Court: West Virginia Supreme Court; November 21, 2012; West Virginia; State Supreme Court
Quicken Loans, Inc., a Michigan corporation and national mortgage lender, appeals a May 2, 2011 order from the Circuit Court of Ohio County, West Virginia, which denied its post-trial motions for amendment of the court’s findings and for offset after being found liable for common law fraud and violations of the West Virginia Consumer Credit and Protection Act regarding a subprime loan to Plaintiff Lourie Brown. The court's order is partially affirmed and partially reversed, with the case remanded for further proceedings.
The factual background reveals that Brown and her mother purchased a duplex in East Wheeling, West Virginia, in 1988 for $35,000, and after her mother's death in 2002, Brown became solely responsible for the property’s expenses. Faced with financial difficulties, she refinanced the property multiple times between 2003 and 2005. In May 2006, seeking to consolidate her debt, Brown applied for a loan after receiving a pop-up advertisement and subsequently chose Quicken Loans due to her comfort with mortgage banker Heidi Johnson.
Quicken requested an appraisal from Title Source, Inc. (TSI), a company under the same parent as Quicken, which issued an appraisal request that inaccurately estimated the property value at $262,500. Appraiser Dewey Guida valued the property at $181,700, which the trial court found grossly inflated, determining the fair market value to be $46,000. The court criticized Quicken for a negligent appraisal review that overlooked significant flaws and violated appraisal standards.
Despite Brown’s hesitation regarding the loan terms and her intention to withdraw—evidenced by a voice message to Quicken on May 30, 2006—Quicken continued to pursue her to finalize the loan.
On June 1, 2006, Ms. Johnson noted her attempts to contact the Plaintiff regarding an appraisal approved by Quicken for Mr. Guida, indicating readiness to proceed despite the Plaintiff's initial desire to back out. Ms. Johnson made multiple contact attempts on June 2 and June 5, 2006, expressing frustration over the Plaintiff's lack of response and indicating that if there was no reply by the following Tuesday, the appraisal would be charged to her. The Plaintiff finally agreed to the loan on June 6, 2006, after Ms. Johnson reassured her about refinancing options in a few months due to her low credit scores. The initial loan presented to the Plaintiff was $112,850 with an interest-only structure and a variable rate of 8.5%. However, the finalized loan amount was significantly higher at $144,800, with an initial rate of 9.25%, escalating to a maximum of 16.25%, and included a substantial balloon payment of $107,015.71 at the end of a thirty-year term amortized over forty years. Notably, the Plaintiff did not receive a revised written “Good Faith Estimate” after these changes. Just before the closing on July 7, 2006, the Plaintiff received a lengthy packet of closing documents, which she did not review before the signing. During the closing, a notary, not affiliated with Quicken, instructed her to sign the documents without providing clarity on their contents, leading to a rushed and pressured experience.
The loan closing lasted approximately fifteen minutes, during which the Plaintiff did not thoroughly review the closing documents. The documents mentioned a "large balloon payment," but did not specify the amount. Although the Plaintiff recognized the term, she did not fully understand its implications and was primarily concerned with refinancing in a few months. The HUD Settlement Statement indicated that Quicken charged the Plaintiff four "loan discount points" totaling $5,792; however, the maximum allowed for her loan's initial interest rate was only 2.5 points. Consequently, only $3,692 of the fee contributed to reducing the interest rate, while $2,100 (1.5 points) did not provide the expected benefit. The Plaintiff argued that Ms. Johnson improperly charged this excess fee, misrepresenting it as a rate reduction. Quicken contended that the excess fee was justified due to the Plaintiff's increased credit risk from being delinquent on her previous mortgage. The circuit court found that the manipulation of discount points misrepresented the reduction of the interest rate. After paying off her previous mortgage and consolidating debt, the Plaintiff made the first two loan payments but later sought to refinance, as promised by Ms. Johnson. Quicken denied her requests. Following a surgery in January 2007 and subsequent complications that affected her ability to work, the Plaintiff defaulted on the loan and her attempts to negotiate a payment arrangement with Quicken were refused.
