Branch Banking and Trust Company v. Meridian Holding Company, LLC et al

Filing 83

MEMORANDUM OPINION AND ORDER granting Plaintiff's 76 MOTION for Summary Judgment in the principal sum of $614,341.73, plus accrued interest of $9,594.85 through 3/22/2018, and late fees and other charges of $8,065.88, for a tota l of $632,002.46, together with pre-and post-judgment interest after 3/22/2018 at a per annum rate equal to Plaintiff's Prime Rate, as announced from time to time, plus 5 percent until paid, and for Plaintiff's reasonable attorney' ;s fees and costs incurred in attempting to collect the indebtedness due under the Note and Guaranty Agreement; directing this case removed from the docket. Signed by Judge Robert C. Chambers on 4/17/2020. (cc: counsel of record; any unrepresented parties) (jsa)

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

BRANCH BANKING AND
TRUST COMPANY,
Plaintiff,
v.

CIVIL ACTION NO. 3:18-0486

MERIDIAN HOLDING COMPANY, LLC
a West Virginia limited liability company;
GREGORY L. HOWARD, JR.;
ROGER J. HARRIS, JR.; and
MICHAEL C. DRAGOVICH,
Defendants.
MEMORANDUM OPINION AND ORDER
Pending before the Court is a Motion for Summary Judgment filed by Plaintiff Branch
Banking and Trust Company on February 14, 2020. Mot. for Summ. J., ECF No. 76. Plaintiff filed
sixteen exhibits and a memorandum of law along with its Motion. Pl.’s Exs., ECF Nos. 76-1–16;
Mem. in Support of Mot. for Summ. J., ECF No. 77. Defendants filed a Response in Opposition to
Plaintiff’s Motion on March 13, 2020, Resp. in Opp’n, ECF No. 80, along with seven exhibits,
Defs.’ Exs., ECF No. 80-1–7. Plaintiff filed a Reply one week later. Reply, ECF No. 81. The issues
have been fully briefed and Plaintiff’s Motion is ripe for review. For the reasons set forth below,
the Court GRANTS the Motion and ORDERS this case removed from its docket.
I. BACKGROUND
Though this action was not initiated until March 2018, its roots lie in a Promissory Note
(“Note”) executed nearly a decade earlier by Defendant Meridian Holding Company, LLC
(“Meridian”) and its members Gregory Howard, Roger Harris, and Michael Dragovich. See Pl.’s

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Ex. A, ECF No. 76-1, at 2–5.1 The Note provided that Meridian would repay an $858,276.62 loan
from Plaintiff over five years at an annual interest rate of 5.875%. Id. at 2. Failure to make required
payments constituted a material default under the Note, and Plaintiff retained the right to “pursue
its full legal remedies at law or equity” to remedy such a default. Id. at 3. While the Note also
referenced the possibility of future modifications to its terms, it provided that “[n]o waivers and
modifications shall be valid unless in writing and signed by” Plaintiff and that no such
modifications “shall in any manner affect, limit, modify, or otherwise impair any rights, guaranties
or security of the holder not specifically waived, released, or surrendered in writing.” Id. at 4.
Incorporated into the Note is a Deed of Trust granting Plaintiff an interest in a property
located at 2401 Sissonville Drive in Charleston, West Virginia. Pl.’s Ex. C, ECF No. 76-3, at 10.
Defendants agreed that they would maintain the property—which acted as security on the Note—
“in as good order and repair as it now is,” and that they would “neither commit nor permit any
waste or any other occurrence or use which might impair the value of the Property.” Id. at 3. At
the time the Note was executed, the Sissonville Drive property was assessed at $1,135,000.00. See
Pl.’s Ex. D, ECF No. 76-4, at 3. The individual defendants—Howard, Harris, and Dragovich—
jointly and severally guaranteed Meridian’s debt on the Note. Pl.’s Ex. B, ECF No. 76-2, at 2.
Over the following years, the parties entered into three written modifications and one
change in terms agreement that altered the interest rate and payment schedule under the Note. See
Pl.’s Ex. A, at 6–22. Neither the modifications nor the change in terms agreement altered aspects
of the original agreement that were not expressly modified. See, e.g., id. at 7 (“It is agreed that
except for the modification(s) contained herein, the Promissory Note, and any other Loan

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The page numbers cited throughout this Memorandum Opinion and Order refer to the
Bates numbers located at the top of each document and exhibit.
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Documents or Agreements evidencing, securing, or relating to the Promissory Note and all singular
terms and conditions thereof, shall remain in full force and effect.”). The first two modifications
were relatively straightforward; executed on April 9, 2013 and July 1, 2013, they lowered the
Note’s interest rate and extended its maturity date. See id. at 6–13. On January 1, 2016, the parties
executed a change in terms agreement that delayed many of Defendants’ payment obligations, but
that also provided for an increased interest rate and various additional remedies in the event of
default. Id. at 14–18. Inter alia, the agreement permitted Plaintiff to remedy default by “tak[ing]
passion of the Collateral or any part thereof” and “foreclos[ing] Lender’s security interest and/or
lien on any Collateral in accordance with applicable law.” Id. at 16. These remedies were not
mutually exclusive. Id. (“Any election . . . to pursue any remedy shall not exclude the right to
pursue any other remedy.”). Plaintiff assented to a final note modification on December 27, 2016,
once again altering the Note’s interest rate and deferring certain monthly payments. Id. at 19–22.
This final modification also established that the Note would mature on January 5, 2018. Id. at 19.
Once again behind on payments and with this deadline approaching, Defendants contacted
Plaintiff at some point in the second half of 2017 to “explore any option that was possible with
them.” Pl.’s Ex. F, ECF No. 76-6, at 8. Several such options were discussed, including refinancing,
a short sale of the property, and—importantly for this case—a deed in lieu of foreclosure (“DIL”).2
To discuss these options, the parties scheduled a conference call for January 17, 2018, or twelve
days after the maturity date laid out in the parties’ final note modification. On January 10, 2018,
however, a pipe in the ceiling of the Sissonville Drive property ruptured and caused extensive
damage to the structure. Pl.’s Ex. I, ECF No. 76-9, at 13–14. The leak poured through the ceiling

