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Quicken Loans, Inc. v. Walters

Supreme Court of West Virginia

June 15, 2017

QUICKEN LOANS, INC., Petitioner
v.
MARSHA GALE WALTERS, administratrix for SUE WALTERS, Respondent

          Submitted: April 19, 2017

         Appeal from the Circuit Court of Raleigh County The Honorable H. L. Kirkpatrick III, Judge Civil Action No. 11-C-1123-K

         AFFIRMED IN PART; REVERSED IN PART; AND REMANDED.

          Jeffrey J. Bresch, Esq. JONES DAY Pittsburgh, PA Carrie Goodwin Fenwick, Esq. GOODWIN & GOODWIN, LLP Charleston, WV Counsel for Petitioner.

          Sarah K. Brown, Esq. Bren Pomponio, Esq. MOUNTAIN STATE JUSTICE Charleston, WV Counsel for Respondent.

          CHIEF JUSTICE LOUGHRY dissents and reserves the right to file a dissenting opinion.

          JUSTICE KETCHUM dissents and reserves the right to file a dissenting opinion.

         SYLLABUS BY THE COURT

         1. "Where the issue on an appeal from the circuit court is clearly a question of law or involving an interpretation of a statute, we apply a de novo standard of review." Syllabus Point 1, Chrystal R.L. v. Charlie A.L., 194 W.Va. 138, 459 S.E.2d 415 (1995).

         2. "'[T]he trial [court] … is vested with a wide discretion in determining the amount of … court costs and counsel fees; and the trial [court's] … determination of such matters will not be disturbed upon appeal to this Court unless it clearly appears that [it] has abused [its] discretion.' Syl. Pt. 3, in part, Bond v. Bond, 144 W.Va. 478, 109 S.E.2d 16 (1959)." Syllabus Point 1, Heldreth v. Rahimian, 219 W.Va. 462, 637 S.E.2d 359 (2006).

         3. "'The primary rule of statutory construction is to ascertain and give effect to the intention of the Legislature.' Syl. Pt. 8, Vest v. Cobb, 138 W.Va. 660, 76 S.E.2d 885 (1953)." Syllabus Point 1, Sheena H. for Russell H. v. Amfire, LLC, 235 W.Va. 132, 772 S.E.2d 317 (2015).

         4. "'Where a particular construction of a statute would result in an absurdity, some other reasonable construction, which will not produce such absurdity, will be made.' Syl. Pt. 2, Newhart v. Pennybacker, 120 W.Va. 774, 200 S.E. 350 (1938)." Syllabus Point 3, Sheena H. for Russell H. v. Amfire, LLC, 235 W.Va. 132, 772 S.E.2d 317 (2015).

         5. The provisions of West Virginia Code § 31-7-8(m)(8) apply to any primary or subordinate mortgage loan that exceeds the fair market value of the property at the time the loan is made, either singly, in the case of a first or consolidation mortgage loan, or in combination with any outstanding balances of any existing loan.

         6. "Where attorney's fees are sought against a third party, the test of what should be considered a reasonable fee is determined not solely by the fee arrangement between the attorney and his client. The reasonableness of attorney's fees is generally based on broader factors such as: (1) the time and labor required; (2) the novelty and difficulty of the questions; (3) the skill requisite to perform the legal service properly; (4) the preclusion of other employment by the attorney due to acceptance of the case; (5) the customary fee; (6) whether the fee is fixed or contingent; (7) time limitations imposed by the client or the circumstances; (8) the amount involved and the results obtained; (9) the experience, reputation, and ability of the attorneys; (10) the undesirability of the case; (11) the nature and length of the professional relationship with the client; and (12) awards in similar cases." Syllabus Point 4, Aetna Cas. & Sur. Co. v. Pitrolo, 176 W.Va. 190, 342 S.E.2d 156 (1986).

         7. Attorney fees and costs awarded under W.Va. Code §31-17-17(c) are compensatory in nature and shall be subject to offset by the amount of any good faith settlements previously made with the plaintiff by other jointly liable parties.

          WALKER, Justice.