In August 2007, the Plaintiff notified Quicken of a claim and provided an opportunity to cure under West Virginia law, but Quicken did not respond and initiated foreclosure proceedings. The Plaintiff subsequently filed a lawsuit in the Circuit Court of Ohio County against Quicken, Appraisals Unlimited, Inc., appraiser Dewey Guida, and an unidentified note holder, alleging predatory lending and consumer fraud. Following a six-day bench trial, the circuit court issued a ruling on February 25, 2010, finding Quicken guilty of fraud and violations of the West Virginia Consumer Credit and Protection Act, including provisions related to unconscionability, unfair and deceptive acts, and illegal balloon notes. The court deemed the Note and Deed of Trust unenforceable, awarded the Plaintiff restitution of $17,476.72, required Quicken to update records to reflect the termination of the Deed of Trust, and prohibited any future collection attempts. The court did not mandate the repayment of the loan principal, effectively canceling the Plaintiff's obligation.
A subsequent trial on September 1, 2010, determined attorneys' fees and punitive damages, leading to an order on February 17, 2011, awarding the Plaintiff $596,199.89 in attorneys' fees and $2,168,868.75 in punitive damages. Quicken's post-trial motions for amendments and offsets were denied on May 2, 2011, prompting this appeal.
The appeal will be reviewed under a two-pronged standard, where the final order is assessed for abuse of discretion, factual findings for clear error, and questions of law undergo de novo review. Quicken argues that the circuit court incorrectly determined that the Plaintiff proved, by clear and convincing evidence, that it fraudulently induced her into the loan, citing failures in disclosure of the balloon payment and misrepresentations regarding loan refinancing and interest rate buy-downs.
The Court identifies the essential elements of fraud as: (1) a fraudulent act by the defendant or induced by them, (2) material and false representation that the plaintiff relied upon justifiably, and (3) damages incurred by the plaintiff due to that reliance. Clear and convincing evidence is required to establish allegations of fraud.
In this case, the evidence showed that the loan presented to the Plaintiff did not include a balloon payment, as indicated in the provided Good Faith Estimate. In contrast, the actual loan included a substantial balloon payment, which Quicken failed to disclose in a revised Good Faith Estimate. The circuit court found that the balloon payment of $107,015.71 was not conspicuously disclosed on the note, a requirement under West Virginia law, specifically West Virginia Code § 46A-2-105. This law mandates that if any scheduled payment is at least twice as large as earlier payments (excluding down payments), it must be clearly stated in the agreement.
Quicken argued that the balloon payment was adequately described in the closing documents provided to the Plaintiff. However, the Court's review of the relevant disclosure showed that it only briefly mentioned the balloon payment, failing to meet the mandatory disclosure requirements outlined in the statute.
The 'Adjustable Rate Rider' and 'Adjustable Rate Balloon Note' lack clear descriptions of the balloon payment, which is stated only as a final payment of the outstanding principal plus accrued interest, without specifying the amount as "large." The balloon payment amount of $107,015.71 is not mentioned in any closing documents signed by the Plaintiff on July 7, 2006. Quicken did not provide a representative at the closing to clarify the loan details, and its counsel suggested that the Plaintiff should have calculated the balloon payment herself. The court references West Virginia Code § 46A-2-105(2), emphasizing that loan agreements must clearly disclose significant payment obligations to protect borrowers. The court is assessing whether Quicken's failure to disclose the balloon payment constitutes fraud, defined as the intentional concealment of facts by a party who has a duty to disclose. The court affirms that fraudulent concealment can mislead a borrower and that even partial reliance on such concealment is sufficient for a fraud claim. Ultimately, the court concludes that Quicken's actions amounted to fraud for not adequately disclosing the balloon payment, supported by clear and convincing evidence from the Plaintiff.
Plaintiff expressed concern about a "balloon payment" in the loan documents but did not fully understand its implications. She was aware that she could not sustain the monthly payments long-term, especially as her child support payments were about to cease. Plaintiff proceeded with the loan due to Quicken's promise to refinance within three to four months post-closing. Although Quicken denied making this promise, trial evidence indicated that Plaintiff's attempts to contact Quicken three months after closing were consistent with this alleged promise. The circuit court found that Quicken's misrepresentation regarding the refinancing was material, influencing Plaintiff's decision to enter the loan, and that she relied on this promise.
