McFarland v. Wells Fargo Bank, N.A. et al

Filing 74

MEMORANDUM OPINION AND ORDER granting in part and denying in part Defendant Wells Fargo Bank, N.A. and US Bank National Association's 46 MOTION for Summary Judgment as more fully set forth herein; dismissing Counts I, III and IV. Signed by Judge Joseph R. Goodwin on 5/7/2014. (cc: attys; any unrepresented party, court's website, www.wvsd.uscourts.gov) (tmh)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA
CHARLESTON DIVISION

PHILIP MCFARLAND,
Plaintiff,
v.

CIVIL ACTION NO. 2:12-cv-07997

WELLS FARGO BANK, N.A., et al.,
Defendants.

MEMORANDUM OPINION AND ORDER

In West Virginia, lender liability suits have taken a strange turn that threatens to uproot
basic principles of contract law. The plaintiffs in these suits, homeowners tied to mortgages, have
concocted a novel theory of injury. That theory is as follows: refinancing a home for more than its
fair market value is one-sided and overly harsh against the borrower, justifying rescission of a
home loan. I have concluded that this theory is absurd. But it has been repeatedly accepted by other
judges. Therefore, with some trepidation, I will explain my view, beginning with the bald
statement that neither West Virginia law nor cases outside of this state support the notion that
lending too much money is unfair.
Before the court is Defendants Wells Fargo Bank, N.A.’s and U.S. Bank National
Association’s Motion for Summary Judgment [Docket 46]. For the reasons stated below, the
motion is GRANTED in part and DENIED in part. Counts I, III, and IV are DISMISSED.

