O'Brien v. Quicken Loans Inc. et al
Filing
16
MEMORANDUM OPINION AND ORDER denying defendant Quicken's 22 MOTION to Dismiss; granting in part and denying in part Bank of America's 24 MOTION to Dismiss; granting Bank of America's 24 MOTION to Dismiss as to Count V; otherwise denying Bank of America's 24 MOTION to Dismiss. Signed by Judge John T. Copenhaver, Jr. on 5/28/2013. (cc: attys; any unrepresented parties) (tmh)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF WEST VIRGINIA
AT CHARLESTON
ANTHONY O’BRIEN,
Plaintiff,
v.
Lead Case No. 2:12-cv-5138
Consolidated Case No. 2:12-cv-5262
QUICKEN LOANS, INC. and
BANK OF AMERICA, N.A.,
Defendants.
MEMORANDUM OPINION & ORDER
Pending is the motion to dismiss by defendant Quicken
Loans Inc. (“Quicken”), filed October 8, 2012.
Also pending is the
motion to dismiss by Bank of America, N.A. (“Bank of America”),
filed October 9, 2012.
I. Background
This case arises from allegedly predatory loans by
Quicken to plaintiff Anthony O’Brien.
The allegations of fact set
forth in the first amended complaint (the “complaint”) are as
follows.
O’Brien resides in St. Albans, West Virginia at the home
that secures the loans at issue.
Compl. ¶ 2.
He resides with and
supports his mother and claims to be unsophisticated in financial
matters.
Id.
Quicken is a corporation with a principal place of
business in Livona, Michigan.
Id. ¶ 3.
Bank of America is a
corporation with a principal place of business in Charlotte, North
Carolina.
Id. ¶ 5.
A. Loan Origination
O’Brien purchased his home with his wife for $87,000 in
2003.
Id. ¶ 7.
In 2008, they divorced, and his ex-wife
quitclaimed the home to him.
Id. ¶ 8.
Sometime thereafter, around
2008, O’Brien responded to a solicitation by Quicken to refinance
his home mortgage.
Id. ¶ 9.
He informed Quicken that his purpose
in refinancing was to remove his ex-wife’s name from the financing.
Id. ¶ 10.
All communications during the application process took
place over the telephone, except for an “electronic signing” that
Quicken instructed O’Brien to complete.
present to explain the documents.
Id.
Id. ¶ 11.
No one was
Quicken informed O’Brien
that it would send an appraiser to his home.
Id. ¶ 12.
On a date
unspecified in the complaint, an appraiser visited O’Brien’s home.
Id. ¶ 13.
After approximately fifteen minutes, the appraiser
instructed O’Brien to paint his garage and back porch and said that
he would return once the painting was completed, which he did.
Id.
Quicken informed O’Brien that the home had appraised for
more than the loan amount, that the loan was approved, and that
2
someone would contact him to close the loan.
Id. ¶ 14.
Thereafter
Quicken’s closing agent, Marshall S. Crowder, Jr., contacted
O’Brien and instructed him to come to a McDonald’s Restaurant at
lunch time on August 22, 2008 to close the loan.
Id. ¶ 4, 15.
During the closing, which took approximately fifteen minutes,
Crowder was eating lunch and the restaurant was crowded with other
customers.
Id.
O’Brien alleges that Crowder did not explain the
loan documents or provide O’Brien with an opportunity to fully
review the loan documents.
Id.
He further alleges that the
circumstances of the closing made him uncomfortable discussing
private financial information and made it difficult for him to ask
questions about the loan.
Id.
O’Brien was not provided a copy of
the signed documents from the closing.
Id. ¶ 16.
He was given a
copy of the appraisal, which valued the home at $147,000.
Id.
¶ 17.
The loan had an initial principal balance of $139,080.00.
Id. ¶ 18.
It had settlement charges of over $9,000.00 as well as
$3,069.58 in cash out that O’Brien had not requested.1
Id.
The
loan also contained a requirement of compliance with the
regulations of the Secretary of Housing and Urban Development
(“HUD”) for loans guaranteed by the Federal Housing Administration
(“FHA”) in the event of borrower default.
1
Id.
The complaint does not specify to whom the cash out was paid or
whether the cash out and the settlement charges are included in the
stated $139,080.00 principal balance.
3
Approximately five months later, around May 2009, Quicken
solicited O’Brien to refinance his loan with Quicken.
Id. ¶ 20.
Quicken arranged for a second appraisal of O’Brien’s home.
¶ 21.