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A deed in lieu of foreclosure, or DIL, would involve transferring title of the Sissonville
Drive property to Plaintiff in return for a release of the Note. Mem. in Support of Mot. for Summ.
J., at 6.
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and walls, and saturated the carpets and the baseboards. Id. at 15. Dragovich traveled to the
property hours after the building’s security system reacted to the leak, and eventually came to
realize that extensive renovations would likely be necessary. Id.
Nevertheless, the conference call took place as scheduled one week after the leak at the
Sissonville Drive property. Present on the call were Howard, Harris, and Dragovich, along with
Stacy Andrews-Smith—Meridian’s Asset Manager—and Ted Bradford—the Asset Management
Group’s Team Leader. Pl.’s Ex. F, at 10. Though the parties’ understanding of their conversation
appears to differ significantly, it is nonetheless possible to summarize the actual substance of their
discussion without much difficulty. The participants began by outlining several options for
resolving Defendants’ inability to repay their loan, including refinancing and foreclosure. Id. Yet
the discussion came to focus on the possibility of a DIL “as soon as [Defendants] heard what it
was.” Id. It appears that Andrews-Smith and Bradford explained the elements of a DIL and other
options over the course of approximately a half an hour, though it does not appear that any specific
terms were established. Id. Indeed, the Meridian members were made well aware that further due
diligence would accompany any eventual DIL. Pl.’s Ex. E, at 8. There remains some dispute as to
whether any water damage was mentioned on the call. See, e.g., Pl.’s Ex. I, at 13–14. If it was
mentioned, it does not appear that the scope and severity of the damage was noted. Defs.’ Ex. C,
ECF No. 80-3, at 16 (“They did tell us at that point that there was some minor damage . . . . And
we did ask about that damage, and they said it was very minimal.”). In any event, Andrews-Smith
and Bradford ended the call by asking the Meridian members to notify them of their preferred
course of action. Pl.’s Ex. F, at 10.
Not much discussion was necessary for Howard, Harris, and Dragovich to agree that a DIL
was their universal preference. Howard emailed Andrews-Smith the same day and advised her that

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the members had reviewed their options and “elected to move forward with the ‘deed in lieu’
option.” Pl.’s Ex. G, at 2. He further wrote that the members were “commit[ted] to working with
the bank and [the bank’s] attorneys throughout this process.” Id. Andrews-Smith responded
promptly, telling the members that she appreciated their quick response and that she and Bradford
would work with Plaintiff’s “litigation department in the morning and get the relationship
transferred over.” Defs.’ Ex. D, ECF No. 80-4, at 1. In the same email, she noted that the members
“should expect to receive correspondence from the attorney in the next few weeks.” Id.
On February 7, 2018, Plaintiff’s attorneys sent a letter to Defendants formally advising
them that they had defaulted on the Note and demanding “immediate payment of all outstanding
principal, interest, fees and late charges due in connection with the Notes.” Pl.’s Ex. O, ECF
No. 76-15, at 2. Instead of responding to the letter, Howard wrote Andrews-Smith and assured her
that the members “continue[d] to remain committed to work with and cooperate with [Plaintiff]
through every step of the process of the deed in lieu.” Defs.’ Ex. E, ECF No. 80-5, at 1. AndrewsSmith advised Howard that she was “no longer managing the relationship” between Meridian and
Plaintiff, but that she had “forwarded [his] email to the Litigation department.” Id. Harris followed
up separately on February 23, 2018, writing Andrews-Smith that he and his fellow members
“recently were told that this is headed to a foreclosure and” that they did not understand “the
change from what [the parties] had discussed earlier.” Defs.’ Ex. F, ECF No 80-6, at 2. AndrewsSmith responded that
Ted and I just spoke with the Asset Manager in the Litigation department regarding
your last email. We explained that there seems to be some confusion or
miscommunication regarding the Deed in Lieu versus Foreclosure. We were
advised that they will have the attorney contact you to explain the process. We were
also advised that they are still doing their due diligence (phase I environmental,
etc.) and that nothing has been determined yet.

