McHUGH, J.:
Quicken Loans, Inc. ("Quicken"), a Michigan corporation and a large national mortgage
Upon careful review of the briefs and arguments of the parties,
Plaintiff and her mother purchased the subject property, a duplex, in 1988, where they or a member of their family have resided ever since.
Upon the death of her mother in 2002, Plaintiff became solely responsible for paying all of the property's utilities, maintenance, taxes and insurance premiums thereon. When these financial obligations, among others, became difficult to meet, Plaintiff refinanced the subject property in August 2003, for $40,518; in January 2004, for $63,961; and in May 2005, for $67,348. She also took out four separate loans for $1,500, $3,060, $5,000 and $7,650, respectively, with interest rates ranging from 24.99% to 31.00%.
In May of 2006, in an effort to consolidate her debt and lower her monthly payments, Plaintiff completed a basic on-line loan application after receiving a "pop-up" advertisement on her computer.
Pursuant to its routine practice, TSI put out an automated (electronic) appraisal request order, which was shared on the internet with independent-contractor appraisers. For reasons not entirely clear from the record, TSI's appraisal request order included an estimated value for the subject property of $262,500.
Based upon his appraisal of the subject property, Mr. Guida valued it at $181,700. Quicken reviewed Mr. Guida's appraisal and approved it on May 31, 2006. The trial court concluded that not only was Mr. Guida's appraisal grossly inflated because the true fair market value of the subject property was actually $46,000, but also that Quicken's appraisal review was negligently conducted because it "ignored obvious flaws" in Mr. Guida's appraisal and "violated its own appraisal review standards and the Uniform Standards of Professional Appraisal Practice."
Prior to approving Mr. Guida's appraisal, Quicken presented Plaintiff with a loan for $112,850, with monthly payments that were higher than what she had expected based upon the initial "pop up" advertisement. For this reason, Plaintiff became hesitant to proceed with the loan process. As a result, Plaintiff did not return telephone calls from
(Footnote added).
Even though Plaintiff had already told Quicken she did not wish to proceed with the loan, Quicken did not give up efforts to persuade her otherwise. According to Ms. Johnson's own written notation, on June 1, 2006, the day after Quicken approved Mr. Guida's $181,700 appraisal of the property, she attempted to contact Plaintiff:
Quicken's records further indicate that Ms. Johnson tried to contact Plaintiff again on June 2 and June 5, 2006; following the latter attempt, Ms. Johnson noted the following: "have called and left numerous messages/client is not responding to me/if I don't hear back by Tues. I will have to kill it and we just charge her for the appraisal."
Ultimately, Plaintiff agreed to the loan on June 6, 2006, as indicated in the following notation by Ms. Johnson: "Client finally reached me/she was being swayed by a broker and that's why she wanted to back out/client very timid
For her part, Plaintiff testified that when she conveyed her hesitation to consummate the loan to Ms. Johnson,
(A925) Indeed, Plaintiff testified that she believed and trusted Ms. Johnson and that the promise to refinance "was one of the main factors in my decision to do it.... because I knew I couldn't keep up that type of payment for a long period of time, especially with a decreased income."
As indicated above, the loan originally presented to Plaintiff, and for which she received a written "Good Faith Estimate," was in the amount of $112,850. The loan was an interest-only loan for the first three years and also provided for Plaintiff to purchase 2.5 "loan discount points"
In contrast, the loan at issue herein was for the much larger amount of $144,800, and was otherwise quite different from the original
One or two days before the loan was scheduled to close, a packet consisting of eighty-one pages of closing documents was delivered to Plaintiff at her home. According to Plaintiff, she did not open the packet prior to the closing. The closing occurred at Plaintiff's home (the subject property) on July 7, 2006, and was attended only by Plaintiff and a notary public unaffiliated with Quicken. According to Plaintiff, when the notary arrived, he opened the packet and told her to sign the documents having red "sign here" stickers already on them. Plaintiff testified that the notary "basically was waiting for me to sign them, and then he would stamp some of them[;]" that she attempted to ask him questions about what some of the documents meant, but that he said she would have to speak with someone at Quicken because he did not know the answers; and that the process was all "kind of hurried and rushed when we went through the paperwork." Indeed, the loan closing took approximately fifteen minutes to complete. Plaintiff admitted that she did not closely review the closing documents in any detail.
As discussed in more detail below, from this Court's review of the record, it appears that the closing documents disclosed that there was "a large balloon payment." However, the actual and precise amount of the balloon payment was not otherwise disclosed therein. Plaintiff admitted that she saw the term "balloon payment" during the closing. She testified that
Additionally, as set forth in the HUD Settlement Statement document also presented to Plaintiff for her signature at closing, Quicken ostensibly charged Plaintiff four "loan discount points" amounting to $5,792. However, at the time Plaintiff's loan was offered, the maximum number of loan discount points available on a loan with a 9.25% initial interest rate such as hers was 2.5 points. Thus, although Quicken represented to Plaintiff that she purchased four loan discount points,
Plaintiff presented evidence at trial that, under Quicken's own policies, Ms. Johnson had the discretion to charge the additional $2,100 fee, from which she received a share:
It is Plaintiff's contention that Ms. Johnson charged her such a "premium" in the amount of $2,100 but falsely represented to her that she was receiving a corresponding reduction in the interest rate on her loan.
