Opinion ID: 1043964
Heading Depth: 2
Heading Rank: 2

Heading: Damages Recoverable for Loss of Credit

Text: A judgment for default impliedly constitutes an admission of all the properly pleaded material allegations of fact contained in the complaint, except the plaintiff's unliquidated damages. Patterson v. Rockwell Int'l, 665 S.W.2d 96, 101 (Tenn. 1984); State ex rel. Jones v. Looper, 86 S.W.3d 189, 194 (Tenn.Ct.App. 2000). While the record is not entirely clear, the parties agree that the trial court in this case grounded the damages award on the TCPA, which provides a private cause of action for [a]ny person who suffers an ascertainable loss of money or property, real, personal, or mixed, or any other article, commodity, or thing of value wherever situated.... Tenn.Code Ann. § 47-18-109(a)(1) (emphasis added). Whether an ascertainable loss includes a loss of available credit is an issue of first impression before this Court. [29] While the TCPA does not define ascertainable loss, the term commonly appears in the consumer protection laws of other states. Victor E. Schwartz & Cary Silverman, Common-Sense Construction of Consumer Protection Acts, 54 U. Kan. L.Rev. 1, 21 (2005). Our Court of Appeals, in the context of injunctive relief sought by the State, [30] surveyed the interpretations that other courts have given this phrase in construing their own statutes: In this context, ascertainable losses include losses that would not be [] cognizable [] at common-law. [31] An ascertainable loss is a deprivation, detriment, or injury that is capable of being discovered, observed, or established. [32] A loss is ascertainable if it is measurable, even though the precise amount of the loss is unknown. [33] An ascertainable loss may include either an out-of-pocket loss or a loss of value. [34] Accordingly, the courts have recognized that an ascertainable loss occurs in circumstances where a consumer receives less than what was promised. [35] State v. New Beginning Credit Ass'n, Inc., No. M1999-00461-COA-R3-CV, 2006 WL 1472284, at  (Tenn.Ct.App. May 25, 2006). [36] We conclude that section 47-18-109(a)(1) does not preclude actions by consumers premised on loss of consumer credit. Once an ascertainable loss has been established, the TCPA allows consumers to recover actual damages, Tenn. Code Ann. § 47-18-109(a)(1), but does not define that term. This Court has recently reaffirmed the distinction between the existence and amount of damages. Hannan v. Alltel Publ'g Co., 270 S.W.3d 1, 10 (Tenn. 2008). The existence of damages cannot be uncertain, speculative, or remote. Id. (citing Overstreet v. Shoney's, Inc., 4 S.W.3d 694, 703 (Tenn.Ct.App. 1999) (damages in tort); Cummins v. Brodie, 667 S.W.2d 759, 765 (Tenn.Ct.App. 1983) (damages for breach of contract)); see also BancorpSouth Bank, Inc. v. Hatchel, 223 S.W.3d 223, 230 (Tenn.Ct.App. 2006). The amount of damages may be uncertain, however, if the plaintiff lays a sufficient foundation to allow the trier of fact to make a fair and reasonable assessment of damages. Hannan, 270 S.W.3d at 10 (citations omitted); see also Hatchel, 223 S.W.3d at 230 ([T]he evidence upon which a party relies to prove damages must be sufficiently certain to enable the trier of fact, using its discretion, to make a fair and reasonable assessment of damages. (citing Wilson v. Farmers Chem. Ass'n, Inc., 60 Tenn.App. 102, 444 S.W.2d 185, 189 (1969))). The burden of proving damages rests on the party seeking them. Hatchel, 223 S.W.3d at 229. In short, a plaintiff may recover damages when she offers `proof of damages within a reasonable degree of certainty.' Id. at 230 (quoting Redbud Coop. Corp. v. Clayton, 700 S.W.2d 551, 561 (Tenn.Ct.App. 1985)).
