is inappropriate inasmuch as “they did not read or understand
those documents and did not know that their loan contained an
interest rate that could adjust upwards.”
6).
(Pl.’s Response at
In West Virginia, however, contracting parties are presumed
to be aware of the contents of the documents they sign.
See
Reddy v. Cmty. Health Found., 289 S.E.2d 906, 910 (W. Va. 1982)
(explaining that the failure to read a contract before signing
it does not excuse a person from being bound by its terms and
stating that “[a] person who fails to read a document to which
he places his signature does so at his peril”).
4
Nine months after closing, in August 2007, plaintiffs were
again reminded that their interest rate could change when
Countrywide granted plaintiffs an extension of the fixed rate
period until 2012. (R. Powell dep. at 60-61; Extension Letter).
15
The Count II fraud claim rests on the allegation that
“Defendants misrepresented that Plaintiffs would be able to
refinance after one year of making payments on their mortgage
loan.”
(Second Amend. Compl. at ¶ 37).
The complaint also
alleges that the Countrywide loan agent told plaintiffs that
“they could refinance at a lower interest rate after one year”
(id. at ¶ 11), and, furthermore, that “[p]laintiffs inquired
with Defendant about the promised reduction in interest rate
after one year and Defendant refused.”
(Id. at ¶ 14).
The
Count II request for “equitable relief,” though unspecified,
requires application of the doctrine of laches.
Compl. ¶ 40).
(Second Am.
See Syl. pt. 7, Dunn, 689 S.E.2d at 258-59; see
also White v. Daniel, 909 F.2d 99, 102 (4th Cir. 1990) (laches
is “properly relevant only where the claims presented may be
characterized as equitable, rather than legal”).
“The elements of laches consist of (1) unreasonable
delay and (2) prejudice.”
904 (W. Va. 1996).
Province v. Province, 473 S.E.2d 894,
“Mere delay will not bar relief in equity on
the ground of laches. ‘Laches is a delay in the assertion of a
known right which works to the disadvantage of another, or such
delay as will warrant the presumption that the party has waived
his right.’”
Syl pt. 1, Smith v. Abbot, 418 S.E.2d 575 (W. Va.
16
1992).
It has also been observed that, “[a]lthough the doctrine
of laches is not bound by any statute of limitations, the
statute of limitations is one measure of whether a claim has
become stale.
Laches and statutes of limitations are analogs.”
Province, 473 S.E.2d at 904 n. 21.5
Defendants argue that plaintiffs’ delay in waiting
more than two years to assert their fraud claim, even after it
was discovered by late 2007, is unreasonable, and that the delay
prejudices defendants because the employee who made the alleged
verbal misrepresentations, Matthew Barker, has left defendants’
5
The Supreme Court of Appeals has explained that
[w]ith respect to claims for equitable relief, a court
of equity will normally invoke the maxim of equity
which states that ‘equity follows the law’ and will
generally look first to what the statute of
limitations would be for any analogous right or remedy
at law. However, a court of equity, in examining the
delay in asserting a claim for equitable relief, is
not bound by any analogous statute of limitations. In
a given case involving equitable relief which is
alleged to be barred by laches, the analogy of the
statute of limitations may be applied; or a longer
period than that prescribed by the statute may be
required; or a shorter time may be sufficient to bar
the claim for equitable relief.
Maynard v. Bd. of Edu. of Wayne Cnty., 357 S.E.2d 246, 254 (W.
Va. 1987)
17
employ.
Even had he not left, defendants contend, “his
recollections of events are bound to be faded and of little
use,” thus warranting the conclusion that plaintiffs waived
their right to assert their claim now.
(Def.’s Reply at 5).
This is particularly critical, defendants note, inasmuch as
plaintiffs’ entire fraud case against them rests on the Powells’
assertions that Mr. Barker fraudulently induced them to agree to
the loan by promising an interest rate that would never
increase.
Plaintiffs respond that their delay in bringing about
the claim was not unreasonable inasmuch as defendants were
actively working with them on loss mitigation efforts from late
2007 until September 2009.
As defendants point out, even after the loan
modification was signed on September 20, 2009, plaintiffs
refused to make a single payment pursuant to it.
Moreover, it
was only after their property was referred for foreclosure that
plaintiffs first asserted their fraud claims seeking equitable
relief.