I. Background
In June 2006, the plaintiff refinanced his home and entered into two new loan agreements
secured by his home. In the first agreement, the plaintiff signed an adjustable rate note with a
principal amount of $181,800 in favor of Wells Fargo Bank, N.A. (“Wells Fargo”). In the second
agreement, the plaintiff signed a note for a home equity line of credit with a principal amount of
$20,000 in favor of Greentree Mortgage Corporation (“Greentree”). I will refer to these loans
collectively as “the loan.”
By late 2007, the plaintiff was struggling to keep up with payments on the notes and
reached out to Wells Fargo for assistance. The plaintiff alleges that Wells Fargo offered to modify
his loan in March 2008, June 2009, and October 2009. Each time, however, Wells Fargo allegedly
refused to honor the modification agreements after the plaintiff accepted the offers and signed the
contracts.
On May 8, 2010, the plaintiff finally obtained a loan modification, but he was unable to
meet his obligations under the modified loan. By 2012, Wells Fargo initiated foreclosure
proceedings and the plaintiff brought the instant lawsuit. The Complaint alleges four counts:
Count I against Greentree, Wells Fargo, and U.S. Bank National Association (“U.S. Bank”) for
unconscionable contract; Count II against Greentree for breach of fiduciary duty; Count III against
Greentree, Wells Fargo, and U.S. Bank for joint venture and agency; Count IV against Wells Fargo
and U.S. Bank for illegal fees; and Count V against Wells Fargo and U.S. Bank for
misrepresentation and unconscionable conduct in debt collection. (See Compl. [Docket 1-2] ¶¶
39-57).
II. Legal Standard
To obtain summary judgment, the moving party must show that there is no genuine issue as
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to any material fact and that the moving party is entitled to judgment as a matter of law. Fed. R.
Civ. P. 56(a). In considering a motion for summary judgment, the court will not “weigh the
evidence and determine the truth of the matter.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
249 (1986). Instead, the court will draw any permissible inference from the underlying facts in the
light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 587-88 (1986).
Although the court will view all underlying facts and inferences in the light most favorable
to the nonmoving party, the nonmoving party nonetheless must offer some “concrete evidence
from which a reasonable juror could return a verdict in his [or her] favor.” Anderson, 477 U.S. at
256. Summary judgment is appropriate when the nonmoving party has the burden of proof on an
essential element of his or her case and does not make, after adequate time for discovery, a
showing sufficient to establish that element. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23
(1986). The nonmoving party must satisfy this burden of proof by offering more than a mere
“scintilla of evidence” in support of his or her position. Anderson, 477 U.S. at 252. Likewise,
conclusory allegations or unsupported speculation, without more, are insufficient to preclude the
granting of a summary judgment motion. See Felty v. Graves Humphreys Co., 818 F.2d 1126,
1128 (4th Cir. 1987); Ross v. Comm’ns Satellite Corp., 759 F.2d 355, 365 (4th Cir. 1985),
abrogated on other grounds by Price Waterhouse v. Hopkins, 490 U.S. 228 (1989).
III. Analysis
A. Count I – Unconscionable Contract
The plaintiff alleges that the loan is procedurally and substantively unconscionable and
seeks, among other remedies, a release of the deed of trust securing the loan. (See Compl. [Docket
1-2], at 9). In support of substantive unconscionability, on which I focus here, the plaintiff brings
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two arguments: “(1) that the loan far exceeded the value of the property and (2) that the loan did
not provide a net tangible benefit to Mr. McFarland, and instead placed him in a worse situation.”
(Pl.’s Resp. in Opp. to Def. Wells Fargo and Def. U.S. Bank’s Mot. for Summ. J. (“Pl.’s Resp.”)
[Docket 54], at 15; see also Compl. [Docket 1-2] ¶ 42). I will address each of these arguments.
Because I find that the plaintiff failed to present evidence in support of substantive
unconscionability, I do not address the parties’ arguments on procedural unconscionability.
In West Virginia, “[t]he doctrine of unconscionability means that, because of an overall
and gross imbalance, one-sidedness or lop-sidedness in a contract, a court may be justified in
refusing to enforce the contract as written.” Syl. Pt. 4, Brown v. Genesis Healthcare Corp., 729
S.E.2d 217, 220 (W. Va. 2012). Although unconscionability was traditionally an equitable defense
to enforcement of a contract (see 8 Williston on Contracts § 18:1 (4th ed. 2013)), it may be asserted
as a cause of action in West Virginia. See W. Va. Code §§ 46A-2-121, 46A-5-101.
Unconscionability may arise in two distinct ways: procedurally or substantively.
“Procedural unconscionability is concerned with inequities, improprieties, or unfairness in the
bargaining process and formation of the contract. 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.” Syl. Pt. 10, Genesis Healthcare
Corp., 729 S.E.2d at 221. Courts often analyze “whether the imposed-upon party had meaningful
choice about whether and how to enter into the transaction[.]” 8 Williston on Contracts, supra §
18:10.
In contrast, “[s]ubstantive 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.” Syl. Pt. 12, Genesis Healthcare Corp., 729 S.E.2d at 221. In determining whether contract
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terms are substantively unconscionable, courts 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.” Syl. Pt. 8, State ex rel. Johnson Controls, Inc. v. Tucker, 729 S.E.2d
808, 812 (W. Va. 2012).
A claimant must prove both procedural and substantive unconscionability to render a
contract term unenforceable. See Syl. Pt. 9, Genesis Healthcare Corp., 729 S.E.2d at 221; Syl. Pt.
6, Tucker, 729 S.E.2d at 812. “However, both need not be present to the same degree. Courts
should apply a ‘sliding scale’ in making this determination: 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.” Syl. Pt. 9, Genesis Healthcare Corp.,
729 S.E.2d at 221.
“Unconscionability is an equitable principle, and the determination of whether a contract
or a provision therein is unconscionable should be made by the court.” Syl. Pt. 7, id. (quoting Syl.
Pt. 1, Troy Mining Corp. v. Itmann Coal Co., 346 S.E.2d 749, 750 (W. Va. 1986)). Whether a
contract is unconscionable will necessarily turn upon the facts of each particular case. See Genesis
Healthcare Corp., 729 S.E.2d at 229 (“[C]ourts should assess whether a contract provision is
substantively unconscionable on a case-by-case basis.”); Quicken Loans, Inc. v. Brown, 737
S.E.2d 640, 659 (W. Va. 2012) (affirming finding of unconscionability “given the particular facts
involved in this case”).
If a court finds a contract or its terms to be unconscionable, the court “may refuse to
enforce the contract, enforce the remainder of the contract without the unconscionable clause, or
limit the application of any unconscionable clause to avoid any unconscionable result.” Syl. Pt. 8,
Genesis Healthcare Corp., 729 S.E.2d at 221.
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The plaintiff’s first argument is that the loan is substantively unconscionable because it
exceeds the value of his home. The plaintiff cites a retrospective appraisal finding his home to be
worth only $120,000, far less than the defendants’ appraisal value of $202,000. (See Appraisal
[Docket 54-18]). The plaintiff argues that the high value of his loan renders it difficult or
impossible to refinance or sell his home. (See Pl.’s Resp. [Docket 54], at 14). In response, the
defendants argue that a loan worth more than the value of a home is not one-sided because such a
loan is as much of a disadvantage to the lender as it is to the borrower.
I FIND that a refinanced loan exceeding the value of a home is not evidence of substantive
unconscionability. It is not “overly harsh” or “one-sided” against the plaintiff that he received
more financing than he was allegedly entitled to receive. See Corder v. Countrywide Home Loans,
Inc., No. 2:10-cv-0738, 2011 WL 289343, at *9 (S.D. W. Va. Jan. 26, 2011) (Copenhaver, J.). The
notion that the plaintiff was harmed by this fact is ridiculous. Consumers using credit cards to
incur more charges than they can repay are not disadvantaged by their high credit limits. Students
financing their education are not disadvantaged by their ability to obtain such financing. The
plaintiff obviously owes a larger debt than he otherwise would if he accepted a smaller loan. But
that is exactly how loans work, and there is nothing unfair about it.
If any party is disadvantaged here, it is the lender. When a lender makes a loan with
inadequate security, the lender cannot recover the loan principal by foreclosing on the home.
While the plaintiff received extra financing, the lender incurred an extra risk of loss at default.
Therefore, receiving extra financing is not one-sided against the borrower.
The plaintiff argues that his loan is unconscionable because he allegedly cannot obtain
refinancing or sell his home. (See Pl.’s Resp. [Docket 54], at 14). Although the plaintiff does not
explain, I assume he means that he is without sufficient security with which to refinance or sell his
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home. But the plaintiff has not presented any evidence that he was prevented from refinancing or
selling his home because it is underwater. And even if he presented such evidence, insufficient
security cannot make a loan unconscionable. There is nothing unfair about a homeowner not being
able to refinance or sell because he converted his equity into debt. Borrowers do not have a right to
refinance or sell their homes. In fact, natural market forces may—and frequently do—push a
home’s market value below the value of a loan, making it difficult to refinance or sell.
Following the plaintiff’s logic, all unsecured loans are substantively unconscionable
because the borrower is without security with which to refinance his obligation. That cannot be.
Neither unsecured loans nor partially secured loans are unconscionable to either the borrower or
the lender.
Not only was the plaintiff not harmed by receiving extra financing, but the plaintiff admits
that he received several benefits from it. The plaintiff paid off an approximately $25,000 student
loan and a $15,775 car loan. (See McFarland Dep. [Docket 54-1], at 30-31, 139; Pl.’s Resp.
[Docket 54], at 5, 6).
For the sake of clarity, I should make a distinction. Merely receiving a loan for any amount
of money, without more, cannot be unconscionable. It is not unfair to receive money that must be
paid back. But, after receiving a loan, it may be substantively unconscionable to overpay for a
product. Paying an unreasonable price for a product is a classic unconscionability argument.
Although it may be unconscionable to overpay for a product, it is not substantively unconscionable
merely to receive the financing that enabled one to overpay. Simply receiving a loan for any
value—without indications that the loan was otherwise unfair in the amount of interest charged,
the timing of payments, or the like—cannot be substantively unconscionable.
The West Virginia Supreme Court of Appeals has not found that a loan exceeding the value
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of a home can support a finding of substantive unconscionability. Instead, in Quicken Loans, Inc.
v. Brown, 737 S.E.2d 640 (W. Va. 2012), the court found that the total cost of a loan supported a
finding of unconscionability combined with other factors. In that case, the plaintiff originally
purchased her home in East Wheeling, West Virginia, in 1988 for $35,000. Brown, 737 S.E.2d at
647. In 2006, after refinancing her home several times and taking out a series of smaller loans, the
plaintiff consolidated all of her debts under a loan for $144,800. See id. at 647-50. The circuit court
rescinded the loan, finding that it contained several unconscionable terms, “including loan
discount points of $5,792, without a fully corresponding reduction in the interest rate or any
benefit to Plaintiff; a $107,015.71 balloon payment that was not properly disclosed . . . ; and a loan
which was based on an inflated appraisal of $181,700 when the proper fair market value of the
Property was $46,000.” Brown, 737 S.E.2d at 658 (quotation marks omitted). The circuit court
also found that the lender “converted Plaintiff’s previously-unsecured debt of approximately
$25,000 into secured debt . . . thus, putting Plaintiff’s home at risk.” Id.
Without explicitly adopting the reasoning of the circuit court, the Supreme Court of
Appeals affirmed. See id. at 659. The court then explained:
This is not a close case. Plaintiff was a single mother to three children who earned
$14.36 an hour and who had a well-documented poor credit history. She was not a
sophisticated borrower. Quicken’s own records describe her as “timid,” “fragile”
and needing to be handled with “kid gloves.” When Plaintiff declined the original
$112,000 loan because the payments were too high, Quicken continued to pursue
her. It tried to contact her numerous times especially after Mr. Guida’s appraisal
came in at almost four times the actual fair market value of the property.
Furthermore, as previously established, the loan contained a $107,015.71 balloon
payment (of which Plaintiff was not aware prior to closing). The total cost of the
loan was exorbitant, costing Plaintiff an additional $349,000 in monthly payments
as compared to her prior mortgage and debts. From this and all of the evidence
presented at trial, we conclude that the circuit court correctly found that, given the
particular facts involved in this case, the terms of the loan described above and the
loan product, in and of itself, were unconscionable.
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Id. (emphasis added).
It is important to note what the court did not do. The court did not hold that a loan that
exceeds the value of a home is per se substantively unconscionable. Rather, the court found that
the total cost of a loan may, as one factor among many, indicate substantive unconscionability.
The total cost of a loan incorporates much more than the principal value. Total cost includes the
interest rate, fees, and the timing of payments, in addition to the initial principal value.
The instant case differs from Quicken Loans, Inc. v. Brown because the plaintiff identifies
as substantively unconscionable only the loaned amount in relation to the fair market value of his
home. (See Pl.’s Resp. [Docket 54], at 15; Compl. [Docket 1-2] ¶ 42 (“the loan is for an amount
that dramatically exceeded the value of the property that it is secured by”)). The plaintiff does not
argue or present evidence regarding the total cost of the loan. The instant case also differs in that
there are no allegations of unfair interest rates or balloon payments.
“[W]hether a contract provision is substantively unconscionable” should be decided “on a
case-by-case basis.” Brown v. Genesis Healthcare Corp., 729 S.E.2d 217, 229 (W. Va. 2012). I
predict that the Supreme Court of Appeals would recognize the absurdity of finding substantive
unconscionability based solely on a loan exceeding the value of a home and would reject such a
claim. Quicken Loans, Inc. v. Brown does not require a different result in this case.
Even though West Virginia law does not recognize that a loan exceeding the value of a
home may be substantively unconscionable, several judges on our court find that to be the case.
See, e.g., O’Brien v. Quicken Loans, Inc., No. 2:12-cv-5138, 2013 WL 2319248, at *6-7 (S.D. W.
Va. May 28, 2013) (Copenhaver, J.); Petty v. Countrywide Home Loans, Inc., No. 3:12-cv-6677,
2013 WL 1837932, at *5-6 (S.D. W. Va. May 1, 2013) (Chambers, C.J.); Hatcher v. Bank of Am.,

