Ann L. Koz v. Wells Fargo Home Mortgage, et al

Charles J. Maxfield

DENNIS J. SMITH. CHIEF JUDGE
MARCUS D. WILLIAMS
JANE MARUM ROUSH
LESLIE M. ALDEN
JONATHAN C.THACHER
R. TERRENCE NEY
RANDY I. BELLOWS
CHARLES J. MAXFIELD
BRUCE DWHITE
ROBERT J. SMITH
DAVID S. SCHELL
JAN L BRCDIE
LORRAINE NORDLUND
BRETT A KASSASIAN
MICHAEL F. DEVINE

JUDGES BARNARD F. JENNINGS
THOMAS J. MIDDLETON
THOMAS A. FORTKDRT
RICHARD J, JAMBORSKY
JACK B. STEVENS
J. HOWE BROWN
F BRUCE BACH
M. LANGHORNE KEITH
ARTHUR B. VIEREGG
KATHLEEN H. MACKAY
ROBERT W. WOOLDRIDGE, JR.
MICHAEL P. McWEENY
GAYLORD L FINCH. JR
STANLEY P. KLEIN
RETIRED JUDGES

June 9, 2011

Dear Mr. Kinsel and Ms. Kies:

Defendant CitiMortgage, Inc. ("CitiMortgage") demurs to Plaintiff's demand for punitive damages and attorneys' fees. Following briefing and oral argument by the parties, the case was taken under advisement. For the reasons that follow, the demurrer is sustained.

BACKGROUND

For the purpose of this motion, the following facts are assumed proven. Joseph and Ann Koz owned a property in Alexandria as tenants by the entirety. Mr. Koz died in April 2010 and, by operation of law, the property passed to Mrs. Koz. Before his death and while estranged, Mr. Koz refinanced the property, without Mrs. Koz's knowledge. On June 16, 2006, he executed two promissory notes totaling $810,000 to George Mason Mortgage, LLC ("George Mason"): one for $675,000.00 and the other for $135,000. Mr. Koz was the only person to sign both notes.. On the same date, Mr. Koz executed two deeds of trust securing the two notes with the property. Both appear to be signed by Mr. and Mrs. Koz, however Mrs. Koz contends that her signatures were forged. Both deeds of trust were recorded on June 16, 2006. Soon after, George Mason sold the first note and corresponding deed of trust to GMAC Mortgage, LLC ("GMAC") and the second note and corresponding deed of trust to CitiMortgage. In November 2006, GMAC sold tbe first note and corresponding deed of trust to Wells Fargo Home Mortgage ("Wells Fargo").

Apparently, Fairfax County Land Records show only George Mason as the lienholder on both deeds of trust. (Am. Compl. ¶67.)

On December 20, 2010, Mrs. Koz filed suit against GMAC; George Mason; CitiMortgage; Wells Fargo; Excel Title Corporation ("Excel Title"); Lisa Merrill ("Merrill"), in her capacity as a notary public; and the Estate of Joseph Koz. She claims that the deeds of trust were forged. Her complaint pleads the following counts: Count I, Declaratory Judgment (against all defendants); Count II, Remove Cloud of Title (against all defendants); Count III, Injunction from Foreclosure (against CitiMortgage and Wells Fargo); Count IV, Slander of Title (against CitiMortgage, Wells Fargo, GMAC, George Mason, Excel Title, and Merrill); and Count V, Civil Liability of Notary (against Merrill).

On April 29, 2011, the Court heard GMAC's and George Mason's demurrers and overruled them. On May 6, 2011, the Court heard Defendants Excel Title and Merrill's Demurrer and Plea in Bar. The Court sustained the plea in bar and dismissed with prejudice Count V, and sustained the demurrers to Counts I and II without leave to amend. The Court also dismissed Count IV with prejudice as to Defendants Excel and Merrill with leave to amend the count within 21 days.

On May 20, 2011, this Court heard oral argument as to CitiMortgage's demurrer to Plaintiffs demand for punitive damages and attorneys' fees. On May 27, 2011, Plaintiff filed an amended complaint, adding facts but re-pleading identical counts from the original complaint (except omitting Excel Title and Merrill from Counts I and II and deleting Count V). As in the original complaint, the amended complaint demands attorneys' fees and $350,000 in punitive damages.

This Court's decision regarding CitiMortgage's demurrer applies to both the original and amended complaints, as the amended complaint is identical in all ways relevant to this inquiry.

ANALYSIS

Standard Review

"A demurrer tests the legal sufficiency of a pleading and can be sustained if the pleading, considered in the light most favorable to the plaintiff, fails to state a valid cause of action." Welding, Inc. v Bland County Serv. Auth., 261 Va. 218, 226, 541 S.E.2d 909, 914 (2001); Va. Code Ann. § 8.01-273 (2011). A party's pleading must set forth specific facts ' constituting a "foundation in law" for the judgment sought, and not merely conclusions of law. Kitchen v. City of Newport News, 275 Va. 378, 385, 657 S.E.2d 132, 136 (2008). The court must admit as true all of the material facts properly alleged, as well as those that may be fairly and justly inferred from those facts. Cox Cable Hampton Rds., Inc. v. City of Norfolk, 242 Va. 394, 397, 410 S.E.2d 652, 653 (1991). Punitive

CitiMortgage contends that is not entitled to punitive damages because she has failed to allege in her action for slander of title any actual compensatory damages upon which punitive damages can be based. In addition, CitiMortgage claims that Plaintiff failed to allege any action that would amount to misconduct or actual malice, as required for punitive damages claims.

Plaintiff does not respond to CitiMortgage's argument that actual compensatory damages have not been alleged. However, she insists that she sufficiently pleaded malice by stating that CitiMortgage refuses to release its deed of trust for Mrs. Koz's property despite notification of the alleged forgery.