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Id. at 1. Harris responded that he had “[j]ust wanted everyone to be on the same page,” as “[s]ome
of our recent dialog [sic] wasn’t what we discussed with you guys.” Id. Andrews-Smith said she
understood Harris’ worries, and that she and Bradford “wanted to make sure that they would pursue
the deed in lieu if possible as it [is] what was previously discussed.” Id. (emphasis added).
Eventually, Plaintiff’s attorneys completed their due diligence with the receipt of an
appraisal report on March 15, 2018 and an environmental report on March 18, 2018. See Pl.’s Ex.
J, ECF No. 76-10; Pl.’s Ex. L, ECF No. 76-12. The appraisal report revealed that significant
damage to the property had decreased its value to $225,000, or an $810,000 loss from its initial
appraisal of $1,135,000. Pl.’s Ex. J, at 2. The environmental report contained equally bad news,
characterizing the property as “High Risk” and nothing “the presence of significant mold growth
and water-damaged building materials.” Pl.’s Ex. L, at 2. In light of this decline in value, Plaintiff
elected to pursue foreclosure rather than a DIL.
To recover their debt under a theory of breach of contract, Plaintiff filed its Verified
Complaint on March 23, 2018 in this Court. Compl., at ¶¶ 13–14. Defendants responded with a set
of their own counterclaims. See ECF Nos. 11–14. As amended, these counterclaims raise five
causes of action against Plaintiff: breach of contract, breach of the duty of good faith and fair
dealing, common law fraud and misrepresentation, special duty and negligence, and promissory
estoppel. Am. Counterclaim, ECF No. 50, at ¶¶ 1–31. While this action was pending, Plaintiff sold
the Sissonville Drive property at auction on November 21, 2019, for $10,500. Pl.’s Ex. M., ECF
No. 13, at ¶ 3. “After deducting the cost associated with the public auction,” Plaintiff “recovered
$5,450.” Id. at ¶ 4. This left Defendants with an outstanding debt of $744,017.05 as of February
13, 2020. Id. at ¶ 5. Plaintiff now moves for summary judgment on its breach of contract claim

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and all of Defendants’ counterclaims. Before turning to the substance of Plaintiff’s Motion, the
Court will briefly review the law that frames its analysis.
II. LEGAL STANDARD
Under Rule 56 of the Federal Rules of Civil Procedure, a party is entitled to summary
judgment “if the movant shows that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.” “Facts are ‘material’ when they might affect
the outcome of the case, and a ‘genuine issue’ exists when the evidence would allow a reasonable
jury to return a verdict for the nonmoving party.” News & Observer Publ. Co. v. Raleigh-Durham
Airport Auth., 597 F.3d 570, 576 (4th Cir. 2010). To demonstrate that no genuine issue of material
facts exists, a moving party may rely on “depositions, answers to interrogatories, answers to
requests for admission, and various documents submitted under requests for production.” Barwick
v. Celotex Corp., 736 F.2d 946, 958 (4th Cir. 1984).
“On summary judgment[,] the inferences to be drawn from the underlying facts . . . must
be viewed in the light most favorable to the party opposing the motion.” United States v. Diebold,
Inc., 369 U.S. 654, 655 (1962). In effect, this means that courts may not “weigh the evidence and
determine the truth of the matter.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). Of
course, this bar on “weighing” evidence does not absolve a nonmoving party from the need to offer
some “concrete evidence from which a reasonable juror could return a verdict” in his or her favor.
Id. at 256. Such a showing must consist of more than a “scintilla of evidence,” id. at 252, or mere
unsupported speculation, Felty v. Graves-Humphreys Co., 818 F.2d 1126, 1128 (4th Cir. 1987). It
is this legal framework that will control the Court’s consideration of the pending Motion.

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III. DISCUSSION
In considering Plaintiff’s Motion, the Court will first proceed through an analysis of
Defendants’ counterclaims. Having done so, the Court will address whether summary judgment is
warranted with respect to Plaintiff’s own breach of contract claim.
A. Defendants’ Counterclaims
1. Breach of Contract
Defendants’ first counterclaim is one for breach of contract. See Am. Counterclaim, at ¶¶ 1–
6. This claim is essentially grounded in Defendants’ belief that Plaintiff offered an entirely new
contract for a DIL during the parties’ January 17, 2018 conference call, and that their refusal to
proceed with a DIL represents a breach of that agreement. Id. at ¶ 4. Plaintiff disagrees, arguing
that their conversation—at most—constituted a non-binding “agreement to agree.” Reply, at 5–6.
“To survive summary judgment on a breach of contract [counter]claim” under West
Virginia law, “the [defendants] must provide concrete evidence on the following elements: (1) the
existence of a valid, enforceable contract; (2) the [defendants’] performance under the contract;
(3) the [plaintiff’s] breach of its duties or obligations under the contract; and (4) resulting injury
to the [defendants].” McNeely v. Wells Fargo Bank, N.A., 115 F. Supp. 3d 779, 789 (S.D.W. Va.
2015). It is the first of these requirements that proves fatal to Defendants’ arguments. “The
elements of a contract are an offer and an acceptance supported by consideration.” Dan Ryan
Builders, Inc. v. Nelson, 737 S.E.2d 550, 556 (W. Va. 2012). An offer and acceptance must be
bound by mutuality of assent, “an essential element of all contracts.” Bailey v. Sewell Coal Co.,
437 S.E.2d 448, 450 (W. Va. 1993). “In order for this mutuality to exist, it is necessary that there
be a proposal or offer on the part of one party and an acceptance on the part of the other.” Id. Yet
to even “create a power of acceptance,” an “offer must be certain in its essential terms.”