Quicken argued, however, that regardless of how the fee was represented to Plaintiff on the closing documents, Quicken would still have charged Plaintiff the excess fee up front because Plaintiff had become delinquent on her existing mortgage with CitiFinancial and as a result, became a greater credit risk to Quicken. Quicken's explanation notwithstanding, the circuit court found that "[t]he manipulation of the increase of 1.5 percent `discount points' misrepresented to [Plaintiff] that her interest rate would be reduced."
With the loan proceeds, Plaintiff paid off her previous mortgage and consolidated debt; received $40,768.78, with which she purchased a new vehicle (for $28,536.90)
Thereafter, in January 2007, Plaintiff was required to undergo surgery and, due to complications, underwent a subsequent emergency surgery. As a result, Plaintiff was unable to work for a time and ultimately, defaulted on the loan. Her repeated requests of Quicken, both by telephone and in writing, to work out a payment arrangement in light of her situation were refused.
According to Plaintiff, in August 2007, she provided statutory notice of a claim and afforded Quicken a right to cure under West Virginia Code § 46A-6-106(b) (2005) (Repl. Vol.2006). However, no cure offer was made and Quicken began foreclosure proceedings.
Plaintiff filed suit against Quicken, Appraisals Unlimited, Inc., appraiser Dewey Guida,
The circuit court further concluded that the Note and Deed of Trust were unenforceable as a matter of law; awarded restitution of payments made by Plaintiff to Quicken in the amount of $17,476.72; ordered Quicken and its successors and assigns to take action consistent with the court's order to reflect the termination of the Deed of Trust; and enjoined them from attempting to collect any future payments under the loan. Notably, the circuit court did not order Plaintiff to repay the loan principal thereby effectively canceling Plaintiff's loan obligation.
A subsequent trial was conducted on September 1, 2010, on the issue of attorneys fees and punitive damages. Upon the conclusion thereof, the circuit court entered an order on February 17, 2011, in which it awarded Plaintiff attorneys fees and litigation costs in the total amount of $596,199.89, and punitive damages in the amount of $2,168,868.75.
Quicken's post-trial Motion for Amendment of Findings of Fact and/or Conclusions of Law and Motion for Offset of Judgment Pursuant to Settlement of Defendant Dewey V. Guida were summarily denied by the circuit court's order entered May 2, 2011. This appeal followed.
It is well settled that
Syl. pt. 1, Public Citizen, Inc. v. First Nat. Bank in Fairmont, 198 W.Va. 329, 480 S.E.2d 538 (1996).
In its first assignment of error, Quicken asserts that the circuit court erred in finding that Plaintiff proved, by clear and convincing evidence, that Quicken fraudulently induced Plaintiff to enter into the loan. The circuit court concluded that Quicken committed fraud by not only failing to disclose the enormous balloon payment prior to the closing but also by failing to properly disclose it at the closing; by falsely promising Plaintiff that it would refinance her loan in three to four months after closing; and by misrepresenting to her the extent to which she was buying down the interest rate on the loan.
This Court has consistently described the elements of fraud as follows:
Syl. Pt. 5, Folio v. City of Clarksburg, 221 W.Va. 397, 655 S.E.2d 143 (2007). Furthermore, allegations of fraud must be established by clear and convincing evidence. Syl. Pt. 5, Tri-State Asphalt Products, Inc. v. McDonough Co., 182 W.Va. 757, 391 S.E.2d 907 (1990).
The evidence at trial revealed that the loan as originally presented to Plaintiff (for $112,850) did not include a balloon payment of any kind, as indicated in the written Good Faith Estimate provided to Plaintiff. In sharp contrast, the loan at issue included an enormous balloon payment. However, Quicken failed to provide Plaintiff with a written Good Faith Estimate for the revised loan, which would have set forth this very critical loan term for Plaintiff to consider.
Moreover, as the circuit court found, the $107,015.71 balloon payment was not conspicuously disclosed on the note as required by West Virginia law. This finding is undisputed by Quicken. West Virginia Code § 46A-2-105 very clearly requires that
Id. See Mallory v. Mortgage America, 67 F.Supp.2d 601, 608 (S.D.W.Va.1999) ("With respect to § 46A-2-105(2), the legislature used the word `shall,' and there being no language within the statute indicating an intent to the contrary, the court construes the statute as mandatory ... [and] strict compliance is required.").
It is Quicken's contention that, despite its failure to comply with the foregoing statutory requirement, the balloon payment was described "in detail" in the following closing documents delivered to Plaintiff prior to closing: the "3/6 Adjustable Rate/Balloon Mortgage Disclosure," the "Adjustable Rate Rider," and the "Adjustable Rate: Balloon Note."
