State v. Webster

232 W.Va. 341

752 S.E.2d 372

STATE of West Virginia ex rel. OCWEN LOAN SERVICING, LLC, Petitioner

v.The Honorable Carrie WEBSTER, Judge of the Circuit Court of Kanawha County, West Virginia; Robert L. Curry and Tina M. Curry, Individually, and on Behalf of a Similarly Situated Class, Respondents.

No. 13–0151.

Supreme Court of Appeals of West Virginia.

Submitted Sept. 25, 2013.

Decided Nov. 13, 2013.

Syllabus by the Court

1. “The purpose of the Federal Arbitration Act, 9 U.S.C. § 2, is for courts to treat arbitration agreements like any other contract. The Act does not favor or elevate arbitration agreements to a level of importance above all other contracts; it simply ensures that private agreements to arbitrate are enforced according to their terms.” Syllabus point 7, Brown v. Genesis Healthcare Corp., 228 W.Va. 646, 724 S.E.2d 250 (2011), overruled on other grounds by Marmet Health Care Center, Inc. v. Brown, ––– U.S. ––––, 132 S.Ct. 1201, 182 L.Ed.2d 42 (2012) (per curiam).

2. “Under the Federal Arbitration Act, 9 U.S.C. § 2, a written provision to settle by arbitration a controversy arising out of a contract that evidences a transaction affecting interstate commerce is valid, irrevocable, and enforceable, unless the provision is found to be invalid, revocable or unenforceable upon a ground that exists at law or in equity for the revocation of any contract.” Syllabus point 6, Brown v. Genesis Healthcare Corp., 228 W.Va. 646, 724 S.E.2d 250 (2011), overruled on other grounds by Marmet Health Care Center, Inc. v. Brown, ––– U.S. ––––, 132 S.Ct. 1201, 182 L.Ed.2d 42 (2012) (per curiam).

3. “ ‘A contract term is unenforceable if it is both procedurally and substantively unconscionable. However, both need not be present to the same degree. Courts should apply a “sliding scale” in making this determination: the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the clause is unenforceable, and vice versa.’ Syllabus Point 20, Brown v. Genesis Healthcare Corp., 228 W.Va. 646, 724 S.E.2d 250 (2011)[, overruled in part on other grounds by Marmet Health Care Center, Inc. v. Brown, –––U.S. ––––, 132 S.Ct. 1201, 182 L.Ed.2d 42 (2012) (per curiam) ].” Syllabus point 9, Brown v. Genesis Healthcare Corp., 229 W.Va. 382, 729 S.E.2d 217 (2012).

4. “ ‘The 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 refusingto enforce the contract as written. The concept of unconscionability must be applied in a flexible manner, taking into consideration all of the facts and circumstances of a particular case.’ Syllabus Point 12, Brown v. Genesis Healthcare Corp., 228 W.Va. 646, 724 S.E.2d 250 (2011)[, overruled in part on other grounds by Marmet Health Care Center, Inc. v. Brown, ––– U.S. ––––, 132 S.Ct. 1201, 182 L.Ed.2d 42 (2012) (per curiam) ].” Syllabus point 4, Brown v. Genesis Healthcare Corp., 229 W.Va. 382, 729 S.E.2d 217 (2012).

5. “ ‘A contract of adhesion is one drafted and imposed by a party of superior strength that leaves the subscribing party little or no opportunity to alter the substantive terms, and only the opportunity to adhere to the contract or reject it. A contract of adhesion should receive greater scrutiny than a contract with bargained-for terms to determine if it imposes terms that are oppressive, unconscionable or beyond the reasonable expectations of an ordinary person.’ Syllabus Point 18, Brown v. Genesis Healthcare Corp., 228 W.Va. 646, 724 S.E.2d 250 (2011)[, overruled in part on other grounds by Marmet Health Care Center, Inc. v. Brown, ––– U.S. ––––, 132 S.Ct. 1201, 182 L.Ed.2d 42 (2012) (per curiam) ].” Syllabus point 11, Brown v. Genesis Healthcare Corp., 229 W.Va. 382, 729 S.E.2d 217 (2012).

6. “Procedural unconscionability is concerned with inequities, improprieties, or unfairness in the bargaining process and formation of the contract. Procedural unconscionability involves a variety of inadequacies that results in the lack of a real and voluntary meeting of the minds of the parties, considering all the circumstances surrounding the transaction. These inadequacies include, but are not limited to, the age, literacy, or lack of sophistication of a party; hidden or unduly complex contract terms; the adhesive nature of the contract; and the manner and setting in which the contract was formed, including whether each party had a reasonable opportunity to understand the terms of the contract.” Syllabus point 17, Brown v. Genesis Healthcare Corp., 228 W.Va. 646, 724 S.E.2d 250 (2011), overruled on other grounds by Marmet Health Care Center, Inc. v. Brown, ––– U.S. ––––, 132 S.Ct. 1201, 182 L.Ed.2d 42 (2012) (per curiam).

