Pannell v. Green Tree Servicing, LLC

Filing 13

MEMORANDUM OPINION AND ORDER: After careful consideration and based on the findings herein, the Court does hereby ORDER that the Defendant Green Tree Servicing, LLC's 5 Partial Motion to Dismiss be GRANTED in part and DENIED in part. The Cour t ORDERS that that the claims contained in Count VII be DISMISSED WITHOUT PREJUDICE, and that the claims contained in Counts I, II, III, IV, V, and VI remain pending. The Court further ORDERS that punitive damages and/or cancellation of the underlying secured debt are prohibited remedies in this matter. Signed by Judge Irene C. Berger on 7/8/2014. (cc: attys; any unrepresented party) (msa)

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

ANGELA M. PANNELL,
Plaintiff,
v.

CIVIL ACTION NO. 5:14-cv-14198

GREEN TREE SERVICING, LLC,
Defendant.

MEMORANDUM OPINION AND ORDER
The Court has reviewed the Defendant, Green Tree Servicing, LLC’s Partial Motion to
Dismiss (Document 5), as well as the accompanying Memorandum in Support (Document 6), the
Plaintiff’s Response in Opposition (Document 8), and the Defendant’s Reply (Document 9).
After careful consideration of the parties’ written submissions and the entire record, the Court
finds that the Defendant’s motion should be granted in part and denied in part.
I.

FACTUAL AND PROCEDURAL HISTORY

This lawsuit arose out of the borrower-lender relationship between the Plaintiff, Angela M.
Pannell (Pannell), and the Defendant, Green Tree Servicing, LLC (Green Tree). Sometime in
March of 2008, Pannell purchased real estate located at 107 Goldcrest Drive, Beckley, West
Virginia, and executed a Security Note to finance the purchase.1 (See Document 1-1 at 7, ¶ 3.)
She made regular monthly payments until mid-2013, when she fell behind schedule, after which
she and Green Tree entered into a loan modification agreement. (Id. at ¶¶ 4-6.) She alleges that
1

The original lender later sold the note to Green Tree on an unknown date. (Id.)

she sent a certified check for $6,921.93 as “consideration for the loan modification agreement”
with Green Tree, but that on November 2, 2013, for “some unknown reason,” Green Tree returned
that check. (Id. at ¶¶ 7-8). After the check was returned, Pannell claims that Green Tree hired a
law firm and instituted eviction and then foreclosure proceedings, allegedly “breaching the loan
modification agreement,” as well as “illegally” charging her attorney’s fees for “its foreclosure
activities . . .” (Document 1-1 at 8, ¶¶ 9-11.) Public records indicate that the subject property
was sold in a foreclosure sale on October 29, 2013, to Federal National Mortgage Association.2
(Document 5-1 at 1-3.)
In response to the foreclosure sale, on February 28, 2014, Pannell filed a seven count
Complaint (Document 1-1 at 7-13) against Green Tree in the Circuit Court of Raleigh County,
West Virginia. The claims include: (1) Count I: Breach of Contract; (2) Count II: Breach of
Covenant of Good Faith and Fair Dealing; (3) Count III: Estoppel; (4) Count IV: West Virginia
Consumer Credit Protection Act (WVCCPA) Violations – Unlawful Debt Collection, pursuant to
West Virginia Code §§ 46A-2-124, 46A-2-125, 46A-2-127, 46A-2-128, 46A-5-105, and
46A-6-104; (5) Count Five: WVCCPA Violations – Misapplication of Payments, pursuant to W.
Va. Code § 46A-2-115(c); (6) Count Six: WVCCPA Violations – Failure to Accept Payments,
pursuant to W. Va. Code §46A-2-115(c); and (7) Count Seven: Negligence. (See Document 1-1
at 8-13.)

Pannell requests equitable relief, actual and punitive damages, appropriate civil

penalties for each violation of the WVCCPA, cancellation of the underlying debt, reasonable
attorney’s fees and costs of the litigation, as well as cancellation of the foreclosure proceedings.
(Id. at 6-7.)