Additionally, Quicken charged Plaintiff $5,792 for four loan discount points, although only 2.5 points were available, meaning $2,100 of her payment did not benefit her. The circuit court determined that Quicken's manipulation of the loan discount points misled Plaintiff regarding her interest rate reduction. While Quicken contended that the misrepresentation was not material or relied upon by Plaintiff, this Court found that Quicken's actions were misleading, charging for a benefit that did not exist. However, it noted that Plaintiff did not prove reliance on the misrepresented discount points, therefore not meeting the fraud criteria in that aspect. Nonetheless, the Court upheld the circuit court's findings related to the concealment of the balloon payment and the refinancing promise as acts of fraud, established by clear and convincing evidence.
Quicken contends that the circuit court erred in determining that the loan to the Plaintiff was tainted by unconscionable conduct, contained unconscionable terms, and constituted an unconscionable loan product under West Virginia Code § 46A-2-121. The principle of unconscionability is recognized as a general contract principle rooted in equity, as established in Arnold v. United Companies Lending Corp. The West Virginia Consumer Credit and Protection Act aims to eliminate unconscionable terms in consumer agreements and allows consumers to seek redress for such terms under § 46A-2-121. This section permits courts to refuse enforcement of an agreement deemed unconscionable at the time of its creation or induced by unconscionable conduct, and to either enforce the remainder of the agreement or limit unconscionable terms to prevent unfair results. While the Act does not define "unconscionable," prior cases have adopted the definition from the Uniform Consumer Credit Code, emphasizing the prevention of oppression and unfair surprise rather than merely addressing disparities in bargaining power. The determination of unconscionability is context-specific, relying heavily on the particular facts of each case and the circumstances surrounding the transaction.
A bargain is not automatically deemed unconscionable due to disparities in bargaining power or risk allocation; however, significant inequality in bargaining power, coupled with terms excessively favorable to the stronger party, may indicate deception, compulsion, or a lack of real alternatives for the weaker party. The court's assessment of unconscionability focuses on the relative positions of the parties, the adequacy of their bargaining positions, available alternatives, and the presence of unfair contractual terms.
In this case, the circuit court found that Quicken's conduct in inducing the loan was unconscionable, citing factors such as false promises of refinancing, the introduction of a balloon payment feature without adequate disclosure, and an inflated appraisal. Quicken contested the ruling, asserting that the loan was not fraudulently induced. However, the court previously established that Quicken acted fraudulently in this regard, negating Quicken’s argument that it did not violate West Virginia Code § 46A-2-121.
The circuit court further determined that the loan product itself was unconscionable, highlighting several unfair terms, including undisclosed balloon payments and excessive loan discount points without corresponding benefits. Additionally, Quicken's conversion of unsecured debt into secured debt significantly increased the plaintiff's monthly financial obligations, putting her home at risk. Quicken argued that an unconscionable bargain must be excessively one-sided and that the court overlooked the immediate benefits of the loan, such as lower payments and cash payouts. The plaintiff countered that these benefits were temporary and overshadowed by the high costs associated with the loan.
The loan transitioned Plaintiff's fixed-rate mortgage with CitiFinancial into a variable rate mortgage, with rates fluctuating between 7.75% and 16.25%. At the highest rate, Plaintiff's monthly payment would have reached $1,582, significantly higher than the combined $578 for her previous mortgage and unsecured debts. Quicken’s financial expert indicated that after two years and five months, any potential savings would vanish, with the monthly payment in year five equating to $1,582, which is substantially more than her prior payments. Overall, the Quicken loan would cost Plaintiff an additional $349,000 in monthly payments compared to her previous obligations.
Plaintiff contended that consolidating her unsecured debts into a secured loan was unconscionable, especially given her low income of $14.36 per hour, poor credit history, and status as a single mother. Quicken's records characterized her as "timid" and in need of careful handling. Despite her initial rejection of a $112,000 loan due to high payments, Quicken persistently pursued her, especially after an inflated appraisal of her property. The loan included a balloon payment of $107,015.71, which Plaintiff was unaware of before closing. The circuit court concluded that the loan terms were unconscionable given the circumstances.
