Mitchell Brozik and MB Security, LLC v. Parmer

         Monongalia County 13-C-651, 14-C-374

          MEMORANDUM DECISION

         These three consolidated appeals concern litigation sparked by a series of financial transactions involving Betty Parmer; Mitchell Brozik and his company, MB Security, LLC; Thomas Kupec, Brandon Kupec, and Gregory Morgan, three Clarksburg, West Virginia, attorneys; and United Bank and its loan officer, Randall Williams. The appeals in Docket Nos. 16-0292 and 16-0400 stem from a jury trial in the Circuit Court of Monongalia County, in which the jury returned a verdict in favor of Betty Parmer and against Mitchell Brozik and MB Security, LLC, in the amount of $1.5 million for breach of fiduciary duties, breach of contract, and fraud, and an additional $200, 000 in punitive damages, for a total award of $1.7 million. The jury also heard Betty Parmer's claims of negligence, legal malpractice, breach of fiduciary duties, and fraud against Respondents/Defendants below Thomas Kupec, Brandon Kupec, and Gregory Morgan, but found no liability on the part of these three parties.

         Specifically, in Docket No. 16-0292, Petitioners/Defendants below, Mitchell Brozik ("Mr. Brozik") and MB Security, LLC ("MB Security"), by counsel William J. Leon, appeal the circuit court's "Trial Order, " entered on December 21, 2015, and its "Order Denying Brozik and MB Security [sic] Post Trial Motions, " entered on February 23, 2016. Respondent/Plaintiff below Betty Parmer ("Ms. Parmer"), by counsel S. Sean Murphy, filed a response. Additionally, Respondent/Third-Party Defendant below Kourt Security Partners, LLC ("Kourt Security"), by counsel Charles J. Kaiser, Jr. and Jeffrey D. Kaiser, filed a response. Mr. Brozik and MB Security filed a reply.

         In Docket No. 16-0400, Ms. Parmer, by counsel S. Sean Murphy, appeals the circuit court's "Trial Order, " entered on December 21, 2015, and its order denying her motion for amended judgment and/or for a new trial, entered on March 15, 2016, as it related to the jury's adverse verdict regarding her claims against the three attorney defendants. Mr. Brozik and MB Security, by counsel William J. Leon, filed a summary response. Thomas Kupec and Brandon Kupec, by counsel, David D. Johnson, III and Larry A. Winter, filed a response. Gregory Morgan, by counsel Peter T. DeMasters, Kyle T. Turnbull, and Mina R. Gantous, also filed a response.

         Finally, the third consolidated case, Docket No. 16-0238, arises from the dismissal of a separate, but related, civil action filed by Ms. Parmer against United Bank, Inc. and Randall Williams (collectively, "United Bank"). In this appeal, Ms. Parmer, by counsel S. Sean Murphy, appeals the Circuit Court of Monongalia County's order granting United Bank's motion for summary judgment, entered on February 12, 2016, and its order denying Ms. Parmer's motion to reconsider the denial of her motion to amend her complaint, entered on February 18, 2016. United Bank, by counsel Shawn P. George, filed a response.

         This Court has considered the parties' briefs and the record on appeal in each of the three above-styled cases. The facts and legal arguments are adequately presented, and the decisional process would not be significantly aided by oral argument. Upon consideration of the standard of review, the briefs, and the record presented, the Court finds no substantial question of law and no prejudicial error. For these reasons, a memorandum decision consolidating the appeals and affirming the circuit court's orders is appropriate under Rule 21 of the Rules of Appellate Procedure.

         Factual and Procedural Background

         I.

         Docket Nos. 16-0292 and 16-0400: Ms. Parmer's claims against Mr. Brozik, MB Security, Thomas Kupec, Brandon Kupec, and Gregory Morgan

         A. Introduction

         These appeals stem from a series of financial transactions, the most important of which was a secured party sale of corporate assets that occurred on May 5, 2012. At the sale, Ms. Parmer foreclosed on assets owned by Secure US, a corporation owned by Mr. Brozik.^[1] Ms. Parmer is Mr. Brozik's aunt, with whom he enjoyed a close relationship throughout his life. Ms. Parmer is a resident of Harrisburg, Pennsylvania, and was 76 years old at the time of the transaction. Ms. Parmer and her husband built, operated, and sold multiple businesses during their marriage. Following their divorce in 1991, Ms. Parmer received a business and other investments worth several million dollars. It is undisputed that Ms. Parmer routinely provided financial assistance to Mr. Brozik over the years leading up to the 2012 transaction giving rise to her claims.^[2]