"It is well-established that an award of compensatory damages ... is an indispensable predicate for an award of punitive damages . .. ." Syed v. Zh Techs., Inc., 280 Va. 58, 74-75, 694 S.E.2d 625, 634 (2010) (internal quotation marks omitted).Compensatory damages are those allowed as remuneration for 'loss or injury actually received and include loss occurring to property, necessary expenses, insult, pain, mental suffering, injury to the reputation, and the like." Giant of Virginia, Inc. v. Pigg, 207 Va. 679, 685, 152 S.E.2d 271, 276 (1967).

One notable exception to this rule is in the cases of libel and slander. Syed, 280 Va. at 75, 694 S.E.2d at 634. The Virginia Supreme Court has not addressed whether slander of title, however, is equal to pure slander in this respect. This court declines to add slander of title to this well-defined exception.

In this case, contrary to CitiMortgage's assertion, Plaintiff has alleged compensatory damages: she claims that she made payments to CitiMortgage on allegedly forged, invalid deed of trust. (Compl. ¶¶ 39, 40; Am. Compl. ¶¶ 73, 83.) This actual pecuniary loss, if proven, clearly qualifies as compensatory damages.

Nevertheless, CitiMortgage's demurrer is sustained because Plaintiff has not pleaded the element of malice necessary for punitive damages. "Punitive or exemplary damages are allowable only where there is misconduct or actual malice, or such recklessness or negligence as to evince a conscious disregard of the rights of others." Pigg, 207 at 686; 152 S.E2d at 277. Put another way, Plaintiff must prove that the defendants acted with "ill will, malevolence, grudge, spite, wicked intention or a conscious disregard of his rights." Lee v. Southland Corp., 219 Va. 23, 27, 244 S.E.2d 756, 759 (1978). Such damages are saved for the cases involving the "most egregious conduct," Xspedius Mgmt. Co. of Virginia v. Stephan, 269 Va. 421, 425, 611 S.E.2d 385, 387 (2005), to punish the wrongdoer and to warn others against such "spirit of malice or criminal indifference to civil obligations." Pigg, 207 Va. at 686, 152 S.E.2d at 277.

Here, the allegations made do not rise to malice. Plaintiff only claims that she notified CitiMortgage of the purported forgery and CitiMortgage "maliciously" refused to relinquish its interest in the deed of trust. (Compl. ¶¶ 76, 109, 110, 111.) None of that rises to the type of deliberate "ill will . . . wicked intention, or a conscious disregard of rights" articulated by the Virginia Supreme Court. See Lee, 219 Va. at 27, 244 S.E.2d at 759. It is not enough to simply plead malice; Plaintiff must plead facts to support that legal conclusion to survive demurrer. See generally Kitchen, 275 Va. at 385, 657 S.E.2d at 136. Cf Woods v. Mendez, 265 Va. 68, 76, 574 S.E.2d 263, 268 (2003) ("A claim for punitive damages at common law in a personal injury action must be supported by factual allegations sufficient to establish that the defendant's conduct was willful or wanton."). Such facts have not been pleaded as to this defendant. Attorneys' Fees

CitiMortgage argues that attorneys' fees are not recoverable unless provided for by contract or statute, neither of which exist in this case. Plaintiff maintains that attorneys' fees are recoverable as "special damages" as part of a slander of title action.

The elements of slander of title are: "(1) that the defendant maliciously published false words, (2) that the false words disparaged plaintiff's property, and (3) that the publication caused plaintiff to suffer special damages." Levine v. McLeskey, 881 F. Supp. 1030, 1050 (E.D. Va. 1995), aff'd in part, rev'd in part, 164 F.3d 210 (4th Cir. 1998).

Virginia case law is clear that attorneys' fees are not recoverable unless provided for by statute or contract, with very limited exceptions. See, e.g., Prospect Dev. Co. v. Bershader, 258 Va. 75, 92, 515 S.E.2d 291, 300 (1999). Many jurisdictions have expanded similar laws to allow recovery of attorneys' fees as part of the plaintiff's "special damages" in slander of title cases. See, e.g., TXO Prod. Corp. v. Alliance Res. Corp., 419 S.E.2d 870, 877 (W. Va. 1992) (attorneys' fees were "special damages" where company wrongfully recorded an unfounded claim to property for use as "leverage for increasing its interest in the [property's] oil and gas rights"). See also James O. Pearson, Annotation, What Constitutes Special Damages in Action for Slander of Title, 4 A.L.R. 4th 532, § 9. (2011). (collecting cases). However, the Virginia Supreme Court has not spoken on the issue. See Allison v. Shapiro & Burson, LLP, 2009 U.S. Dist. LEXIS 108040, at *25 (W.D. Va. Nov. 19, 2009). Without guidance from the Virginia Supreme Court, this court is unwilling to disrupt a time-honored and well-established rule by adding to its limited number of exceptions.

CONCLUSION

The demurrer is sustained. Similarly situated defendants whose demurrers have resulted in inconsistent rulings as to punitive damages and attorneys' fees are invited to renew them.

Sincerely,

CJM/jw

ORDER

THIS MATTER came to be heard on CitiMortgage, Inc's demurrer; and IT APPEARING to the court for the reasons stated in this court's Letter

Opinion of June 9, 2011 that the demurrer should be sustained; it is therefore ORDERED that the demurrer is SUSTAINED; it is further ORDERED that the Court's Letter Opinion of June 9, 2011 is incorporated into this Order.

ENTERED this 9 day of June, 2011.

Honorable Charles J. Maxfield

In order to expedite the disposition of this matter, endorsement of this Order by counsel of record for the parties is waived in the discretion of the Court pursuant to Rule 1:13 of the Rules of the Supreme Court of Virginia.

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