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N.A., No. 2:12-cv-5793, 2013 WL 1776091, at *4 (S.D. W. Va. Apr. 25, 2013) (Copenhaver, J.);
Carroll v. JPMorgan Chase Bank, N.A., No. 3:12-cv-5985, 2013 WL 173728, at *5 (S.D. W. Va.
Jan. 16, 2013) (Chambers, C.J.); Robinson v. Quicken Loans Inc., No. 3:12-cv-0981, 2012 WL
3670391, at *2-3 (S.D. W. Va. Aug. 24, 2012) (Chambers, C.J.). For example, in Petty and
Hatcher this court denied motions to dismiss where the only claim in support of substantive
unconscionability was that the refinanced loans exceeded the value of the plaintiffs’ homes. See
Petty, 2013 WL 1837932, at *5; Hatcher, 2013 WL 1776091, at *4.
I am puzzled that my esteemed colleagues have reached such conclusions. West Virginia
law does not require such conclusions, and I can find no cases outside of West Virginia wherein
loans exceeding the value of a home are unconscionable. In fact, I can find only one reported case
outside this state wherein a litigant made an argument—ultimately unsuccessful—similar to the
plaintiff’s. See In re Sullivan, 346 B.R. 4, 30 (Bankr. D. Mass. 2006) (finding plaintiff failed to
present evidence of substantive unconscionability where plaintiff alleged, inter alia, that the value
of her refinanced mortgage exceeded the value of her equity).
Even though I believe the federal cases cited above incorrectly apply the law of
unconscionability, they are nonetheless distinguishable from the instant case. The court in
O’Brien, Petty, Hatcher, Carroll, and Robinson identified an inflated loan value as
unconscionable before the parties conducted discovery, whereas discovery is complete in the
instant case. See, e.g., O’Brien, 2013 WL 2319248, at *6-7, Petty, 2013 WL 1837932, at *3-6;
Hatcher, 2013 WL 1776091, at *3-4; Carroll, 2013 WL 173728, at *2-5; Robinson, 2012 WL