         The transaction at the center of this case was the result of Mr. Brozik seeking financial assistance from his aunt because he was at risk of losing his business, Secure US. In short, Secure U.S. had pledged all of its assets as collateral to secure a loan that Ms. Parmer purchased from a creditor of Secure U.S. in April 2012. Following the secured party sale on May 5, 2012, Ms. Parmer became the owner of Secure US's assets. Thereafter, Ms. Parmer and Mr. Brozik entered into a management agreement that provided that a new company formed by Brozik, MB Security, would manage Secure US's assets that Ms. Parmer had purchased and would continue to operate the business as usual.

         Ms. Parmer filed suit in September of 2013, naming Mr. Brozik and MB Security as defendants, and claiming breach of fiduciary duties, fraud, conspiracy, and conversion. Ms. Parmer also named as defendants three attorneys who were involved in the transaction, Thomas Kupec, Brandon Kupec, and Gregory Morgan. The Kupecs represented Mr. Brozik and Secure US; Gregory Morgan is unaffiliated with the Kupecs and presided over the secured party sale on May 5, 2012. Against the attorney defendants, Ms. Parmer raised the same claims that she raised against Mr. Brozik and MB Security, and added claims of negligence, legal malpractice, and breach of contract. In February of 2014, Ms. Parmer sought to terminate the management agreement with MB Security. By agreed order, the parties terminated the agreement and transferred operation of the business to Ms. Parmer. Additionally, Mr. Brozik and MB Security were unsuccessful in their attempts to have the circuit court dismiss Ms. Parmer's fraud claim on the basis that it lacked specificity.

         Mr. Brozik and MB Security filed their answer and a counterclaim in August of 2014. In their counterclaim, they asserted breach of contract, tortious interference with business opportunities, and conversion of Mr. Brozik's personal property. In addition, Mr. Brozik and MB Security filed a third-party complaint against Kourt Security, the entity that had purchased the Secure U.S. assets from Ms. Parmer during the pendency of this case below. Against Kourt Security, Mr. Brozik and MB Security raised claims of tortious interference and conversion, and sought indemnification and contribution for any damages that may be awarded to Ms. Parmer.

         Following discovery, the parties filed dispositive motions. Mr. Brozik and MB Security moved for summary judgment on Ms. Parmer's breach of fiduciary duty, fraud, and conspiracy claims, and also argued that Ms. Parmer suffered no damages. The circuit court denied Mr. Brozik's and MB Security's motion by order entered in November of 2015. Kourt Security was granted summary judgment with respect to Mr. Brozik's conversion of lost wages and profits and tortious interference claims. Mr. Brozik's claim that Kourt converted his personal property, his claims of quantum meruit for rent, and property damage claim survived summary judgment. Additionally, the circuit court dismissed Mr. Brozik's and MB Security's claim against Kourt Security for indemnification and contribution. The circuit court granted summary judgment in favor of the Kupecs and Mr. Morgan only with respect to Ms. Parmer's conspiracy claim. Finally, Ms. Parmer sought partial summary judgment in which she sought a declaration that she purchased Secure US's assets subject to a judgment lien held by Security Alarm Financing Services, Inc. ("SAFE"), which the circuit court denied.^[3]

         After addressing the parties' respective motions, the following claims were presented to the jury: (1) Ms. Parmer's claims of fraud, breach of contract, and breach of fiduciary duty against Mr. Brozik and MB Security; (2) Ms. Parmer's claims of fraud, breach of fiduciary duty, legal malpractice, and negligence against the Kupecs and Mr. Morgan; and (3) Mr. Brozik's and MB Security's claims of conversion of personal property, property damage, and quanum meruit for rent against Kourt Security. The case proceeded to a jury trial in December of 2015.^[4]

         B. The Trial Evidence

         The evidence revealed that Mr. Brozik's financial difficulties, at least as they related to the present litigation, began around 2008. Secure U.S. defaulted on a loan that it had obtained in 2007 from LaSalle Bank, which was later acquired by Bank of America. Bank of America sued Secure U.S. in the United States District Court of the Northern District of Illinois as a result of the default, and was granted summary judgment on the $3.5 million owed on the LaSalle Bank note. Secure U.S. was ordered to turn over its assets that it had pledged as collateral on the note. To avoid Bank of America's collection efforts, in 2009, Mr. Brozik sought help from Milan Puskar, a family friend. Mr. Puskar agreed to purchase the loan in order to acquire all of the related debt and security instruments and to extend Mr. Brozik an additional $900, 000 in credit, resulting in Mr. Brozik and Secure U.S. owing Mr. Puskar approximately $4 million. Mr. Brozik and Secure U.S. pledged their personal property as collateral to secure the line of credit. The Secure U.S. debt and security instruments were held by the Puskar Family Trust. Because the indebtedness of Secure U.S. and Mr. Brozik was prior in time to the SAFE Judgment lien, ^[5] the Puskar lien was superior in priority.

