Lucas v. Fairbanks Capital Corp.

• Decision Date: 14 July 2005
• Docket Number: No. 31745.,No. 31744.,31744.,31745.
• Parties: Jackie LUCAS, Janice Lucas, Jack Overbaugh, Charlotte Overbaugh, Dale Michaelson, Pansy Michaelson, and Angela Michaelson, Individually and on Behalf of All Others Similarly Situated, Plaintiffs, v. FAIRBANKS CAPITAL CORP., a Corporation, R. Vance Golden, III, John Doe and Robert Doe, as Trustees, Defendants.
• Court: West Virginia Supreme Court

618 S.E.2d 488

Jackie LUCAS, Janice Lucas, Jack Overbaugh, Charlotte Overbaugh, Dale Michaelson, Pansy Michaelson, and Angela Michaelson, Individually and on Behalf of All Others Similarly Situated, Plaintiffs, v. FAIRBANKS CAPITAL CORP., a Corporation, R. Vance Golden, III, John Doe and Robert Doe, as Trustees, Defendants.

No. 31744.

No. 31745.

Supreme Court of Appeals of West Virginia.

Submitted January 12, 2005.

Decided March 18, 2005.

Concurring and Dissenting Opinion of Justice Starcher July 14, 2005.

COPYRIGHT MATERIAL OMITTED

Daniel F. Hedges, Bren J. Pomponio, Heather W. Walsh, Mountain State Justice, Inc., Charleston, for Plaintiffs.

R. Vance Golden, III, Golden & Amos, Parkersburg, Pro Se.

Sandra M. Murphy, Julia A. Chincheck, Thomas A. Heywood, Courtney A. Kirtley, Bowles Rice McDavid Graff & Love, L.L.P., Charleston, for Amici Curiae, The West Virginia Bankers Assoc., Inc. and The West Virginia Association of Community Bankers, Inc.

Ancil G. Ramey, Kara L. Cunningham, Steptoe & Johnson, P.L.L.C., Charleston, Evans L. King, Jr., Davin L. Seamon, Steptoe & Johnson, P.L.L.C., Clarksburg, Thomas M. Hefferon, Goodwin Procter, L.L.P., Washington, DC, for Defendant, Fairbanks Capital Corp.

DAVIS, Justice:

The Circuit Court of Lincoln County presents this Court with two certified questions involving sales under deeds of trust given as security for home mortgage loans under W. Va.Code § 38-1-3 (1923) (Repl. Vol. 1997). The first question inquires whether a trustee's fiduciary duty requires him or her to, prior to foreclosure, perform functions that are not expressly set out in any relevant statute or the deed of trust document. We answer this question in the negative. The second question asks whether the creditor in a deed of trust must pursue remedies that are not set out in the deed of trust document or any relevant statute to attempt to cure a default prior to foreclosure. We likewise answer this question in the negative.

I. FACTUAL AND PROCEDURAL HISTORY

The underlying putative class action lawsuit was filed on January 2, 2003, in the Circuit Court of Lincoln County, by plaintiffs Jackie and Janice Lucas, Jack and Charlotte Overbaugh, Dale and Pansy Michaelson, and Angela Kennedy, individually and on behalf of all others similarly situated (hereinafter collectively referred to as "the Lucases"), against defendants Fairbanks Capital Corp. (hereinafter referred to as "Fairbanks"), and R. Vance Golden, III (hereinafter referred to as "Mr. Golden").¹ The Lucases are homeowners who are obligated under home loans for which Fairbanks is the loan servicer.² The Lucases alleged numerous wrongful acts by Fairbanks in performing its loan servicing activities, such as failing to post or improperly posting payments tendered, charging and collecting unlawful fees, and illegally pursuing foreclosure. They asserted causes of action against Fairbanks for breach of the duty of good faith and fair dealing, illegal pursuit of foreclosure, and collection of unauthorized charges.

Mr. Golden, the second named defendant in the Lucases law suit, serves as trustee or substitute trustee on many West Virginia deeds of trust for loans serviced by Fairbanks. The Lucases asserted claims against Mr. Golden for breach of fiduciary duty as trustee and illegal pursuit of forfeiture. The Lucases sought actual and punitive damages against both Fairbanks and Mr. Golden, and further sought to enjoin Fairbanks and Mr. Golden from pursuing "illegal practices as alleged." In addition, the Lucases filed a motion for a temporary injunction to enjoin Fairbanks and Mr. Golden from foreclosing on any properties in West Virginia. On or about January 8, 2003, the Circuit Court of Lincoln County entered an order granting the temporary injunction and directing that Mr. Golden "shall not proceed with any foreclosure on behalf of defendant Fairbanks on loans serviced by Fairbanks in the State of West Virginia until further order of this Court."