Id.
It then advised O’Brien that he was approved for the loan
based on the value of his original 2008 appraisal, which Quicken
indicated was more accurate than the second appraisal.
Id. ¶ 22.
The second loan closed on June 22, 2009, again at
McDonald’s during lunch time at Crowder’s request.
Id. ¶¶ 23-24.
As with the first closing, Crowder was eating lunch and the
restaurant was crowded with other customers.
Id. ¶ 24.
O’Brien
alleges that Crowder again failed to explain the loan documents and
did not provide him with an opportunity to fully review the loan
documents.
Id. ¶ 25.
He repeats his allegation as to feeling
uncomfortable discussing financial information and asking questions
about the loan.
Id. ¶ 26.
The 2009 loan had an initial principal balance of
$140,323.00.
Id. ¶ 27.
It had “additional” fees of $4,997.43 and
a requirement that O’Brien pay Quicken $1,003.53 of his own funds
to close the loan.2
Id.
Like the 2008 loan, it contained a
requirement of compliance with the regulations of the Secretary of
2
Again, it is unclear from the complaint whether the fees are
included in the principal balance. Also, O’Brien does not state
the outstanding balance on the 2008 loan at the time of the 2009
refinancing.
4
HUD for loans guaranteed by the FHA in the event of borrower
default.
Id.
O’Brien states that as a result of these transactions he
paid over $14,000 in settlement charges over the course of six
months.
Id. ¶ 28.
By letter dated February 2, 2012, Quicken again
solicited O’Brien to refinance his home, advertising that no
additional appraisal would be required.
Id. ¶ 50.
In June 2012,
O’Brien learned that the market value of his property in June 2009
was approximately $122,000.
Id. ¶ 51.
He alleges that Quicken
knew at the time of closing that the loan amount exceeded the value
of his home.
Id. ¶ 29.
B. Loan Servicing
Immediately after origination of the 2008 and 2009 loans,
Quicken transferred servicing to Countrywide Home Loans, which
later merged into defendant Bank of America.
Id. ¶¶ 19, 30.
Around May 2011, while current on his payment, O’Brien applied for
a loan modification to obtain a lower monthly payment.
32.
Id. ¶¶ 31-
O’Brien asked if the loan modification would negatively affect
his credit or otherwise create problems for his account, and Bank
of America assured him that it would not.
Id. ¶ 33.
On approximately June 9, 2011, Bank of America informed
O’Brien that he had been approved for a trial period plan and
instructed O’Brien that his loan would be permanently modified if
5
he made four payments of $832.52.3
Id. ¶ 34.
modification documents within a month.
Id.
O’Brien returned the
Bank of America stated
that the documents were not received, so O’Brien resubmitted the
documents on approximately July 13, 2011.
Id.
As quoted in O’Brien’s complaint, the trial period
contract states, “If I am in compliance with this Trial Period Plan
(the “Plan”) . . . the Servicer will provide me with a Partial
Claim and FHA-Home Affordable Modification Agreement . . . .”
¶ 36.
Id.
It also provided that upon completion of the four payments,
Bank of America would apply the payments to the loan and cure the
default, correcting O’Brien’s credit.
Id. ¶ 37.
O’Brien made the four payments as instructed.
Id. ¶ 38.
He then contacted Bank of America for an update regarding the
permanent modification.
Id. ¶ 39.
He alleges that Bank of America
repeatedly responded by giving conflicting information, including
statements that the final documents would be mailed soon and that
they had been mailed but not returned by O’Brien.
Id. ¶ 40.
Bank
of America instructed O’Brien to continue making the modified
payments until he received the documentation for his final
modification.
Id. ¶ 42.
He never received those documents.
¶ 43.
3
O’Brien’s original monthly payment amount is unstated in the
complaint.
6
Id.
O’Brien alleges that Bank of America refused to apply his
payments to his account and instead reported him as delinquent to
the credit reporting agencies.
Id. ¶ 41.
He represents that he
continues to make the monthly payments, and Bank of America
continues to refuse to apply the payments to his account or report
him as current to the credit reporting agencies.
Id. ¶ 44.
In
addition, Bank of America has assessed and continues to assess late
fees to O’Brien’s account for each month, despite his payments that
he claims are timely and in the amount instructed.
Id. ¶ 54.
O’Brien contends that his credit has been substantially damaged as
a result of Bank of America’s conduct.
Id. ¶ 47.
By correspondence dated April 27, 2012, Bank of America
explained to O’Brien that he had not been provided the final
modification documents because of delays related to the Government
National Mortgage Association (“Ginnie Mae”).