         In July of 2011, SAFE initiated efforts in the United States District Court for the Northern District of West Virginia to execute on its $1.132 million judgment against Secure US. As noted above, the Kupecs represented Secure U.S. in the SAFE matter. In March of 2012, a federal magistrate ordered that a judicial sale of Secure US's assets be held on May 16, 2012. In the midst of SAFE's collection efforts, in October of 2011, Mr. Puskar died unexpectedly. The Puskar Trust sought to divest itself of the Secure U.S. debt and security instruments, and was willing to accept $2.5 million from Mr. Brozik for the note with a face value of over $4 million. Around early April of 2012, Mr. Brozik approached Ms. Parmer to ask her if she was willing to loan him the $2.5 million. Ms. Parmer agreed to do so, and borrowed the necessary money from Centra Bank (now United Bank) in Morgantown, West Virginia. Ms. Parmer personally arranged for the loan and negotiated the terms, without counsel, with bank representative Randall Williams. Ms. Parmer's goal was to assist her nephew in keeping his business operating.

         However, rather than loaning Mr. Brozik the money, Ms. Parmer agreed to purchase the notes from the Puskar Trust herself, and then, according to Mr. Brozik and the attorney defendants, further agreed to foreclose on Secure US's assets prior to the SAFE judicial foreclosure scheduled for May of 2012. The alleged plan was for Mr. Brozik to then repay Ms. Parmer from the profits generated by continuing to operate the business. Mr. Brozik advised Brandon Kupec of his agreement with Ms. Parmer, and Brandon Kupec called Ms. Parmer and confirmed her understanding of the transactions.^[6] Ms. Parmer traveled to Morgantown for the closing on her loan from United Bank, which took place on April 19, 2012. That same day, following the closing on the loan, Ms. Parmer met with representatives from the Puskar Trust and executed the necessary documents for her to acquire the LaSalle/Bank of America note, Puskar line of credit, and related security instruments. As a result, Ms. Parmer stepped into the shoes of the Puskar Trust and acquired the total indebtedness of about $4 million secured by a first lien on all of Secure US's assets, which was superior to SAFE's $1.132 million judgment lien against Secure US.

         Ms. Parmer's next action was to give notice to Secure U.S. that she was calling on it to cure its default under the note and line of credit. Mr. Brozik then responded to Ms. Parmer's demand and stated that Secure U.S. was unable to cure the default. By letter dated April 20, 2012, Ms. Parmer requested that foreclosure proceedings commence. All of the foregoing letters were drafted by Brandon Kupec on behalf of Secure US. After discovering a conflict of interest with the initial attorney selected, the Kupecs requested that Gregory Morgan conduct the foreclosure sale. Mr. Morgan spoke with Ms. Parmer by telephone and explained that he would be conducting the foreclosure sale, and she confirmed that was her intention. According to Mr. Morgan, he and Ms. Parmer agreed that the goal of the sale was to make her the owner of the Secure U.S. assets. Ms. Parmer authorized Mr. Morgan to issue a bid of up to $4 million on her behalf.

         The secured party foreclosure sale took place on May 2, 2012. Of the seventeen attendees, there were only two bidders: Patrick Egan, owner of Kourt Security, and Mr. Morgan, on Ms. Parmer's behalf. Mr. Egan made a final bid of $3.6 million. Mr. Morgan then placed the winning bid for Ms. Parmer in the amount of $4 million. As a result, Ms. Parmer became the owner of Secure US's assets.

         Around the time of the sale in May of 2012, Mr. Brozik organized MB Security for the purpose of operating the security business using the former Secure U.S. assets. At Mr. Brozik's request, Brandon Kupec contacted Ms. Parmer to discuss her signing a management agreement with MB Security, which obligated MB Security to pay the $2.5 million note that Ms. Parmer obtained from United Bank and entitled MB Security to receive all profits and gains from the management of the new company. Ms. Parmer requested that Brandon Kupec make several modifications to the agreement, which he did. Ms. Parmer then signed the agreement in August of 2012.

