Harrison v. PNC Bank, National Association et al

Filing 70

MEMORANDUM OPINION AND ORDER granting in part and denying in part Defendant PNC Bank, National Association's 43 MOTION for Summary Judgment to the extent Plaintiff seeks relief under the WVCCPA in Count I, granting the motion as to Counts III and IV, and denying the motion as to Count II. Signed by Judge Robert C. Chambers on 5/8/2015. (cc: attys; any unrepresented parties) (mkw)

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

LOWELL HARRISON,
Plaintiff,
v.

CIVIL ACTION NO. 3:13-19944

PNC BANK, NATIONAL ASOCIATION,
as successor to the lender
NATIONAL CITY BANK, and
JOHN DOE HOLDER,
Defendants.
MEMORANDUM OPINION AND ORDER
Pending before the Court is Defendant PNC Bank, National Association (PNC)’s
Motion for Summary Judgment. ECF No. 43. For the following reasons, the Court GRANTS, IN
PART, and DENIES, IN PART, PNC’s motion.

In this action, Plaintiff Lowell Harrison alleges that PNC’s predecessor in interest,
National City Bank, misrepresented the value of his house and intentionally inflated the amount of
his income in order to induce him into mortgage loans which exceeded his monthly income.
Plaintiff further asserts that PNC engaged in illegal debt collection and refused to tell him who
held his loan. As a result, Plaintiff alleges claims for: (1) Count 1 – Unconscionable Contract; (2)
Count II – Fraud; (3) Count III – Unlawful Debt Collection; and (4) Count IV – Refusal to Identify
the Holder. PNC moved to dismiss each of these counts, but the Court denied the motion by

Order entered on March 31, 2014. Discovery followed, and PNC now moves for summary
judgment on each of Plaintiff’s claims.

PNC first argues that Plaintiff’s claims under the West Virginia Consumer Credit
and Protection Act (WVCCPA) in Counts I, III, and IV cannot be maintained because the
relationship between the parties is governed by Ohio law, not West Virginia law. As the Court’s
jurisdiction over this action is based upon diversity, the Court must apply the conflict of laws
analysis of the forum state, which is West Virginia. See Erie R. Co. v. Tompkins, 304 U.S. 64, 78,
(1938); Ellis v. Louisiana-Pac. Corp., 699 F.3d 778, 782 (4th Cir. 2012) (holding that law of
forum state applies in diversity cases). Under West Virginia law, the Supreme Court of Appeals
of the State of West Virginia has stated that in contract cases:
“Our traditional contract conflict rule gives substantial deference to
the state where the contract is made and where it is to be performed,
assuming both incidents occurred in the same state. This rule is
subject to two qualifications: (1) that the parties have not made a
choice of applicable law in the contract itself; and (2) the law of the
other state does not offend our public policy.”
Syl. Pt. 3, Joy v. Chessie Employees Fed. Credit Union, 411 S.E.2d 261 (W. Va. 1991) (quoting
Lee v. Saliga, 373 S.E.2d 345, 351 (1988)).

PNC asserts that the loans at issue in this matter were entered into in Ohio and were
performed in Ohio. In addition, PNC states that the Notes provide that “[Plaintiff’s] application
for this loan, [National City’s] decision to make this Loan and the disbursement of all proceeds
were made in Ohio,” and the Notes require that “all notices and payments . . . must be sent to”
Ohio. Mem. in Sup. of PNC Bank, Nat. Assoc.’s Mot. for Sum. J., at 6 (internal quotations and

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citations omitted; ECF No. 44). The Notes also contain a choice-of-law provision selecting Ohio
law. PNC argues these facts undoubtedly result in the application of Ohio law.

On the other hand, Plaintiff asserts that West Virginia law applies because his
claims in Counts I, III, and IV sound in tort rather than contract law. Under West Virginia’s
conflict of law analysis for tort-based claims, the doctrine of lex loci delicti applies. Thus,
Plaintiff claims that West Virginia law applies because there is no dispute the injury to Plaintiff
occurred in West Virginia. Specifically, with respect to Count I for Unconscionable Contract,
Plaintiff alleges that PNC misrepresented the value of his property located in West Virginia and
the amount of his income which he receives in West Virginia. Largely as a result of his inability
to make payments on the loan, Plaintiff states he filed for bankruptcy in West Virginia in 2004. In
addition, the loan is secured by a Deed of Trust in West Virginia and, if he loses his house, the
foreclosure sale will be in West Virginia.