         Following a five-day trial in the Circuit Court of Raleigh County, West Virginia, a jury found that Petitioner Quicken Loans, Inc. ("Quicken Loans") violated the "illegal loan" provision of the West Virginia Residential Mortgage Lender, Broker and Servicer Act, West Virginia Code §31-17-8(m)(8)[1] in originating a primary mortgage loan for Respondent Sue Walters2 and was liable to Ms. Walters for damages in the amount of $27, 000.00. The jury found in favor of Quicken Loans on Ms. Walters's claim of fraud, and further found that Quicken Loans had not acted with malice.

         Significantly, for purposes of this appeal, Ms. Walters had earlier settled her claims against co-defendants Kirk Riffe, an appraiser, and Bank of America N.A. ("BOA"), the entity that serviced the subject loan, for $75, 000.00 and $23, 000.00, respectively. Of these amounts, a total of $65, 500.00 was designated to be paid to Ms. Walters or on her behalf, and $32, 500.00 was designated as payment of attorney fees. In post-trial proceedings, the court below offset the settlement amounts designated to be paid to Ms. Walters against the $27, 000.00 in damages awarded by the jury. Subsequently, in considering Ms. Walters's request for an award of attorney fees and costs, the court offset the settlement amounts designated as attorney fees against the fees sought by Ms. Walters's counsel. Thus, in total the court offset only $59, 500.00 of the $98, 000.00 paid by the settling defendants, against the total damages, costs and fees awarded against Quicken Loans.

         In this appeal, Quicken Loans contends that the circuit court erred in allowing the illegal loan claim to go to the jury, arguing that W.Va. Code §31-17-8(m)(8) applies only where there are two or more mortgages on the property and the aggregate principal amount of the mortgage loans exceeds the property's fair market value. Quicken Loans also contends that the court erred in awarding any attorney fees, arguing that Ms. Walters did not prevail because the jury's verdict was effectively wiped out by application of the offset. Alternatively, Quicken Loans argues that the award of attorney fees cannot be sustained under the principles articulated in this Court's seminal decision in Aetna Casualty & Surety Co. v. Pitrolo, 176 W.Va. 190, 342 S.E.2d 156 (1986). Finally, Quicken Loans argues that the court erred in offsetting only a portion of the settlement monies received from appraiser Riffe and BOA against the total compensatory damages received by Ms. Walters, which damages include attorney fees and costs.

         After careful review of the parties' briefs and arguments, the Appendix Record, and the applicable law, we affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         In the summer of 2007, Ms. Walters called Quicken Loans seeking to refinance the existing mortgage loan on her home in Mabscott, Raleigh County, West Virginia. Ms. Walters, who was responding to a Quicken Loans advertisement, was interested in obtaining a lower interest rate and a lower mortgage payment.

         On September 14, 2007, Quicken Loans originated a fixed-rate, 30-year mortgage loan in the amount of $136, 000.00. As part of the loan approval process, Quicken Loans had contacted Title Source Inc., an entity described by Quicken Loans as "a related but independent company, " which in turn contracted with Kirk Riffe, a licensed appraiser. In performing the appraisal, Mr. Riffe compared Ms. Walters's Mabscott home to properties in the Woodlawn neighborhood of Beckley, concluding that the home was worth $152, 000.00. In fact, evidence at trial indicated that the fair market value of the property in September, 2007, was $64, 000.00, and that Mr. Riffe's appraisal methodology was fatally flawed.

         As of the date of closing of the Quicken Loans loan, no other mortgage loans existed on Ms. Walters's home; the purpose of the loan was to refinance her existing mortgage obligation, i.e., to pay off the existing mortgage loan and replace it with a loan carrying a lower rate of interest.

         Immediately after originating the loan, Quicken Loans sold it to Countrywide Financial, which in turn sold it to BOA. Ms. Walters made regular payments on the loan for approximately twenty months, after which she found herself in financial difficulty and attempted, unsuccessfully, to work out a modification with BOA.