Regarding the cancellation of the loan obligation, Quicken argued that the circuit court lacked the authority to nullify Plaintiff's obligation to repay the $144,800 principal, asserting that the West Virginia Consumer Credit and Protection Act restricts such remedies to specific circumstances, which were not met in this case. The Act stipulates that if a creditor violates provisions regarding regulated consumer loans, the loan is void, relieving the consumer of the obligation to repay the principal or finance charge.
West Virginia Code 46A-1-102(38) defines a "consumer loan" as one with a finance charge exceeding eighteen percent per year. The loan in question is not classified as a "regulated consumer loan," meaning West Virginia Code 46A-5-101(2) does not empower the circuit court to cancel the loan and absolve the Plaintiff from repaying the principal. West Virginia Code 46A-5-105 allows for debt cancellation when a creditor willfully violates legal provisions regarding unlawful conduct or prohibited debt collection practices, provided the debt is unsecured. In this case, although Quicken violated these provisions, the Plaintiff's debt is secured by a security interest, thereby rendering 46A-5-105 inapplicable.
Despite failing to meet these statutory conditions, the circuit court canceled the debt based on claims of illegal appraisal, unconscionability, and common law fraud. Specifically, the court found Quicken in violation of the illegal appraisal statute, West Virginia Code 31-17-8(m)(8), which prohibits securing a mortgage loan that exceeds the property's fair market value. An independent appraiser, Dewey Guida, appraised the property at $181,700, but the court determined the actual fair market value was only $46,000. The court identified significant flaws in Quicken's appraisal review process and concluded that these errors led to a misleading appraisal that should not have been used to approve the loan. The negligent appraisal gave the Plaintiff an incorrect impression of her ability to repay the loan, and Quicken intended to sell the loan to a third party after closing, rather than servicing it.
Negligently conducted appraisal reviews misled potential buyers regarding the value of the Property, as emphasized in the document. Under West Virginia Code § 31-17-17(a), a court can cancel a loan if it violates the relevant provisions willfully. The circuit court found Quicken's actions to be negligent rather than willful, leading to an erroneous cancellation of the Plaintiffs' mortgage obligation.
Regarding unconscionability, West Virginia Code § 46A-2-121(l)(a) and (b) allows courts to refuse enforcement of consumer loans deemed unconscionable. Quicken argues that this provision does not permit debt cancellation, contrasting it with West Virginia Code § 46A-5-101(2), which voids loans in cases of statutory violations, exempting consumers from repayment of both principal and finance charges.
The document highlights principles of statutory interpretation, asserting that related statutes should be read together to discern legislative intent, ensuring that the entire act is considered rather than isolated provisions. Courts cannot add to or omit terms from statutes but must interpret them as they are written, reflecting the legislators' intentions.
The circuit court had the authority to refuse enforcement of the Note and Deed of Trust under West Virginia Code § 46A-2-121; however, it erred by canceling the Plaintiff's debt obligation, as the statute does not permit such cancellation. The court found that Quicken engaged in unfair competition and deceptive practices, including misleading the Plaintiff about her interest rate, failing to disclose a significant balloon payment before closing, and approving a loan based on an inflated appraisal. Quicken did not appeal these findings. Under West Virginia Code § 46A-6-106(a), a consumer can recover actual damages or $200 for ascertainable losses due to prohibited acts. Quicken argued that cancellation of the debt is not an equitable remedy, highlighting that forfeiture—defined as the loss of rights due to negligence or breach—is generally disfavored in equity. Case law supports that courts of equity typically avoid enforcing forfeitures and may provide relief against them.
Plaintiff did not provide legal support for forfeiting the loan principal as an equitable remedy under the unfair and deceptive acts provisions. The Court emphasizes the need to restore the parties to their previous status quo, referencing the case of Go-Mart, Inc. v. Olson, which directed a seller deemed incompetent to return the full purchase price to achieve equity. Following the liability trial, the circuit court awarded $596,199.89 for attorneys' fees and costs, and set punitive damages at $2,168,868.75, after considering the factors from Garnes v. Fleming Landfill, Inc. This included a tripling of compensatory damages and fees, ensuring a fair relationship between punitive and compensatory awards. Quicken contends that the circuit court violated procedural due process by not adequately analyzing punitive damages as required by Garnes, which outlines factors for jury consideration: the relationship of damages to actual harm, the reprehensibility of the defendant's conduct, the need to eliminate profits from wrongful actions, the fairness of punitive to compensatory damages, and the defendant’s financial position. Additional considerations for reviewing punitive damages include litigation costs, any criminal penalties, other civil actions for similar conduct, and the necessity of punitive damages to promote fair settlements.