This Court's review of the "3/6 Adjustable Rate/Balloon Mortgage Disclosure" reveals that the extent of the "Balloon Payment" section in that document is as follows:
The "Adjustable Rate Rider" and the "Adjustable Rate Balloon Note" documents are even less descriptive. Both of those documents include language that is very similar to that which was set forth in the "3/6 Adjustable Rate/Balloon Mortgage Disclosure" document, above, but neither describes the balloon payment due and payable as "large." Rather, the "Adjustable Rate Rider" and the "Adjustable Rate Balloon Note" documents provide only that "THERE WILL BE DUE AND PAYABLE ON THE MATURITY
Not surprisingly, the foregoing documents are, under any standard, very complicated and include sophisticated terms and concepts that require specialized knowledge. Despite the complex nature of the closing documents, Quicken did not send a representative to the closing who could answer Plaintiff's questions or point out to her that the loan has a balloon payment which amounted to $107,015.71. To the contrary, Quicken's position with regard to its failure to disclose the $107,015.71 balloon payment was summed up during oral argument before this Court when its counsel maintained that the amount of the balloon payment was a "math product," thereby suggesting Plaintiff should have simply calculated the amount of the balloon payment on her own.
Quicken's arguments notwithstanding, the mandatory statutory requirement that the loan agreement "contain the language essentially as set out in the statute and in the conspicuous manner illustrated" therein serves the very reasonable and important purpose of advising borrowers in no uncertain terms that, at some point during the course of the loan, a balloon payment of a precise amount will be due and owing to the lender on an equally precise date. Mallory, 67 F.Supp.2d at 609. The Court in Mallory specified that West Virginia Code § 46A-2-105(2) "was designed to bring home to the borrower the extraordinary payment that must some day be met." 67 F.Supp.2d at 609.
In light of the foregoing, we now proceed to determine if the circuit court properly concluded that Quicken's above-described conduct with regard to its failure to properly disclose the enormous balloon payment due on the loan was an act of fraud. This Court has recognized that "[f]raudulent concealment involves the concealment of facts by one with knowledge or the means of knowledge, and a duty to disclose, coupled with an intention to mislead." Trafalgar House Constr. v. ZMM, Inc., 211 W.Va. 578, 584, 567 S.E.2d 294, 300 (2002) (citing Silva v. Stevens, 156 Vt. 94, 589 A.2d 852, 857 (1991)). Thus, this Court has recognized that "`"an action for fraud can arise by the concealment of truth."'" Smith v. First Community Bancshares, Inc., 212 W.Va. 809, 822, 575 S.E.2d 419, 432 (2002) (internal citations omitted). Indeed, "`[f]raud is the concealment of the truth just as much as it is the utterance of a falsehood.' Frazer v. Brewer, 52 W.Va. 306, 310, 43 S.E. 110, 111 (1902)." Id.
It is undisputed that the reason Plaintiff sought to refinance was to consolidate her debt and reduce her monthly payments — in short, to save money. Concealing such an enormous balloon payment from Plaintiff was designed to mislead her and to induce her into entering into the loan and, in fact, that is precisely what occurred. With regard to Plaintiff's reliance on Quicken's concealment of the exorbitant balloon payment amount, "`[i]t is not necessary that the fraudulent [concealment] ... should be the sole consideration or inducement moving the plaintiff. If the [concealment] contributed to the formation of the conclusion in the plaintiff's mind, that is enough[.]'" Trafalgar House, 211 W.Va. at 585, 567 S.E.2d at 301 (quoting syl. pt. 3, Horton v. Tyree, 104 W.Va. 238,
As previously indicated, Plaintiff testified that upon seeing the term "balloon payment" in the loan documents, she became "concerned." She further testified that she did not know exactly what the term meant. Indeed, as already established, the amount of the balloon payment was fraudulently concealed. Plaintiff testified that she knew she would be unable to keep up with the monthly payments for a long period of time especially because the child support payments she was then receiving would soon be ending. According to Plaintiff, she went forward with the loan because Quicken promised that she could refinance in three to four months after closing. Though Quicken denies that it made such a promise to refinance, the evidence at trial revealed that precisely three months after the closing — after she had timely made her September and October mortgage payments — Plaintiff made repeated attempts to contact Quicken. Plaintiff's attempts to contact Quicken at that time are clearly consistent with Quicken's promise to refinance three to four months after closing. The circuit court concluded that her attempts to contact Quicken were for the purpose of beginning the refinancing process.
Quicken's fraudulent misrepresentation to Plaintiff that it would refinance the loan in three to four months was clearly material because, absent that promise, Plaintiff would not have otherwise entered into the loan.
It is undisputed that Quicken charged Plaintiff $5,792 for four loan discount points to buy down the interest rate on the loan. It is further undisputed that, in fact, Plaintiff purchased only 2.5 points because, at the time the loan was offered, 2.5 points were the maximum number of loan discount points available on a loan such as Plaintiff's. Thus, of the $5,792 Plaintiff paid Quicken to ostensibly buy down her interest rate, $2,100 of that amount (or 1.5 points worth) resulted in no such benefit to her. In reality, the facts established in the circuit court below indicated that Quicken charged Plaintiff a $2,100 "premium," which was an additional fee Quicken mortgage bankers were permitted, in their discretion, to charge clients.