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Charbonnages de France v. Smith, 597 F.2d 406, 417 (4th Cir. 1979) (looking to “West Virginia
cases and to general authorities in applying the elementary principles pertinent to [this] decision”).
These foundational principles of contract law lead to a single conclusion: that no mutuality
of assent existed between Plaintiff and Defendants during their January 17 conference call, or even
in the weeks following it, that would afford Defendants the power to accept an offer. At most, the
call—which began at 3:00 p.m.—could have lasted for approximately fifty minutes. See Pl.’s Ex.
G, at 2 (scheduling conference call for 3:00 p.m. and confirming desire to pursue DIL option at
3:53 p.m.). The parties discussed several options on the call in addition to a DIL, and it belies
reason to assume that they mutually assented to every material term of a new, complex contract in
under an hour. Defendants appear to have recognized as much, having repeatedly reaffirmed their
commitment to working with Plaintiff throughout the due diligence process that had yet to occur.
See, e.g., Pl.’s Ex. G, at 2.
The nature of the purported DIL contract weighs heavily against Defendants as well.
“[W]hen it is shown that the parties intend to reduce a contract to writing this circumstance creates
a presumption that no final contract has been entered into, which requires strong evidence to
overcome.” Sprout v. Bd. of Educ. of Cnty. of Harrison, 599 S.E.2d 764, 768 (W. Va. 2004). While
the parties never explicitly mention their intent to reduce the theoretical DIL contract to writing,
the nature of such a contract makes it exceedingly unlikely that Plaintiff or Defendants would be
satisfied with anything short of a written instrument. See Blair v. Dickinson, 54 S.E.2d 828, 844
(1949) (reasoning that, inter alia, courts should consider “whether the contract is of that class
which are usually found to be in writing; whether it is of such nature as to need a formal writing
for its full expression; whether it has few or many details; whether the amount involved is large or
small; whether it is a common or unusual contract” in considering whether parties intend to reduce

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an agreement to writing). Indeed, as Plaintiff points out, West Virginia law mandates that title
transfers—an inherent aspect of a DIL—be reduced to writing. See W. Va. Code § 36-1-3. Here,
no written contract concerning a DIL or title transfer was ever offered in writing, providing further
evidence that no final agreement was reached on the call.
Of course, a more charitable reading of Defendants’ argument might be that they believe
the parties formed a binding preliminary agreement to agree on a DIL contract at a future date. See
Resp. in Opp’n, at 10 (“By way of explanation, with the Deed-in-Lieu of Foreclosure as agreed,
the parties contemplated how to satisfy the obligation and specifically contemplated how the same
would be accomplished depending on the appraised value.”). At the broadest level of generality,
such “bare-boned ‘agreements to agree’ are not binding.” Burbach Broad. Co. of Del. v. Elkins
Radio Corp., 278 F.3d 401, 407 (4th Cir. 2002). Indeed, “[w]hen terms are so vague and indefinite
that there is no basis or standard for deciding whether the agreement has been kept or broken, or
to fashion a remedy, and no means by which such terms may be made certain, then there is no
enforceable contract.” Id.
Two potential exceptions to this general rule exist. First, where “parties have reached a
complete agreement (including the agreement to be bound) on all issues perceived to require
negotiation,” a preliminary agreement may be biding. Burbach Broad. Co. of Del., 278 F.3d at
407. Of course, “[s]uch an agreement is preliminary only in form—only in the sense that the parties
desire a more elaborate formalization of the agreement.” Id. The Court’s analysis on this point is
rather redundant, because—as discussed above—there is no evidence suggesting that the parties
reached an agreement on every material term of the hypothetical DIL contract. In fact, the evidence
suggests quite the opposite; in “accepting” Plaintiff’s purported offer, for example, Howard made

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clear that he and the fellow Meridian members were “commit[ted] to working with the bank and
your attorneys throughout this process.” Pl.’s Ex. G, at 2 (emphasis added).
The second potential exception to the rule against binding preliminary agreements is
equally unavailing to Defendants. In narrow circumstances, parties may bind themselves “to
negotiate . . . open issues in good faith in an attempt to reach the contractual objective within the
agreed framework.” Burbach Broad. Co. of Del., 278 F.3d at 407. This prevents a party from
“renouncing the deal, abandoning the negotiations, or insisting on conditions that do not conform
to the preliminary agreement.” Id. Yet such preliminary agreements do not guarantee that an
agreement will be reached, because “it is possible that the parties will not eventually come to
agreement after negotiating in good faith on other terms, or that circumstances may change, and
the parties may abandon the agreement.” Akers v. Minn. Life Ins. Co., 35 F. Supp. 3d 772, 786
(S.D.W. Va. 2014). Assuming for the sake of argument that the parties reached such an agreement
here—a proposition that is far from certain3—it is plain that changed circumstances following the
call justified Plaintiff’s decision not to execute a final contract respecting a DIL with Defendants.
Indeed, it appears that Plaintiff conducted due diligence in good faith and only elected to pursue
foreclosure after two separate reports revealed significant damage to the property—just the sort of
change in circumstance that may justify a party’s abandonment of a final contract. See Akers, 35
F. Supp. 3d at 786. It follows that no theory of contract law supports the idea that the parties either

