Court Opinion

ID: 2808910
Source: CourtListenerOpinion
Date Created: 2015-06-16 20:35:15.649889+00
Date Added: 2024-06-11T11:30:10.824033
License: Public Domain

IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA

                                 January 2015 Term
                                 _______________                       FILED
                                                                    June 16, 2015
                                                                   released at 3:00 p.m.
                                   No. 14-0291                   RORY L. PERRY II, CLERK
                                                               SUPREME COURT OF APPEALS
                                 _______________                    OF WEST VIRGINIA

               CHARLES J. EVANS and CYNTHIA B. EVANS, et al.,

                          Plaintiffs Below, Petitioners

                                        v.

                UNITED BANK, INC., a West Virginia Corporation,
               STAN McQUADE, Individually, THELMA McQUADE,
                  and d/b/a McQUADE APPRAISAL SERVICES
                          Defendants Below, Respondents

       ____________________________________________________________

                  Appeal from the Circuit Court of Monroe County

                      The Honorable Robert A. Irons, Judge

                             Civil Action No. 09-C-94

        AFFIRMED IN PART, REVERSED IN PART, AND REMANDED

      ____________________________________________________________

                             Submitted: March 10, 2015

                                Filed: June 16, 2015

John H. Bryan, Esq.                            C. William Davis, Esq.
John H. Bryan, Attorney at Law                 Richardson & Davis, PLLC
Union, West Virginia                           Bluefield, West Virginia
Counsel for the Petitioners                    Counsel for the Respondent
                                               United Bank, Inc.

                                               John T. Jessee, Esq.
                                               LeClairRyan
                                               Roanoke, Virginia
                                               Counsel for Respondents
                                               Stan McQuade and McQuade
                                               Appraisal Services
JUSTICE BENJAMIN delivered the Opinion of the Court.

JUSTICE KETCHUM concurs in part and dissents in part and reserves the right to filing
a separate Opinion.
                             SYLLABUS BY THE COURT

              1.     “‘Appellate review of a circuit court’s order granting a motion to

dismiss a complaint is de novo.’ Syllabus point 2, State ex rel. McGraw v. Scott Runyan

Pontiac–Buick, Inc., 194 W.Va. 770, 461 S.E.2d 516 (1995).’” Syl. Pt. 1, Longwell v. Bd.

of Educ. of the Cnty. of Marshall, 213 W.Va. 486, 583 S.E.2d 109 (2003).

              2.     “‘The trial court, in appraising the sufficiency of a complaint on a

Rule 12(b)(6) motion, should not dismiss the complaint unless it appears beyond doubt

that the plaintiff can prove no set of facts in support of his claim which would entitle him

to relief.’ Syllabus, Flowers v. City of Morgantown, W.Va., 272 S.E.2d 663 (1980).” Syl.

Pt. 2, Sticklen v. Kittle, 168 W.Va. 147, 287 S.E.2d 148 (1981).

              3. “‘In tort actions, unless there is a clear statutory prohibition to its

application, under the discovery rule the statute of limitations begins to run when the

plaintiff knows, or by the exercise of reasonable diligence, should know (1) that the

plaintiff has been injured, (2) the identity of the entity who owed the plaintiff a duty to

act with due care, and who may have engaged in conduct that breached that duty, and (3)

that the conduct of that entity has a causal relation to the injury.’ Syllabus Point 4,

Gaither v. City Hosp., Inc., 199 W.Va. 706, 487 S.E.2d 901 (1997).” Syl. Pt. 3, Dunn v.

Rockwell, 225 W.Va. 43, 689 S.E.2d 255 (2009).

                                             i
              4. “A five-step analysis should be applied to determine whether a cause of

action is time-barred. First, the court should identify the applicable statute of limitation

for each cause of action. Second, the court (or, if questions of material fact exist, the jury)

should identify when the requisite elements of the cause of action occurred. Third, the

discovery rule should be applied to determine when the statute of limitation began to run

by determining when the plaintiff knew, or by the exercise of reasonable diligence should

have known, of the elements of a possible cause of action, as set forth in Syllabus Point 4

of Gaither v. City Hosp., Inc., 199 W.Va. 706, 487 S.E.2d 901 (1997). Fourth, if the

plaintiff is not entitled to the benefit of the discovery rule, then determine whether the

defendant fraudulently concealed facts that prevented the plaintiff from discovering or

pursuing the cause of action. Whenever a plaintiff is able to show that the defendant

fraudulently concealed facts which prevented the plaintiff from discovering or pursuing

the potential cause of action, the statute of limitation is tolled. And fifth, the court or the

jury should determine if the statute of limitation period was arrested by some other tolling

doctrine. Only the first step is purely a question of law; the resolution of steps two

through five will generally involve questions of material fact that will need to be resolved

by the trier of fact.” Syl. Pt. 5, Dunn v. Rockwell, 225 W.Va. 43, 689 S.E.2d 255 (2009).