2
The admissibility of the Deed of Trust and Trustee Deed contained in Exhibits A and C of Green Tree’s
partial motion to dismiss is addressed infra.

2

On or about April 7, 2014, Green Tree filed its Notice of Removal (Document 1) pursuant
to 28 U.S.C. §§ 1332(a), 1441, and 1446. (See Document 1 at 1.) To date, Pannell has not filed
a motion to remand or otherwise opposed removal. On April 14, 2014, Green Tree filed its
Partial Motion to Dismiss (Document 5), as well as an accompanying Memorandum in Support
(Document 6). 3 On April 28, 2014 Pannell filed her Response in Opposition (Pl.’s Resp.)
(Document 8), and Green Tree filed its Reply (Def.’s Rep.) (Document 9) on May 1, 2014.
II.

STANDARD OF REVIEW

A motion to dismiss filed pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the
legal sufficiency of a complaint. Francis v. Giacomelli, 588 F.3d 186, 192 (4th Cir. 2009);
Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008).

“[T]he legal sufficiency of a

complaint is measured by whether it meets the standard stated in Rule 8 [of the Federal Rules of
Civil Procedure] (providing general rules of pleading) . . . and Rule 12(b)(6) (requiring that a
complaint state a claim upon which relief can be granted.)” Id. Federal Rule of Civil Procedure
8(a)(2) requires that a pleading must contain “a short and plain statement of the claim showing that
the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2).
In reviewing a motion to dismiss under Rule 12(b)(6) for failure to state a claim, the Court
must “accept as true all of the factual allegations contained in the complaint.” Erikson v. Pardus,
551 U.S. 89, 93 (2007). The Court must also “draw[ ] all reasonable factual inferences from those
facts in the plaintiff’s favor.” Edwards v. City of Goldsboro, 178 F.3d 231, 244 (4th Cir. 1999).
However, statements of bare legal conclusions “are not entitled to the assumption of truth” and are

3
Green Tree attached the following as exhibits to its partial motion to dismiss: (1) a three page copy of the
“Trustee Deed,” dated November 4, 2013, (2) a seventeen page copy of the “Deed of Trust,” dated July 13, 2006, and
(3) a three page copy of the “Security Note,” dated July 13, 2006.

3

insufficient to state a claim. Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). Furthermore, the Court
need not “accept as true unwarranted inferences, unreasonable conclusions, or arguments.” E.
Shore Mkts., v. J.D. Assocs. Ltd. P’ship, 213 F.3d 175, 180 (4th Cir. 2000). “Threadbare recitals
of the elements of a cause of action, supported by mere conclusory statements, do not suffice…
[because courts] ‘are not bound to accept as true a legal conclusion couched as a factual
allegation.’” Iqbal, 556 U.S. at 678 (quoting Atlantic Corp. v. Twombly, 550 U.S. 544, 555
(2007)).
To survive a motion to dismiss, “a complaint must contain sufficient factual matter,
accepted as true, ‘to state a claim to relief that is plausible on its face.’” Iqbal, 556 U.S. at 678
(quoting Twombly, 550 U.S. at 570.) In other words, this “plausibility standard requires a
plaintiff to demonstrate more than ‘a sheer possibility that a defendant has acted unlawfully.’”
Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir. 2009) (quoting Twombly, 550 U.S. at 570.) In
the complaint, a plaintiff must “articulate facts, when accepted as true, that ‘show’ that the plaintiff
has stated a claim entitling him to relief.” Francis, 588 F.3d at 193 (quoting Twombly, 550 U.S.
at 557.) “Determining whether a complaint states [on its face] a plausible claim for relief [which
can survive a motion to dismiss] will ... be a context-specific task that requires the reviewing court
to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679.
III.