         Thereafter, in December, 2011, Ms. Walters filed a lawsuit against Quicken Loans, Riffe and BOA, asserting three claims against Quicken Loans (unconscionable inducement, illegal loan, and fraud), two against Riffe (negligence and acceptance of a fee contingent on a predetermined conclusion), and one against BOA (illegal debt collection practice). In its answer, Quicken Loans admitted certain allegations, including, of relevance to this appeal, the principal amount of the loan. Further, Quicken Loans asserted affirmative defenses, including, of relevance to this appeal, that it had made the loan to Ms. Walters on reliance upon a bona fide written appraisal of the property made by Kirk Riffe, an independent third-party appraiser duly licensed or certified by the West Virginia Real Estate Appraiser Licensing and Certification Board, and prepared in compliance with the uniform standards of professional appraisal practice. Finally, Quicken Loans filed a motion for judgment on the pleadings, arguing that Ms. Walters's illegal loan claim failed as a matter of law because the statute on which the claim was based, West Virginia Code §31-17-8(m)(8), applies only where there are two or more mortgages on the property whose aggregate total exceeds the property's fair market value.

         The case was hotly contested for more than three years. The docket sheet for the litigation evidences voluminous written discovery, multiple dispositive motions, motions in limine, multiple hearings on motions, several court-led mediations, a motion to exclude "pattern and practice" witnesses and an evidentiary hearing on the motion, and the like. Ultimately, as noted above, Ms. Walters settled with Mr. Riffe and BOA and dismissed her claim against Quicken Loans for unconscionable inducement, deeming it duplicative. On March 2, 2015, Ms. Walters's case against Quicken Loans proceeded to trial on the two remaining claims (illegal loan, and fraud), resulting in a finding for Ms. Walters on the illegal loan claim, a finding for Quicken Loans on the fraud claim, and a finding that Quicken Loans had not acted with malice. As noted, the jury awarded Ms. Walters $27, 000.00 in compensatory damages. In light of its finding on the fraud claim, the jury did not address the issue of punitive damages.

         In post-trial proceedings, Quicken Loans filed a motion to correct the verdict pursuant to Rule 60(a) of the West Virginia Rules of Civil Procedure, requesting that the circuit court apply an offset of the Riffe/BOA settlement monies as follows: $27, 000.00 to be offset against the jury's award of damages, and the remaining $71, 000.00 to be offset against any attorney fees that might be awarded to Ms. Walters's counsel. Ms. Walters, in turn, filed a petition for an award of attorney fees, seeking $180, 312.55 in fees and costs for 675 hours of work. After requiring Ms. Walters's attorneys to refine their billing entries, in order to allow the court to better distinguish work done and costs incurred on claims against settling defendants and claims in which Ms. Walters did not prevail, and following a hearing on both outstanding motions, the court below ruled that Ms. Walters had "suffered a single indivisible loss arising from the combined actions of Defendant Quicken Loans and the settling co-defendants, Bank of America and Kirk Riffe … [and therefore] Defendant Quicken Loans is entitled to an offset as a matter of law"; and Ms. Walters prevailed on her claim based on a violation of the appraisal statute "regardless of the dollar amount of damages actually awarded…, " and therefore was entitled to an award of attorneys' fees and costs.

         The court applied the offset not as Quicken Loans had requested but as follows: (1) the portion of the combined Riffe/BOA settlements payable to Ms. Walters or on her behalf ($65, 500.00)[3] was offset against the damages awarded by the jury against Quicken Loans, effectively wiping out the jury award; and (2) the portion of the settlements designated as attorney fees ($32, 500.00) was offset against the fees and costs sought from Quicken Loans. The total amount of the fees and costs awarded to Ms. Walters's attorneys by the court, after application of the offset, was $156, 653.38.

         II. STANDARD OF REVIEW

         It is well established in this Court's jurisprudence that "[w]here the issue on an appeal from the circuit court is clearly a question of law or involving an interpretation of a statute, we apply a de novo standard of review." Syl. Pt. 1, Chrystal R.L. v. Charlie A.L., 194 W.Va. 138, 459 S.E.2d 415 (1995).

         With respect to our review of an award of costs and damages, we have held that:

"[T]he trial [court] … is vested with a wide discretion in determining the amount of … court costs and counsel fees; and the trial [court's] … determination of such matters will not be disturbed upon appeal to this Court unless it clearly appears that [it] has abused [its] discretion." Syl. Pt. 3, in part, Bond v. Bond, 144 W.Va. 478, 109 S.E.2d 16 (1959).