3

Courts consider five factors in determining whether a preliminary agreement to negotiate
in good faith has been reached: “1) the language of the agreement, 2) the existence of open terms,
3) whether there has been partial performance, 4) the context of negotiations, and 5) the custom of
such transactions.” Burbach Broad. Co. of Del., 278 F.3d at 408. The language of the agreement
is the most important factor, but the other factors are relevant here as there is no written agreement
for the Court to parse. Id. In any event, there were clearly substantial open terms following the
call, there was no partial performance to speak of (beyond Plaintiff’s own due diligence, that is),
the “negotiations” consisted of a brief phone call, and it seems highly unlikely that Plaintiff
customarily entered into binding agreements limiting its remedies for default via conference call.
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reached a final, binding agreement during the conference call, or that Plaintiff breached a binding
agreement to agree in the future. Plaintiff is therefore entitled to summary judgment with respect
to Defendants’ first counterclaim.
2. Breach of the Duty of Good Faith and Fair Dealing
Defendants next argue that Plaintiff “breached the duty of good faith and fair dealing
implied in the ‘Note.’” Am. Counterclaim, at ¶ 8. Plaintiff counters by arguing that it acted “within
the rights provided under the Note,” and therefore “did not breach the duty of good faith and fair
dealings.” Mem. in Support of Mot. to Dismiss, at 16. Plaintiff further claims that, if anything,
Defendants breached their own duty of good faith and fair dealing in failing to notify it of the
extensive damage to the Sissonville Drive property during the January 17, 2018 conference call.
Id.
“West Virginia law ‘implies a covenant of good faith and fair dealing in every contract for
purposes of evaluating a party’s performance of that contract.’” Corder v. Countrywide Home
Loans, Inc., No. 2:10-0738, 2011 WL 289343, at *3 (S.D.W. Va. Jan. 26, 2011) (quoting Stand
Energy Corp. v. Columbia Gas Transmission, 373 F. Supp. 2d 631, 644 (S.D.W. Va. 2005)). Yet
the Supreme Court of Appeals of West Virginia has “‘declined to recognize an independent claim
for a breach of the common law duty of good faith,’ and has instead held that such a claim sounds
in breach of contract.” Id. (quoting Doyle v. Fleetwood Homes of Va., 650 F. Supp. 2d 535, 541
(S.D.W. Va. 2009)). As such, the Court construes Defendants’ counterclaim as implied in its
counterclaim for breach of contract. Even with the benefits of such a liberal construction, however,
Defendants’ counterclaim fails for the simple reason that “[t]he implied covenant of good faith
and fair dealing cannot give contracting parties rights which are inconsistent with those set out in
the contract.” Barn-Chestnut, Inc. v. CFM Dev. Corp., 457 S.E.2d 502, 509 (W.Va.1995). Here,

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Plaintiff maintained the unqualified right under the Note to foreclose on the Sissonville Drive
property—a right it elected to exercise after learning of the property’s lessened value.
In an attempt to circumvent this unfavorable law, Defendants lean heavily on Warden v.
PHH Mortgage Corporation, No. 3:10-CV-75, 2010 WL 3720128 (N.D.W. Va. Sept. 16, 2010).
In Warden, Judge Bailey was confronted with plaintiffs who claimed they promised and paid their
defendant lender $1,600.00 to consider their loan current. Id. at *5. Instead of doing so, the
plaintiffs alleged that the defendant breached their agreement and sought foreclosure. Id. Judge
Bailey reasoned that this subsequent agreement to consider the loan current could serve as the
basis for an underlying breach of contract claim, which could in turn support a claim for breach of
the implied covenant of good faith and fair dealing. Id. Two obvious factors distinguish Warden
from the instant case. First, the plaintiffs in Warden were proceeding on a motion to dismiss and
their factual allegations were accepted as true. See Erickson v. Pardus, 551 U.S. 89, 94 (2007).
The Court is under no similar obligation in this case, and instead takes the evidence in the light
most favorable to Defendants. Second, the Court has already concluded that no subsequent contract
was formed that would bind Plaintiff to any sort of remedy. Where there is no subsequent
agreement that could serve as the basis for a breach of contract claim, Warden is simply
inapplicable. See, e.g., Spoor v. PHH Mortgage Corp., No. 5:10CV42, 2011 WL 883666, at *5
(N.D.W. Va. Mar. 11, 2011) (reasoning that “[u]nlike the Warden case, [the plaintiff’s] first
amended complaint does not allege any specific agreement regarding loan modification that could
be interpreted as a new and enforceable contract” and that “no such similar claim for breach of
contract [exists] in this case”). Simply put: Defendants’ failure to establish the existence of a valid,
enforceable contract to pursue a DIL is fatal to their counterclaim for breach of the implied duty
of good faith and fair dealing. West Virginia law “does not require creditors in a deed of trust, or

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their representatives, to pursue remedies that are not set out in the deed of trust or any relevant
statute to attempt to cure a default prior to pursuing a foreclosure,” Lucas v. Fairbanks Capital
Corp., 618 S.E.2d 488, 490, Syl. Pt. 5 (W. Va. 2005), and so Plaintiff is entitled to summary
judgment on Defendants’ second counterclaim.
3. Common Law Fraud and Misrepresentation
Defendants’ next counterclaim is one for fraud and misrepresentation. See Am.
Counterclaim, at ¶¶ 11–18. In particular, they argue that “[b]y offering the Deed-in-Lieu of
Foreclosure with apparent authority to do so, Plaintiff absolutely” fraudulently or negligently
misrepresented their plans to offer a DIL. Resp. in Opp’n, at 15. Plaintiff argues that Defendants
fall short on each necessary element of both torts. Reply, at 11.
To make out a claim for fraud under West Virginia law, a party must establish “(1) that the
act claimed to be fraudulent was the act of the [plaintiff] or induced by him; (2) that it was material
and false; (3) that [the defendant] relied upon it and was justified under the circumstances in relying
upon it; and (4) that he was damaged because he relied upon it.” Bowens v. Allied Warehousing
Servs., Inc., 729 S.E.2d 845, 852 (2012) (internal punctuation omitted). As an initial matter, the
Court notes that “[a]ctionable fraud must ordinarily be predicated upon an intentional
misrepresentation of a past or existing fact and not upon a misrepresentation as to a future
occurrence.” Gaddy Eng’g Co. v. Bowles Rice McDavid Graff & Love, LLP, 746 S.E.2d 568, 576
(2013). It is unclear what “past or existing” fact that Defendants believe is the source of Plaintiff’s
purported fraud; at most, it appears they are alleging that Andrews-Smith and Bradford
affirmatively misled them as to the likelihood of a DIL in the future. Even so, their fraud claims
fail for an even clearer reason: that they have not pointed to any injury resulting from Plaintiff’s
allegedly fraudulent statements. The closest they come to doing so is to argue that their decision