DISCUSSION

A. Initial Determinations
i.

Jurisdiction

Although the Plaintiff has not challenged removal, this Court must satisfy itself that it
possesses subject matter jurisdiction. Brickwood Contrs., Inc. v. Datanet Eng'g, Inc., 369 F.3d
4

385, 390 (4th Cir. 2004) (“questions of subject-matter jurisdiction may be raised at any point
during the proceedings and may (or, more precisely, must) be raised sua sponte by the court.”)
The record before the Court indicates that the Plaintiff, Pannell, is a resident of Raleigh County,
West Virginia, while the Defendant, Green Tree, is a Maryland corporation with its principal place
of business in Tampa, Florida.4 The price paid for the subject property at the foreclosure sale was
$174,596.61. (Document 1 at 4.) Because Pannell prays for relief in the form of rescinding5 the
foreclosure sale, the total jurisdictional amount is greater than $75,000. See, Moses Auto., Inc. v.
American Honda Motor Co., Inc., 581, F.Supp.2d 763, 767 (S.D. W.Va. 2007) (Chambers, J.)
(citation omitted.)

Upon consideration of Green Tree’s notice of removal and Plaintiff’s

complaint, the Court finds the existence of diversity jurisdiction, and thus, removal was proper and
this Court enjoys complete diversity jurisdiction pursuant to 28 U.S.C. § 1332.
ii.

Green Tree’s Exhibits

The next issue the Court must address is whether to consider the (1) original Security Note,
(2) Trustee Deed, and/or (3) Deed of Trust at the current stage of the litigation. Green Tree wants
the Court to “take judicial notice of [the Trustee Deed and Deed of Trust because they are]
recorded, public document[s].” (Document 6 at 2, fn 1.) Green Tree asserts that
although generally prohibited from reviewing matters outside of the
Complaint at the motion to dismiss stage, a court ‘may also consider

4
The Court notes that Pannell’s complaint asserts that Green Tree is an “Arizona corporation licensed and
doing business in Raleigh County, West Virginia.” (Document 1-1 at ¶ 2.) While this does not appear to be correct,
diversity of citizenship is present. Green Tree’s Notice of Removal (Document 1) states it is a wholly owned
subsidiary of Walter Investment Management Corp (Walter). (Document 1 at 3.) Pursuant to 28 U.S.C. §
1332(c)(1), a corporation’s citizenship is determined by its state of incorporation and the state where it maintains its
principal place of business. Walter is a Maryland corporation with its principal place of business in Tampa, Florida.
(See SEC Form 10-K; http://www.sec.gov/Archives/edgar/data/1040719/000119312514071098/d631621d10k.htm.)
(last visited June 30, 2014.)
5
It must also be noted that Pannell seeks “cancellation of the alleged debt” under Count VI. (Document 1-1 at
¶ 36.)

5

materials appearing in the public record, such as documents
recorded with the appropriate government office,’ including a deed
of trust and ‘other recorded documents regarding the foreclosure
sale . . .’
(Document 6 at 2, fn 1) (citing Holzapfel v. Wells Fargo Bank, N.A., 2013 WL 1337283, *2 (S.D.
W.Va. Mar. 29, 2013) (Copenhaver, J.) (unpublished) (citations omitted in original). Green Tree
also cites Katyle v. Penn Nat. Gaming, Inc., 637 F.3d 462 (4th Cir. 2011) for the proposition that
this Court may take notice of “‘documents incorporated into the complaint by reference, and
matters of which the court may take judicial notice.’” (Document 6 at 2, fn1.)
Pannell’s response does not directly discuss this issue, but instead implies that the Deed of
Trust and Trustee Deed should not be considered at this point in the pleadings, and that even if they
were, under West Virginia law the Court must construe the partial motion to dismiss as one for
summary judgment, and afford the parties adequate time for discovery. (Document 8 at 2-3.)
Green Tree responds that this matter is not currently in state court, but rather in federal court,
where more is required under federal law than the “notice pleading” required under West Virginia
law.6 (Document 9 at 2.)
With respect to the issue of the extraneous documents and whether the Court will take
judicial notice of the Deed of Trust and Trustee Deed, applicable Fourth Circuit case law and the
Federal Rules of Evidence guide the Court’s decision. The Deed of Trust and Trustee Deed are
official public records chronicled with the appropriate government office, the Clerk of the County
Commission of Raleigh County, West Virginia. Importantly, no party has challenged their
authenticity, though Pannell does argue that they are not relevant at this stage of the proceedings.
6
Regarding whether state or federal rules apply to the current dispute, Rule 81 of the Federal Rules of Civil
Procedure mandates that “these rules apply to a civil action after it is removed from a state court.” See Fed. R. Civ. P.
81(c)(1). (emphasis added.) Thus, federal, and not state law, controls here and offers the relevant rules of civil
procedure.