The Court of Appeals has implicitly recognized a right to recover damages for loss of available credit in certain circumstances, although none of the plaintiffs in these cases prevailed on appeal. See, e.g., Filson v. Wells Fargo Home Mortg., Inc., No. M2007-01842-COA-R3-CV, 2008 WL 3914899 (Tenn.Ct.App. Aug. 25, 2008) (breach of contract); Crowe v. First Am. Nat'l Bank, No. W2001-00800-COA-R3-CV, 2001 WL 1683710 (Tenn.Ct.App. Dec. 10, 2001) (conversion); Rey v. Hestle, No. 01A01-9110-CV-00399, 1992 WL 102231 (Tenn.Ct.App. May 15, 1992) (legal malpractice). Similarly, other state and federal courts have impliedly acknowledged a cause of action for loss of available credit, from which we discern three criteria necessary for recovery. First, a plaintiff must have suffered a demonstrable loss of credit. E.g., Divenuta v. Bilcare, Inc., No. 09-3657, 2011 WL 1196703, at  (E.D.Pa. Mar. 30, 2011) (striking damages for breach of contract claim based on injury to credit score, where plaintiff merely argued that credit score is a matter of record and if necessary, one could make an inquiry to the credit raters and find out what [plaintiff's] exact score was during any particular time period); Garza v. Sallie Mae, Inc., No. SA-10-CV-510-XR, 2010 WL 3784197, at -6 (W.D.Tex. Sept. 21, 2010) (denying motion to dismiss breach of contract claim where plaintiff alleged that he suffered damage to his credit rating, his credit balances increased, and his amount of available credit disappeared); Hoffman v. Asseenontv.com, Inc., 404 N.J.Super. 415, 962 A.2d 532, 538 (N.J.Super.Ct.App.Div. 2009) (affirming dismissal of claim for consumer fraud where plaintiff alleged that improper charge reduced his available credit, but nothing in the record supports the critical assumption that American Express imposed any credit limit on plaintiff's purchases or use of the card); Kim v. BMW of Manhattan, Inc., No. 601447/05, 2005 WL 3963831 (N.Y.Sup. Ct. 2005) (dismissing RICO claim where plaintiffs failed to allege credit card had a pre-set limit); Auto. Ins. Co. of Hartford, Conn. v. Davila, 805 S.W.2d 897, 908 (Tex. App. 1991) (reforming judgment to delete loss of credit damages for breach of good faith and fair dealing claim where plaintiff merely testified that her credit was totally ruined), disapproved on other grounds by Hines v. Hash, 843 S.W.2d 464, 469-70 (Tex. 1992). Second, the defendant must have proximately caused the loss of credit. E.g., Divenuta, 2011 WL 1196703, at  (finding insufficient evidence demonstrating a causal connection between [defendant's] failure to pay incentive compensation allegedly owed to [plaintiff] under the terms of his offer letter and any alleged decline in his credit score); Erdman v. White, 411 N.E.2d 653, 659 (Ind.App. 1980) (finding sufficient evidence to show a causal link between the [defamatory] letter sent by [defendant] to ... the Bank and the subsequent failure of [plaintiff] to obtain a sufficient line of credit to operate his business); Mead v. Johnson Grp., Inc., 615 S.W.2d 685, 688 (Tex. 1981) (finding some evidence to support the jury finding of proximate cause); Bailey v. Fleming, No. 14-95-01470-CV, 1997 WL 634166, at  (Tex.App. Oct. 16, 1997) (finding evidence sufficient to support the trial court's finding that [plaintiff] did in fact suffer damage to his credit and that [defendant] was the proximate cause of such damage). Third, the loss of credit must have caused actual harm to the aggrieved party, such as lost profits or added costs. For example, Pennsylvania has long recognized that some further injury must be shown to recover damages for loss of credit. See Johnson v. Four States Enters., Inc., 355 F.Supp. 1312, 1318 (E.D.Pa. 1972) (under state law, loss of credit, standing alone, is not proof of damage, unless the loss of credit connects itself with some tangible pecuniary loss of which the loss of credit was the cause. (citing Eckel v. Murphey, 15 Pa. 488, 495 (1850))). The Supreme Court of Texas appears to have gone a step further in holding that a plaintiff does not suffer actual damage merely from the inability to obtain a loan. St. Paul Surplus Lines Ins. Co. v. Dal-Worth Tank Co., 974 S.W.2d 51, 53 (Tex. 1998) (per curiam). In short, courts generally require plaintiffs to show something more than mere loss of credit. In particular, plaintiffs fail to recover when they proffer little or no evidence that the loss of credit caused by the defendant led to a subsequent, concrete injury. E.g., Divenuta, 2011 WL 1196703, at  ([E]ven if [plaintiff] could prove that his credit score declined as a result of [defendant's] alleged breach, to recover damages [plaintiff] would still have to demonstrate that the decline in his credit resulted in a `tangible pecuniary loss.' (quoting Four States Enters., Inc., 355 F.Supp. at 1318)); St. Paul Surplus Lines Ins. Co., 974 S.W.2d at 53 ([Plaintiff] had strong credit before filing for bankruptcy, perhaps as much as $2.75 million, and weak credit afterwards, maybe as little as $250,000. But there is no evidence that the decline injured [plaintiff] in any way because [it] never needed to use the credit and never tried to do so.); Pourmemar v. Chase Home Fin., L.L.C., No. 01-10-00474-CV, 2011 WL 5026189, at  (Tex.App. Oct. 20, 2011) (finding no evidence of actual damages due to loss of credit reputation). Plaintiffs may recover for loss of credit when they can demonstrate how the credit they lost would have resulted in specific profits or savings. E.g., Erdman, 411 N.E.2d at 659 ([Plaintiff] also testified as to the importance of having a large line of credit available in order to purchase airplanes that suddenly became available....); Tempo, Inc. v. Rapid Elec. Sales & Serv., Inc., 132 Mich.App. 93, 347 N.W.2d 728, 733 (1984) (per curiam) (withdrawn credit line resulted in additional interest of $90,000 and lost discounts of $4,500); EMC Mortg. v. Jones, 252 S.W.3d 857, 873 (Tex.App. 2008) ([Plaintiff] concluded that [defendant's] reporting of the foreclosure on his credit report would result in his having to pay an additional $163,000 [in higher interest].); see also Cortez v. Keystone Bank, Inc., No. 98-2457, 2000 WL 536666, at  (E.D.Pa. May 2, 2000) (denying motion for summary judgment on RESPA claim where plaintiffs offered evidence that their available credit was decreased by the amount of outstanding interest charges on the account during any given week and they were thus unable to earn interest on other accounts).