Although the Court agrees that Plaintiff may suffer, or may have suffered, harm in
West Virginia, Plaintiff cites no authority in support of his position that his claim for
“Unconscionable Contract” is a tort claim. Clearly, it is a contract claim. In Quicken Loans, Inc.
v. Brown, 737 S.E.2d 640 (W. Va. 2012), the West Virginia Supreme Court “recognized
‘unconscionability’ to be a ‘general contract principle, based in equity.’” 737 S.E.2d at 656
(quoting Arnold v. United Cos. Lending Corp., 511 S.E.2d 854, 859 (W. Va. 1998), overruled, in
part, on other grounds, Dan Ryan Builders, Inc. v. Nelson, 737 S.E.2d 550 (W. Va. 2012)). In
deciding whether a contract term is unconscionable, “[a]n analysis . . . necessarily involves an
inquiry into the circumstances surrounding the execution of the contract and the fairness of the

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contract as a whole.” Syl. Pt. 6, in part, Kirby v. Lion Enterprises, Inc., 756 S.E.2d 493 (W. Va.
2014) (citations omitted). When there exists “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. 5, in part, id. (internal quotation marks and citations omitted). In Count I, Plaintiff alleges
his contract is unconscionable based upon the fact he was an unsophisticated and vulnerable
consumer who entered a contract with unfair terms in which the value of his home and his income
were misrepresented by PNC. However, there is nothing about these allegations which convert
Plaintiff’s action into a tort claim. Thus, the Court rejects Plaintiff’s argument that the Court
should apply a conflict of law analysis for a tort.

Plaintiff further asserts, that if the Court applies the contract conflict rule, it still
should apply West Virginia law because Ohio law offends West Virginia public policy against
unconscionable credit agreements. However, Plaintiff fails to indicate how Ohio law offends this
policy other than stating that West Virginia has an interest in protecting consumers from
unconscionable contracts. In fact, in footnote 2, Plaintiff states that, if West Virginia law does not
apply, his claim cannot be dismissed because he has sufficiently stated a claim of Unconscionable
Contract under Ohio law. Pl.’s Mem. of Law in Resp. to Def.’s Mot. for Summ. J., at 10 n.2. Thus,
Plaintiff recognizes that a cause of action exists under Ohio law. The mere fact West Virginia has
an interest in protecting consumers does not demonstrate that the application of Ohio law is
“contrary to pure morals or abstract justice, or . . . enforcement would be of evil example and
harmful to its own people,” 1 under the facts of this case.

1

Nader v. Liberty Mut. Fire Ins. Co., 424 S.E.2d 256, 265 (W. Va. 1992) (citing 16
Am.Jur.2d Conflict of Laws § 18).
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Similarly, Plaintiff argues that applying Ohio law would offend West Virginia’s
public policy that actions affecting interests in land should be brought in the county in which the
property is situated. In support, Plaintiff cites West Virginia Code § 56-1-1(a)(3) and Ray v. Hey,
396 S.E.2d 702 (W. Va. 1990). However, § 56-1-1(a)(3) is West Virginia’s general venue statute
and the West Virginia Supreme Court applied that statute Ray in deciding that venue is proper in
the county in which the land is located that is subject to an injunction action to stop the sale of that
land. 396 S.E.2d at 706. Plaintiff fails to explain how these authorities mandate that West
Virginia law, as opposed to Ohio law, applies to Plaintiff’s claim for Unconscionable Contract.
Thus, the Court also rejects this argument.

In further support of its position that Ohio law applies, Defendant relies upon the
analysis set forth by the West Virginia Supreme Court in Joy. In Joy, the plaintiffs owned some
land in Mineral County, West Virginia, and used it as security to obtain a loan in Maryland from
the defendant credit union. 411 S.E.2d at 262. The plaintiffs also executed a deed of trust in
Maryland. Id. After the plaintiffs fell behind on their payments, the defendant started foreclosure
proceedings. Id. The property was sold below its appraised value. Id.

On certified questions, the West Virginia Supreme Court affirmed the lower court’s
decision that Maryland law controlled the note and loan agreement, which “was used to finance a
business—not to the improve real property.” Id. at 265. In doing so, the West Virginia Supreme
Court rejected the plaintiffs’ argument that West Virginia law always should apply when a West
Virginia consumer is involved. Id. In addition, the West Virginia Supreme Court rejected the
plaintiffs’ argument under conflicts of law principles, recognizing that the plaintiffs “went to

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Maryland and contracted for a loan with a credit union located in Maryland, the payments on
which were to be made in Maryland.” Id. (italics original). Similarly, in this case, PNC argues
that the loans were entered into in Ohio, the proceeds were disbursed in Ohio, and all payments
were made in Ohio. Thus, PNC asserts it is very clear Ohio law applies.