Relevant information may not be fully accessible to the jury, leading to potential awards that appear reasonable based on the presented facts but require adjustment by the trial court through remittitur. This adjustment may be necessary to prevent prejudice against the defendant, particularly concerning factors like criminal sanctions or pending lawsuits. However, defendants or trial courts may opt to present these factors to the jury. In the current case, the circuit court's order regarding punitive damages does not meet the requirements established in *Games*, which necessitates a thorough analysis for meaningful appellate review. The Court will review all punitive damages awards upon petition, requiring detailed consideration of specified factors and addressing evidence presented during the trial or post-judgment review. Failure to address any factor in the petition results in waiver of related assignments of error.
Due to the circuit court's inadequate analysis, a proper review must be conducted upon remand. Additionally, Quicken argues that the inclusion of attorneys' fees in the punitive damages calculation was erroneous, asserting that these fees are punitive rather than compensatory. The court had awarded attorneys' fees under the West Virginia Consumer Credit and Protection Act, which allows for such awards in cases involving illegal or unconscionable conduct. Quicken does not dispute the applicability of this statute. The Court has recognized this Act as a remedial measure aimed at protecting consumers from unfair and deceptive business practices.
Fee-shifting provisions in consumer protection laws, including West Virginia's, are intended to be liberally construed and are fundamentally compensatory, aimed at reimbursing the prevailing party for legal expenses incurred in bringing an action under the statute. Various jurisdictions, including Kentucky and Massachusetts, have clarified that their consumer protection fee-shifting statutes are designed to compensate for attorney fees based on the reasonable value of legal services rendered, rather than serving punitive purposes. In West Virginia, case law supports this interpretation, emphasizing that such provisions aim to protect workers and facilitate the collection of compensation owed. For example, in Farley v. Zapata Coal Corporation, the court underscored that laborers should not be financially burdened when seeking rightful wages, and should be made whole through the inclusion of attorney fees in any award. Similarly, in Orndorff v. West Virginia Department of Health, the court recognized that the provision for reasonable attorney fees serves to both restore civil service employees wrongfully denied employment and incentivize them to seek redress without the fear of incurring legal costs.
The fee-shifting statute under the West Virginia Freedom of Information Act (FOIA), W.Va. Code § 29B-1-7, deviates from the general principle that parties bear their own litigation costs, aiming to alleviate the public's burden in accessing public records and promoting cooperation from officials. In Bettinger v. Bettinger, the statute is recognized for enabling financially disadvantaged spouses to recover litigation costs and attorney fees. The excerpt also discusses cases from other jurisdictions where attorney fees under fee-shifting statutes were deemed compensatory damages for the purpose of comparing with punitive damages awards. In Willow Inn, Inc. v. Public Service Mut. Ins. Co., the court ruled that attorney fees awarded under Pennsylvania's bad faith statute should be included in the compensatory to punitive damages ratio, facilitating access to legal recourse for plaintiffs. Similarly, in Blount v. Stroud, the court emphasized the remedial nature of the Civil Rights Act's fee-shifting provision, asserting that attorney fees should be considered in the compensatory damages calculation. Additionally, Clausen v. Icicle Seafoods, Inc. confirmed that attorney fees can be included in compensatory damages when assessing punitive damages. Therefore, it is concluded that attorney fees and costs under West Virginia Code § 46A-5-104 should be included in the ratio of compensatory to punitive damages in cases of common law fraud.