This Court's review of the record indicates that Quicken misrepresented to Plaintiff the extent to which she was buying down her interest rate. It charged her $2,100 for a benefit she never received. Quicken's claim that it would have charged Plaintiff this extra fee anyway based upon the fact that she was a high credit risk in no way legitimizes its actions, which this Court finds to be distasteful and opportunistic. Nevertheless, an action in fraud requires that Plaintiff prove that she relied upon the misrepresented discount points when she entered into the loan. From our review of the evidence, we agree with Quicken that clear and convincing evidence in this regard was not presented.
Although we do not find that the elements of fraud were met with regard to the misrepresentation of the loan discount points, we otherwise affirm the circuit court's rulings that the evidence relating to the concealment of the balloon payment and promise to refinance were acts of fraud and were proven by clear and convincing evidence.
Quicken also asserts that the circuit court committed error in concluding that, under West Virginia Code § 46A-2-121, the loan to Plaintiff was induced by unconscionable conduct; included several unconscionable terms; and was, in and of itself, an unconscionable loan product.
This Court has recognized "unconscionability" to be a "general contract principle, based in equity." Arnold v. United Companies Lending Corp., 204 W.Va. 229, 234, 511 S.E.2d 854, 859 (1998), overruled, in part, on other grounds, Dan Ryan Builders, Inc. v. Nelson, ___ W.Va. ___, 737 S.E.2d 550 (2012).
As this Court held in syllabus point three of Arnold,
West Virginia Code § 46A-2-121 provides, in relevant part, that
The Act does not define the term "unconscionable." However, in past cases, this Court has relied on the definition provided in the Uniform Consumer Credit Code ("Consumer Credit Code"), the unconscionability
Arnold, 204 W.Va. at 235, 511 S.E.2d at 860 (internal citation omitted). See Herrod, 218 W.Va. at 617, 625 S.E.2d at 379.
According to the drafters of the Consumer Credit Code,
Arnold, 204 W.Va. at 235, 511 S.E.2d at 860 (quoting Orlando, 179 W.Va. at 450, 369 S.E.2d at 885). See Herrod, 218 W.Va. at 617, 625 S.E.2d at 379.
Furthermore, the drafters explained that "`[t]he particular facts involved in each case are of utmost importance since certain conduct, contracts or contractual provisions may be unconscionable in some situations but not in others.'" Arnold, 204 W.Va. at 235, 511 S.E.2d at 860 (quoting Orlando, 179 W.Va. at 450, 369 S.E.2d at 885). See Herrod, 218 W.Va. at 617, 625 S.E.2d at 379.
Importantly,
Arnold, 204 W.Va. at 235, 511 S.E.2d at 860 (quoting Troy Mining Corp. v. Itmann Coal Co., 176 W.Va. 599, 604, 346 S.E.2d 749, 753 (1986)).
Accordingly, this Court held in syllabus point 4 of Arnold, that "`[a] determination of unconscionability must focus on the relative positions of the parties, the adequacy of the bargaining position, the meaningful alternatives available to the plaintiff, and "the existence of unfair terms in the contract."' Syl. pt. 4, Art's Flower Shop, Inc. v. Chesapeake and Potomac Tel. Co., 186 W.Va. 613, 413 S.E.2d 670 (1991)."
As indicated above, the circuit court determined that the loan was induced by Quicken's unconscionable conduct, that the loan included several unconscionable terms, and that the loan product, in and of itself, was unconscionable.
With regard to unconscionability in the inducement, the circuit court in the present case concluded that the unconscionable conduct of Quicken included "[t]he false promise of refinancing; [i]ntroducing a balloon payment feature at closing; [f]ailing to properly disclose the balloon payment; [f]alsely representing that the plaintiffs were buying the interest rate down; and [n]egligently conducting the appraisal review and failing to realize the highly inflated appraisal from Guida[.]"
In arguing that the circuit court committed error in concluding that the loan was induced by its unconscionable conduct, Quicken reiterates its previous argument that the loan was not fraudulently induced. See One Valley Bank of Oak Hill, Inc. v. Bolen, 188 W.Va. 687, 691, 425 S.E.2d 829, 833 (1992) (stating that "W.Va.Code, 46A-2-121 [1974], expressly deals with conduct that is `unconscionable'
The circuit court further determined that the loan product, in and of itself, is unconscionable and that it "contains several unconscionable terms," including loan discount points of $5,792, without a fully corresponding reduction in the interest rate or any benefit to Plaintiff
It is Quicken's contention that a bargain is unconscionable only when it is so one-sided as to have an overly harsh effect on the disadvantaged party and lead to absurd results. Quicken challenges the circuit court's findings and conclusions arguing that the court failed to weigh the clear and immediate benefits of the loan to Plaintiff. Such benefits, according to Quicken, included a large cash payout with which Plaintiff purchased a new car and satisfied other debt, reduced monthly payments, and a reduced interest rate.