Plaintiff argues that Joy is distinguishable from this case because his loan was
discharged in Chapter 7 bankruptcy, but the security interest was not. In Joy, the West Virginia
Supreme Court specifically stated that, although Maryland law controlled the loan agreement,
“[t]he court below found, and no one disputes, that West Virginia law applies to the deed of trust in
question . . . [and] the circuit court’s decision properly protects our jurisdiction over issues
involving property located in West Virginia.” 411 S.E.2d at 265. Plaintiff asserts that the security
instrument, which is governed by West Virginia law, is not enforceable because of
unconscionability and fraud. In addition, Plaintiff asserts that the loan in Joy was obtained for a
business purpose, which made the WVCCPA inapplicable to the transaction. 2 On the other hand,
Plaintiff states he used the loan proceeds to payoff prior indebtedness on the property. In
addition, Plaintiff argues that if the loan agreement is not enforceable due to unconscionability and
fraud, then the choice of law provision in the contract applying Ohio law also cannot be enforced.

However, Plaintiff alleges in Count I that the “loan . . . was unconscionable,” not
the deed of trust. Compl., at ¶32. For the reasons stated above, it is clear that Ohio law controls

2

In support of its position, Plaintiff cites Bennett v. Skyline Corp., Civ. Act. No.
1:14CV129, 2014 WL 4966462 (N.D. W. Va. Oct. 3, 2014), which found Joy distinguishable
because the loan in Joy was used to finance a business and the loan in Bennett was used to improve
real property. 2014 WL 4966462, at *14. However, this case is unlike Bennett because the loan
was not used to improve real property.
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whether or not the loan was unconscionable. Thus, the Court GRANTS, IN PART, PNC’s
Motion for Summary Judgment as to Count I to the extent it seeks relief under the WVCCPA and
West Virginia law. However, to the extent Plaintiff may have a claim under Ohio law, the claim
survives.

Turning next to Count III for Unlawful Debt Collection in violation of West
Virginia Code § 46A-2-128(e) and Count IV for Refusal to Identify the Holder in violation of West
Virginia Code § 46A-2-127(c), PNC argues that Plaintiff cannot maintain these claims because he
is not a “consumer” within the meaning of West Virginia Code § 46A-2-122 of the WVCCPA
because his debt was discharged in Chapter 7 bankruptcy on July 12, 2004. For purposes of the
violations alleged in Counts III and IV, the WVCCPA defines a “consumer” as “any natural person
obligated or allegedly obligated to pay any debt.” W. Va. Code § 46A-2-122(a); 3 see Fleet v.
Webber Springs Owners Ass’n, Inc., No. 14-0637, 2015 WL 1880224 (Apr. 23, 2015) (stating “for
purposes of the unfair debt collection provisions of the WVCCPA, the term ‘consumer’ is broadly
defined” in W. Va.Code § 46A–2–122(a)). Although Plaintiff’s personal liability for the debt
was discharged in bankruptcy, he states that PNC treated him “as though he was obligated to pay
on the loan by repeatedly sending him solicitations to pay on the loan and asserting amounts due.”
Pl.’s Mem. of Law in Resp. to Def’s Mot. for Sum. J., at 11. In addition, Plaintiff asserts PNC
threatened to foreclose on his house, which is considered “a method of collecting a debt by
acquiring and selling secured property to satisfy a debt,” and demonstrates PNC’s efforts to collect
3

West Virginia Code § 46A-2-122 provides, in part: “For the purposes of this section and
sections one hundred twenty-three, one hundred twenty-four, one hundred twenty-five, one
hundred twenty-six, one hundred twenty-seven, one hundred twenty-eight, one hundred
twenty-nine, and one hundred twenty-nine-a of this article, the following terms shall have the
following meanings: (a) ‘Consumer’ means any natural person obligated or allegedly obligated to
pay any debt.” W. Va. Code § 46A-2-122(a), in part.
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an alleged obligation by Plaintiff. Id. (citing Wilson v. Draper & Goldber, P.L.L.C., 443 F.3d 373,
376 (4th Cir. 2006) (internal quotation marks omitted)). However, the purported collection letters
and monthly loan statements Plaintiff attached to his Response contain a provision stating that, if
the debt was discharged in bankruptcy, PNC is not attempting to collect a personal debt, but it may
exercise its rights against the property. Thus, in these letters and statements, PNC disavows it is
attempting to collect a personal debt from Plaintiff.

This provision makes this case directly comparable to Fabian v. Home Loan
Center, No. 5:14-CV-42, 2014 WL 1648289 (N.D. W. Va. Apr. 24, 2014), in which the District
Court held the plaintiff was not a “consumer” within the meaning of West Virginia Code §
46A-2-122(a) because the lender’s letters provided that the plaintiff had no personal obligation to
repay the loan because his debt was discharged in bankruptcy. 2014 WL 1648289, at *6. As the
plaintiff was not a consumer, the District Court concluded that the plaintiff lacked standing to
bring a WVCCPA claim and dismissed it. Id. Similarly, the exhibits submitted by Plaintiff in this
case provide that he is not personally obligated to repay the debt if it was discharged in bankruptcy.