              5.     “The ‘discovery rule’ is generally applicable to all torts, unless there

is a clear statutory prohibition to its application.” Syl. Pt. 2, Dunn v. Rockwell, 225 W.

Va. 43, 689 S.E.2d 258 (2009).

                                              ii
Benjamin, Justice:

              The instant action is before the Court upon the appeal of thirty-three

Petitioners from a Rule 12(b)(6) order dismissing their second amended complaint filed

against United Bank and Stan and Thelma McQuade, d/b/a McQuade Appraisal Services.

The circuit court ruled that 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. Lastly, 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.

                I.     FACTUAL AND PROCEDURAL BACKGROUND

              This case centers on an alleged fraudulent scheme involving Respondent

United Bank and Respondent McQuade Appraisal Services to inflate the value of

property in a residential development in Monroe County named Walnut Springs

Mountain Reserve (“Walnut Springs”) and the circuit court’s dismissal of the same

                                             1

pursuant to West Virginia Rule of Civil Procedure 12(b)(6). The Petitioners are all

owners of lots in Walnut Springs. Petitioners purchased their respective lots in 2005 and

2006, and United Bank provided the financing. Walnut Springs ultimately failed and was

abandoned by the developer, Mountain America, LLC.1

             This case began with the filing of a civil action on November 30, 2009, by

Petitioners Charles J. Evans and Cynthia B. Evans against United Bank. The complaint

was amended in July of 2010, to add additional Walnut Springs property owners as

plaintiffs and Respondents Stan McQuade and Thelma McQuade, as defendants,

individually and doing business as McQuade Appraisal Services (collectively

“McQuade”).2 McQuade was engaged by United Bank to perform the appraisals for the

Petitioners’ lots. In September of 2010, the complaint was amended a second time to add

additional plaintiff property owners, all thirty-three of whom are Petitioners herein.

      1
         Petitioners state that the two developers of Walnut Springs were Washington,
DC, attorney Jonathan Halperin and Las Vegas developer Dan “Berg” Schonberger.
Walnut Springs, which was advertised in the Washington Post and Farm and Ranch
magazine, was allegedly supposed to include a grand lodge with a restaurant, fitness,
center, game rooms, and meeting rooms; lakes filled with trout and waterfalls; and
underground utilities, none of which came to fruition. The development attracted
potential buyers from the suburbs of Washington, D.C., and elsewhere, looking to invest
in beautiful mountain real estate subdivision properties.
      2
          The first amended complaint also named two United Bank employees as
defendants, then-vice president Ray Leon Cooper and Joyce Durham. These two
defendants were subsequently dismissed from the suit. Petitioners allege that Mr. Cooper
is currently serving time in federal prison for bank fraud.

                                           2

Specifically, Petitioners alleged the following in their second amended complaint: (1)

fraud in the inducement or aiding and abetting fraud in the inducement; (2) negligence;

(3) civil conspiracy; (4) punitive damages; (5) intentional or negligent infliction of

emotional distress; (6) respondeat superior; (7) breach of implied covenant of good faith

and fair dealing; (8) breach of fiduciary duty; (9) constructive fraud; and (10) detrimental

reliance.3

               Petitioners’ second amended complaint is based on allegations of bank and

appraisal fraud stemming from an allegedly fraudulent transaction occurring in 2005 that

led to grossly-inflated lot values at Walnut Springs. Petitioners state that they learned of

the fraudulent transaction in late 2009 or early 2010, after serving a subpoena upon

McQuade in a companion case against the developers, Monroe County Civil Action No.

09-C-93. Petitioners allege that in 2005, they were told by developers that the property

values in Walnut Springs were $50,000 per acre. This value was supposedly justified by

an initial transaction in 2005, in which a woman named Chaya Schonberger purchased a

5.88 acre lot for $294,000. This transaction was then used as the “comp” for future

appraisals and sales, which appraisals and sales then were used as “comps” for other

sales, resulting in a “pyramid” of appraisals and sales all resulting from the Schonberger

transaction.

