737 S.E.2d 640
W. Va.2012Background
- Quicken Loans, Inc. appealed a May 2, 2011 circuit court order in a WV consumer-protection suit arising from a subprime loan to Lourie Brown.
- The loan transaction involved a balloon payment of about $107,016 and an inflated appraisal; closing occurred with limited borrower review.
- Appraisals Unlimited, Inc. and appraiser Dewey Guida were involved; their appraisal was found grossly inflated.
- Quicken’s appraisal review and the closing disclosures allegedly misrepresented discount points and the balloon payment.
- Plaintiff alleged predatory lending under WV Code chapter 46A and common-law fraud; she sought restitution and cancellation of the loan obligation, among other remedies.
- A later trial awarded attorneys’ fees, costs, and punitive damages; the circuit court also ordered restitution and enjoined further collection on the loan.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is Quicken liable for fraud based on balloon-payment concealment and refinancing promises? | Brown argues concealment and misrepresentation induced the loan. | Quicken contends findings lack clear and convincing proof. | Yes; fraud found; balloon concealment and refinancing promise sustained; discount-points misrepresentation not proven. |
| Was the loan inducement unconscionable under WV §46A-2-121? | Brown asserts unconscionable terms and predatory structure. | Quicken argues lack of unconscionability. | Yes; loan inducement and loan product deemed unconscionable. |
| Did the court have authority to cancel the debt under WV law? | Plaintiff seeks cancellation under 46A-5-101/105 and related statutes. | Quicken argues debt cancellation not permitted for this loan. | No; cancellation under 46A-2-121 and 31-17-8(m)(8) was improper; debt cancellation not supported by statute; remand for proper analysis. |
| Were the unfair and deceptive acts under WV §46A-6-104 proven and recoverable? | Brown contends misrepresentations and concealments violated the Act. | Quicken disputes the extent of violations and remedies. | Proven; order upheld for UDAP violations, with damages considered. |
| Should attorneys’ fees be counted as compensatory in the punitive-damages ratio under Games v. Garnes? | Fees under 46A-5-104 are compensatory, not punitive. | Fees should not inflate the punitive ratio. | Fees are compensatory and may be included in the ratio where punitive damages are available. |
| Is an offset against the verdict appropriate for settlements with co-defendants? | Settlement with Guida/Appraisals Unlimited should reduce the award. | Offset permitted by Rule 60(a) and Zando; applies to compensatory damages only. | Yes; credit for settlement with appraisal defendants permitted; not to be applied to any potential punitive damages on remand. |
Key Cases Cited
- Mallory v. Mortgage America, 67 F.Supp.2d 601 (S.D.W.Va.1999) (strict compliance for balloon-pmt disclosure under 46A-2-105(2))
- Arnold v. United Companies Lending Corp., 204 W.Va. 229, 511 S.E.2d 854 (1998) (unconscionability focus on bargaining position and terms under 46A-2-121)
- Orlando v. Finance One of West Virginia, Inc., 179 W.Va. 447, 369 S.E.2d 882 (1988) (unconscionability standards for consumer credit)
- Garnes v. Fleming Landfill, Inc., 186 W.Va. 656, 413 S.E.2d 897 (1991) (punitive-damages factors framework)
- Zando v. Martin & Milstead, Inc., 182 W.Va. 597, 390 S.E.2d 796 (1990) (settlement credits for single indivisible losses against joint defendants)
- Games v. Garnes, 186 W.Va. 656, 413 S.E.2d 897 (1991) (standard for reviewing punitive-damages awards)
- Tri-State Asphalt Products, Inc. v. McDonough Co., 182 W.Va. 757, 391 S.E.2d 907 (1990) (unconscionability and contract-terms analysis in WV CC&PA)
- Horton v. Tyree, 104 W.Va. 238, 139 S.E. 737 (1927) (fraud elements and reliance)
- Kidd v. Mull, 215 W.Va. 151, 595 S.E.2d 308 (2004) (clear and convincing standard for fraud)