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to stop pursuing other potential avenues to resolve their default represents some type of prejudice,
but this is a meritless claim. Even Defendants appear to recognize that the decision to cease pursuit
of refinancing or another note modification was theirs alone, and that Plaintiff never conditioned
the availability of a DIL on their forbearance from other options. See Pl.’s Ex. F, at 11 (“Q: Do
you recall a time prior to that call where the option to refinance was kind of taken off the table? A:
I don’t specifically recall that.”).
Defendants’ counterclaims for negligent misrepresentation also fail, but for an even more
apparent reason. As an initial matter, it is true that West Virginia recognizes a cause of action for
negligent misrepresentation. Folio v. City of Clarksburg, 655 S.E.2d 143, 151 (2007) (“One under
a duty to give information to another, who makes an erroneous statement when he has no
knowledge on the subject, and thereby misleads the other to his injury, is as much liable in law as
if he had intentionally stated a falsehood.” (internal quotations omitted)). Yet “a successful claim
for negligent misrepresentation would require a finding that [Plaintiff] maintained a special
relationship or duty to [Defendants].” Kidd v. Mull, 595 S.E.2d 308, 317 (2004) (emphasis added).
Where the relationship between a lender and a borrower is customary, and where a lender does not
“endeavor to perform uncustomary services for [Defendants], possess information of unique
relevance to [Defendants] in regard to this claim, or participate in any conduct which could
arguably be seen as creating a special relationship with [Defendants],” a claim for negligent
misrepresentation claim must fail. Tinsley v. OneWest Bank, FSB, 4 F. Supp. 3d 805, 839 (S.D.W.
Va. 2014). In arguing that a special relationship existed here, Defendants argue that Plaintiff’s
decision to transfer control of their account to a special asset management unit in Florida—as well
as the involvement of the Team Leader of that unit on their call, Tom Bradford—somehow renders
their relationship “uncustomary.” Resp. in Opp’n, at 17–18. Yet the services provided to

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Defendants by this unit do not create any sort of positive legal duty; indeed, its primary purpose
seems to have been to work with Defendants to fashion a suitable remedy to their default, if
possible. Indeed, the crux of this case—a foreclosure following three contractual note
modifications and a change in terms agreement—reveals the underlying flaw with Defendants’
argument: that Plaintiff never took any action with respect to Defendants’ Note beyond their
contractual relationship as lender and borrowers. See, e.g., McNeely v. Wells Fargo Bank, N.A.,
No. 2:13-cv-25114, at *6 (S.D.W. Va. Dec. 10, 2014) (Goodwin, J.) (ruling that negligence claim
failed where complaint did not allege duties apart from those required by West Virginia Consumer
Credit Protection Act); Hanshaw v. Wells Fargo Bank, N.A., No. 2:14-cv-28042, 2015 WL
5345439, at *19 (S.D.W. Va. Sept. 11, 2015) (Johnston, J.) (dismissing negligence claim where
borrower failed to plead allegations supporting a special relationship); Ranson v. Bank of Am.,
N.A., No. 3:12-5616, 2013 WL 1077093, at *6 (S.D.W. Va. Mar. 14, 2013) (Chambers, J.)
(concluding that no special relationship existed between lender and borrower). Plaintiff is therefore
entitled to summary judgment with respect to Defendants’ fraud and negligent misrepresentation
counterclaim.
4. Special Duty and Negligence
Defendants’ penultimate counterclaim is one for negligence, and is once again predicated
on the notion that a special extra-contractual relationship existed between Plaintiff and Defendants.
Am. Counterclaims, at ¶¶ 19–24. Specifically, they claim that Plaintiff “created a special duty with
Counter Claim Plaintiffs during the course of loan to ensure that the subject ‘Note’ was refinanced
and to disclose accurate and timely information.” Id. at ¶ 20. Plaintiff argues that no such special
relationship existed, and that it upheld any extra-contractual duties even if one did. Reply, at 13–
14.

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Given Defendants’ prior counterclaim for negligent misrepresentation, the Court’s analysis
on this issue is somewhat repetitive. Broadly speaking, a party “cannot maintain an action in tort
for an alleged breach of a contractual duty” under West Virginia law. Lockhart v. Airco Heating
& Cooling, 567 S.E.2d 619, 624 (W. Va. 2002) (footnote omitted). Instead, “[t]ort liability of the
parties to a contract arises from the breach of some positive legal duty imposed by law because of
the relationship of the parties, rather than a mere omission to perform a contract obligation.” Id.
“In the lender-borrower context, courts consider whether the lender has created such a ‘special
relationship’ by performing services not normally provided by lender to a borrower.” Warden,
2010 WL 3720128, at *9. “The possession of information unique to the lender can also indicate a
special relationship.” Tinsley, 4 F. Supp. 3d at 839.
As noted earlier, Defendants attempt to establish a special relationship by relying on
several key pieces of information. First, they point to their account’s transfer to a specialized unit
in Florida. Resp in Opp’n, at 17. Second, they point to the personal involvement of that unit’s
Team Leader. Id. Third, they claim that Plaintiff withheld information of “unique significance,”
including limitations on the availability of a DIL, the role of other departments in the approval
process, and a warning “not to cease working towards all of their options.” Id. at 17–18. None of
this is sufficient to actually create a special relationship. The fact that Defendants’ account was
transferred to a special unit—or that a relatively high-ranking employee was involved in managing
it—does not demonstrate that Plaintiff provided a service not normally provided by a lender to a
borrower. Indeed, the “service” provided by the specialized asset management unit falls well
within the parameters of a lender/borrower relationship—that is, attempting to remedy a default.4