Id. ¶ 46.
that a permanent modification would be mailed to O’Brien.
It stated
Id.
On May 1, 2012, O’Brien sent a letter to Bank of America
requesting that all further communications be directed to counsel
and requesting a detailed account record.
Id. ¶ 48.
A certified
mail return receipt indicates that Bank of America received the
letter on May 4, 2012.
Bank of America nonetheless contacted
O’Brien directly ten times from May 8, 2012 to June 28, 2012, eight
times by phone and twice by letter.
7
Id. ¶ 49.
O’Brien initiated this action on August 3, 2012 in the
Circuit Court of Kanawha County, West Virginia against the two
current defendants, Quicken and Bank of America, as well as Crowder
and Ginnie Mae.
Ginnie Mae removed the case to federal court on
September 6, 2012, asserting federal question jurisdiction.
Quicken, invoking this court’s diversity jurisdiction, filed a
separate notice of removal on September 7, 2012, that was docketed
as a separate action.
The court consolidated the two cases on
October 1, 2012, designating the Ginnie Mae action as the lead
case.
Quicken and Bank of America filed the pending motions to
dismiss on October 8, 2012 and October 9, 2012, respectively.
On
October 10, 2012, in response to O’Brien’s Rule 41 notice of
dismissal, the court dismissed Ginnie Mae without prejudice.
On
April 2, 2013, the court entered a proposed order by O’Brien that
dismissed Marshall Crowder without prejudice.
O’Brien’s first amended complaint, filed on September 26,
2012, alleges eleven counts.
The first three counts are alleged
against Quicken and relate to the loans’ origination: Count I,
Unconscionable Contracts; Count II, Illegal Loan; and Count III,
Fraud.
The remaining eight counts are alleged against Bank of
America and relate to the servicing of the loans: Count IV, Breach
of Contract; Count V, Negligence; Count VI, Misrepresentations &
Unconscionable Conduct in Debt Collection; Count VII, Refusal to
Apply Payments; Count VIII, Illegal Late Charges; Count X,
8
Estoppel; Count XI, Fraud; and Count XII, Illegal Debt Collection.
The complaint nowhere sets forth or references a Count IX, and Bank
of America’s motion does not seek dismissal of Count IV or Count X.
II. The Governing Standard
Under Federal Rule of Civil Procedure 8(a)(2), a
complaint must contain “a short and plain statement of the claim
showing that the pleader is entitled to relief.”
Rule 12(b)(6)
correspondingly permits a defendant to challenge a complaint when
it “fail[s] to state a claim upon which relief can be granted.”
Fed. R. Civ. P. 12(b)(6).
The required “short and plain statement” must provide
“‘fair notice of what the . . . claim is and the grounds upon which
it rests.’”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 545 (2007)
(quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)); see also
Anderson v. Sara Lee Corp., 508 F.3d 181, 188 (4th Cir. 2007).
“To
survive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that
is plausible on its face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (quoting Twombly, 550 U.S. at 570); see also Monroe v. City
of Charlottesville, 579 F.3d 380, 386 (4th Cir. 2009).
Facial
plausibility exists when the court is able “to draw the reasonable
inference that the defendant is liable for the misconduct alleged.”
Iqbal, 566 U.S. at 678 (quoting Twombly, 550 U.S. at 556).
9
The
plausibility standard “is not akin to a ‘probability requirement,’”
but it requires more than a “sheer possibility that a defendant has
acted unlawfully.”
Id. (quoting Twombly, 550 U.S. at 556).
In assessing plausibility, the court must accept as true
the factual allegations contained in the complaint, but not the
legal conclusions.
Id.
“Threadbare recitals of the elements of a
cause of action, supported by mere conclusory statements, do not
suffice.”
Id.
The determination is “context-specific” and
requires “the reviewing court to draw on its judicial experience
and common sense.”
Id. at 679.
III. Discussion
A.
Count I: Unconscionable Contract
Count I claims that O’Brien’s loan transactions with
Quicken were unconscionable.
In support O’Brien alleges disparity
in sophistication between himself, an unsophisticated borrower, and
Quicken, a large national corporation; misrepresentations by
Quicken regarding the value of his home; pressure to increase the
loan amount without regard to his stated desire to merely
refinance; repeated solicitations to refinance by Quicken that
resulted in a still greater loan amount and additional fees; and
the closing in a setting that impeded his ability to ask questions
and understand the loan documents.