10

3670391, at *2-3 1. This is significant because the West Virginia Consumer Credit and Protection
Act (“WVCCPA”) encourages courts to allow unconscionability claims to proceed through
discovery when plaintiffs merely claim that a contract is unconscionable. The relevant WVCCPA
provision reads: “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(2) (emphasis added). Several cases explicitly cite this
WVCCPA provision in denying motions to dismiss. See, e.g., O’Brien, 2013 WL 2319248, at *6
(“[T]he WVCCPA emphasizes the need for discovery in assessing unconscionability claims[.]”);
Hatcher, 2013 WL 1776091, at *3 (same); Petty, 2013 WL 1837932, at *4 (“[I]t is clear that
unconscionability claims should but rarely be determined based on the pleadings alone[.]”)
(internal quotation omitted).
Having determined that a loan exceeding the value of a home is not evidence of substantive
unconscionability, I turn to the plaintiff’s second argument. The plaintiff maintains that the loan is
substantively unconscionable because it “did not provide a net tangible benefit to Mr. McFarland,
and instead placed him in a worse situation.” (Pl.’s Resp. in Opp. to Def. Wells Fargo and Def.
U.S. Bank’s Mot. for Summ. J. (“Pl.’s Resp.”) [Docket 54], at 15). This argument also fails. There
is no requirement that a contract provide a “net tangible benefit” to either party. Whether a contract
is unconscionable does not turn on whether a party receives a net tangible benefit from the
contract. Rather, to be unconscionable, the contract must be “one-sided and . . . have an overly
1