6

However, through “resort to sources whose accuracy cannot reasonably be questioned,” the Court
takes judicial notice of the Deed of Trust and Trustee Deed attached to Green Tree’s motion for
dismissal, and will consider them. Katyle 637 F.3d at 466; see also Hall v. Virginia, 385 F.3d
421, 424 (4th Cir. 2004).
Green Tree also points out that the Security Note is integral to Pannell’s complaint because
she relied on it to frame the counts throughout, even though it was not attached. Again, Pannell
does not squarely challenge this contention. It is undisputed that the Security Note attached as
Exhibit B to Green Tree’s partial motion to dismiss is authentic. Further, the Security Note is the
baseline document that frames the complaint’s allegations and is incorporated by reference
throughout. Thus, it is integral to Pannell’s complaint and the Court may consider it in analyzing
this Rule 12(b)(6) motion. See Blankenship v. Manchin, 471 F.3d 523, 526 (4th Cir. 2006). The
Court will now turn to the merits of Green Tree’s arguments for dismissal.
B. Merits
Green Tree first argues that part of Count I and Counts II, IV and V fail to satisfy the
pleading standard set forth in Iqbal and Twombly, as well as Rule 8 of the Federal Rules of Civil
Procedure. (Document 6 at 5.) Green Tree points out that Pannell “relies solely on legal
conclusions that she attempts to masquerade as facts.” (Id.) It argues that Count I fails because
“there are no facts to support the breach of contract claim relating to misrepresentation of the
amount due for reinstatement.”7 (Id. at 5.) Likewise, Green Tree claims that Count II fails as a
matter of law because Pannell failed to allege facts regarding: “(a) the date(s) and time(s) that
7
Green Tree also argues that Count One fails to state a claim upon which relief can be granted because under
applicable case law, discretionary actions cannot support a breach of contract action. (Document 6 at 12.) Put
another way, “West Virginia does not recognize a stand-alone cause of action for failure to exercise contractual
discretion in good faith.” (Id.) (citing Wittenberg v. Wells Fargo, N.A., 82 F.Supp.2d 731, 750 (N.D. W.Va. 2012)
(internal citation omitted).