10
Compl. ¶¶ 53-56.
In moving to
dismiss Count I, Quicken argues that O’Brien has failed to
plausibly allege both procedural and substantive unconscionability.
Section 46A–2–121 of the West Virginia Consumer Credit
and Protection Act (“WVCCPA” or “the Act”) provides the following
instructions respecting unconscionability:
(1) With respect to a transaction which is or gives rise
to a consumer credit sale 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
(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.
(2) If it is claimed or appears to the court that the
agreement or transaction or any term or part thereof may
be unconscionable, the parties shall be afforded a
reasonable opportunity to present evidence as to its
setting, purpose and effect to aid the court in making
the determination.
W. Va. Code § 46A–2–121.
The principle of unconscionability is “the prevention of
oppression and unfair surprise and not the disturbance of
reasonable allocation of risks or reasonable advantage because of
superior bargaining power or position.”
Orlando v. Fin. One of W.
Va., Inc., 179 W. Va. 447, 369 S.E.2d 882, 885 (1988) (citation
omitted).
The test for unconscionability is
11
whether, in the light of the background and setting of
the market, the needs of the particular trade or case,
and the condition of the particular parties to the
conduct or contract, the conduct involved is, or the
contract or clauses involved are so one sided as to be
unconscionable under the circumstances existing at the
time the conduct occurs or is threatened or at the time
of the making of the contract.
Arnold v. United Cos. Lending. Corp., 204 W. Va. 229, 235, 511
S.E.2d 854, 860 (1998) (quoting Orlando, 179 W. Va. at 450, 369
S.E.2d at 885).
Courts analyze unconscionability in terms of two
component parts: procedural unconscionability and substantive
unconscionability.
Brown v. Genesis Healthcare Corp. (“Brown II”),
229 W. Va. 382, 729 S.E.2d 217, 227 (2012).
Both must be present,
but they need not be present to the same degree.
Id.
The court
applies a sliding scale in making the determination, whereby “‘the
more substantively oppressive the contract term, the less evidence
of procedural unconscionability is required to come to the
conclusion that the clause is unenforceable, and vice versa.’”
Id.
(quoting Brown v. Genesis Healthcare Corp. (“Brown I”), 724 S.E.2d
250, 285 (W. Va. 2011)).
The West Virginia Supreme Court of Appeals recently
described both procedural and substantive unconscionability.
Regarding procedural unconscionability it stated,
Procedural unconscionability is concerned with
inequities, improprieties, or unfairness in the
bargaining process and formation of the contract.
12
Procedural unconscionability involves a variety of
inadequacies that results in the lack of a real and
voluntary meeting of the minds of the parties,
considering all the circumstances surrounding the
transaction. These inadequacies include, but are not
limited to, the age, literacy, or lack of sophistication
of a party; hidden or unduly complex contract terms; the
adhesive nature of the contract; and the manner and
setting in which the contract was formed, including
whether each party had a reasonable opportunity to
understand the terms of the contract.
Id. (quoting Syl. Pt. 17, Brown I, 724 S.E.2d at 261).
Substantive
unconscionability was described as follows:
Substantive unconscionability involves unfairness in the
contract itself and whether a contract term is one-sided
and will have an overly harsh effect on the
disadvantaged party. The factors to be weighed in
assessing substantive unconscionability vary with the
content of the agreement. Generally, courts should
consider the commercial reasonableness of the contract
terms, the purpose and effect of the terms, the
allocation of the risks between the parties, and public
policy concerns.
Id. (quoting Syl. Pt. 19, Brown I, 724 S.E.2d at 262).
This court has previously stated that
“[u]nconscionability claims should but rarely be determined based
on the pleadings alone with no opportunity for the parties to
present relevant evidence of the circumstances surrounding the
consummation of the contractual relationship.”
Mallory v. Mortg.
Am., Inc., 67 F. Supp. 2d 601, 612 (S.D. W. Va. 1999) (citing
Carlson v. Gen. Motors Corp., 883 F.2d 287, 292 (4th Cir. 1989)).
“‘The particular facts involved in each case are of utmost
importance since certain conduct, contracts or contractual
13
provisions may be unconscionable in some situations but not in
others.’”
Arnold, 204 W. Va. at 235, 511 S.E.2d at 860 (quoting
Orlando, 179 W. Va. at 450, 369 S.E.2d at 885).