Robinson later proceeded through discovery and the court denied the defendant’s motion for summary judgment,
stating that “numerous material issues of fact are in genuine dispute.” Robinson v. Quicken Loans, Inc., --- F. Supp. 2d.
---, No. 3:12-cv-0981, 2013 WL 6817643, at *5 (S.D. W. Va. Dec. 24, 2013). Among those disputed facts were that
Quicken Loans “pressured” the plaintiff into a larger loan than she requested and placed her into a “higher interest rate
loan than that for which she qualified.” Id. The court did not identify or explain which facts related to procedural
unconscionability and which facts related to substantive unconscionability.

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harsh effect on the disadvantaged party.” Syl. Pt. 12, Genesis Healthcare Corp., 729 S.E.2d at 221.
Further, the plaintiff must point to a particular term or aspect of the contract that he believes is
unconscionable. It is not enough to vaguely assert that the contract fails to provide a net tangible
benefit. See id. at 229 (“[C]ourts should assess whether a contract provision is substantively
unconscionable on a case-by-case basis.”) (analyzing fairness of arbitration clause) (emphasis
added); Tucker, 729 S.E.2d at 820-22 (arbitration clauses); Quicken Loans, Inc. v. Brown, 737
S.E.2d at 659 (balloon payment and total cost of the loan). Therefore, whether the loan provided a
net tangible benefit is irrelevant.
It is the court’s responsibility to determine whether a contract or provision therein is
unconscionable. Syl. Pt. 7, Genesis Healthcare Corp., 729 S.E.2d at 221 (quoting Syl. Pt. 1, Troy
Mining Corp. v. Itmann Coal Co., 346 S.E.2d 749, 750 (W. Va. 1986)). On the facts of this case, I
FIND that the plaintiff has failed to present any evidence that the loan is substantively
unconscionable. Because a plaintiff is required to establish both substantive and procedural
unconscionability (see Syl. Pt. 9, Genesis Healthcare Corp., 729 S.E.2d at 221; Syl. Pt. 6, Tucker,
729 S.E.2d at 812), and the plaintiff has failed to establish substantive unconscionability, I do not
address whether the loan is procedurally unconscionable. The defendants’ motion for summary
judgment on Count I for unconscionable contract is GRANTED, and Count I is DISMISSED. 2
B. Count III – Joint Venture & Agency
In Count III, the plaintiff argues that the defendants are vicariously liable for each other’s
actions. (See Compl. [Docket 1-2] ¶¶ 49-55). This vicarious liability is premised on two separate
theories: joint venture and agency. The defendants move for summary judgment, arguing that the
plaintiff has failed to present evidence in support of either theory.
2

The defendants also argue that Count I is time-barred. Because I find that the plaintiff failed to present evidence in
support of Count I, I do not discuss whether Count I is time-barred.

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It is difficult to understand how joint venture and agency can be asserted as independent
claims for relief. Joint venture and agency are vehicles for assigning liability to parties who did not
themselves commit a wrong. See Armor v. Lantz, 535 S.E.2d 737, 742-43 (W. Va. 2000)
(“[M]embers of a joint venture are . . . jointly and severally liable for all obligations pertaining to
the venture, and the actions of the joint venture bind the individual co-venturers.”); Bailey v.
Firemen’s Ins. Co., 150 S.E. 365, 365 (W. Va. 1929) (“A judgment binding an agent will also bind
his principal, where, under authority of the latter, his rights were asserted by the agent.”).
Nonetheless, West Virginia courts recognize that joint venture and agency may be asserted
as independent claims as long as they are based on other underlying claims. See, e.g., Croye v.
GreenPoint Mortgage Funding, Inc., 740 F. Supp. 2d 788, 799-800 (S.D. W. Va. 2010)
(Copenhaver, J.) (rejecting argument that claim for joint venture, agency, and conspiracy is not
independently cognizable); see also Carroll v. JPMorgan Chase Bank, N.A., No. 3:12-cv-5985,
2013 WL 173728, at *5-6 (S.D. W. Va. Jan. 16, 2013) (Chambers, C.J.); Proffitt v. Greenlight Fin.
Servs., No. 2:09-cv-1180, 2011 WL 1485576, at *4 (S.D. W. Va. Apr. 19, 2011) (Copenhaver, J.).
The Supreme Court of Appeals has repeatedly analyzed claims of joint venture and agency in
depth without dismissing them for failure to state a claim. See, e.g., Herrod v. First Republic
Mortgage Corp., 625 S.E.2d 373, 383 (W. Va. 2005) (joint venture, agency, and conspiracy);
Price v. Halstead, 355 S.E.2d 380, 383-84 (W. Va. 1987) (joint venture). Additionally, the court in
Dunn v. Rockwell, 689 S.E.2d 255 (2009), determined that a claim for civil conspiracy—another
form of vicarious liability—could stand as an independent claim, even though the court recognized
that “[a] civil conspiracy is not a per se, stand-alone cause of action; it is instead a legal doctrine
under which liability for a tort may be imposed on people who did not actually commit a tort