There is a degree of irony in Defendants’ argument here as well. If every lender who
worked with borrowers to pursue mutually-beneficial solutions to default—even where such
solutions are ultimately determined to be unworkable—were subject to tort liability for their
4

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Finally, the allegedly “unique” information Defendants draw on is actually just material related to
their contractual relationship as lender and borrowers. Of course, this too is insufficient to create
a special relationship. As such, Plaintiff is entitled to summary judgment on Plaintiff’s negligence
and special duty counterclaim.
5. Promissory Estoppel
Defendants’ final counterclaim is styled as one for promissory estoppel, but overlaps
heavily in substance with a claim for equitable estoppel.5 Am. Counterclaims, at ¶¶ 25–31. The
thrust of their argument is that Plaintiff’s employees “promised to accept the property securing the
‘Note’ in exchange for pursuing judicial foreclosure.” Id. at ¶ 27. They argue that this promise
should estop Plaintiff from “asserting its Claims against the Defendants after having induced them
to detrimentally change their position in reliance thereon.” Resp. in Opp’n, at 18. Plaintiff argues

actions, they would be disincentivized from offering the types of remedies and services Defendants
appear to favor.
5
“Courts have recognized that ‘[t]here are several estoppel doctrines, including equitable
estoppel, judicial estoppel, promissory estoppel, estoppel by record, estoppel by deed, and
collateral estoppel.’” W. Va. Dept. of Transp., Div. of Highways v. Robertson, 618 S.E.2d 506, 512
(W. Va. 2005). Indeed, the very notion of “‘[e]stoppel’ is not a single coherent doctrine, but a
complex body of interrelated rules.” Id. (quoting Whitacre P’ship v. Biosignia, Inc., S.E.2d 870,
879 (N.C. 2004)). Here, Defendants’ counterclaims appear to more neatly fit the parameters of
equitable—rather than promissory—estoppel, as they seek to “prevent the Plaintiff from asserting
its Claims against the Defendants after having induced them to detrimentally change their position
in reliance thereon.” Resp. in Opp’n, at 18. This distinction is relevant only because Defendants
do not appear to seek enforcement of Plaintiff’s alleged promise in this counterclaim, but rather
estoppel of Plaintiff’s ability to exercise its rights under the original Note. Of course, for the
purposes of the substance of Defendants’ counterclaims, this represents more a legal distinction
than an actual difference; both doctrines involve related tests that include inquiries into detrimental
reliance and prejudice. Compare Stuart v. Lake Washington Realty Corp., 92 S.E.2d 891, 893, Syl.
Pt. 6 (W. Va. 1956) (equitable estoppel) with Everett v. Brown, 321 S.E.2d 685, 686, Syl. Pt. 3 (W.
Va. 1984) (promissory estoppel). In any event, the Court will consider Defendants’ counterclaims
under both doctrines. See Blackwood v. Berry Dunn, LLC, No. 2:18-cv-1216, 2019 WL 3323350,
at *3 (S.D.W. Va. July 24, 2019) (combining tests for both equitable and promissory estoppel).
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that Defendants are incorrect for several reasons, including that they did not rely on any statements
to their detriment. Reply, at 16.
As an initial matter, Plaintiff suggests that equitable estoppel is an affirmative defense
rather than an independent cause of action. This much is far from clear, as “[t]he Supreme Court
of Appeals of West Virginia has treated equitable estoppel as a viable cause of action.” Holtzapfel
v. Wells Fargo Bank, N.A., No. 2:12-00937, 2013 WL 1337283, at *5 (S.D.W. Va. Mar. 29, 2013)
(Copenhaver, J.) (citing Folio, 655 S.E.2d at 148; Cleaver v. Big Arm Bar & Grill, Inc., 502 S.E.2d
438, 443–45 (W. Va. 1998)); but see Warden, 2010 WL 3720128, at *7 (Bailey, J.) (reasoning that
“equitable estoppel has no place in the plaintiffs’ Complaint” where the plaintiffs had already
pleaded equitable estoppel as an affirmative defense). The Court is persuaded by Judge
Copenhaver’s reasoning, and will treat Defendants’ counterclaim as an independent cause of
action.
To succeed on an equitable estoppel claim in West Virginia,
[1] [t]here must exist a false representation or a concealment of material facts; [2]
it must have been made with knowledge, actual or constructive of the facts; [3] the
party to whom it was made must have been without knowledge or the means of
knowledge of the real facts; [4] it must have been made with the intention that it
should be acted on; and [5] the party to whom it was made must have relied on or
acted on it to his prejudice.
Corder, 2011 WL 289343, at *7 (brackets in original) (quoting Stuart v. Lake Washington Realty
Corp., 92 S.E.2d 891, 893, Syl. Pt. 6 (1956)). Similarly, promissory estoppel may apply where a
party makes “[a] promise which the promisor should reasonably expect to induce action or
forbearance on the part of the promisee or a third person and which does induce the action or
forbearance is enforceable . . . if injustice can be avoided only by enforcement of the promise.”
Everett v. Brown, 321 S.E.2d 685, 686, Syl. Pt. 3 (W. Va. 1984). Though the parties argue about
entangled issues under both frameworks, it is the requirement of detrimental reliance (or prejudice,
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depending on one’s preferred syntax and equitable doctrine) that is immediately fatal to
Defendants’ counterclaim.
To demonstrate an injury resulting from their reliance on Plaintiff’s purported offer of a
DIL, Defendants contend that they ceased pursuit of other alternative remedies available under the
Note.6 This may very well be true; having elected to pursue a DIL, it seems logical enough that
Defendants would stop pursuing refinancing or other potential avenues for relief. See Pl.’s Ex. E,
at 4–5. Yet Defendants have presented no evidence at all that the possibility of a DIL was ever
conditioned upon their decision to cease pursuit of further refinancing or another remedy. To the
contrary, Howard acknowledged that the option to refinance was never “taken off the table.” See
Pl.’s Ex. F, at 11. The fact that Defendants voluntarily chose to cease their pursuit of other options
without any prompting by Plaintiff is not prejudice, and so their counterclaim for estoppel must
fail. 7 Summary judgment in Plaintiff’s favor is therefore warranted on Defendants’ final
counterclaim.
B. Plaintiff’s Breach of Contract Claim
Having disposed of Defendants’ counterclaims, the Court turns to Plaintiff’s single claim
for breach of contract. Compl., ¶¶ 8–17. Plaintiff’s argument is straightforward: that the Note and
its subsequent modifications provided for a maturation date of January 5, 2018, that all outstanding