Accordingly the
WVCCPA emphasizes the need for discovery in assessing
unconscionability claims: “If it is claimed or appears to the court
that the agreement or transaction or any term or part thereof may
be unconscionable, the parties shall be afforded a reasonable
opportunity to present evidence as to its setting, purpose and
effect to aid the court in making the determination.”
W. Va. Code
§ 46A-2-121.
The court finds that O’Brien has sufficiently pled
unconscionability.
With respect to procedural unconscionability,
O’Brien has alleged that he is an unsophisticated consumer and that
he did not have a reasonable opportunity to read and understand the
documents given the unusual manner and setting for the closing.
With respect to substantive unconscionability, he has alleged that
inflated appraisals led him unwittingly to take out loans in excess
of the value of his home and rendered him unable to refinance or
sell his home.
Taken as true, the allegations implicate the one-
sidedness and public policy concerns that are the subject of
substantive unconscionability.
Regardless of whether these
allegations can be proved so as to ultimately support a finding of
unconscionability when fully developed and presented to the trier
of fact, they provide a well-pled basis for the court to conclude
14
at this stage that the contract “may be unconscionable” and that
dismissal is inappropriate.
W. Va. Code § 46A-2-121(2)
Contrary to Quicken’s arguments, this court’s unpublished
decision in Corder v. Countrywide Home Loans, Inc., No. 2:10-0738,
2011 WL 289343 (S.D. W. Va. January 26, 2011), does not counsel for
a different result.
In Corder this court dismissed an
unconscionability claim that rested on the bare allegation that the
plaintiff was unsophisticated and the appraisal was inflated.
at *9.
Id.
While O’Brien’s reference to fifty-eight supporting facts
in his response brief is doubtless an exaggeration, he has pled
substantially more than was present in Corder.
Allegations
concerning the rushed closing in McDonald’s, for example, provide
concrete facts that were missing from the complaint in Corder.
Likewise, appraisal amounts and the allegation concerning Quicken’s
disregard for the 2009 appraisal support O’Brien’s inflated
appraisal allegation.
There is no merit to Quicken’s further
contention that O’Brien must plead the source and methodology of
his retroactive appraisal.
See Robertson v. Sea Pines Real Estate
Cos., Inc., 679 F.3d 278, 291 (4th Cir. 2012 ) (“. . . Iqbal and
Twombly do not require a plaintiff to prove his case in the
complaint.”).
The court is unpersuaded by Quicken’s further arguments
regarding substantive unconscionability -- that O’Brien’s signature
precludes an unconscionability claim and that inadequate collateral
15
only disadvantages the lender.
Where there is fraud or other
wrongful conduct, a signing party will not necessarily be bound by
the written instrument’s terms.
See Hager v. Am. Gen. Fin., Inc.,
37 F. Supp. 2d 778, 788 (S.D. W. Va. 1999) (citing Acme Food Co. v.
Older, 61 S.E. 235, 244 (1908)).
Regarding the impact of
inadequate collateral, the complaint alleges that the inflated
appraisal deprived O’Brien of his ability to refinance the loan or
sell his home and subjected him to increased risk of foreclosure.
The complaint also alleges, by way of contrast, that Quicken was
able to eliminate its own risk through its practice of immediately
selling the loans.
Taken as true, these allegations provide
sufficient grounds from which the court can infer that the
resulting risk disproportionately rested with O’Brien.
B.
Count II: Illegal Loan
Count II alleges that Quicken violated West Virginia Code
§ 31-17-8(m)(8) by issuing a mortgage loan in an amount exceeding
the fair market value of O’Brien’s property.
The relevant
provision states as follows:
(m) In making any primary or subordinate mortgage loan,
no licensee may, and no primary or subordinate mortgage
lending transaction may, contain terms which:
* * *
(8) Secure a primary or subordinate mortgage loan in a
principal amount that, when added to the aggregate
total of the outstanding principal balances of all
other primary or subordinate mortgage loans secured by
the same property, exceeds the fair market value of
16
the property on the date that the latest mortgage loan
is made.
W. Va. Code § 31-17-8(m)(8).
In seeking dismissal of Count II,
Quicken reiterates its argument that O’Brien has failed to
adequately plead facts relating to the true value of his home.
It
asserts that there can be no violation with regard to the 2008 loan
because O’Brien alleges only the value of his home as of 2009.
O’Brien has sufficiently pled his illegal loan claim.
The complaint sets forth the amounts of both the 2008 and 2009
loans, and it states that the true value of the home in 2009 was
significantly less than either.
As discussed above with regard to
Count I, O’Brien need not set forth the source and methodology for
the retroactive valuation at the pleadings stage.