Plaintiff counters that the lower interest rate and lower monthly payment resulting from the loan were temporary because they were good only for three years and were far outweighed by the exorbitant cost of the loan. The loan converted Plaintiff's previous 9.75% fixed rate mortgage with CitiFinancial into a variable rate ranging from 7.75% to 16.25%. According to Plaintiff, who was earning $14.36 per hour at the time she applied for and received the loan, her mortgage payment would have equaled $1,582 per month (excluding taxes and insurance) at the highest rate.
Plaintiff argues that, as evidence of just how short-lived any savings to Plaintiff would be, Quicken's own financial expert testified that beginning only two years and five months into the loan, Plaintiff's monthly payments would no longer save her money as compared to Plaintiff's previous mortgage payment and other (unsecured) debt, which the Quicken loan consolidated. In fact, as previously noted, Quicken's expert testified that in year five of the loan, the monthly payment would be $1,582, whereas the combined monthly payment for Plaintiff's previous mortgage and other debt would have been $578. Plaintiff points out that, in total, the cost of the Quicken loan, when compared to Plaintiff's prior mortgage and prior debts, was an additional $349,000 in monthly payments.
Furthermore, Plaintiff argues that in consolidating her debt, Plaintiff's formerly unsecured debt was now secured under the Quicken loan. Plaintiff contends that, given her well-documented poor credit history, income and financial obligations, it was unconscionable for Quicken to secure all of her debt and to thereby jeopardize her family's home.
As set forth above, in determining unconscionability, this Court "must focus on the
Furthermore, as previously established, the loan contained a $107,015.71 balloon payment (of which Plaintiff was not aware prior to closing). The total cost of the loan was exorbitant, costing Plaintiff an additional $349,000 in monthly payments as compared to her prior mortgage and debts. From this and all of the evidence presented at trial, we conclude that the circuit court correctly found that, given the particular facts involved in this case, the terms of the loan described above and the loan product, in and of itself, were unconscionable.
Quicken's next assignment of error is that the circuit court lacked the legal authority to cancel Plaintiff's obligation to repay the $144,800 loan principal. It is Quicken's contention that the legislature has strictly limited the circumstances under which this remedy may be awarded under the West Virginia Consumer Credit and Protection Act and that those circumstances are absent in the case sub judice. We agree.
Cancellation of debt is a permissible remedy under the following two provisions of the Act: West Virginia Code § 46A-5-101(2) (1996) and § 46A-5-105 (1994). West Virginia Code § 46A-5-101(2) provides, in relevant part, that
This statute specifically applies to "regulated consumer loans," which term is defined in West Virginia Code § 46A-1-102(38) (1996) as "a consumer loan ... in which the rate of the loan finance charge exceeds eighteen percent per year[.]" It is undisputed that the loan at issue is not a "regulated consumer loan," and thus, West Virginia Code § 46A-5-101(2) does not apply to give the circuit court the authority to cancel the loan such that Plaintiff is not obligated to repay the principal.
Likewise, West Virginia Code § 46A-5-105 provides that
In this case, although it has been determined that Quicken violated the provisions of Chapter 46A "applying to illegal, fraudulent or unconscionable conduct or any prohibited debt collection practice," Plaintiff's debt may only be canceled under West Virginia Code § 46A-5-105 if it "is not secured by a security interest." Plaintiff's loan debt is, of course, secured by a security interest. Thus, West Virginia Code § 46A-5-105 does not apply.
Although the foregoing statutory requirements were not met in this case, the circuit court canceled the debt under the illegal appraisal, unconscionability, and unfair and deceptive acts provisions of the Act, and under the common law fraud claim. We will discuss each in turn.
The circuit court concluded that Quicken violated that portion of the illegal appraisal statute, West Virginia Code § 31-17-8(m)(8), which states as follows:
As previously described, Dewey Guida, an appraiser who was unaffiliated with Quicken, appraised the subject property for $181,700. The circuit court found that Mr. Guida's appraisal was grossly inflated because the actual fair market value of the property was $46,000. In its February 25, 2010, order, the court set forth numerous "obvious flaws" that Quicken's appraisal review team ignored with regard to Mr. Guida's appraisal and further found that Quicken violated its own appraisal review standards and the Uniform Standards of Professional Appraisal Practice. See n. 10, infra.
The circuit court concluded that
(Emphasis added).
Pursuant to West Virginia Code § 31-17-17(a) (1967), a court may cancel a loan made in violation of the provisions of West Virginia Code § 31-17-1 et seq., if the violation is "willful." West Virginia Code § 31-17-17(a) states:
Because the circuit court found Quicken's violation of West Virginia Code § 31-17-8(m)(8) to have been negligent rather than willful, the court committed error in canceling Plaintiff's mortgage obligation under that particular statute.