         SAFE believed that it was aggrieved by the May 5, 2012, secured party sale, and filed suit against Ms. Parmer, Mr. Brozik, and Secure U.S. in the United States District Court for the Northern District of West Virginia on May 22, 2012. SAFE alleged that the sale was a fraudulent attempt to deny it the benefit of its $1.132 million judgment against Secure US. SAFE sought a declaration that its judgment lien survived the secured party sale and that Ms. Parmer be found personally liable for its judgment against Secure US. The District Court denied SAFE's motion for summary judgment that its judgment survived the sale and further ruled that Ms. Parmer could not be held personally liable under the theory of successor liability. However, despite these rulings, Ms. Parmer and SAFE entered into a settlement agreement wherein Ms. Parmer stipulated that (1) she was not a good faith purchaser of the Secure U.S. assets; (2) she took the Secure U.S. assets subject to SAFE's judgment lien; and (3) she was personally liable for SAFE's judgment lien.^[7] The crux of Ms. Parmer's claims in the present lawsuit was that she was unaware that she would become the owner of Secure US's assets; she alleged that she merely intended to help her nephew in his time of financial trouble.

         C. The Verdict

         Following the December of 2015, jury trial, the jury returned the following verdict: (1) neither Thomas nor Brandon Kupec breached any fiduciary duties owed to Ms. Parmer; (2) Mr. Brozik and MB Security breached both a contract with and fiduciary duties owed to Ms. Parmer; (3) neither Thomas Kupec nor Mr. Morgan committed negligence or malpractice; (4) Brandon Kupec committed negligence and malpractice in his representation of Ms. Parmer, however, the jury found Brandon Kupec and Ms. Parmer each to be 50 percent at fault; (5) Mr. Brozik and MB Security made false representations, untrue statements, failed to provide Ms. Parmer necessary and important information, and fraudulently induced Ms. Parmer into a series of transactions that made her the owner of Secure US's assets; (6) neither Thomas Kupec nor Brandon Kupec committed fraud; (7) Mr. Brozik and MB Security acted in a willful, wanton, and reckless manner; and (8) neither Thomas Kupec nor Brandon Kupec acted in a willful, wanton, and reckless manner. The jury found no liability on any of Mr. Brozik's conversion claims, real property claims, or quantum meruit/rent claims against Kourt Security.

         With respect to damages, the jury awarded a judgment in favor of Ms. Parmer in the amount of $750, 000 against Mr. Brozik and MB Security for breach of contract and breach of fiduciary duty; $750, 000 against Mr. Brozik and MB Security for fraud; and $200, 000 against Mr. Brozik and MB Security in punitive damages. The circuit court memorialized the jury's verdict in a "Trial Order" entered on December 21, 2015.

         D. The Post-Trial Motions

         Mr. Brozik and MB Security filed a post-trial motion in which they requested that the circuit court set aside the verdict and grant a new trial. The circuit court denied Mr. Brozik's and MB Security's motion by order entered on February 23, 2016. Ms. Parmer also filed a motion seeking a new trial with respect to her claims against the Kupecs and Mr. Morgan. The circuit court denied Ms. Parmer's post-trial motion by order entered on March 15, 2016. Mr. Brozik/MB Security and Ms. Parmer each appealed to this Court.

         II.

         Docket No. 16-0238:

         Ms. Parmer's claims against United Bank and Randall Williams

         In April of 2014, while her suit against Mr. Brozik, MB Security, the Kupecs, and Gregory Morgan was pending, Ms. Parmer filed a separate action against United Bank and its loan officer, Randall Williams, concerning their role in the transaction. She alleged claims of negligence, breach of fiduciary duty, and conspiracy. Specifically, Ms. Parmer alleged that when she closed on the $2.5 million loan from United Bank in April of 2012, she was unaware of the SAFE judgment or that her nephew was the subject of an Internal Revenue Service investigation. Rather, she alleged that she believed she was merely signing a note for her nephew to help him with his debt to the Puskar Trust. Ms. Parmer further alleged that United Bank was involved in every step of the alleged scheme that formed the basis of her claims against Mr. Brozik, MB Security, the Kupecs, and Greg Morgan. Additionally, she alleged that, without her knowledge, United Bank loaned an additional $827, 000 to MB Security pursuant to the management agreement and took as collateral the former Secure U.S. assets she owned. However, Ms. Parmer admitted that she signed the management agreement; that she contacted United Bank to originate the loan; and that Mr. Williams did not advise her one way or the other about whether to borrow the money.