The adequacy of
the retroactive valuation is a matter for discovery.
Additionally,
O’Brien’s retroactive 2009 valuation, taken as true, provides a
plausible basis to infer at this stage that the 2008 loan, with its
amount $17,080 greater than the retroactive 2009 valuation,
exceeded the property’s fair market value.
C.
Count III: Fraud
Count III claims that Quicken fraudulently represented
that O’Brien’s home has a value of $147,000 and that it was
following “responsible and prudent lending practices.”
¶ 62.
17
Compl.
The essential elements of fraud are
(1) that the act claimed to be fraudulent was the act of
the defendant or induced by him; (2) that it was material
and false; that plaintiff relied on it and was justified
under the circumstances in relying upon it; and (3) that
he was damaged because he relied on it.
Folio v. City of Clarksburg, 221 W. Va. 397, 404, 655 S.E.2d 143,
150 (2007) (internal quotation marks and citations omitted).
Fraud
claims are subject to a two-year limitations period as set forth in
West Virginia Code § 55-2-12.
Alpine Prop. Owners Ass’n, Inc. v.
Mountaintop Dev. Co., 179 W. Va. 12, 21, 365 S.E.2d 57, 66 (1987).
Quicken contends that O’Brien’s fraud claim is timebarred under the two-year statute of limitations.
Supp. Mot. Dismiss 13.
Quicken’s Mem.
It asserts that the clock began running
when O’Brien received a copy of the appraisal, at the August 22,
2008 closing.
O’Brien initiated this action on August 3, 2012,
significantly more than two years after that closing.
O’Brien
responds that Quicken’s statute of limitations argument is a
factually-based affirmative defense and inappropriate for
resolution at the pleadings stage.
Dismiss 16.
Pl.’s Opp’n Quicken’s Mot.
He argues that under the discovery rule, the
limitations period should begin only after he became aware of the
misrepresentation by obtaining the retrospective appraisal in June
2012.
Alternatively, O’Brien argues that insofar as he has
requested equitable relief, the claims are subject to laches, not
the limitations provision.
Dunn v. Rockwell, 225 W. Va. 43, 54,
18
689 S.E.2d 255, 266 (2009) (“Our law is clear that there is no
statute of limitation for claims seeking equitable relief.”).
Pursuant to the discovery rule, the court cannot conclude
at this juncture that O’Brien’s claim was untimely filed.
The
discovery rule provides that for tort actions “the statute of
limitations begins to run when the plaintiff knows, or by the
exercise of reasonable diligence, should know (1) that [he] has
been injured, (2) the identity of the entity who owed [him] 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.”
Id. at 52-53, 689 S.E.2d at 265-66
(quoting Syl. Pt. 4, Gaither v. City Hosp., Inc., 199 W. Va. 706,
487 S.E.2d 901 (1997).
Applying the discovery rule to the present
case, the limitations period appears at this stage to begin in June
2012, when O’Brien obtained a retrospective appraisal and allegedly
discovered that Quicken had misrepresented his home’s appraisal
value.
As viewed from that date, he timely filed the action only
two months later.
Quicken argues that O’Brien did not exercise reasonable
diligence.
That, however, is the subject of a material factual
dispute whose outcome is unclear on the existing record.
Legg v.
Rashid, 222 W. Va. 169, 176, 663 S.E.2d 623, 630 (2008) (“While
many cases will require a jury to resolve the issue of when a
plaintiff discovered his or her injury, including the related issue
19
of whether the plaintiff was reasonably diligent in discovery of
his or her injury, the issue can also be resolved by the court
where the relevant facts are undisputed and only one conclusion may
be drawn from those facts.”).
Having found that the discovery rule prevents dismissal
based on the limitations period, the court need not address
O’Brien’s alternate argument regarding claims for equitable relief.
Quicken also asserts that O’Brien has failed to allege a
misrepresentation to serve as the basis for his fraud claim because
Quicken’s home valuation constitutes an expression of an opinion.
Quicken’s Mem. Supp. Mot. Dismiss 12.
Our court of appeals,
though, has recently held that misrepresentations concerning home
values can support fraud claims.4
See McCauley v. Home Loan Inv.
Bank, F.S.B., 710 F.3d 551, 559 (4th Cir. 2013) (finding no basis
for the dismissal of a fraud claim because “[a] lender that informs
a borrower about how much her property is worth, whether required
to do so or not, is under an obligation not to misrepresent that
value.”).