As previously indicated, West Virginia Code § 46A-2-121(1)(a) and (b) provides that when a consumer loan is found to be unconscionable, a court may, among other things, "refuse to enforce the agreement[.]" It is Quicken's contention that refusal to enforce the agreement does not allow the court to cancel Plaintiff's debt. Quicken compares the language in West Virginia Code § 46A-2-121(1) with that contained in West Virginia Code § 46A-5-101(2), which, as previously discussed, provides that when a creditor violates the statutory provisions governing regulated consumer loans, "the loan is void and the consumer is not obligated to pay either the principal or the loan finance charge." Quicken argues that the legislature could have used similar language in West Virginia Code § 46A-2-121, but clearly did not do so.
This Court has consistently adhered to the principles of statutory construction set forth in syllabus points four, five and six of Community Antenna Serv., Inc. v. Charter Communications VI, LLC, 227 W.Va. 595, 712 S.E.2d 504 (2011), in which we stated, respectively, as follows:
Furthermore, as we have made clear in prior cases, "[i]t is not for [courts] arbitrarily to read into [a statute] that which it does not say. Just as courts are not to eliminate through judicial interpretation words that were purposely included, we are obliged not to add to statutes something the Legislature purposely omitted." Williamson v. Greene, 200 W.Va. 421, 426, 490 S.E.2d 23, 28(1997) (emphasis provided) (quoting Banker v. Banker, 196 W.Va. 535, 546-47, 474 S.E.2d 465, 476-77 (1996)).
Applying these rules of statutory construction, therefore, we must conclude that although the circuit court had the authority to refuse to enforce the Note and Deed of Trust in this case pursuant to the provisions of West Virginia Code § 46A-2-121, the clear language of the statute simply does not allow the court to cancel Plaintiff's debt obligation. Therefore, this Court finds that the court committed error in canceling Plaintiff's debt obligation under West Virginia Code 46A-2-121.
Under West Virginia Code § 46A-6-104, "[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful." In the case sub judice, the circuit court found that Quicken engaged in unfair methods of competition and unfair or deceptive acts or practices by misrepresenting to Plaintiff the extent to which she was buying down her interest rate; by "[n]ot disclosing to [Plaintiff] prior to closing that her loan had an enormous balloon payment and then not properly disclosing the balloon payment at closing;" and by "[c]onducting a negligent appraisal review and approving a loan based on a grossly inflated appraisal." Specifically, the circuit court found that this conduct met the definitions of "unfair methods of competition and unfair or deceptive acts or practices" as set forth in West Virginia Code § 46A-6-102(7)(K)(L)(M) and (N).
Under West Virginia Code § 46A-6-106(a), a consumer who suffers an "ascertainable loss of money or property, real or personal, as a result of the use or employment by another person of a method, act or practice prohibited or declared to be unlawful by the provisions of this article may ... recover actual damages or two hundred dollars, whichever is greater. The court may, in its discretion, provide such equitable relief as it deems necessary or proper." Id. in relevant part. (Emphasis added). It is Quicken's contention that cancellation of Plaintiff's debt obligation (i.e., forfeiture of the loan principal) is not an equitable remedy.
The term "forfeiture" is defined, inter alia, as "[t]he loss of a right, a privilege, or property because of a crime, breach of obligation, or neglect of duty." Black's Law Dictionary 661 (7th ed.1999). In past cases, this Court has not looked favorably on forfeiture as a remedy. Rather, "[i]t is an `elementary principle of equity jurisprudence that equity looks with disfavor upon forfeitures, and that equity never enforces a penalty or forfeiture if such can be avoided.' Sun Lumber Co. v. Thompson Land & Coal Co., 138 W.Va. 68, 76, 76 S.E.2d 105, 109 (1953)." Fraley v. Family Dollar Stores of Marlinton, W.Va., Inc., 188 W.Va. 35, 38, 422 S.E.2d 512, 515 (1992). As we held in syllabus point one of Helton v. Reed, 219 W.Va. 557, 558, 638 S.E.2d 160, 161(2006), "`[e]quity will not enforce a forfeiture.'" (quoting Syllabus, in part, Craig v. Hukill, 37 W.Va. 520, 16 S.E. 363 (1892)). See Carder v. Matthey, 127 W.Va. 1, 7, 32 S.E.2d 640, 642 (1944) ("It is familiar law that forfeitures are not favored in courts of equity.... not only will a court of equity ordinarily refuse to act affirmatively in the enforcement of a forfeiture, but will often relieve against it.")
Plaintiff has failed to offer any authority tending to support forfeiture of the loan principal as an equitable remedy under the unfair and deceptive acts provisions of the Act, as set forth above. To the contrary, this Court finds that a balancing of the equities requires that the parties be returned to the status quo as nearly as is possible.
Following the trial on the issue of liability, the circuit court conducted a trial on the issues of attorneys fees and punitive damages. Upon the conclusion thereof, the circuit court awarded attorneys fees and costs in the amount of $495,956.25 and expenses in the amount of $100,243.64, for a total of $596,199.89.
