McFarland v. Wells Fargo Bank, N.A.
| Decision Date | 07 May 2014 |
| Docket Number | Civil Action No. 2:12–cv–07997. |
| Citation | 19 F.Supp.3d 663 |
| Court | U.S. District Court — Southern District of West Virginia |
| Parties | Philip McFARLAND, Plaintiff, v. WELLS FARGO BANK, N.A., et al., Defendants. |
Daniel F. Hedges, Jennifer S. Wagner, Sarah K. Brown, Mountain State Justice, Inc., Charleston, WV, for Plaintiff.
Jason E. Manning, John C. Lynch, Troutman Sanders, Virginia Beach, VA, for Defendants.
In West Virginia, lender liability suits have taken a strange turn that threatens to uproot basic principles of contract law. The plaintiffs in these suits, homeowners tied to mortgages, have concocted a novel theory of injury. That theory is as follows: refinancing a home for more than its fair market value is one-sided and overly harsh against the borrower, justifying rescission of a home loan. I have concluded that this theory is absurd. But it has been repeatedly accepted by other judges. Therefore, with some trepidation, I will explain my view, beginning with the bald statement that neither West Virginia law nor cases outside of this state support the notion that lending too much money is unfair.
Before the court is Defendants Wells Fargo Bank, N.A.'s and U.S. Bank National Association's Motion for Summary Judgment [Docket 46]. For the reasons stated below, the motion is GRANTED in part and DENIED in part. Counts I, III, and IV are DISMISSED.
In June 2006, the plaintiff refinanced his home and entered into two new loan agreements secured by his home. In the first agreement, the plaintiff signed an adjustable rate note with a principal amount of $181,800 in favor of Wells Fargo Bank, N.A. (“Wells Fargo”). In the second agreement, the plaintiff signed a note for a home equity line of credit with a principal amount of $20,000 in favor of Greentree Mortgage Corporation (“Greentree”). I will refer to these loans collectively as “the loan.”
By late 2007, the plaintiff was struggling to keep up with payments on the notes and reached out to Wells Fargo for assistance. The plaintiff alleges that Wells Fargo offered to modify his loan in March 2008, June 2009, and October 2009. Each time, however, Wells Fargo allegedly refused to honor the modification agreements after the plaintiff accepted the offers and signed the contracts.
On May 8, 2010, the plaintiff finally obtained a loan modification, but he was unable to meet his obligations under the modified loan. By 2012, Wells Fargo initiated foreclosure proceedings and the plaintiff brought the instant lawsuit. The Complaint alleges four counts: Count I against Greentree, Wells Fargo, and U.S. Bank National Association (“U.S. Bank”) for unconscionable contract; Count II against Greentree for breach of fiduciary duty; Count III against Greentree, Wells Fargo, and U.S. Bank for joint venture and agency; Count IV against Wells Fargo and U.S. Bank for illegal fees; and Count V against Wells Fargo and U.S. Bank for misrepresentation and unconscionable conduct in debt collection. (See Compl. [Docket 1–2] ¶¶ 39–57).
To obtain summary judgment, the moving party must 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(a). In considering a motion for summary judgment, the court will not “weigh the evidence and determine the truth of the matter.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Instead, the court will draw any permissible inference from the underlying facts in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587–88, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
Although the court will view all underlying facts and inferences in the light most favorable to the nonmoving party, the nonmoving party nonetheless must offer some “concrete evidence from which a reasonable juror could return a verdict in his [or her] favor.” Anderson, 477 U.S. at 256, 106 S.Ct. 2505. Summary judgment is appropriate when the nonmoving party has the burden of proof on an essential element of his or her case and does not make, after adequate time for discovery, a showing sufficient to establish that element. Celotex Corp. v. Catrett, 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The nonmoving party must satisfy this burden of proof by offering more than a mere “scintilla of evidence” in support of his or her position. Anderson, 477 U.S. at 252, 106 S.Ct. 2505. Likewise, conclusory allegations or unsupported speculation, without more, are insufficient to preclude the granting of a summary judgment motion.See Felty v. Graves–Humphreys Co., 818 F.2d 1126, 1128 (4th Cir.1987) ; Ross v. Comm'ns Satellite Corp., 759 F.2d 355, 365 (4th Cir.1985), abrogated on other grounds by Price Waterhouse v. Hopkins, 490 U.S. 228, 109 S.Ct. 1775, 104 L.Ed.2d 268 (1989).