4
Even in jurisdictions where good-faith appraisals are treated as
opinions and are immune from fraud allegations, an intentionally
inflated appraisal may still be fraudulent. See Decatur Ventures,
LLC v. Daniel, 485 F.3d 387, 390 (7th Cir. 2007) (“[B]ecause
Indiana treats an appraisal as an opinion rather than a fact, the
representation could be fraudulent only if the appraisal’s author
did not believe her own numbers.”). Here, O’Brien alleges, and the
retrospective appraisal might suggest, that Quicken was aware of
the inaccuracy.
20
Quicken next contends that O’Brien’s reliance on
Quicken’s appraisal of his property is unjustified, given that
Quicken conducted the appraisal for its own benefit in assuring the
loan’s security.
Quicken’s Mem. Supp. Mot. Dismiss 13.
As
discussed above with reference to Count I, O’Brien has sufficiently
demonstrated that an accurate appraisal was in his own interest and
that he had reason to rely on Quicken’s representation.
See
McCauley, 710 F.3d 551, 559 (finding the plaintiff to have alleged
justifiable reliance on the lender’s valuation of her property).
Quicken’s alleged misrepresentations of the appraisal value to
O’Brien can constitute fraud.
E.
Counts V and XI: Common Law Negligence and Fraud Claims
Counts V and XI assert, respectively, common law
negligence and fraud claims arising from Bank of America’s
servicing of O’Brien’s loans.
In seeking to dismiss these claims,
Bank of America argues that common law claims must arise out of a
special duty separate from the duties the WVCCPA imposes.
America’s Mem. Supp. Mot. Dismiss 5.
Bank of
It contends that the
negligence and fraud claims are duplicative of O’Brien’s WVCCPA
claims and allege no such special duty.
Id.
“The West Virginia Consumer Credit and Protection Act
does not preclude claims brought at common law against assignees,
holder, or lenders.”
Casillas v. Tuscarora Land Co., 186 W. Va.
21
391, 394, 412 S.E.2d 792, 795 (1991).
“[A] common law action of
fraud may be maintained against a lender, assignee, or holder where
direct allegations of fraud or misrepresentation exist separate
from the Act.”
Id. at 394, 412 S.E.2d at 795.
This district has
interpreted Casillas to require only that the common law claim be
capable of existing independently from the Act.
See, e.g.,
Pemberton v. U.S. Bank, No. 5:11-cv-0630, 2012 WL 37113, at *2-*3
(S.D. W. Va. January 5, 2012) (rejecting the defendant’s position
that “Casillas stands for the proposition that Plaintiff’s claims
must be factually separable from the statutory claims that arise
under the WVCCPA.”).
Contrary to Bank of America’s assertion, a
plaintiff can allege WVCCPA and common law claims arising from the
same or similar facts.
The question then is whether Counts V and
XI adequately plead claims for common law negligence and fraud.
To prevail in a negligence suit, a plaintiff must
demonstrate by a preponderance of the evidence that the defendant
owed to the plaintiff a legal duty whose breaching proximately
caused the plaintiff’s injury.
175, 603 S.E.2d 197, 205 (2004).
Strahin v. Cleavenger, 216 W. Va.
Whether a defendant in a
particular case owes a duty to the plaintiff “is not a factual
question for the jury,” but rather is a determination that “must be
rendered by the court as a matter of law.”
Syl. Pt. 5, Aikens v.
Debow, 208 W. Va. 486, 489, 541 S.E.2d 576, 579 (2000).
22
Under West Virginia law, a plaintiff “cannot maintain an
action in tort for an alleged breach of a contractual duty.”
Lockhart v. Airco Heating & Cooling, 211 W. Va. 609, 614, 567
S.E.2d 619, 624 (2002).
A legal duty, however, may arise from a
special relationship between the parties.
Glascock v. City Nat’l
Bank of W. Va., 213 W. Va. 61, 66, 576 S.E.2d 540, 545 (2002).
“The existence of a special relationship will be determined largely
by the extent to which the particular plaintiff is affected
differently from society in general.”
Id. at 66, 576 S.E.2d at
545.
In the lender-borrower context, a special relationship
may exist where a lender performs services not normally provided by
a lender to a borrower.
See id. at 67, 576 S.E.2d at 546 (“[W]here
a lender making a construction loan to a borrower creates a special
relationship with the borrower by maintaining oversight of, or
intervening in, the construction process, that relationship brings
with it a duty to disclose any information that would be critical
to the integrity of the construction project.”).