Quicken argues that the circuit court deprived it of procedural due process by failing to perform the required analysis of punitive damages pursuant to syllabus point three of Garnes v. Fleming Landfill, Inc., 186 W.Va. 656, 413 S.E.2d 897 (1991), in which this Court held as follows:
In syllabus point four of Garnes, we also held that
In the case sub judice, the circuit court's conclusory order on punitive damages fails to satisfy the requirements set forth in Garnes. Even though this matter was tried before a judge rather than a jury, it was necessary for the circuit court to conduct a meaningful and adequate analysis under Garnes so that this Court may, in turn, conduct a meaningful and adequate review of the award on appeal. Id. 186 W.Va. at 667, 413 S.E.2d at 908. As we held in syllabus point five of Garnes,
See Syl. Pt. 5, Alkire v. First Nat'l Bank of Parsons, 197 W.Va. 122, 475 S.E.2d 122 (1996).
Because the circuit court's order on punitive damages lacked the necessary analysis and findings required by Garnes, this Court is unable to conduct a meaningful and adequate review of the punitive damages award. See State ex rel. Harper-Adams v. Murray, 224 W.Va. 86, 680 S.E.2d 101 (2009). Because the circuit court failed to conduct a proper analysis under Garnes, such an analysis must be conducted upon remand.
Quicken's next assignment of error is that the circuit court committed error by including attorneys fees in its calculation of the punitive damages award. As indicated above, the circuit court took "all of the Garnes factors into consideration, including applying a factor of three times the compensatory damages and attorneys fees" and awarded punitive damages in the amount of $2,168,868.75.
The circuit court awarded Plaintiff attorneys fees and costs pursuant to West Virginia Code § 46A-5-104 of the West Virginia Consumer Credit and Protection Act, which provides as follows:
Quicken does not challenge the applicability of this fee-shifting statute to the facts and circumstances of this case.
Likewise, the purpose of fee-shifting statutes similar to West Virginia Code § 46A-5-104, above, have been considered by this Court to be compensatory in nature. For example, in Farley v. Zapata Coal Corp., 167 W.Va. 630, 639, 281 S.E.2d 238, 244 (1981), former employees of a defunct strip mine operator sought to recover from the coal rights' lessee unpaid wages, accrued vacation and sick pay, liquidated damages and attorneys fees and costs. Upon holding that an award of attorneys fees was warranted under the fee-shifting provision of the West Virginia Wage Payment and Collection Act, this Court stated that the statutory provisions at issue
Farley, 167 W.Va. at 639, 281 S.E.2d at 244 (emphasis added).
Likewise, in Orndorff v. West Virginia Dept. of Health, 165 W.Va. 1, 4, 267 S.E.2d 430, 432 (1980), which involved a plaintiff who was unlawfully denied civil service employment, this Court concluded that the plaintiff was entitled to reasonable attorneys' fees under the applicable fee-shifting statute. In addressing the "scope of the right to obtain" such fees in a civil reinstatement proceeding, we recognized that
Orndorff, 165 W.Va. at 4-5, 267 S.E.2d at 432 (emphasis added). See Daily Gazette Co., Inc. v. West Virginia Development Office, 206 W.Va. 51, 58, 521 S.E.2d 543, 550 (1999) (stating that FOIA's fee-shifting statute, W.Va.Code § 29B-1-7, "which is a marked departure from the general rule that each party bears his/her own litigation costs, is intended to relieve some of the burden associated with the public's pursuit of the right to access public records and to encourage the cooperation of public officials when requests for such records are made." (Footnote omitted
Furthermore, we are mindful of cases from other jurisdictions in which attorneys fees awarded pursuant to a fee-shifting statute were included as compensatory damages in the ratio of compensatory to punitive damages. In Willow Inn, Inc. v. Public Service Mut. Ins. Co., 399 F.3d 224 (3rd Cir.2005), the insured, Willow Inn, sued its insurer under Pennsylvania's bad faith statute after the insured "encountered sustained resistance to its insurance claim" for property damage resulting from a tornado. 399 F.3d at 227. In the bad faith claim, the insured was awarded $150,000 in punitive damages and attorneys fees and costs in the amount of $135,400. The United States Court of Appeals for the Third Circuit concluded the attorneys fees and costs awarded under the applicable fee-shifting statute to be "the proper term to compare to the punitive damages award for ratio purposes." Id., at 235. The court reasoned, in part, that the statute's fee-shifting provisions "vindicate the statute's policy by enabling plaintiffs such as Willow Inn to bring ... actions alleging bad faith delays [and] to secure counsel on a contingency fee." Id., at 236. The court thus concluded that attorneys fees and costs awarded pursuant to the applicable fee-shifting statute are compensatory damages for "ratio purposes." Id., at 237.
Similarly, in Blount v. Stroud, 395 Ill.App.3d 8, 333 Ill.Dec. 854, 915 N.E.2d 925 (2009), the court recognized "that the amount of attorney fees expended in a case may be taken into account when assessing the propriety of a punitive damage award." 333 Ill.Dec. 854, 915 N.E.2d at 943. In Blount, the plaintiff prevailed in a retaliation claim against her former employer under the United States Civil Rights Act of 1991 and was awarded attorneys fees under the fee-shifting provision of the statute.