         On December 16, 2015, ^[8] eighteen days before discovery closed in her suit against United Bank, Ms. Parmer moved to extend discovery, which United Bank opposed. Nevertheless, United Bank made their expert available and Ms. Parmer took the deposition. Additionally, United Bank's representative and Mr. Williams agreed to be deposed, but Ms. Parmer declined.

         United Bank filed a motion for summary judgment on January 6, 2016. Rather than file a response, Ms. Parmer filed two motions: a motion to disqualify the presiding circuit court judge^[9] and a motion to reconsider the previous denial of her motion to amend her complaint to allege fraud. The Chief Justice denied the disqualification motion by Administrative Order on January 22, 2016. Ms. Parmer then timely filed a response to United Bank's summary judgment motion.

         By order entered on February 12, 2016, the circuit court granted United Bank's motion for summary judgment. In sum, the circuit court ruled that (1) Ms. Parmer's negligence claim failed for a lack of valid legal duty; (2) Ms. Parmer had no breach of fiduciary duty claim because she did not allege a breach of contract and United Bank owes no fiduciary duty to a borrower absent special circumstances not present in this case; and (3) Ms. Parmer's civil conspiracy claim failed because she did not present any evidence of wrongdoing by United Bank. By order entered on February 18, 2016, the circuit court denied Ms. Parmer's motion to reconsider the denial of her motion to amend her complaint. Ms. Parmer appeals both orders to this Court.

         Discussion

         I.

         Docket No. 16-0292

         We first address the assignments of error raised on appeal by Mr. Brozik and MB Security in Docket No. 16-0292, which are as follows: (1) that the circuit court erred in denying their Rule 50(a) motions for judgment as a matter of law and seeking dismiss[al] [of] Ms. Parmer's fraud claim; (2) that the circuit court erred in denying their Rule 50(b) post-trial motion for judgment as a matter of law; (3) that the circuit court erred in ruling that Mr. Brozik breached a fiduciary duty; (4) that the circuit court erred in denying their Rule 50 motions asserting that Ms. Palmer suffered no damages; (5) that the circuit court erred in denying their motion to disqualify Judge Wilkes; and (6) that the circuit court failed to conduct a post-trial analysis of the jury's punitive damages award as required by Alkire v. First National Bank of Parsons, 197 W.Va. 122, 475 S.E.2d 122 (1996).

         Rule 50(a) of the West Virginia Rules of Civil Procedure, which governs a circuit court's entry of judgment as a matter of law, provides as follows:

(1)If during a trial by jury a party has been fully heard on an issue and there is no legally sufficient evidentiary basis for a reasonable jury to find for that party on that issue, the court may determine the issue against that party and may grant a motion for judgment as a matter of law against that party with respect to a claim or defense that cannot under the controlling law be maintained or defeated without a favorable finding on that issue.

(2) Motions for judgment as a matter of law may be made at any time before submission of the case to the jury. Such a motion shall specify the judgment sought and the law and the facts on which the moving party is entitled to the judgment.

         Moreover, this Court has held that

[i]n ruling . . . on a motion for a judgment notwithstanding the verdict, . . . the evidence must be viewed in the light most favorable to the nonmoving party. If on review, the evidence is shown to be legally insufficient to sustain the verdict, it is the obligation of this Court to reverse the circuit court and to order judgment for the appellant.

Syl. Pt. 1, in part, Mildred L.M. v. John O.F., 192 W.Va. 345, 452 S.E.2d 436 (1994). We expanded upon this standard by holding in syllabus point three of Alkire that

[t]he granting of a motion for judgment notwithstanding the verdict is reviewed de novo, which triggers the same stringent decisional standards that are used by the circuit courts. While a review of this motion is plenary, it is also circumscribed because we must review the evidence in a light most favorable to the nonmoving party.

Moreover,

[w]e review the rulings of the circuit court concerning a new trial and its conclusion as to the existence of reversible error under an abuse of discretion standard, and we review the circuit court's underlying factual findings under a clearly erroneous standard. Questions of law are subject to a de novo review.

Kizer v. Harper, 211 W.Va. 47, 51, 561 S.E.2d 368, 372 (2001).

         With respect to claims of fraud, this Court has held that the plaintiff is required to show the following ...