7. “ ‘Substantive 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. The factors to be weighed in assessing substantive unconscionability vary with the content of the agreement. Generally, courts should 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.’ Syllabus Point 19, Brown v. Genesis Healthcare Corp., 228 W.Va. 646, 724 S.E.2d 250 (2011)[, overruled in part on other grounds by Marmet Health Care Center, Inc. v. Brown, ––– U.S. ––––, 132 S.Ct. 1201, 182 L.Ed.2d 42 (2012) (per curiam).” Syllabus point 12, Brown v. Genesis Healthcare Corp., 229 W.Va. 382, 729 S.E.2d 217 (2012).

8. “ ‘As a general rule each litigant bears his or her own attorney's fees absent a contrary rule of court or express statutory or contractual authority for reimbursement.’ Syl. Pt. 2, Sally–Mike Properties v. Yokum, 179 W.Va. 48, 365 S.E.2d 246 (1986).” Syllabus point 2, State ex rel. Hicks v. Bailey, 227 W.Va. 448, 711 S.E.2d 270 (2011).

9. “In assessing whether a contract provision is substantively unconscionable, a court may consider whether the provision lacks mutuality of obligation. If a provision creates a disparity in the rights of the contracting parties such that it is one-sided and unreasonably favorable to one party, then a court may find the provision is substantively unconscionable.” Syllabus point 10, Dan Ryan Builders, Inc. v. Nelson, 230 W.Va. 281, 737 S.E.2d 550 (2012).

10. “A court in its equity powers is charged with the discretion to determine, on a case-by-case basis, whether a contract provision is so harsh and overly unfair that it should not be enforced under the doctrine of unconscionability.” Syllabus point 9, Dan Ryan Builders, Inc. v. Nelson, 230 W.Va. 281, 737 S.E.2d 550 (2012).Mychal Sommer Schulz, Arie M. Spitz, Dinsmore & Shohl LLP, Charleston, WV, for the Petitioner.

John W. Barrett, Jonathan Marshall, Michael B. Hissam, Bailey & Glasser LLP, Charleston, WV, for the Respondents.

PER CURIAM:

In this proceeding seeking a writ of prohibition, the petitioner, Ocwen Loan Servicing, LLC (“Ocwen”), asks this Court to prevent the circuit court of Kanawha County from enforcing its order that denied Ocwen's “ Motion to Compel Individual Arbitration and Dismiss, or Alternatively, Stay Matter.” In denying Ocwen's motion, the circuit court first concluded that the arbitration agreement was unenforceable under a provision of the Dodd–Frank Act that proscribes the inclusion of arbitration agreements in connection with residential mortgage loans. See15 U.S.C. § 1639c(e)(1) (2010) (Cum. Ann. Pocket Pt.2013). Additionally, the circuit court found the arbitration agreement to be both procedurally and substantively unconscionable on various grounds. After considering the briefs and appendix record submitted on appeal, oral arguments presented by the parties and the relevant law, we conclude that the Dodd–Frank Act does not apply to a mortgage loan executed prior to its enactment. In addition, we find the arbitration agreement is neither procedurally nor substantively unconscionable. For these reasons, we grant the requested writ.

I.FACTUAL AND PROCEDURAL HISTORY

In October 2006, Respondents Robert and Tina Curry (“the Currys”) obtained an adjustable rate mortgage loan from Saxon Mortgage, Inc. In connection with the loan, the Currys executed a deed of trust on the real property being purchased and separately executed an arbitration rider. The arbitration rider stated that it was “incorporated into and shall be deemed to amend and supplement the Mortgage, Deed of Trust, or Security Deed.”

Petitioner Ocwen Loan Servicing, LLC (hereinafter “Ocwen”), ultimately began servicing the Currys' home mortgage loan. After the Currys apparently defaulted on the loan, Ocwen assessed a number of fees including: (1) a “statutory mailings” fee of $210.94; (2) a “skip trace/search” charge of $50.00; (3) an “FC thru service” charge of $550.00; and (4) a “title report fee” of $300.00.

In November 2011, the Currys filed a complaint against Ocwen in the circuit court of Kanawha County alleging violations of the West Virginia Consumer Credit and Protection Act. The action was brought on the Currys' own behalf and as a putative class action.¹ Ocwen responded by filing a “Motion to Compel Individual Arbitration and Dismiss, or Alternatively, Stay Matter” in January 2012. The Currys filed an opposing motion and Ocwen filed a reply. Thereafter, the circuit court held a hearing in February 2012. On January 7, 2013, the circuit court entered an order denying Ocwen's motion based upon that court's conclusions that the arbitration agreement is unenforceable under the Dodd–Frank Act or, alternatively, that it is unconscionable under West Virginia law. Ocwen then filed the instant petition for writ of prohibition on February 20, 2013, seeking to prevent enforcement of the circuit court's January 7, 2013 order. On April 10, 2013, this Court issued a rule to show cause. We now...