The possession of
information unique to the lender can also indicate a special
relationship.
See id. (finding a special relationship where “the
bank possessed information of no interest to ‘society in general,’
but of great interest to the [plaintiffs]”).
O’Brien has failed to allege facts indicating that Bank
of America owed to him a legal duty that could support a common law
23
negligence claim.
The relationship O’Brien outlines in his
complaint, including during the loan modification process, is
customary of that of a borrower and lender, as is any duty to
provide accurate information during the loan modification process.
The complaint does not allege that Bank of America endeavored to
perform uncustomary services or possessed information of unique
relevance to O’Brien.
In the absence of a special relationship,
O’Brien has alleged no duty apart from the WVCCPA.
Claims stemming
from the violation of those duties do not sound in tort, and Count
V fails to state a cognizable negligence claim.
As stated above with regard to Count II, a prima facie
claim of common law fraud requires a showing
(1) that the act claimed to be fraudulent was the act of
the defendant or induced by him; (2) that it was material
and false; that plaintiff relied on it and was justified
under the circumstances in relying upon it; and (3) that
he was damaged because he relied on it.
Folio, 221 W. Va. at 404, 655 S.E.2d at 150 (internal quotation
marks and citations omitted).
Count XI alleges that Bank of
America represented that the loan modification process would not
adversely affect his credit; that the representation was false;
that he justifiably began making modified payments; and that Bank
of America, by reporting him to credit bureaus, has damaged his
credit.
Compl. ¶¶ 98-104.
These allegations adequately state a
prima facie case for common law fraud, irrespective of the WVCCPA.
24
F.
Counts VI, VII, VIII, and XII: WVCCPA Claims
Count VI, VII, VIII and XII set forth WVCCPA claims
against Bank of America related to its servicing of O’Brien’s loan.
Bank of America seeks to dismiss each of these counts on the ground
that the “bare and conclusory allegations” do not meet the pleading
requirements of Rule 8(a) and 12(b)(6).
Supp. Mot. Dismiss 8.
Bank of America’s Mem.
Specifically, Bank of America asserts that
O’Brien sets forth no factual basis for the WVCCPA claims.
It
further asserts that the illegal debt collection claim in Count XII
fails because O’Brien has not adequately alleged that Bank of
America was engaged in debt collection activities.
Bank of America’s motion does not highlight any specific
deficiencies in O’Brien’s factual pleadings regarding the WVCCPA
counts, and the court does not find any now.
Regarding Count VI
(misrepresentations and unconscionable conduct), alleged
misrepresentations concerning O’Brien’s qualification for loan
modification and the lack of harm to his credit state a plausible
violation of West Virginia Code § 46A-2-127, and the allegations
that O’Brien timely made modified payments support an asserted
violation of § 46A-2-124(c), concerning false reporting of
delinquency.
Counts VII (refusal to apply payments) and VIII
(illegal late charges) are adequately supported by allegations that
Bank of America did not apply O’Brien’s modified payments as
promised and assessed late charges.
25
Compl. ¶¶ 37, 41, 45.
Allegations that O’Brien informed Bank of America by letter that he
was represented by counsel and that Bank of America nonetheless
continued to contact him directly plausibly support Count XII
(illegal debt collection).
Finally, Bank of America’s assertion
that O’Brien failed to demonstrate that it was involved in debt
collection activities has no merit.5
The complaint is replete with
references to Bank of America’s debt collection activities,
including collecting payments, assessing late fees, and reporting
O’Brien to credit agencies.
The court concludes that O’Brien has
adequately pled his WVCCPA claims.
IV.
Based upon the foregoing discussion, it is, accordingly,
ORDERED as follows:
1.
that Quicken’s motion to dismiss, filed October 8, 2012,
be, and it hereby is, denied; and
2.
that Bank of America’s motion to dismiss, filed October
9, 2012, be, and hereby is, granted as to Count V and
otherwise denied.
5
Bank of America relies on the unpublished and distinguishable
decision in Spoor v. PHH Mortg. Corp., 2011 U.S. Dist. LEXIS 24952
(N.D. W. Va. March 11, 2011), for the argument that loan
modification is not a debt collection activity. Whereas Spoor
concerned the lender’s evaluation and denial of a loan modification
request, see id. at *22, this case involves debt collection
activities under an allegedly agreed loan modification.
26
The Clerk is directed to transmit copies of this order to
all counsel of record and any unrepresented parties.
ENTER:
May 28, 2013
John T. Copenhaver, Jr.
United States District Judge
27
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?