       3
        Each count is applicable to United Bank, and all but “breach of implied covenant
of good faith and fair dealing” are applicable to McQuade.

                                             3

             Petitioners allege, however, that the Schonberger transaction never actually

occurred. Chaya Schonberger is actually the mother of one of the developers, Dan

Schonberger, who according to Petitioners uses multiple aliases, one of which is “Dan

Berg.”4 Petitioners state that the 5.88 acre lot was never a part of Walnut Springs, a fact

which Petitioners allege was cleverly disguised by McQuade, who appraised it, and

misidentified the deed book and page number to be completely untraceable. Moreover,

while Chaya Schonberger did own the 5.88 acres, there was never a sale of the property

to her for a price of $294,000.00. Rather, she owned the property the entire time, having

purchased it from a third party in 2004 for $99,000.00.5

       4
         In their second amended complaint, Petitioners allege that Dan Berg, who at the
time was using a fictitious social security number, was born as Daniel Schonberger.
Petitioners contend that he has previously claimed that he was in a car accident and could
not remember his real social security number and name.
      5
          Petitioners allege that the property was originally 67.5 acres adjoining the
Walnut Springs development and was held in her name from the beginning. In the
developers’ partnership agreement, it notes that the 67.5 acres was owned by Berg and
exempt from the agreement’s “corporate opportunity clause.” Petitioners contend that on
or about October 12, 2004, Chaya Schonberger, by and through her son using a power of
attorney, conveyed two five acre parcels to two individuals, Shoupe and Chamberland,
who were employees of the Walnut Springs development. These sales indicated a per
acre value of $15,000.00 per acre. On May 12, 2005, Chaya Schonberger conveyed her
remaining 57.5 acres into a limited liability company owned by the developers. The deed
from that conveyance excepted 5.88 acres from the conveyance to remain in her name.
At that time the 5.88 acre parcel was designated as “Walnut Springs Mountain Reserve
Phase 1 Lot 1” and was listed in the books as having been a sale of 5.88 acres for the
consideration of $294,000.00.

                                            4

              At the same time as the supposed sale of the 5.88 acre lot, a construction

loan was taken out through United Bank with loan officer Leon Cooper. Mr. Cooper had

a $300,000.00 limit for which he could solely approve loans.             He approved the

construction loan for a house to be constructed on a 5.88 acre parcel in the Walnut

Springs subdivision. While Chaya Schonberger owned the 5.88 acre lot and the house

constructed on it, the lot was never owned by Walnut Springs.

              Petitioners allege that United Bank was aware of the fraud since 2005, but

continued to finance the development using appraisals supported by the Schonberger

transaction. Petitioners state that they were not aware of this fraud until 2009 or 2010,

when their counsel reviewed the documents provided pursuant to the above-referenced

subpoena in the other civil action. According to Petitioners, this discovery is what led to

the filing of the second amended complaint in September of 2010.

              In February of 2011, Respondents moved 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, Petitioners’ claims are barred by the

applicable two-year statute of limitations. In its February 27, 2014, order granting the

motions to dismiss, the circuit court first addressed United Bank’s request that the circuit

court take judicial notice of the “adjudicative facts” set forth in MBMA, LLC, which was

a matter before the Monroe County Commission sitting as the Board of Equalization and

                                             5

Review, the subsequent appeal of that matter to the circuit court in civil action number

07-C-30, and the ultimate appeal to this Court in Mountain America, LLC, et al. v.

Huffman, 224 W.Va. 669, 687 S.E.2d 768 (2009).

              This prior tax appeal involved a challenge to the 2007 assessed values of

the lots in Walnut Springs by the Monroe County Assessor. The basis of the challenge,

which was presented at a February 7, 2007, evidentiary hearing held before, was that the

assessments were excessive and unequal, and not based on the true and actual value of

the properties. The parties dispute the level of involvement the individual landowners

(the Petitioners herein) had in the 2007 litigation. Petitioners assert that the matter was

spear-headed by the developers and the Petitioners were involved only insofar as their

names were used. Respondents counter that the Petitioner landowners were the primary

challengers to the assessments. Over Petitioners’ objection, the circuit court took judicial

notice of the adjudicative facts of the tax appeal. In Mountain America, LLC, this Court

affirmed the circuit court’s order that affirmed the assessments. 224 W.Va. 669, 687
S.E.2d 768.