7

Green Tree ‘attempted to collect a debt not owed from Plaintiff;’ (b) the dates or amounts of any
misapplied payments; or (c) the dates and amounts of payments purportedly placed in suspense.”
(Id. at 6.) Green Tree also claims that Pannell did not “provide facts showing how the purported
misapplication and/or placement in a suspense account were contrary to the terms of the contract
between the parties.” (Id.)
With respect to Count IV, Green Tree again emphasizes that Pannell’s pleadings are
deficient because she uses the same factual basis for Counts I and II as Count IV, and thus, “these
statements are insufficient to meet the Rule 8 pleading standard.”8 (Document 6 at 6.) Simply
put, Green Tree alleges that Pannell’s pleadings cannot support a claim for any violation of
WVCCPA §§ 46A-2-124, 46A-2-125, 46A-2-127, 46A-2-128, and 46A-6-104 because she has not
pled any facts that indicate the occurrence of any of the activities prohibited by those sections.
(Id. at 6-11.) Green Tree challenges the pleadings underlying Count V because there are “no
factual allegations regarding the dates or amounts of the alleged payments that were made,” or the
“misapplied payments” and “payments purportedly placed in suspense.” (Id. at 11.) In totem,
Green Tree maintains that Pannell has “failed to provide any factual support for her Complaint.”
(Id.) (emphasis in original.)
Green Tree also claims that Counts IV, V, and VI fail to state a claim upon which relief
can be granted to the extent that Pannell is claiming punitive damages for violations of the
WVCCPA because they are unavailable under the WVCCPA. (Document 6 at 14-15.) It also
argues that Count VI fails to state a claim pursuant to WVCCPA § 46A-2-115(c) because the
8
Green Tree also argues that Count IV fails to state a claim under the WVCCPA to the extent that Pannell
seeks cancellation of the underlying debt because the debt at issue here is secured and not subject to the cancellation
provision found in W. Va. Code § 46A-5-105, as opposed to an unsecured debt which can be subject to cancellation.
(Document 6 at 14.) It cites Quicken Loans, Inc. v. Brown, 230 W. Va. 306 (2012) as well as Travis v. JP Morgan
Chase Bank, N.A., 2012 WL 3193341 (N.D. W. Va. Aug. 6, 2012) for support. (See Document 6 at 14.)

8

check for $6,921.93 was returned on November 2, 2013, after the property had been sold at the
October 29, 2013 foreclosure sale. Green Tree claims it “was well within its rights to return the
payment” because the reinstatement period under § 46A-2-115(b) had expired.
Finally, Green Tree argues that Count VII fails as a matter of law because there is no
special relationship between Pannell and Green Tree that would support a claim for negligence.
(Document 6 at 16-17.) It argues that under West Virginia law, “‘a common law claim must exist
separate from the WVCCPA claim.’” (Id. at 16) (citing Blackburn v. Consumer Portfolio Servs.,
Inc., 2012 WL 1679796, *2 (S.D. W.Va. May 14, 2012)) (Goodwin, J.) (unreported). Treating as
true Pannell’s claim that Green Tree “owed a duty to Plaintiff to provide her with accurate
information about the status of her loan account and to provide accurate notice of her payment
due,” Green Tree points out that these actions are essentially a “function of its normal service in
the lender-borrower relationship,” and consequently, cannot form the basis of a special
relationship. (Id. at 17.)
As mentioned above, while Pannell did file a timely response in opposition to Green Tree’s
partial motion to dismiss, she devotes the vast majority of her pleading to citing state case law
relevant to the standards for analyzing dismissal and summary judgment motions. (Document 8
at 1-5.) She then offers a one sentence response in her “Argument” section, “[a]s the Complaint is
sufficient and there are genuine issues of material fact to be tried and inquiries concerning the
facts, Plaintiff should prevail on Defendant’s Partial Motion to Dismiss or the summary judgment
standard.” (Id. at 5.)
Green Tree’s reply largely mirrors the memorandum in support of its partial motion to
dismiss, emphasizing that the federal rules of civil procedure control the instant dispute and that

9

pursuant to Iqbal and Twombly, Pannell has simply failed to provide facts to support her
allegations. (Document 9 at 1-3, 5-6.) Green Tree further declares that incorporating the
Security Note, Deed of Trust, and Trustee Deed does not transform the partial motion to dismiss
into a dispositive motion. (Id. at 4-5.)
i.

