Tuesday, December 4, 2012

WV High Court Says Quicken Loan Terms "Unconscionable", Violate State UDAP Statute, But Nixes Mortgage Cancellation & Directs Lower Court To Reconsider Screwed Over Homeowners' $2.8M Damages Award

In Charleston, West Virginia, The West Virginia Record reports:

  • The West Virginia Supreme Court has agreed with a trial court finding that Quicken Loans, Inc. committed fraud and violated various provisions of the West Virginia Consumer Credit and Protection Act in a mortgage loan with an Ohio County woman, but it sent the case back to the circuit court to adjust the approximately $2.8 million dollar award.
  • [Lower court] Judge Arthur M. Recht found that Quicken “committed fraud and violated various provisions of the West Virginia Consumer Credit and Protection Act(1)… regarding unconscionability … unfair and deceptive acts … and regarding illegal balloon notes.”

    The [lower] court also found that Quicken had violated West Virginia law regarding illegal appraisals and 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 … and enjoined them from attempting to collect any further payments under the loan.”

    Recht subsequently awarded Brown attorneys fees and litigation costs of $596,199.89 and punitive damages of $2,168,869.75.
  • After an analysis of all the evidence presented at trial, the [West Virginia Supreme] Court concluded 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.”

    The Court then moved to the “cancellation of the loan obligation” issue and found that the circuit court had overstepped its bounds when canceling the obligation of Brown to pay back the principal of the loan – “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.”

    Regarding punitive damages, “Quicken argues that the circuit court deprived it of procedural due process by failing to perform the required analysis of punitive damage pursuant to [Garnes v. Fleming Landfill, Inc]” and the Court again agreed with Quicken, ruling “Because the circuit court failed to conduct a proper analysis under Garnes, such an analysis must be conducted upon remand.”

    Quicken next argued that the circuit court should not have included attorneys fees in the calculation of the punitive damages award.

    Recht had added the compensatory damages together and then multiplied by three to determine the amount of punitive damages. Quicken argued that the attorneys fees should not have been part of the compensatory damages. If Quicken was right, then the punitive damages award would have been much lower according to Recht’s formulation.

    The Court agreed with Recht – “[W]e hold that attorneys fees and costs awarded under West Virginia Code §46A-5-104 (1994) of the West Virginia Consumer Credit and Protection Act shall be included in the compensatory to punitive damages ratio in cases where punitive damages are available.”
For more, see Supreme Court affirms judgment against Quicken Loans.

For the ruling, see Quicken Loans, Inc. v. Brown, No. 11-0190 (WV. November 21, 2012).

(1) The Consumer Credit and Protection Act is West Virginia's version of the state laws that prohibit unfair and deceptive acts and practices in trade and commerce (generically referred to as state UDAP statutes).

For more on UDAP statutes across the U.S., see Consumer Protection In The States: A 50-State Report on Unfair and Deceptive Acts and Practices Statutes.

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