In light of the foregoing, and considering this Court's past recognition that, in general, fee-shifting statutes are compensatory and not punitive in nature, we find persuasive the argument that the attorneys fees and costs awarded under West Virginia Code § 46A-5-104 shall be included in the compensatory to punitive damages ratio
Quicken's final assignment of error is that the circuit court committed error in failing to offset the compensatory damages award against Plaintiff's pre-trial settlement with co-defendants Appraisals Unlimited, Inc. and appraiser Dewey Guida. Quicken represents that Plaintiff settled with these parties for the amount of $700,000 and that, because all of Plaintiff's damages flowed from the inflated appraisal by Mr. Guida and his company, Plaintiff is entitled to an offset as a matter of law.
The circuit court entered the judgment order in this case on February 17, 2011. Quicken filed its motion for offset on April 8, 2011, and the circuit court summarily denied it by order entered May 2, 2011. Although the circuit court offered no explanation for its ruling, Plaintiff argues that Quicken failed to file its motion within ten days of the entry of judgment, pursuant to Rule 59(e) of the West Virginia Rules of Civil Procedure.
Despite Plaintiff's argument to the contrary, the issue of offset is governed by Rule 60(a) of the West Virginia Rules of Civil Procedure and this Court's decision in Savage v. Booth, 196 W.Va. 65, 468 S.E.2d 318 (1996). In Savage, during the pendency of a sexual harassment trial, the plaintiffs settled with one of the defendants for $50,000. The trial against the remaining defendant proceeded to a jury verdict for $40,000. The judgment order "gave no credit nor made any reference to the settlement agreement." 196 W.Va. at 67, 468 S.E.2d at 320. Three months after the entry of judgment, the defendant filed a Rule 60 motion to, inter alia, "give credit for the $50,000 settlement ... and to enter a new order stating that there is no balance due the plaintiffs from the defendant." Id. The trial court ultimately denied the defendant's motion because he failed to timely file it pursuant to Rule 59(e).
On appeal, this Court reiterated that
Id., at syl. pt. 3, 196 W.Va. at 66, 468 S.E.2d at 319.
This Court in Savage concluded "as a matter of law that upon the defendant's motion the trial court was required to deduct the settlement amount from the jury verdict prior to entering the final judgment. The trial court's initial failure to give such credit was a mere oversight and does not arise to the level of more substantial errors which must be considered pursuant to Rule 59(e) or Rule 60(b)." Id., 196 W.Va. at 70, 468 S.E.2d at 323.
According to Quicken, Plaintiff suffered a single indivisible loss and, thus, she is entitled to but one complete satisfaction for her injury. Board of Educ. of McDowell County v. Zando, Martin & Milstead, Inc., 182 W.Va. 597, 390 S.E.2d 796 (1990). See Pennington v. Bluefield Orthopedics, P.C., 187 W.Va. 344, 349, 419 S.E.2d 8, 13 (1992). Plaintiff counters (albeit very superficially) that Quicken fails to meet the "`joint obligation' and/or `single indivisible injury'" elements under Zando.
182 W.Va. at 600, 390 S.E.2d at 799.
Accordingly, given that Plaintiff does not seriously argue otherwise, it is clear that Plaintiff suffered a single indivisible loss arising from the actions of Quicken and the settling co-defendants. Quicken is therefore entitled to a credit for the settlement between Plaintiff and the appraisal defendants, pursuant to Rule 60(a) and Savage.
Finally, we note that the parties are in agreement that any credit for the settlement between Plaintiff and Quicken's co-defendants is not to be applied to any punitive damages which may be awarded upon remand in this case. As we held in syllabus point one of Burgess v. Porterfield, 196 W.Va. 178, 469 S.E.2d 114 (1996),
For the reasons stated herein, the order of the Circuit Court of Ohio County entered May 2, 2011, is affirmed, in part; reversed, in part; and this matter is remanded for further proceedings consistent with this opinion.
Affirmed, in part; Reversed, in part; and Remanded.
Additional training material included how to overcome a prospective borrower's objections to a loan. For example, when a client indicated that he or she "wants to wait," Quicken trained its employees to explain to him or her that
Other flaws in the appraisal which should have raised "red flags" to Quicken's appraisal review team were the fact that the condition and age of the home listed in the appraisal were false and that Mr. Guida identified the subject property as a single unit dwelling rather than a duplex. The foregoing are just some of the flaws and standards the circuit court found that Quicken's appraisal team should have seen and should have requested an explanation from Mr. Guida.
Quicken's argument in this regard misstates the evidence. Plaintiff's testimony was not that Quicken promised to refinance after Plaintiff made four timely payments on the loan. Rather, Plaintiff testified that Quicken promised to refinance "in three to four months," at which time Plaintiff "could get it at a cheaper rate" and "once that loan was in place and I got — everything started to be paid off, then I would be able to refinance my loan." Plaintiff closed on the loan on July 7, 2006, and three months later, after she timely made her September and October payments, she promptly began efforts to contact Quicken to begin the refinancing process.
