557 B.R. 902
Bankr. S.D.W. Va.2016Background
- James and Nancy Tillette refinanced their Lansing, WV home with Beneficial West Virginia, Inc. (BWV), resulting in an $88,907.05 mortgage; they later defaulted.
- The Tillettes allege they are unsophisticated consumers who were pressured/steered into a predatory refinance that converted unsecured debt to secured debt and lacked proper underwriting.
- They filed Chapter 7 (filed Oct. 16, 2014) and received a discharge Feb. 12, 2015; this adversary proceeding was filed Mar. 3, 2015.
- Complaint asserts counts for: unconscionability; breach of fiduciary duty; fraud/intentional misrepresentation; negligent misrepresentation; violation of W. Va. Code § 31-17-8(m)(8); and damages (including punitive).
- BWV moved for judgment on the pleadings; court applied Rule 12(c)/12(b)(6) and Twombly/Iqbal plausibility standards, and considered recent Fourth Circuit and West Virginia precedent.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Unconscionability (Count One) | Loan contained unfair terms (loan > FMV) and was induced by pressure/sophisticated sales tactics; lacked proper underwriting | Amount alone cannot show unconscionability; dismissal urged per McFarland | Denied — allegations of procedural unfairness, steering, lack of underwriting, and securing home are minimally sufficient to proceed to discovery |
| Breach of Fiduciary Duty (Count Two) | BWV provided professional mortgage advice and recommended loan products, creating duty | No special relationship; routine lending/advice does not create tort duty | Granted — pleading fails to show the special relationship needed to impose fiduciary/tort duty |
| Fraud / Intentional Misrepresentation (Count Three) | BWV made false material representations and plaintiffs relied to their detriment | Allegations are conclusory; lack of particularity under Rule 9(b) | Granted — fraud claims are too generalized and do not plead time/place/person/content with required particularity |
| Remaining Claims: Negligent Misrep, WV statutory claim, Damages (Counts Four–Seven) | Negligent misrep and statutory illegal loan; damages requested | BWV moved for dismissal on limits and pleading grounds | Granted as to Counts Four (without prejudice to replead), Five (statute of limitations not opposed — dismissed), and Six/Seven (damages not standalone claims). Court gave leave to replead dismissed claims by Sept. 15, 2016 |
Key Cases Cited
- McFarland v. Wells Fargo Bank, N.A., 810 F.3d 273 (4th Cir. 2016) (loan amount alone typically not substantive unconscionability but may contribute with other circumstances)
- Nationstar Mortgage, LLC v. West, 237 W.Va. 84 (W. Va. 2016) (defines procedural and substantive unconscionability under WV law)
- Brown v. Genesis Healthcare Corp., 229 W.Va. 382 (W. Va. 2012) (discusses sliding-scale approach to unconscionability)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleading must include factual allegations to state plausible claim)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (plausibility standard for pleading)
- Sneberger v. Morrison, 285 W.Va. 654 (W. Va. 2015) (elements of fraud under WV law)