(Id. at 6).6
In view of the circumstances surrounding
6
Defendants further state that plaintiffs “have been living
in their property for the past four years without making any
payments on it and without pursuing their lawsuit until they
were threatened with foreclosure. Plaintiffs should not be
(contin.)
18
plaintiffs’ conduct -- including the more than two-year delay in
asserting their claims despite having knowledge of the
underlying facts, together with the real potential for prejudice
to defendants’ defense of their case -- the court concludes that
plaintiffs’ Count II fraud claim is barred by the doctrine of
laches.
In light of the court’s conclusion that the fraud
claims are plainly precluded by the statute of limitations and
laches, the court need not address defendants’ additional
contentions, namely, that plaintiffs failed to establish at
least three elements of fraud in each Counts I and II.
C.
Count III: Unconscionable Conduct
The count of unconscionable contract states as
follows:
42. The Defendants have engaged in a pattern of
predatory lending practices.
43. The Plaintiffs are unsophisticated consumers with
little understanding of financial matters.
44. The Plaintiffs were induced into the loan through
misrepresentations and suppressions of terms, and were
permitted to game the system and assert their claims now.”
(Def.’s Reply at 6).
19
not afforded a meaningful opportunity to understand
the essential elements of the transaction.
45. The loan agreement contained the following unfair
terms, which amounted to an unfair surprise to the
Plaintiffs:
(a) excessive closing costs and fees, including
but not limited to, bogus recording and document
preparation fees;
(b) an exploding ARM loan, which could adjust
upward to over 19%, but which could never decrease
below the initial rate of 12.25% that was not
explained and that was contrary to representations
made prior to and at closing.
46. The agreement provided to the Plaintiffs was
induced by unconscionable conduct and contains unfair
terms, under all circumstances alleged, and therefore
is unenforceable pursuant to section 46A-2-121 of the
West Virginia Code.
(Compl. §§ 42-46).
Plaintiffs allege that the loan was unconscionable, in
violation of West Virginia Code § 46A-2-121.
That section
provides a remedy for consumers who have entered into consumer
loans that contain unconscionable terms or were induced by
unconscionable conduct.
It prescribes in relevant part:
(1) With respect to a transaction which is or gives
rise to a consumer credit sale, consumer lease or
consumer loan, if the court as a matter of law finds:
(a) The agreement or transaction to have been
unconscionable at the time it was made, or to
have been induced by unconscionable conduct, the
court may refuse to enforce the agreement, or
20
(b) Any term or part of the agreement or
transaction to have been unconscionable at the
time it was made, the court may refuse to enforce
the agreement, or may enforce the remainder of
the agreement without the unconscionable term or
part, or may so limit the application of any
unconscionable term or part as to avoid any
unconscionable result.
W. Va. Code § 46A-2-121.
“Whether a particular term in a contract is
unconscionable often depends on the circumstances in which the
contract was executed or the fairness of the contract as a
whole, and therefore [the] analysis necessarily includes an
inquiry beyond the face of the contract.”
Troy Mining Corp. v.
Itmann Coal Co., 346 S.E.2d 749, 753 (W. Va. 1986).
West
Virginia courts further instruct that the unconscionability
determination “must focus on the relative positions of the
parties, the adequacy of the bargaining positions, and the
meaningful alternatives available” to the plaintiff.
Art’s
Flower Shop, Inc. v. Chesapeake & Potomac Tel. Co., 413 S.E.2d
670, 675 (W.Va.1991); see also Hager v. Am. Gen. Fin., Inc., 37
F. Supp. 2d 778, 786 (S.D. W. Va. 1999).
However, it is
fundamental that:
[a] bargain is not unconscionable merely because the
parties to it are unequal in bargaining position, nor
even because the inequality results in allocation of
risks to the weaker party. But gross inadequacy in
bargaining power, together with terms unreasonably
21
favorable to the stronger party, may confirm
indications that the transaction involved elements of
deception or compulsion or may show that the weaker
party had no meaningful, no real alternative, or did
not in fact assent or appear to assent to the unfair
terms.
Troy Mining Corp., 346 S.E.2d at 753 (quoting Restatement
(Second) of Contracts § 234 cmt. d (1970)).