Counts I and II – Breach of Contract and Breach of Good Faith and Fair Dealing

The Court finds that Pannell has adequately pleaded Counts I and II to survive Green
Tree’s partial motion to dismiss. “To avoid dismissal of a breach of contract claim under Rule
12(b)(6), West Virginia law requires: ‘the existence of a valid, enforceable contract; that the
plaintiff has performed under the contract; that the defendant has breached or violated its duties or
obligations under the contract; and that the plaintiff has been injured as a result.’” Ranson v. Bank
of America, N.A., 2013 WL 1077093 *3 (S.D. W.Va. 2013) (Chambers, C.J.) (unpublished) (citing
Executive Risk Indem., Inc. v. Charleston Area Med. Ctr., Inc., 681 F.Supp.2d 694, 714 (S.D.
W.Va. 2009)) (Goodwin, J.) (internal citations omitted.)
Treating her allegations as true, Pannell has indicated that she and Green Tree agreed to
modify her original loan “sometime in September/October of 2013,” and that despite providing a
certified check for $6,921.93, “the Defendant returned her check . . . breaching the loan
modification agreement.” Importantly, while “West Virginia does not recognize a stand-alone
cause of action for failure to exercise contractual discretion in good faith,” here, the discretion had
allegedly already been exercised. Pannell clearly alleges that Green Tree exercised its discretion
by agreeing to a loan modification, but breached the duty of good faith and fair dealing by refusing
to honor the modification agreement already entered into.

10

Pannell has alleged that Green Tree expressly violated the loan modification agreement
when it returned her monies and failed to follow through on its modification promise (Count I).
Pannell has also alleged that Green Tree violated the standard of good faith and fair dealing under
West Virginia law by leading her to believe that the loan was being modified, when in fact Green
Tree was allegedly turning the gears of foreclosure (Count II) and not properly applying payments
to her account. Count II builds upon Count I, and if the Court is to treat as true the allegations
contained in paragraphs fifteen (15) through twenty (20) of the complaint – as it must – then
Pannell has adequately pleaded a breach of contract and a violation of the duty of good faith and
fair dealing, or ‘claim[s] to relief that [are] plausible on [their] face.’” Iqbal, 556 U.S. at 678
(quoting Twombly, 550 U.S. at 570.) Pannell plainly reincorporates and restates the previous
paragraphs at the beginning of each count to further flesh out the factual underpinnings of her
claims. Viewing the Counts in isolation as Green Tree wants is inappropriate and disregards the
basic principles of pleading. Accordingly, the Court finds that Green Tree is not entitled to
dismissal of Counts I and II of Pannell’s complaint.
ii.

Count IV – Unlawful Debt Collection

The Court finds that Green Tree’s motion to dismiss for failure to state a claim should
likewise be denied for Count IV. Count IV alleges that Green Tree violated West Virginia Code
§§ 46A-2-124, 46A-2-125, 46A-2-127, 46A-2-128, 46A-5-105, and 46A-6-104.

Section

46A-2-124 states, in pertinent part, that “[n]o debt collector shall collect or attempt to collect any
money alleged to be due and owing by means of any threat, coercion, or attempt to coerce.” W.
Va. Code § 46A-2-124. Section 46A-2-125 decrees, in pertinent part, that “[n]o debt collector
shall unreasonably oppress or abuse any person in connection with the collection of or attempt to

11

collect any claim alleged to be due and owing by that person or another.” W. Va. Code §
46A-2-125. Section 46A-2-127 mandates, 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.

Section

46A-2-128 dictates, 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.