Thereafter, on or about January 17, 2003, the Lucases filed a motion seeking partial judgment on the pleadings and a motion to certify questions. Substantial proceedings followed, including significant settlement discussions. The parties ultimately reached a monetary settlement of the action. However, the parties apparently disagreed as to whether they had also resolved issues related to declaratory or injunctive relief, which led the Lucases to file a motion to enforce settlement. Following a hearing on or about December 8, 2003, the circuit court approved, at least on a preliminary basis, the monetary settlement, but did not act on the motion to enforce settlement as it related to other relief. The circuit court did, however, hear arguments related to the Lucases' motion to certify questions, and ultimately agreed to certify the following two questions to this Court:

1. Does the fiduciary duty of the trustee to both parties of a deed of trust include the duty to proceed to foreclosure (a) only after review of the account records to ascertain the actual amount due, and (b) to consider legitimate objections of the grantor/homeowner to foreclosure sale?

The circuit court answered this question in the affirmative.

2. Does the principle that equity abhors a forfeiture require home equity loan servicers such as Fairbanks Capital Corp. to pursue another remedy (e.g. a repayment plan, or other remedy at law) other than foreclosure when it can be made whole through such other remedy?

The circuit court answered this question in the affirmative.

Following the circuit court's ruling granting the motion to certify questions, the parties negotiated further and apparently reached an agreement with respect to disputed declaratory and injunctive aspects of their dispute, with the exception of the issues raised in the questions herein certified. By order entered December 8, 2003, the circuit court certified the two above-quoted questions to this Court. On March 24, 2004, Fairbanks filed a petition in this Court asking that we accept the questions certified, and further asking that we reformulate those questions. On the same day, the Lucases filed a petition asking this Court to docket the certified questions. We consolidated the two petitions for purposes of our consideration and accepted the certified questions for review. Upon examining the briefs filed by the Lucases; Fairbanks; Mr. Golden;³ and The West Virginia Bankers Associate, Inc and The West Virginia Association of Community Bankers, Inc., as Amici Curiae;⁴ hearing oral arguments, and reviewing the relevant law, we reformulate both questions and now answer them in the negative.⁵

II. CERTIFIED QUESTIONS

Upon consideration of the questions certified by the Circuit Court of Lincoln County, we have determined that reformulating them will allow this Court to better address the legal questions therein raised. In this respect, we have previously held that

"`[w]hen a certified question is not framed so that this Court is able to fully address the law which is involved in the question, then this Court retains the power to reformulate questions certified to it under both the Uniform Certification of Questions of Law Act found in W. Va.Code, 51-1A-1 et seq. and W. Va.Code, 58-5-2 [1967], the statute relating to certified questions from a circuit court of this State to this Court.' Syl. Pt. 3, Kincaid v. Mangum, 189 W.Va. 404, 432 S.E.2d 74 (1993)." Syllabus Point 1, Aikens v. Debow, 208 W.Va. 486, 541 S.E.2d 576 (2000).

Syl. pt. 1, Charter Communications VI, PLLC v. Community Antenna Serv., Inc., 211 W.Va. 71, 561 S.E.2d 793 (2002). Accord W. Va.Code § 51-1A-4 (1996) (Repl. Vol. 2000) ("The [S]upreme [C]ourt of [A]ppeals of West Virginia may reformulate a question certified to it."). Therefore, we reformulate the first certified question as follows:

1. Does the trustee in a trust deed given as security in connection with a home mortgage loan owe a fiduciary duty to the signatories of the trust deed to, prior to foreclosing under W. Va.Code § 38-1-3 (1923) (Repl. Vol. 1997), (1) review account records to ascertain the actual amount due, or (2) consider objections to foreclosure raised by the trust grantor?

The second certified question is reformulated to ask:

2. Does the principle that equity abhors a forfeiture require creditors in a deed of trust, or their representatives, to pursue remedies that are not set out in the deed of trust, or any relevant statutes, to attempt to cure a default prior to pursuing a foreclosure under W. Va.Code § 38-1-3?

Following a brief statement of the appropriate standard for our review, we will address each of these questions in turn.

III. STANDARD OF REVIEW

It is well-settled law that "`[t]he appellate standard of review of questions of law answered and certified by a circuit court is de novo.' Syllabus point 1, Gallapoo v. Wal-Mart Stores, Inc., 197 W.Va. 172, 475 S.E.2d 172 (1996)." Syllabus pt. 2, Keplinger v. Virginia Elec. & Power Co., 208 W.Va. 11, 537 S.E.2d 632 (2000). Accord Syl. pt. 1, Perito v. County of Brooke, 215 W.Va. 178, 597 S.E.2d 311 (2004); Syl. pt. 2, Charter Communications v. Community Antenna Serv., Inc., 211 W.Va. 71, 561 S.E.2d 793. Accordingly, we proceed to conduct a plenary review of the reformulated certified questions.

IV. DISCUSSION

In presenting their arguments to this Court in relation to the questions herein certified, the parties have discussed at length the changes that have occurred in the lender/borrower relationship in this State. They have explained the development and growth of the secondary mortgage market and exhorted its pros and cons. They also discuss the pervasive use of loan servicers such as the defendant Fairbanks in the lending industry. Furthermore, the parties explore the possible benefits and risks of accomplishing change in this critical area, which ranges from providing greater protection for homeowners to severely limiting the availability of mortgage loans to...