13

themselves but who shared a common plan for its commission with the actual perpetrator(s).” 689
S.E.2d at 269.
In light of these authorities, the court will assume that West Virginia law permits joint
venture and agency to be asserted as an independent claim, provided that such a claim is based
upon some other underlying wrong. Therefore, in order to survive summary judgment, the
plaintiff’s joint venture and agency claim must be based upon an allegation and evidence of some
underlying wrong. The court thus examines the Complaint to determine which underlying claims
are vicariously attributed to which defendants. Count I for unconscionable contract is directed to
“All Defendants,” Count II for breach of fiduciary duty is directed to “Defendant Greentree,” and
Counts IV and V under WVCCPA for illegal fees and misrepresentations are directed to “Wells
Fargo & U.S. Bank.” Therefore, the only substantive claims against defendants Wells Fargo and
U.S. Bank are unconscionable contract, illegal fees, and misrepresentations.
Here, joint venture and agency may not be used to impose liability for unconscionable
contract in Count I, as that claim is dismissed. Additionally, the plaintiff has not presented any
evidence that there existed a joint venture or agency relationship as to Counts IV and V, which
relate to the servicing of the loan. And the plaintiff did not direct Count II for breach of fiduciary
duty to U.S. Bank or Wells Fargo; that claim is only asserted against Greentree. Therefore, without
a viable underlying claim premised on agency or joint venture asserted against them, Wells Fargo
and U.S. Bank cannot be vicariously liable as a result of an agency or joint venture relationship.
If there is any doubt about whether the plaintiff sought to hold Wells Fargo and U.S. Bank
liable for Greentree’s alleged breach of fiduciary duty, the plaintiff failed to present evidence
supporting the existence of any fiduciary relationship. In West Virginia, a plaintiff seeking to
recover for a breach of fiduciary duty must first establish that a fiduciary relationship exists. See
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Elmore v. State Farm Mut. Auto. Ins. Co., 504 S.E.2d 893, 898 (W. Va. 1998) (defining fiduciary
relationship and determining that no such relationship runs from an insurance carrier to a
third-party claimant).
Fiduciary relationships do not exist as a matter of course. In determining whether a
fiduciary relationship exists, the court should determine whether a lender has created a special
relationship by performing extraordinary services. See White v. AAMG Const. Lending Ctr., 700
S.E.2d 791, 798 (W. Va. 2010) (“[W]here the lender and borrower have a ‘special relationship’
that extends beyond the contract, the borrower may recover tort-type damages.”); Syl. Pt. 6,
Glascock v. City Nat. Bank of W. Va., 576 S.E.2d 540, 541 (W. Va. 2002) (“Where 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.”).
Further, “the law does not generally recognize a fiduciary relation between creditor and debtor[.]”
Knapp v. Am. Gen. Fin. Inc., 111 F. Supp. 2d 758, 766 (S.D. W. Va. 2000); see also Wittenberg v.
First Indep. Mortgage Co., No. 3:10-cv-58, 2011 WL 1357483, at *18 (N.D. W. Va. Apr. 11,
2011) (“West Virginia does not recognize a fiduciary duty between a lender and borrower unless a
special relationship has been established.”).
Here, the plaintiff has presented no facts indicating that his relationship with Greentree was
anything more than that of a typical creditor/broker and borrower. In fact, the plaintiff himself
admitted that he did not ask Greentree to “do anything special” for him other than refinance his
house. (McFarland Dep. [Docket 54-1], at 82:1-12). The plaintiff merely alleges that he was
unsophisticated about finance and unsure of the precise terms of the loan. But those facts do not

