Justice remand United Bank fraud case

By The West Virginia Record | Jun 22, 2015

CHARLESTON – The state Supreme Court has remanded a fraud lawsuit against United Bank back to circuit court for further proceedings.

The instant action is before the Court upon the appeal of 33 petitioners from a Rule 12(b)(6) order dismissing their second amended complaint filed against United Bank and Stan and Thelma McQuade, who are doing business as McQuade Appraisal Services.

The circuit court ruled that the petitioners' claims of fraud in the inducement, negligence, intentional and/or negligent infliction of emotional distress, breach of fiduciary duty and constructive fraud were time-barred by the two-year statute of limitations.

"The circuit court also dismissed petitioners' claim of breach of implied covenant of good faith and fair dealing on the basis that petitioners failed to allege a breach of contract," the June 16 opinion states.

The circuit court dismissed petitioners' detrimental reliance claim, finding that it was improper because they seek money damages, and, alternatively, that it was essentially a restatement of their fraud in the inducement claim.

"Upon review of the parties' arguments, the record before us on appeal, and applicable legal precedent, we affirm in part, and reverse in part, the circuit court’s order and remand this case for further proceedings consistent with this opinion," the opinion states.

Justice Brent Benjamin authored the majority opinion. Justice Menis Ketchum concurred in part and dissented in part and reserved the right to file a separate opinion.

The petitioners claimed the respondents fraudulently inflated the value of property in a residential development in Monroe County named Walnut Springs Mountain Reserve. The petitioners are all owners of lots in Walnut Springs and purchased their respective lots in 2005 and 2006, with United Bank providing the financing.

Walnut Springs ultimately failed and was abandoned by the developer, Mountain America.

The lawsuit was filed on Nov. 30, 2009, by Charles J. Evans and Cynthia B. Evans against United Bank. In July 2010 and in September 2010, the complaint was amended to add additional Walnut Springs property owners.

The petitioners alleged that United Bank was aware of fraud occurring since 2005, but continued to finance the development using appraisals supported by the Schonberger transaction. The petitioners stated that they were not aware of the fraud until 2009 or 2010, when their counsel reviewed the documents provided pursuant to a subpoena in another civil action.

In February 2011, the respondents move to dismiss the case pursuant to Rule 12(b)(6), asserting that except for the claims of breach of implied covenant of good faith and fair dealing and breach of fiduciary duty, the petitioners' claims are barred by the applicable two-year statute of limitations.

On Feb. 24, 2014, an order granting the motion to dismiss was filed.

"We agree with United Bank’s argument and conclude that petitioners fail to address the substantive merits of the circuit court’s ruling and, thus, the issue has been waived for purposes of appeal," the opinion states. "The circuit court’s ruling dismissing the Petitioners’ detrimental reliance claim is therefore affirmed."

The court ruled that the circuit court’s rulings dismissing the petitioners' claims for breach of implied covenant of good faith and fair dealing and detrimental reliance are affirmed.

"However, the circuit court’s ruling dismissing the petitioners’ claims for fraud in the inducement and aiding and abetting fraud in the inducement, negligence, intentional or negligent infliction of emotional distress/tort of outrage, breach of fiduciary duty, civil conspiracy, respondeat superior and punitive damages is reversed and remanded for further proceedings consistent with this opinion," the opinion states.

The petitioners were represented by John H. Bryan of John H. Bryan-Attorney at Law.

United Bank was represented by C. William Davis of Richardson & Davis PLLC. McQuade Appraisal Services was represented by John T. Jessee of LeClairRyan.

W.Va. Supreme Court case number: 14-0291

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