The plaintiff alleges that the loan is procedurally and substantively unconscionable and seeks, among other remedies, a release of the deed of trust securing the loan. (See Compl. [Docket 1–2], at 9). In support of substantive unconscionability, on which I focus here, the plaintiff brings two arguments: “(1) that the loan far exceeded the value of the property and (2) that the loan did not provide a net tangible benefit to Mr. McFarland, and instead placed him in a worse situation.” ). I will address each of these arguments. Because I find that the plaintiff failed to present evidence in support of substantive unconscionability, I do not address the parties' arguments on procedural unconscionability.
In West Virginia, “[t]he doctrine of unconscionability means that, because of an overall and gross imbalance, one-sidedness or lop-sidedness in a contract, a court may be justified in refusing to enforce the contract as written.” Syl. Pt. 4, Brown v. Genesis Healthcare Corp., 229 W.Va. 382, 729 S.E.2d 217, 220 (2012). Although unconscionability was traditionally an equitable defense to enforcement of a contract (see 8 Williston on Contracts § 18:1 (4th ed.2013) ), it may be asserted as a cause of action in West Virginia. See W. Va.Code §§ 46A–2–121, 46A–5–101.
Unconscionability may arise in two distinct ways: procedurally or substantively. Syl. Pt. 10, Genesis Healthcare Corp., 729 S.E.2d at 221. Courts often analyze “whether the imposed-upon party had meaningful choice about whether and how to enter into the transaction[.]” 8 Williston on Contracts, supra § 18:10.
In contrast, “[s]ubstantive unconscionability involves unfairness in the contract itself and whether a contract term is one-sided and will have an overly harsh effect on the disadvantaged party.” Syl. Pt. 12, Genesis Healthcare Corp., 729 S.E.2d at 221. In determining whether contract terms are substantively unconscionable, courts consider “the commercial reasonableness of the contract terms, the purpose and effect of the terms, the allocation of the risks between the parties, and public policy concerns.” Syl. Pt. 8, State ex rel. Johnson Controls, Inc. v. Tucker, 229 W.Va. 486, 729 S.E.2d 808, 812 (2012).
A claimant must prove both procedural and substantive unconscionability to render a contract term unenforceable. See Syl. Pt. 9, Genesis Healthcare Corp., 729 S.E.2d at 221 ; Syl. Pt. 6, Tucker, 729 S.E.2d at 812. Syl. Pt. 9, Genesis Healthcare Corp., 729 S.E.2d at 221.
“Unconscionability is an equitable principle, and the determination of whether a contract or a provision therein is unconscionable should be made by the court.” Syl. Pt. 7, id. ). Whether a contract is unconscionable will necessarily turn upon the facts of each particular case. See Genesis Healthcare Corp., 729 S.E.2d at 229 (); Quicken Loans, Inc. v. Brown, 230 W.Va. 306, 737 S.E.2d 640, 659 (2012) ().
If a court finds a contract or its terms to be unconscionable, the court “may refuse to enforce the contract, enforce the remainder of the contract without the unconscionable clause, or limit the application of any unconscionable clause to avoid any unconscionable result.” Syl. Pt. 8, Genesis Healthcare Corp., 729 S.E.2d at 221.
The plaintiff's first argument is that the loan is substantively unconscionable because it exceeds the value of his home. The plaintiff cites a retrospective appraisal finding his home to be worth only $120,000, far less than the defendants' appraisal value of $202,000. (See Appraisal [Docket 54–18] ). The plaintiff argues that the high value of his loan renders it difficult or impossible to refinance or sell his home. (See Pl.'s Resp. [Docket 54], at 14). In response, the defendants argue that a loan worth more than the value of a home is not one-sided because such a loan is as much of a disadvantage to the lender as it is to the borrower.
I FIND that a refinanced loan...
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