Notably, Defendants claim one of the alternatives they ceased pursuing was “voluntary”
submission “to the protections of Judicial Foreclosure.” Resp. in Opp’n, at 18–19.
7
The Court also emphasizes that the Note matured on January 5, 2018—twelve days
before the parties’ conference call. As of that date, Defendants were entitled to foreclose on the
property. If Defendants truly believed that Plaintiff had entirely foresworn its ability to foreclose
at any point in the future during the conference call, their reliance on this belief was unreasonable.
See, e.g., Stoler v. PennyMac Loan Servs., LLC, No. 2:18-cv-00988, 2019 WL 691406, at *6
(S.D.W. Va. Feb. 19, 2019) (reasoning that “common sense would not suggest[] that PennyMac
represented to the plaintiff that it would provide assistance and not pursue foreclosure in all
circumstances—even if the plaintiff became unable to make any payments”).
6

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debts became due on that day, and that the Note and the Meridian members’ Guaranty Agreements
are consequently in default for nonpayment. Id. Rather than respond directly to these arguments,
Defendants once again turn to their theory that the parties entered into a new contract on January
17, 2018 that “resulted in the Note being satisfied, and the Deed of Trust and Guarantees released
thereafter.” Resp. in Opp’n, at 11.
As noted earlier, “the elements of breach of contract” under West Virginia law “are (1) a
contract exists between the parties; (2) a defendant failed to comply with a term in the contract;
and (3) damage arose from the breach.” Wittenberg v. Wells Fargo Bank, N.A., 852 F. Supp. 2d
732, 749 (N.D.W. Va. 2012). As an initial matter, Defendants do not appear to dispute the second
and third elements of this test. This narrows the Court’s inquiry to a single question: whether the
terms of the Note, Deed of Trust, and Guaranty Agreement were still valid and enforceable at the
time of Defendants’ alleged (and ongoing) breach. And on this point, the Court’s earlier analysis
of Defendants’ breach of contract counterclaim is dispositive. Defendants simply have not
presented sufficient evidence to conclude that Plaintiff offered them anything more than the sort
of “bare-boned agreement[] to agree” that is not binding in West Virginia. Burbach Broad. Co. of
Del., 278 F.3d at 407. No reasonable trier of fact could look at the scintilla of evidence Defendants
have presented—which is comprised of subjective and conclusory statements by each of the
Meridian members attesting to their belief that Plaintiff had offered them a DIL—and conclude
that a new contract was formed to supplant the written terms of the parties’ original agreement.
Defendants’ only other evidence is comprised of emails exchanged between Plaintiff and the
Meridian members, but these are vague and often make points directly contrary to Defendants’
arguments. See, e.g., Defs.’ Ex. F, at 2 (confirming Andrews-Smith “wanted to make sure that
[Plaintiff’s litigation department] would pursue the deed in lieu if possible as it [is] what was

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previously discussed”). In none of these emails do Plaintiff’s employees represent that a binding
agreement, or even an agreement to agree, was reached. For that matter, neither do Defendants;
their own emails simply reference the parties’ earlier discussions rather than any substantive,
binding agreement. See id. (noting Harris’ confusion regarding “the change from what [the parties]
had discussed earlier” (emphasis added)). This is insufficient to demonstrate the existence of a
contract supplanting the parties’ earlier agreement, which Defendants breached by defaulting on
the terms of the Note on January 5, 2018. Plaintiff is thus entitled to summary judgment on its
breach of contract claim.
IV. CONCLUSION
For the foregoing reasons, Plaintiff’s Motion for Summary Judgment, ECF No. 76, is
GRANTED, in the principal sum of $614,341.73, plus accrued interest of $9,594.85 through
March 22, 2018, and late fees and other charges of $8,065.88, for a total of $632,002.46, together
with pre-and post-judgment interest after March 22, 2018 at a per annum rate equal to Plaintiff’s
Prime Rate, as announced from time to time, plus 5% until paid, and for Plaintiff’s reasonable
attorney’s fees and costs incurred in attempting to collect the indebtedness due under the Note and
Guaranty Agreement. The Court accordingly ORDERS this case removed from its docket.
The Court DIRECTS the Clerk to send a copy of this Memorandum Opinion and Order to
counsel of record and any unrepresented parties.
ENTER:

April 17, 2020

ROBERT C. CHAMBERS
UNITED STATES DISTRICT JUDGE

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