The fact Plaintiff in this case was sent letters and statements which disavowed they
were attempts to collect a personal debt as a result of Plaintiff’s bankruptcy also makes this case
distinguishable from McGuire v. Jim Walter Homes, LLC, No. 5:14-cv-14299, 2014 WL 5149725,
(S.D. W. Va. Oct. 14, 2014). In McGuire, although the lender produced mailings stating the
borrowers did not owe any money if the borrowers’ debt was discharged in bankruptcy, the
borrowers also alleged they received up to four to five phone calls a day demanding payment
post-bankruptcy. 2014 WL 5149725, at *7. Finding the WVCCPA encompasses debt collectors’

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phone calls, the court concluded there was a genuine issue of material fact as to whether lender
demanded payment from the borrower after the bankruptcy had closed. Id.

Similarly, in Croye v. Greenpoint Mortgage Funding, Inc., 740 F. Supp.2d 788
(S.D. W. Va. 2010), the court found a question of fact existed because the ex-husband of the
borrower asserted the lender called him over thirty times in an effort to collect on the loans, despite
the fact he never signed the notes and had filed bankruptcy. 740 F. Supp.2d at 797. 4 The court
found these repeated calls “suggest[ed] the existence of an alleged obligation . . . to pay the loans.”
Id. Thus, the court denied the lenders motion for summary judgment for illegal debt collection.
Id. at 798.

To the contrary, in this case, Plaintiff has not made any allegation PNC called him,
and the letters and statements sent to him provide, if the debt was discharged in bankruptcy, PNC
was not attempting to collect a personal debt. Thus, unlike McGuire and Croyle, the Court finds
in this case there is no genuine issue of material fact that PNC was attempting to collect a debt.
Accordingly, the Court finds that he is not a “consumer” within the meaning of West Virginia
Code § 46A-2-122(a) as he was not personally obligated to pay the debt and there was no alleged
obligation to pay the debt by virtue of the letters and statements. Therefore, the Court GRANTS
summary judgment in favor of PNC as to Counts III and IV. 5

4

The ex-husband of the borrower had an interest in the property that was the security for the
mortgage notes executed by the ex-wife. Id. at 790-93.
5

As with his Unconscionable Contract claim, Plaintiff also argues that his WVCCPA
claims for Unlawful Debt Collection and Refusal to Identify the Holder are tort like claims
governed by West Virginia law under a conflicts of law analysis. The Court need not address this
argument because PNC is entitled to summary judgment on other grounds.
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PNC also argues that Count II for fraud is barred by the two-year statute of
limitations for such claims. Plaintiff asserts, however, that his claim was timely filed under the
discovery rule, which provides that the statute of limitations does not begin to run until after he
“knew, or by the exercise of reasonable diligence should have known, of the elements of a possible
cause of action” Syl. Pt. 5, in part, Dunn v. Rockwell, 689 S.E.2d 255 (W. Va. 2009) (citation
omitted). Specifically, Plaintiff argues he did not know, nor through the exercise of reasonable
diligence should have known, that he was defrauded until May of 2012 when he had a
retrospective appraisal of his house. On the other hand, PNC insists that there were a number of
alleged facts which indicate Plaintiff should have known about any alleged fraudulent conduct
prior to the date of his bankruptcy discharge. Upon review, the Court finds that there exists a
genuine issue of material fact which is best reserved for trial. Therefore, the Court DENIES
PNC’s motion for summary judgment as to Count II. 6

Lastly, PNC argues that Plaintiff’s unconscionable contract and fraud claims are
barred by the doctrine of judicial estoppel because he did not list these potential claims as assets on
his bankruptcy petition. Thus, PNC insists that Plaintiff’s claims in this matter are entirely
inconsistent with the position he took during his bankruptcy proceedings. Plaintiff responds that
as soon as he became aware of his claims, he amended his bankruptcy schedules to inform the
trustee and the creditors of the claims and the bankruptcy court allowed the claims to proceed.
Thus, the bankruptcy court did not accept any prior inconsistent statements. Although PNC
replies by arguing the claims are barred because Plaintiff knew the factual predicate for his claims

6

The Court holds in abeyance PNC’s argument regarding the last scheduled payment
accelerating the debt.
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and had a motive to conceal them, the Court finds that it is a factual issue and ill-suited for
summary judgment. Therefore, the Court DENIES PNC’s motion for summary judgment with
respect to Counts I and II on judical estoppel grounds.

Accordingly, for the foregoing reasons, the Court GRANTS, IN PART, PNC’s
Motion for Summary Judgment to the extent Plaintiff seeks relief under the WVCCPA in Count I,
GRANTS the motion as to Counts III and IV, and DENIES the motion as to Count II.

The Court DIRECTS the Clerk to send a copy of this Order to counsel of record
and any unrepresented parties.
ENTER:

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May 8, 2015