              With that ruling in mind, the circuit court found that in the present suit,

Petitioners seek to “recover damages from the Defendants on the theory that the Plaintiffs

paid more than fair market value for their property because of the alleged wrongful acts

of the Defendants.” The circuit court then went on to find that Petitioners should have

                                             6

known of their present claims no later than the hearing before the Board of Equalization

and Review on February 7, 2007. The circuit court reasoned, essentially, that if

Petitioners were challenging the value of their land in 2007, they should have inquired at

that time “as to the identity and conduct of the parties involved in the sales of their

property, i.e. the Defendants.” The circuit court determined that Petitioners instituted

their action on November 30, 2009, more than two years later. As such, the circuit court

granted Respondents’ motions to dismiss with regard to the claims carrying a two-year

statute of limitations.

               The circuit court then turned to Petitioners’ breach of implied covenant of

good faith and fair dealing claim, to which a five-year limitation period applies. The

circuit court relied on federal case law in holding that without an allegation of breach of

contract, Petitioners could not maintain a claim for breach of implied covenant of good

faith and fair dealing. Finally, the circuit court ruled that it was without jurisdiction to

entertain the detrimental reliance claim because it is an equitable remedy and Petitioners

were expressly seeking monetary relief, and that it was essentially a restatement of their

fraud in the inducement claims. Petitioners now appeal to this Court.6

       6
         On or about March 7, 2014, Petitioners filed a “Motion to Alter or Amend
Judgment, or in the Alternative Motion for Relief from Judgment.” They filed their
appeal to this Court on May 18, 2014. By order entered May 29, 2014, the circuit court
denied Petitioners’ motion.

                                             7

                              II. STANDARD OF REVIEW

              Rule 12(b)(6) of the West Virginia Rules of Civil Procedure authorizes the

filing of a motion requesting dismissal of a claim or counterclaim for “failure to state a

claim upon which relief can be granted.” W.V.R.C.P. 12(b)(6). “‘Appellate review of a

circuit court’s order granting a motion to dismiss a complaint is de novo.’ Syllabus point

2, State ex rel. McGraw v. Scott Runyan Pontiac–Buick, Inc., 194 W.Va. 770, 461 S.E.2d
516 (1995).” Syl. Pt. 1, Longwell v. Bd. of Educ. of the Cnty. of Marshall, 213 W.Va.

486, 583 S.E.2d 109 (2003).

              “‘The trial court, in appraising the sufficiency of a complaint on a Rule

12(b)(6) motion, should not dismiss the complaint unless it appears beyond doubt that the

plaintiff can prove no set of facts in support of his claim which would entitle him to

relief.’ Syllabus, Flowers v. City of Morgantown, W.Va., 272 S.E.2d 663 (1980).” Syl. Pt.

2, Sticklen v. Kittle, 168 W.Va. 147, 287 S.E.2d 148 (1981). See also, F.D. Cleckley, R.J.

Davis, L.J. Palmer, Litigation Handbook on West Virginia Rules of Civil Procedure §

12(b)(6) (Juris Pub. 2006).

                                    III. ANALYSIS

   A) Judicial Notice/Statute of Limitations

              The Petitioners allege two separate assignments of error with respect to the

circuit court’s rulings on the issues of judicial notice and statute of limitations barring

                                            8

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, and constructive fraud. First, Petitioners allege that the

circuit court erred in finding that the statutes of limitation were tolled under the discovery

rule until no later than February 7, 2007, and therefore dismissing their claims as time

barred, because the Petitioners each alleged in the second amended complaint that they

were unaware of the Schonberger fraud until this litigation began due to the Respondents’

attempt to conceal it. Second, Petitioners allege that the circuit court erred in taking

judicial notice that the Petitioners were involved in the prior tax assessment appeal and

finding that they therefore knew, or should have known, that fraud occurred, that

Respondents engaged in it, and that their conduct had a causal relationship to their

injuries. Because these assignments of error are interdependent, we will address them

collectively.

                In dismissing some of the Petitioners’ claims based upon the statute of

limitations, the circuit court first took judicial notice7 of the adjudicative facts in MBMA,

       7
         Rule 201 of the West Virginia Rules of Evidence permits courts to take judicial
notice of certain facts. “A judicially noticed fact must be one not subject to reasonable
dispute in that it is either (1) generally known within the territorial jurisdiction of the trial
court or (2) capable of accurate and ready determination by resort to sources whose
accuracy cannot reasonably be questioned.” W. Va. R. Evid. 201(b). Moreover, “a court
may take judicial notice of its own records concerning the same subject matter and
                                                                                (continued . . .)