Punitive damages in West Virginia cases are subject to a compensatory to punitive damages ratio as outlined in the West Virginia Consumer Credit and Protection Act. Quicken claims the circuit court erred by not offsetting the compensatory damages award by the $700,000 settlement the Plaintiff reached with co-defendants Appraisals Unlimited, Inc. and appraiser Dewey Guida, arguing that all damages stem from an inflated appraisal. Quicken filed a motion for offset after the judgment order on February 17, 2011, which was denied without explanation on May 2, 2011. The Plaintiff contends that Quicken's motion was untimely under Rule 59(e) of the West Virginia Rules of Civil Procedure. However, the issue of offset falls under Rule 60(a) and is supported by the precedent set in Savage v. Booth, where the court ruled that a defendant is entitled to a deduction for settlement amounts from a jury verdict before final judgment. Quicken argues that the Plaintiff sustained a single indivisible loss, warranting one complete satisfaction for the injury. The court's ruling in Zando establishes that multiple parties contributing to a single loss can allow for credit against settlements made. The Plaintiff does not sufficiently contest this, affirming that Quicken is entitled to the credit for the settlement with the appraisal defendants based on the Savage decision and Rule 60(a).
The parties have agreed that any credit from the settlement between the Plaintiff and Quicken’s co-defendants will not reduce any punitive damages awarded upon remand. According to the precedent established in Burgess v. Porterfield, defendants in civil cases are entitled to a reduction in compensatory damages by the amount of any good faith settlements with jointly liable parties, but this does not apply to punitive damages. The Circuit Court of Ohio County's order from May 2, 2011, is affirmed in part, reversed in part, and remanded for further proceedings.
The Plaintiff's mother died in 2002, and at the time of the events, the Plaintiff was a 41-year-old single mother of three. She no longer resides on the subject property but visits regularly to check on her oldest child, Monique Brown, who suffers from a traumatic brain injury due to a 2001 automobile accident. Monique had previously paid off the subject property with settlement funds from a wrongful death lawsuit and executed a power of attorney allowing the Plaintiff to manage the property and loan proceeds.
The refinancing and loans mentioned were with CitiFinancial, and the Plaintiff also borrowed $5,785 from AmeriFirst Loan in 2003 and took out a Refund Anticipation Loan for $3,418 with Jackson Hewitt in 2006 at a high interest rate. The Plaintiff was motivated to consolidate her debts for lower payments after seeing advertisements for loans. Additionally, Quicken provided its employees with training materials, including "Selling Tips," to assist in communicating with potential borrowers, emphasizing that they specialize in helping those with poor credit.
A review of the borrower’s credit situation will take place, followed by a discussion of the loan program and its benefits, with a $500 good faith deposit required to initiate the loan process. The program, referred to as a Stepping Stone Loan, aims to help borrowers establish a track record of timely payments, potentially allowing for refinancing to a better program in the future. The importance of prompt decision-making is emphasized, cautioning against delaying actions due to fears of worsening credit situations.
Additional training materials instruct employees on addressing borrower objections and reinforcing the loan’s benefits. On appeal, the plaintiff alleges that including an estimated property value may improperly influence appraisers. Quicken claims it does not influence appraiser selection; however, evidence shows appraiser Mr. Guida conducted over 100 appraisals for Quicken. The circuit court identified significant flaws in Mr. Guida's appraisal, including a lack of comparable properties from the correct neighborhood and an inflated property valuation without justification. These discrepancies were deemed violations of USPAP/industry standards, and the appraisal contained inaccuracies regarding the property’s condition and classification. Quicken's appraisal review team failed to recognize these issues, which should have prompted further inquiry. This summary captures critical points regarding the loan process and the appraisal flaws identified by the court.
Ms. Johnson communicated to a co-worker that she was cautious in her dealings with the Plaintiff, whom she deemed "very fragile." Ms. Johnson offered the Plaintiff a loan of $144,800, which was approved after an appraisal of $181,700 by Mr. Guida. Quicken compensates its employees based on loan amounts, closures, and types, with Ms. Johnson earning a commission of $834.40 on this subprime loan, which yields higher commissions than prime loans. The Plaintiff testified about a decline in income as her child support payments were ending upon her son turning eighteen. Expert Margot Saunders explained that "loan discount points" are fees paid upfront to reduce interest rates, affecting monthly payments. The Plaintiff’s previous mortgage had a 9.75% fixed rate with monthly payments of $578. However, Quicken’s financial expert stated that two years and five months into the loan, the Plaintiff stopped saving money compared to her prior mortgage. After five years, her monthly payment increased to $1,582, significantly higher than her previous combined payment of $578.