15

give rise to a fiduciary relationship between the plaintiff and Greentree or a vicarious fiduciary
relationship between the plaintiff and Wells Fargo or U.S. Bank.
For these reasons, the defendants’ motion for summary judgment on Count III is
GRANTED and Count III is DISMISSED.
C. Count IV – Illegal Fees under WVCCPA
The plaintiff alleges that Wells Fargo charged fees in violation of the WVCCPA. (See
Compl. [Docket 1-2] ¶¶ 56-57). Specifically, the plaintiff contends that Wells Fargo improperly
charged 32 property inspection fees and three broker price opinion fees between February 2008
and August 2011. (See Pl.’s Resp. [Docket 54], at 19).
West Virginia Code § 46A-2-115 limits the fees a lender may assess upon default. In
relevant part, it provides as follows:
(a) Except for reasonable expenses including costs and fees authorized by statute
incurred in realizing on a security interest, the agreement with respect to a
consumer credit sale or a consumer loan may not provide for charges as a result of
default by the consumer other than those authorized by this chapter.
(b) A consumer loan secured by real property . . . which includes in the loan
agreement a reinstatement period beginning with the trustee notice of foreclosure
and ending prior to foreclosure sale, may, in addition to those authorized by this
chapter, permit the recovery of the following actual reasonable reinstatement
period expenses paid or owed to third parties: (i) Publication costs paid to the
publisher of the notice; (ii) appraisal fee when required by the circumstances or by
a regulatory authority and only after the loan has been referred to a trustee for
foreclosure; (iii) title check and lienholder notification fee not to exceed two
hundred dollars, as adjusted from time to time by the increase in the consumer price
index for all consumers published by the United States Department of Labor; and
(iv) certified mailing costs.

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W. Va. Code § 46A-2-115. 3
According to the plaintiff, Wells Fargo’s fees were illegal because “they were not assessed
after a notice of sale, and they were not assessed for publication costs, appraisals, title fees, or
mailing costs.” (Pl.’s Resp. [Docket 54], at 19). The plaintiff argues that all default fees are
prohibited except for those expressly enumerated by statute. (See id. at 18-19). In response, Wells
Fargo contends that the fees were permissible because they were assessed after default for work
actually performed in order to “realize on their security interest.” (Defs. Wells Fargo and U.S.
Bank’s Reply in Supp. of Their Mot. for Summ. J. (“Defs.’ Reply”) [Docket 65], at 18).
The plaintiff’s argument that all fees are prohibited, save those expressly enumerated by
statute, is without merit. Section 46A-2-115 indicates that “reasonable expenses” may be charged
by a lender as a result of default, including those expressly authorized by statute. Thus, reasonable
expenses are permitted, as well as those authorized by statute. This interpretation is consistent with
dicta in Kesling v. Countrywide Home Loans, Inc. See No. 2:09-cv-588, 2011 WL 227637, at *5
(S.D. W. Va. Jan. 24, 2011) (Copenhaver, J.) (observing that § 46A-2-115(a) “expressly permits
consumer loan agreements that provide for recovery of ‘reasonable expenses’ incurred as a result
of ‘realizing on a security interest’”).
Although the fees assessed to the plaintiff are not per se prohibited by § 46A-2-115, they
still must (1) be incurred “in realizing on a security interest” and (2) be reasonable. First, the fees
were incurred in realizing on a security interest. It is undisputed that once the plaintiff was in
default, Wells Fargo had a right to foreclose on the property. Therefore, the fees were incurred “in

3

Count IV also alleges that Wells Fargo assessed fees in violation of West Virginia Code §§ 46A-2-127 (“Fraudulent,
deceptive or misleading representations”) and 46A-2-128 (“Unfair or unconscionable means”). It appears to the court
that these sections merely address the means of collecting fees, not the legality of the underlying fees. The plaintiff
does not explain how these sections render Wells Fargo’s fees per se illegal. Therefore, the court addresses §§ 127 and
128 in relation to Count V for “Misrepresentations & Unconscionable Conduct in Debt Collection.”