Syl. Pt. 1, Heldreth v. Rahimian, 219 W.Va. 462, 637 S.E.2d 359 (2006).

         III. DISCUSSION

         A. Applicability of West Virginia Code §31-17-8(m)(8)

         The first issue we consider is whether West Virginia Code §31-17-8(m)(8) applies where, as here, the mortgage at issue is the sole mortgage on the subject property. Quicken Loans contends that by its express terms, West Virginia Code §31-17-8(m)(8) applies only where there are two or more mortgages on the property and the aggregate principal amount of the mortgage loans exceeds the property's fair market value. In furtherance of its position, Quicken Loans presents the relevant portion of the statute as follows:

In making any primary or subordinate mortgage loan, no licensee may, and no primary or subordinate mortgage lending transaction may, contain terms which: … (8) Secure a primary or subordinate mortgage loan in a principal amount that, when added to the aggregate total of the outstanding principal balances of all other primary or subordinate mortgage loans secured by the same property, exceeds the fair market value of the property on the date that the latest mortgage loan is made…. (Emphasis in Quicken Loans brief)

         In reliance on the longstanding rule of statutory construction "that significance and effect must, if possible, be given to every section, clause, word or part of the statute, " Syl. Pt. 3, in part, Meadows v. Wal-Mart Stores, Inc., 207 W.Va. 203, 530 S.E.2d 676 (1999), Quicken Loans argues that under the clear and unambiguous terms of the emphasized language, a single mortgage loan, even one in a principal amount that exceeds the property's fair market value, does not fall within the statutory prohibition. Quicken Loans points out that in Skibbe v. Accredited Home Lenders, Inc., No. 2:08-cv-01393, 2014 WL 2117088 at *6 (S.D. W.Va. May 21, 2014), the United States District Court for the Southern District of West Virginia so held, and that this Court should find Judge Goodwin's opinion to be persuasive, if not dispositive.[4]

         In contrast, Ms. Walters contends that by its express terms, West Virginia Code §31-17-8(m)(8) applies to any primary or secondary loan whose principal amount exceeds the property's fair market value. In furtherance of her position, Ms. Walters presents the relevant portion of the statute in her brief as follows:

In making any primary or subordinate mortgage loan, no licensee may, and no primary or subordinate mortgage lending transaction may, contain terms which: … (8) Secure a primary or subordinate mortgage loan in a principal amount that, when added to the aggregate total of the outstanding principal balances of all other primary or subordinate mortgage loans secured by the same property, exceeds the fair market value of the property on the date that the latest mortgage loan is made…. (Emphasis in Ms. Walters's brief)

         In reliance on the same rule of statutory construction as set forth above, Ms. Walters argues that literal application of the "aggregate total" language would effectively eliminate all primary loans, including consolidation loans, from the statute's ambit, as only secondary loans are defined under the Act as those "… subject to the lien of one or more prior recorded mortgages or deeds of trust." W.Va. Code §31-17-1(o). Ms. Walters further suggests that in this case the "aggregate total of the outstanding principal balances of all other primary or subordinate mortgage loans…, " equals zero, an attempt to finesse Quicken Loans's argument by focusing solely on the amount of total indebtedness, not the number of mortgages on the property.

         In short, we are presented with an interesting situation in which both parties contend that West Virginia Code §31-17-8(m)(8) is clear and unambiguous - and then reasonably argue, utilizing the same rule of statutory construction, that the statutory provision has two entirely irreconcilable clear and unambiguous meanings. On this basis alone it might be tempting for this Court to conclude that the statute is ambiguous, but our precedents counsel against a rush to such conclusion. See Habursky v. Recht, 180 W.Va. 128, 132, 375 S.E.2d 760, 764 (1988) (disagreement among the parties "as to the meaning or the applicability of [a statutory] provision does not of itself render [the] provision ambiguous or of doubtful, uncertain or obscure meaning.") (internal quotations and citations omitted); see also T. Weston, Inc. v. Mineral Cty., 219 W.Va. 564, 568, 638 S.E.2d 167, 171 (2006) ("[t]he fact that parties disagree about the meaning of a statute does not itself create ambiguity or obscure meaning.") (internal citations omitted). Rather, we will look beyond the parties' arguments, and their laser focus on a single rule of statutory construction, in order to determine whether our precedents provide a path to a more enlightened analysis.

