Mallory v. Mortgage America, Inc.

• Decision Date: 30 September 1999
• Docket Number: No. Civ.A. 2:97-0338.,Civ.A. 2:97-0338.
• Citation: 67 F.Supp.2d 601
• Court: U.S. District Court — Southern District of West Virginia
• Parties: Harry I. MALLORY and Jeanne L. Mallory, individually and on behalf of all others similarly situated, Plaintiffs, v. MORTGAGE AMERICA, INC., a corporation d/b/a Alternative Lending Mortgage Corporation and Industry Mortgage Company, a corporation, Defendants.

67 F.Supp.2d 601

Harry I. MALLORY and Jeanne L. Mallory, individually and on behalf of all others similarly situated, Plaintiffs, v. MORTGAGE AMERICA, INC., a corporation d/b/a Alternative Lending Mortgage Corporation and Industry Mortgage Company, a corporation, Defendants.

No. Civ.A. 2:97-0338.

United States District Court, S.D. West Virginia, at Charleston.

September 30, 1999.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Daniel Hedges, Mountain State Justice, Inc., Charleston, WV, for plaintiffs.

Richard L. Gottlieb, Lewis, Friedberg, Glasser, Casey & Rollins, Charleston, WV, for defendants.

MEMORANDUM ORDER

COPENHAVER, District Judge.

This matter is before the court on the parties' cross motions for summary judgment with respect to the state law class claim asserted in Count I of plaintiffs' amended complaint.

I.

On September 7, 1996, the named plaintiffs borrowed $60,000 from defendant Mortgage America, Inc. d/b/a Alternative Lending Mortgage Company. The loan was subsequently assigned to defendant Industry Mortgage Company. The named plaintiffs were to repay the loan at a rate of approximately $819 per month for a period of 179 months, for a total of $146,601. At the conclusion of this period, the named plaintiffs were to make a balloon payment to defendants of $55,925.

The named plaintiffs complain of several aspects of the loan transaction and they assert four individual claims in addition to the one class claim.¹ The Count I class claim concerns whether the loan complied with West Virginia Code § 46A-2-105(2), which, in short, requires loan documents to disclose in specified language, set out conspicuously,² the existence of any balloon payment due under a consumer loan, such as the loan in issue, and whether the failure to disclose such a payment in the language and the all-capital letters set forth in the statute renders the loan illegal, unconscionable and unenforceable pursuant to West Virginia code § 46A-2-121. Plaintiffs seek civil penalties in the amount of $3,100 for each of the named plaintiffs and class members as a result of defendants' alleged failure to comply with West Virginia Code § 46A-2-105(2). The court provisionally certified the class b a memorandum order entered March 30, 1998, and fully certified the class by order entered April 30, 1998. the certified class consists of all consumers who signed a balloon loan agreement in West Virginia with the defendants within ten years of the filing of this action and whose loan agreement did not comply with § 46A-2-105(2).³

II.

A. Summary Judgment Standard

A party is entitled to summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). Material facts are those necessary to establish the elements of a party's cause of action. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). If a party fails to establish an essential element of the cause of action, the opposing party is entitled to summary judgment. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). That is, a defendant satisfies its requirement as a matter of law by demonstrating that there is an absence of evidence to support the plaintiff's claims. Cray Communications, Inc. v. Novatel Computer Sys., Inc., 33 F.3d 390, 393-94 (4th Cir.1994), cert. denied, 513 U.S. 1191, 115 S.Ct. 1254, 131 L.Ed.2d 135 (1995). A defendant is also entitled to summary judgment if the record as a whole could not lead a rational trier of fact to find in favor of the plaintiff. Williams v. Griffin, 952 F.2d 820, 823 (4th Cir.1991).

Conversely, summary judgment is not appropriate if the evidence is sufficient for a reasonable jury to return a verdict in favor of the plaintiff. Anderson, 477 U.S. at 248, 106 S.Ct. 2505. Even if there is no dispute as to the evidentiary facts, summary judgment is also not appropriate where the ultimate factual conclusions to be drawn from them are in dispute. Overstreet v. Kentucky Cent. Life Ins. Co., 950 F.2d 931, 937 (4th Cir.1991).

In reviewing the evidence, a court must neither resolve disputed facts or weigh the evidence, Ross v. Communications Satellite Corp., 759 F.2d 355, 364 (4th Cir.1985), nor make determinations of credibility, Sosebee v. Murphy, 797 F.2d 179, 182 (4th Cir.1986). Rather, the party opposing the motion is entitled to have his or her version of the facts accepted as true and, moreover, to have all internal conflicts resolved in his or her favor. Charbonnages de France v. Smith, 597 F.2d 406, 414 (4th Cir.1979). Inferences that are "drawn from the underlying facts ... must be viewed in the light most favorable to the party opposing the motion." United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962).