17

realizing on a security interest.” Cf. Banks v. Paul White Chevrolet, Inc., 629 S.E.2d 792, 796 n.7
(W. Va. 2006) (finding that lender was not “realizing on a security interest” where it had no legal
or contractual right to do so).
Second, I FIND that the plaintiff has not presented evidence that the fees were
unreasonable. Wells Fargo contends that “[c]onducting inspections of secured property where a
loan is in default ensures that the property remains occupied and in good repair.” (Defs.’ Reply
[Docket 65], at 18). Further, Wells Fargo’s corporate representative testified that it is the bank’s
regular practice to review property inspection reports to ensure that the work was actually
performed. (See Ferguson Dep. [Docket 54-5], at 63:15-20).
In response, the plaintiff argues that the fees were unreasonable because the plaintiff was in
regular contact with the bank, negating any need for Wells Fargo to inspect the property. (See Pl.’s
Resp. [Docket 54], at 19). This assertion is not evidence in support of the plaintiff’s claim, and
therefore it is not considered for purposes of summary judgment. Next the plaintiff argues that
there is no evidence that Wells Fargo received or reviewed reports of the inspections. (See id.). But
the burden of proof is on the plaintiff. The defendants are not required to negate the plaintiff’s
assertions. Rather, the defendants satisfy their burden of production at the summary judgment
stage by demonstrating that the “evidence is insufficient to establish an essential element of the
[plaintiffs’] claim.” Celotex Corp. v. Catrett, 477 U.S. 317, 331 (1986) (Brennan, J. dissenting).
The defendants have done that here. In any event, the plaintiff does not dispute the testimony of
Wells Fargo’s corporate representative that Wells Fargo regularly reviews property inspection
reports to ensure that work is actually performed.
Therefore, the defendants’ motion for summary judgment on Count IV for illegal fees is
GRANTED, and Count IV is DISMISSED.
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D. Count V – Misrepresentations under the WVCCPA
The plaintiff alleges that Wells Fargo made misrepresentations in attempting to collect
debt in violation of West Virginia Code § 46A-2-127. (See Compl. [Docket 1-2] ¶ 60). That
section provides in relevant part that “[n]o debt collector shall use any fraudulent, deceptive or
misleading representation or means to collect or attempt to collect claims or to obtain information
concerning consumers.” W. Va. Code § 46A-2-127. The plaintiff further alleges that Wells Fargo
engaged in unconscionable means to collect debt in violation of West Virginia Code § 46A-2-128.
(See Compl. [Docket 1-2] ¶ 59). That section provides in relevant part that “[n]o debt collector
shall use unfair or unconscionable means to collect or attempt to collect any claim.” W. Va. Code
§ 46A-2-128.
In support, the plaintiff asserts that Wells Fargo misrepresented that it was approving him
for loan modifications on March 8, 2008, and June 20, 2009. (See Loan Modification Agreements
[Dockets 54-14 and 54-15]). Both agreements purported to reduce the plaintiff’s monthly
payments. The plaintiff and Wells Fargo signed each agreement. 4 (See id.). However, it is
undisputed that Wells Fargo never honored the agreements. (See Ferguson Dep. [Docket 54-5], at
72:2-5; 76:3-7; 77:16-20). Viewing this evidence most favorably to the plaintiff, a reasonable jury
could conclude that Wells Fargo violated West Virginia Code §§ 46A-2-127 and 46A-2-128. Cf.
Ranson v. Bank of Am., N.A., No. 3:12-cv-5616, 2013 WL 1077093, at *9 (S.D. W. Va. Mar. 14,
2013) (Chambers, C.J.) (finding that plaintiff stated claims under §§ 46A-2-127 and 46A-2-128
where plaintiff alleged, among other things, that bank defendant “told him he qualified for loan
modification and would receive one if he completed the requested financial information”); Koontz
4

Confusingly, Wells Fargo asserts that the plaintiff failed to present evidence “that Wells Fargo actually signed any
loan modification agreement or forbearance plan prior to the loan modification dated May 8, 2010.” This statement
flies in the face of the March 8, 2008, agreement [Docket 54-14] and the June 20, 2009, agreement [Docket 54-15],
which clearly display signatures from Wells Fargo representatives.

19

v. Wells Fargo, N.A., No. 2:10-cv-00864, 2011 WL 1297519, at *5-6 (S.D. W. Va. Mar. 31, 2011)
(Johnston, J.) (finding plaintiff stated a claim under § 46A-2-127 where plaintiff alleged bank
defendant misrepresented that it was providing a loan modification).

5

Accordingly, the

defendants’ motion for summary judgment on Count V is DENIED.
IV. Conclusion
As set out above, the defendants’ motion for summary judgment [Docket 46] is
GRANTED in part and DENIED in part. Accordingly, Counts I, III, and IV are DISMISSED.
The court DIRECTS the Clerk to send a copy of this Order to counsel of record and any
unrepresented party. The court further DIRECTS the Clerk to post a copy of this published
opinion on the court’s website, www.wvsd.uscourts.gov.
ENTER:

5

May 7, 2014

The plaintiff also contends that Wells Fargo misrepresented to the office of the West Virginia Attorney General the
fact that it approved the plaintiff for loan modifications on March 8, 2008, and June 20, 2009. (See Letter to WV
Attorney General [Docket 46-8], at 2). Neither party explains how alleged misrepresentations to a third party are
collections or attempts to collect debt or obtain financial information concerning consumers under West Virginia Code
§§ 46A-2-127 or 46A-2-128. I therefore did not consider that evidence here.

20