Under the Real Estate Settlement Procedures Act (RESPA), a good faith estimate must be provided for new loans with varying closing costs. After making 360 payments totaling $550,084, the Plaintiff, earning $14.36 per hour as a licensed practical nurse, faced a balloon payment of $107,015.71 to avoid foreclosure. An email dated June 26, 2006, revealed Ms. Johnson's acknowledgment of the Plaintiff's concerns about her payments and her encouragement to proceed with the loan despite those worries. The Plaintiff testified about the appraisal process and her financial decisions regarding vehicle purchases. The loan's first payment was due on September 1, 2006, and Quicken denied a refinancing request in October 2006, leading to the Plaintiff missing her November payment until January 16, 2007. The Plaintiff settled with Mr. Guida and Appraisals Unlimited for $700,000 before trial and alleged that an unidentified "John Doe Note Holder" currently holds her loan.
Quicken originates and sells loans to investment banks without servicing them, which subsequently securitize these loans for large corporate investors. The trial court dismissed the plaintiff's claim for breach of the covenant of good faith and fair dealing, noting that this principle has not been recognized in West Virginia's lender/borrower context. The plaintiff was not presented with the Federal Truth in Lending Statement, which disclosed a balloon payment of $107,015.71, until after the loan closing on July 7, 2006, complicating her understanding of the payment structure. Although her initial payment was $1,114 at a 9.25% interest rate, subsequent payment changes involved complex calculations. Quicken acknowledged that refinancing could occur after four timely payments, but argued the plaintiff breached this alleged agreement by failing to make timely payments. The plaintiff clarified that Quicken promised refinancing within three to four months, which she attempted to initiate after making timely payments in September and October. Quicken contended that even if a promise was made, there was no evidence of fraudulent intent. The case references the legal precedent that fraud can arise from unfulfilled promises when used as a means to induce agreement. The court found that $2,100 of the $5,792 charged in loan discount points did not correspond to a lower interest rate, and deemed the excessive closing costs of $8,889 unconscionable. The plaintiff argued that Quicken's inflated appraisal was the basis for a cash offer related to her loan, which she used to purchase a new car.
Unfair competition and deceptive practices encompass several actions, including:
1. Making false or misleading statements concerning price reductions.
2. Conduct that creates confusion or misunderstanding.
3. Engaging in deception, fraud, false pretense, or misrepresentation, including the concealment or omission of material facts intended for others to rely upon during sales or advertisements of goods or services, regardless of whether actual harm occurred.
4. Distributing false or misleading representations regarding the sale of goods or consumer credit terms, or omitting necessary material information to avoid misleading consumers.
Quicken asserts that forfeiture does not equate to actual damages but is instead a windfall, rendering it an inadequate remedy for the plaintiff's fraud claim. The circuit court described the case as particularly complex and, after adjusting the proposed attorney fees, deemed the billing records reasonable and reliable according to Aetna Casualty and Surety Co. v. Pitrolo. Quicken does not contest the awarded attorney fees. Both parties acknowledge the availability of punitive damages in common law fraud actions but agree that such damages are not applicable under specific provisions of West Virginia Code. The matter of punitive damages under other relevant provisions remains unaddressed in the appeal. The court's prior rulings suggest that if a plaintiff alleges common law fraud alongside statutory claims, punitive damages may still be recoverable.
The outer limit for punitive damages relative to compensatory damages, in cases of extreme negligence without intent to harm, is approximately 5 to 1, provided compensatory damages are not trivial or excessive. In instances where the defendant exhibits actual evil intent, significantly higher ratios may be permissible. In the case of Blount, the jury awarded $282,350 in compensatory damages for pain and suffering and back pay, over $1 million in attorneys' fees under the Civil Rights Act, and $2.8 million in punitive damages. This aligns with the guidance from Games, which emphasizes considering litigation costs among other factors when reviewing punitive damages. The argument raised by Quicken regarding the inconsistency of including attorneys' fees in punitive damage calculations was not supported by legal authority from the plaintiff, leading the court to decline addressing it. Additionally, Rule 60(a) of the West Virginia Rules of Civil Procedure allows for the correction of clerical mistakes in judgments or records by the court, either on its own initiative or upon request from any party, before or during the appeal process with necessary notice.