B. Failure to Disclose Balloon Payment in Accordance With West Virginia Code § 46A-2-105(2)

Count I alleges, in part, that defendants' loan documents failed to properly disclose the existence of any balloon payment due under the terms of the loan in accordance with West Virginia Code § 46A-2-105(2), which provides, in pertinent part, that:

With respect to a consumer credit sale or consumer loan whenever any scheduled payment is at least twice as large as the smallest of all earlier scheduled payments other than any down payment, any writing purporting to contain the agreement of the parties shall contain the following language typewritten or printed in a conspicuous manner. THIS CONTRACT IS NOT PAYABLE IN INSTALLMENTS OF EQUAL AMOUNTS: Followed, if there is only one installment which is at least twice as large as the smallest of all earlier scheduled payments other than any down payment, by: AN INSTALLMENT OF $....... WILL BE DUE ON ....... or, if there is more than one such installment, by: LARGER INSTALLMENTS WILL BE DUE AS FOLLOWS: (The amount of every such installment and its due date shall be inserted).

W.Va.Code § 46A-2-105(2) (1998).

In connection with their loan, the named plaintiffs signed various documents, including, but not limited to, a truth-in-lending disclosure statement, a promissory note, a balloon rider, a balloon mortgage notice, and a mortgage loan disclosure statement. According to defendants, these same documents are signed by all of their consumer borrowers who obtain a balloon loan secured by an interest in real estate. (See Defendants' Memo. in Support of Motion for Partial Summary Judgment, Exh. A, Affidavit of Thomas P. LaPorte, ¶ 8).

The documents signed by the named plaintiffs contained the following disclosures regarding the balloon payment. First, the truth-in-lending disclosure statement included the following language:

Your Payment Schedule Will Be:

179 payments monthly of $818.96 beginning October 12, 1996

1 payment of $55,925.32 due on September 12, 2011 (See Defendants' Memo. in Support of Motion for Partial Summary Judgment, Exh. C, Truth-in-Lending Disclosure Statement).

Additionally, Section 3 of the promissory note provided that:

3. PAYMENTS

* * * * * *

(B) Amount of Monthly Payments

My monthly payment will be in the amount of U.S. $179 payments monthly of $818.96 beginning October 12, 1996 1 payment of $55,925.32 due on September 12, 2011

(See Id., Promissory Note).

Attached to the promissory note was a rider entitled "BALLOON RIDER TO NOTE" which stated the following:

For a valuable consideration, receipt of which is hereby acknowledged, both Borrower and Lender agree that this BALLOON RIDER TO NOTE ("Rider") amends that certain Promissory Note ("Note") of date shown above, to which this Rider is attached. Borrower and lender agree that this Note shall be subject to the following provisions, notwithstanding any provisions to the contrary contained in said Note or the Mortgage given by Borrower to secure repayment of the Note.

BALLOON PAYMENT

This loan is payable in full at the end of fifteen (15) years. Borrower must repay the entire principal balance of the loan and the unpaid interest then due. THE LENDER IS UNDER NO OBLIGATION TO REFINANCE THE LOAN AT THAT TIME. Borrower will therefore be required to make payment out of other assets borrower may own, or borrower will have to find a lender, which may be the lender borrowers [sic] has this loan with, willing to lend borrower the money at prevailing market rates, which may be considerably higher or lower than the interest rate on this loan. If borrowers [sic] refinances this loan at maturity, borrower may have to pay some or all closing costs normally associated with a new loan, even if borrower obtains refinancing from the same lender.

(See Id., Balloon Rider to Note).

Plaintiffs also signed a balloon mortgage notice reading as follows:

BALLOON MORTGAGE NOTICE

Thank you for applying for a mortgage loan from us. The payment schedule you've selected requires a "balloon" payment. We urge you to read this very carefully because we feel it is important you understand it.

By having a balloon payment as a final payment, we can offer you a loan with smaller monthly payments. In other words, because you will make a larger payment at the end of the loan, your regular monthly payment will be lower than the monthly payment on a loan with equal payments over the same number of months.

"IMPORTANT"

At the end of the loan you will have three alternatives:

1. To apply to us to refinance the balloon payment so that you can pay it in monthly installments. The refinance will be available only to those who have handled their account in a satisfactory manner and have satisfactorily maintained their financial condition.

2. To pay the balloon payment in full.

3. To apply to another lender to refinance the balloon payment.

Before signing this statement which acknowledges your acceptance of the balloon...