Here, plaintiffs offer no evidence indicating the
closing fees were “excessive.”
As noted above, plaintiffs also
concede that the adjustable interest rate was disclosed on the
face of the loan documents at the time of closing.
The Powells
acknowledge that they knew at the time of closing that their
initial interest rate would be 12.25%, and they do not claim
that such a rate was unfair.
dep. 26).
(R. Powell dep. 39-40; S. Powell
Moreover, plaintiffs do not claim, and no evidence
suggests, that defendants in any way denied them the opportunity
to read or ask questions about the closing documents.
(R.
Powell dep. at 44-45; S. Powell dep. 20, 25).
Plaintiffs also allege that they are unsophisticated
consumers, and rely on testimony from Mrs. Powell stating that
the transaction was the first mortgage loan she ever obtained,
22
and that she did not always understand what defendants were
communicating to her.
(R. Powell 21:4-10, 25:11-13, 37:14-16).7
She further testified that no one told her what the closing
documents meant, and that they “just went by what we was told.”
(Id. at 22-23).8
While the Powells may not be sophisticated consumers,
plaintiffs present no evidence that they were compelled to agree
to the transaction, that they were unable to secure financing
through other avenues, or that the terms as actually set forth
in the various agreements, including the adjustable rate, were
patently unfair.
Even so, plaintiffs again direct the court to
the alleged statements made by the agent for Countrywide prior
to closing in which the agent told plaintiffs that their
adjustable rate would never increase.
This disputed testimony,
if true, evidences deception and is barely enough to allow
7
Mr. Powell, though, had previously financed a trailer.
(R. Powell. 21:7-10).
8
Mrs. Powell states that she graduated from high school,
and in response to a question as to whether she can read and
write, she answered “Yes, just fine.” (Id. at 21:1-3).
23
plaintiffs to survive summary judgment on their count of
unconscionable contract.9
D.
Count VIII: Illegal Debt Collection
Plaintiffs allege that on two occasions an agent of
BAC visited them and left a note asking plaintiffs to call BAC
urgently, and that by doing so BAC violated West Virginia Code §
46A-2-129a.
(Second Am. Compl. ¶ 26).
Defendants advance the
argument that the “Urgent!” note left at the plaintiffs’
residence does not constitute a violation under the plain
language of § 46A-2-129a, which provides that “No debt collector
shall place a telephone call or otherwise communicate by
telephone with a consumer . . . falsely stating that the call is
‘urgent’. . . .”
Inasmuch as the plain language of the statute
9
Plaintiffs argue that unconscionability cannot be
determined at the summary judgment stage in this case inasmuch
as plaintiffs have not yet had an opportunity to fully present
evidence on this issue to the court. In West Virginia,
unconscionability is a question of law to be determined based on
the factual circumstances of the case. While the court does not
accept plaintiffs’ suggestion that summary judgment is
inappropriate with respect to a determination of
unconscionability, the court, viewing the evidence in the light
most favorable to plaintiffs, does find that a question of fact
exists as to whether the alleged misrepresentation as to the
adjustable rate was so deceptive as to render the transactions
between plaintiffs and defendants unconscionable.
24
applies only to telephone calls and no other method of
communication, plaintiffs’ Count VIII claim is without merit.
Accordingly, defendants are granted summary judgment as to Count
VIII.10
III.
Conclusion
Based on the foregoing reasons, it is ORDERED that
defendants’ motion for summary judgment be, and it hereby is,
granted as to Counts I, II, and VIII and denied as to Count III.
In sum, Counts III (unconscionable contract against
all defendants) and Counts VI and VII (illegal debt collection
against BAC) remain.
10
The court notes that in their response memorandum,
plaintiffs state that they voluntarily dismiss Count VIII,
inasmuch as “the allegations in Count VIII are more
appropriately addressed by Counts VI and VII, stating claims
pursuant to West Virginia Code sections 46A-2-128(e) & -128.”
(Pl.’s Response at 4 n.1). In view of the disposition of this
claim on defendants’ motion for summary judgment, plaintiffs’
attempt to voluntarily dismiss Count VIII is moot.
25
The Clerk is directed to forward copies of this
written opinion and order to all counsel of record and any
unrepresented parties.
Enter: April 5, 2012
John T. Copenhaver, Jr.
United States District Judge
26
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