         As a threshold matter, we reject Ms. Walters's claim that this issue was resolved in Quicken Loans v. Brown, 230 W.Va. 306, 737 S.E.2d 640 (2012) (Quicken Loans I), either directly or sub silentio. Although one count of the complaint in Quicken Loans I alleged a violation of West Virginia Code §31-17-8(m)(8) in the origination of a primary loan - a consolidation loan, as in the instant case - the trial court's ruling that the statute applied to a single primary loan was not challenged on appeal. Rather, the illegal loan count was raised on appeal only in the context of whether the lower court erred in finding that a negligent violation of the statute supported the remedy of cancellation of the loan.[5] Quicken Loans I, 230 W.Va. at 325-26, 737 S.E.2d at 659-60. We found this ruling to be error. The remainder of the Quicken Loans I decision dealt with issues involving attorney fees and punitive damages, all arising from the court's findings that Quicken Loans was liable for common law fraud and various claims under the West Virginia Consumer Credit and Protection Act, West Virginia Code §§ 46A-1-1 through 8-102. Thus, whether the appraisal statute applied to a single primary loan was neither raised in the appeal nor material to its disposition.

         Similarly, we reject Quicken Loans's urging that we treat Judge Goodwin's ruling in Skibbe as persuasive authority. Judge Goodwin held that "[by] its terms, the statute does not apply when a borrower takes out her first mortgage loan and the principal balance of that loan exceeds the fair market value of the property at the time the loan is made…." Skibbe, 2014 WL 2117088 at *6. However, the district court provided no analysis to support his reasoning, and cited no precedents or other authority upon which he had relied, and we do not find a bald conclusion to be persuasive.

         As this Court has instructed on many occasions, "'[t]he primary rule of statutory construction is to ascertain and give effect to the intention of the Legislature.' Syl. Pt. 8, Vest v. Cobb, 138 W.Va. 660, 76 S.E.2d 885 (1953)." Syl. Pt. 1, Sheena H. for Russell H. v. Amfire, LLC, 235 W.Va. 132, 772 S.E.2d 317 (2015). More specifically, and of particular relevance to this case, we have held that "'[w]here a particular construction of a statute would result in an absurdity, some other reasonable construction, which will not produce such absurdity, will be made.' Syl. Pt. 2, Newhart v. Pennybacker, 120 W.Va. 774, 200 S.E. 350 (1938)." Syl. Pt. 3, Sheena H.

         West Virginia Code §31-17-8(m)(8) is contained in Article 17, Section 8 of the WEST VIRGINIA RESIDENTIAL MORTGAGE LENDER, BROKER AND SERVICER ACT. W.Va. Code §§ 31-17-1 through -20 (2015). Article 17, Section 8 is entitled Maximum interest rate on subordinate loans; prepayment rebate; maximum points, fees and charges; overriding of federal limitations; limitations on lien documents; prohibitions on primary and subordinate mortgage loans; civil remedy; and consistent with the tenor of this title language, all of the Section 8 provisions fall within one or both of two categories, restrictions on mortgage lenders, brokers and servicers, and protections for borrowers. W.Va. Code §§ 31-17-8. Section 8(m)(8) falls within the former category: it is a restriction on a lender's ability to extend either a primary or subordinate loan which, in lay terms, puts the borrower "underwater" on his or her mortgage indebtedness. The Legislature enumerated only two defenses to this statutory restriction, both very specific. The first exception provides that

[f]or purposes of this paragraph [§8(m)(8)], a broker or lender may rely upon a bona fide written appraisal of the property made by an independent third-party appraiser, duly licensed or certified by the West Virginia Real Estate Appraiser Licensing and Certification Board and prepared in compliance with the uniform standards of professional appraisal practice.

         W.Va. Code § 31-17-8(m)(8). Pursuant to this statutory exception, Quicken Loans asserted as an affirmative defense that it had relied on a bona fide written appraisal made by an independent ...


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