Section

46A-6-104 states that “[u]nfair methods of competition and unfair or deceptive acts or practices in
the conduct of any trade or commerce are hereby declared unlawful.” W. Va. Code § 46A-6-104.
Pannell alleges that Green Tree violated the above WVCCPA sections when it
“misrepresented in correspondence . . . that [she] was in arrears. This statement is false.”
(Document 1-1 at ¶ 25.) Pannell then plainly alleges that
Green Tree’s acts in attempting to collect an alleged debt that
[Pannell] did not owe constitutes fraudulent, deceptive, or
misleading representations . . . oppression and abuse . . . unfair or
unconscionable means . . . illegal threats or coercion . . . unfair or
deceptive acts or practices in the conduct of trade or commerce . . .
and willful violations [of the pertinent sections of the WVCCPA].
(Id. at ¶ 26.) Importantly, WVCCPA §§ 46A-2-124, 46A-2-125, 46A-2-127, and 46A-2-128
expressly declare that, “[w]ithout limiting the general application of the foregoing, the following
conduct is deemed to violate this section” and each section goes on to list certain prohibited
activities. See, generally, WVCCPA § 46A-2-124. (emphasis added.) Thus, Green Tree’s
contention that dismissal is appropriate because Pannell did not explicitly allege facts to support
the finding of any of the specific prohibited activities of the respective WVCCPA sections is
unsupported by the very language of the WVCCPA. The Court’s review of Pannell’s allegations,
including incorporating the preceding paragraphs, reveals that Count IV contains allegations that
12

state a claim to relief that is plausible on its face. Therefore, Green Tree’s request for dismissal as
to Count IV is denied.
iii.

Counts V and VI – Misapplication of Payments and Failure to Accept Payments

The Court finds that Counts V and VI should not be dismissed for failure to state a claim.
W. Va. Code § 46A-2-115(c) states, in relevant part,
[a]ll amounts paid to a creditor arising out of any consumer credit
sale or consumer loan shall be credited upon receipt against
payments due: Provided, That amounts received and applied during
a cure period will not result in a duty to provide a new notice of right
to cure; and provided further that partial amounts received during
the reinstatement period set forth in subsection (b) of this section do
not create an automatic duty to reinstate and may be returned by the
creditor. Default charges shall be accounted for separately; those set
forth in subsection (b) arising during such a reinstatement period
may be added to principal.
§ 46A-2-115(c) (emphasis added). Clearly, Pannell reincorporates the preceding paragraphs and
allegations, and then alleges that “[Green Tree] placed payments made by Plaintiff during the loan
modification application process in a suspense account rather than properly posting payments to
the amount due or owing in violation of [§] 46A-2-115(c).” (Document 1-1 at ¶ 30.) Pannell
further alleges that “[Green Tree] refused to accept payments made by Plaintiff during and after
the loan modification application process rather than properly posting payments to the amount due
or owing in violation of [§] 46A-2-115(c).” (Id. at ¶ 34.) Accepting the allegations in the
complaint to be true, Pannell clearly alleges that after entering into a loan modification agreement
and providing a certified check, Green Tree did not honor its agreement but instead: (1) posted the
amounts in another suspense account and (2) failed to accept her payment(s). It necessarily
follows that she has clearly pleaded facts to support a claim for misapplying payments and failure
to accept payments in violation of WVCCPA § 46A-2-115(c).
13

While Green Tree complains that it “was well within its rights to return the payment” under
§ 46A-2-115(c) and (d) because the property was sold on October 29, 2013, this argument is
unavailing at this stage of the litigation. According to the complaint, Green Tree and Pannell
contracted to modify the loan and Pannell tendered a check for $6,921.93, but Green Tree
unilaterally returned the money after foreclosure proceedings had run their course. Although the
Court recognizes that per the language of 115(c), accepting payment(s) during a reinstatement
period does not create a duty to automatically reinstate, and payments may be returned by the
creditor, negotiating and agreeing to a loan modification with the borrower, outside of the
parameters of the Security Note, may create such a duty. Drawing reasonable inferences from the
alleged facts in the Plaintiff’s favor reveals that the very point of the modification agreement was
to help Pannell salvage her payment schedule on the secured loan to avoid foreclosure. Thus,
assuming the allegations of the complaint to be true, Green Tree is not entitled to dismissal for
failure to state a claim for Counts V and VI.
iv.