Few facts as to Morgan's alleged losses were proffered at the April 29, 2008 hearing. Morgan testified that her available credit had fallen from $123,400 to $5,500, but she did not explain how this credit was used in the past or needed in the future. While Morgan claimed that several credit card companies closed her accounts, she did not indicate what purchases she regularly made with those cards, whether she could buy the same goods and services with her remaining credit (or cash), or the appreciation (or depreciation) of those items. We certainly do not suggest that Morgan can recover the purchase price of things she would have bought but for her loss of credit; [37] rather, we reiterate that Morgan must lay[] a sufficient foundation to allow the trier of fact to make a fair and reasonable assessment of damages. Hannan, 270 S.W.3d at 10. In her counter-complaint, Morgan alleged that she purchases investment homes for supplemental income, and that her negative credit history rendered her unable to purchase these homes at her previous interest rates. A lost investment opportunity may warrant damages for loss of available credit, but considerably more detail is required to enable the trier of fact, using its discretion, to make a fair and reasonable assessment of damages. Hatchel, 223 S.W.3d at 230 (citing Wilson, 444 S.W.2d at 189). Morgan also failed to address this purported loss of opportunity at the April 29, 2008 hearing. For example, she did not testify as to what interest rates she previously obtained, what profits she enjoyed (or losses she suffered) from her previous transactions, what actual opportunities to purchase she has in the current market, what profits she expected from additional purchases, and what interest rate, if any, she eventually obtained from lenders for this purpose. The trial court awarded Morgan $6800 for additional Home Equity Costs, as proposed by Morgan at the April 29, 2008 hearing. Neither the court nor Morgan offered any explanation as to how this figure had been computed, but Morgan alleged in her countercomplaint that refinancing of her property could have lowered her interest rate from an 8%, 15 year variable interest rate to a fixed 30 year, 6.25% interest rate and would have lowered her monthly mortgage payments by at least $200.00 a month for at least 15 years. Taken as true, this suggests that the trial court calculated this award on Morgan's additional costs over thirty-four months. In any event, the details alleged do provide some foundation to allow the trier of fact to make a fair and reasonable assessment of damages. Hannan, 270 S.W.3d at 10. The trial court further awarded Morgan an additional $500 in higher interest rates on [credit] cards, again without explanation as to how this number had been computed. Morgan alleged, however, that the APR on Morgan's Chase Visa card increased from 11.24% before the collection actions by Discover Bank, to 29.99% after the collection actions. At the hearing, Morgan testified that the Chase card had a balance of $3000 when the APR rose. While the math here is a bit fuzzy, the trial court at least had specific facts from which to determine damages. See Hatchel, 223 S.W.3d at 230 (While the amount of damages to be awarded in a given case is not controlled by fixed rules of law or mathematical formulas, Overstreet, 4 S.W.3d at 703, the evidence upon which a party relies to prove damages must be sufficiently certain to enable the trier of fact, using its discretion, to make a fair and reasonable assessment of damages, Wilson, 444 S.W.2d at 189.). Because we have never previously determined the requirements to prove damages for loss of consumer credit, we believe Morgan is entitled to a new hearing on this matter. We therefore remand the case to the trial court. On remand, after a new hearing, the trial court must specify which of Morgan's causes of action support any award of damages. If multiple theories allow Morgan to recover damages, the court must allow Morgan to elect her choice of remedies. See Concrete Spaces, Inc. v. Sender, 2 S.W.3d 901, 909 (Tenn. 1999). The award of actual damages shall be determined in a manner consistent with this opinion.