Count VII – Negligence

The same cannot be said for Count VII, however, and the Court finds that Green Tree is
entitled to dismissal for failure to state a claim upon which relief can be granted. Green Tree
contends that West Virginia law requires more than what the Plaintiff alleges here and the Court
agrees. It is black letter law that the traditional elements of negligence are duty, breach, causation
and damages. “The determination of whether a defendant in a particular case owes a duty to the
plaintiff is not a factual question for the jury; rather the determination of whether a plaintiff is
owed a duty of care by a defendant must be rendered by the court as a matter of law.” Syl. Pt. 5,
Aikens v. Debow, 208 W.Va. 486, 541 S.E.2d 576 (2000). This inquiry is somewhat tempered,

14

however, because “under West Virginia law, a plaintiff ‘cannot maintain an action in tort for an
alleged breach of a contractual duty,’” without some “‘positive legal duty imposed by law because
of the special relationship of the parties, rather than a mere omission to perform a contract
obligation.’” Ranson, 2013 WL 1077093 at *5 (internal emphasis omitted) (citing Lockhart v.
Airco Heating & Cooling, 567 S.E.2d 619, 624 (W. Va. 2002) (internal footnote omitted).
Here, Pannell alleges that Green Tree committed negligence when it breached its duty to
“provide her with accurate information about the status of her loan account and to provide accurate
notice of her payment due,” by “misrepresent[ing] amounts due” and beginning foreclosure
proceedings. (Document 1-1 at ¶¶ 38-39.) The Court finds that nothing in Pannell’s allegations
remotely approaches the creation or existence of a special relationship between the parties. “To
the contrary, Plaintiff's negligence claim in this case rests merely on the fact Defendant had a duty
to provide [her] accurate information about the loan and failed to do so.” Ranson, 2013 WL
1077093 at *6. Thus, Green Tree is entitled to dismissal of Count VII for failure to state a claim
upon which relief can be granted.
v.

Punitive Damages and Cancellation of the Debt

Finally, the Court must determine the appropriateness of some of Pannell’s requested
relief. With respect to Pannell’s prayer for punitive damages for willful violations of Counts IV,
V, and VI, the Court finds that punitive damages are not recoverable under the WVCCPA. “[T]he
penalty provision of the WVCCPA has been interpreted to preclude an award of punitive
damages.”

Tucker v. Navy Fed. Credit Union, 2011 WL 6219852, *9 (N.D. W.V. 2011)

(unpublished) (citing One Valley Bank of Oak Hill, Inc. v. Bolen, 188 W.Va. 687, 692, 425 S.E.2d

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829, 834 (1992)). Accordingly, to the extent that Counts IV, V, and VI seek punitive damages,
they are disallowed.
Further, with respect to Pannell’s prayer for cancellation of the underlying debt per §
46A-5-105, the Court finds that cancellation is not possible given the allegations in the case and
the plain language of § 46A-5-105. Section 46A-5-105 states that, “[i]f a creditor has willfully
violated the provisions of this chapter applying to illegal, fraudulent, or unconscionable conduct or
any prohibited practice,” then “the court may cancel the debt when the debt is not secured by a
security interest.” W. Va. Code § 46A-5-105. (emphasis added.) Here, Pannell’s complaint
alleges that she “executed a note for security instrument securing the purchase of real estate . . .”
(Document 1-1 at ¶ 3.) Treating as true the allegations contained in the complaint, Pannell’s debt
is safeguarded by a security instrument, and per the WVCCPA, she cannot seek cancellation of the
underlying secured debt. Thus, to the extent that Count IV seeks cancellation of the debt, such
relief is prohibited.
CONCLUSION
WHEREFORE, after careful consideration and based on the findings herein, the Court
does hereby ORDER that the Defendant Green Tree Servicing, LLC’s Partial Motion to Dismiss
(Document 5) be GRANTED in part and DENIED in part. The Court ORDERS that the
claims contained in Count VII be DISMISSED WITHOUT PREJUDICE, and that the claims
contained in Counts I, II, III, IV, V, and VI remain pending. The Court further ORDERS that
punitive damages and/or cancellation of the underlying secured debt are prohibited remedies in
this matter.

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

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July 8, 2014