                                               9

LLC, et al., the tax appeal matter before the Monroe County Commission sitting as the

Board of Equalization and Review, and the subsequent appeal of that matter to this Court

in Mountain America, LLC v. Huffman, 224 W. Va. 669, 687 S.E.2d 768. The circuit

court held that:

              In the Second Amended Complaint, the Plaintiffs allege that
              they could not have known of their causes of action until the
              institution of the present action because the Defendants
              camouflaged information contained in appraisals requested by
              United [National Bank] and prepared by the McQuades.

              Assuming those allegations to be true, the Court finds that
              Plaintiffs, by the exercise of reasonable diligence, should
              have known of their claims no later than the date of their
              hearing before the Monroe County Board of Equalization and
              Review. First, the Plaintiffs claimed before the Board that
              their tax assessments exceeded the true and actual value of
              their property. Second, the fair market value of Plaintiffs’
              property is the basis of Plaintiffs’ claims against Defendants
              in this civil action. Third, the Plaintiffs’ were represented by
              counsel and retained a certified general real estate appraiser in
              connection with their challenges. Fourth, although the
              Plaintiffs did not present evidence of the fair market value of
              their respective properties at the hearing, the Plaintiffs had the
              means to determine the fair market value at that time and
              should have known that the land they purchased was
              overvalued. Last, knowing that their land was overvalued, a
              reasonable person would have inquired as to the identity and
              conduct of the parties involved in the sales of their property,
              i.e., the Defendants.

              Therefore, the Court finds that the statutes of limitation for
              Plaintiffs’ claims against Defendants were tolled under the
              discovery rule until no later than February 7, 2007.

substantially the same parties.” 1 Franklin D. Cleckley, Handbook on Evidence for West
Virginia Lawyers, § 201.03[3][e] (5th ed. 2012).

                                             10
              Petitioners do not dispute that the circuit court had the legal power to take

judicial notice of the fact that at least some of the Petitioners had previously appealed

their tax assessments, and that the developers’ attorneys appealed the case on behalf of

Mountain America, LLC, resulting in an opinion being issued by this Court. However,

the Petitioners dispute that the prior litigation has any relevancy to the allegations in the

action currently sub judice other than the identities of the real estate involved and

possibly some of the Petitioners. Additionally, Petitioners allege that the circuit court

erred in dismissing their claims as time barred because each Petitioner alleged in the

second amended complaint that they were unaware of the Schonberg fraud until this

litigation began because the Respondents attempted to conceal it. They maintain that the

Schonberger fraud was never disclosed, or discovered by any individual during the 2007

tax appeal. Petitioners allege that in 2007, they may have known that they suffered

damage and injury, but they had no idea of the fraud by Respondents. Petitioners

contend that it was not until their counsel came into possession of the appraisals

submitted by McQuade that the details of the fraudulent acts became known.

              Respondents assert that the circuit court properly took judicial notice of the

adjudicative facts in the tax appeal matter because they are relevant to whether the

Petitioners’ claims were timely filed. Respondent contend that the circuit court correctly

ruled that the discovery rule tolled the statute of limitations to February 7, 2007, because

                                             11

this is the date Petitioners challenged their tax assessments, arguing that they exceeded

the fair market value. Respondents maintain that in this action, Petitioner again allege the

same point they argued in their 2007 tax appeal - that they paid more than market value

for their properties. They assert that Petitioners had the means at that time to determine

the fair market value of their properties and should have known their land was

overvalued. Respondents assert that Petitioners never explained exactly why it took until

their counsel reviewed the appraisal information in 2009 and 2010 to allege fraud.

              The only named petitioner in Mountain America, LLC, 224 W. Va. 669,

687 S.E.2d 768, was Mountain America, LLC, the Walnut Springs developers. We noted

in the Mountain America, LLC case that, “some four months after the appeal was filed, it

is impossible to pick up the court file and determine the name of the Appellants or the tax

parcels in question.” Id., 224 W. Va. at 677, 719 S.E.2d at 776. We further noted that

“[a] review of the record of the hearing before the Board of Equalization reveals the

names of at least some of the persons contesting their assessments, but this is insufficient

for purposes of West Virginia Rules of Civil Procedure Rule 10.” Id. In the tax appeal,

this Court’s discussion of Mountain America’s arguments centered on due process and

equal protection.

              Specifically, the Appellants assert that the tax assessments are
              excessive and unequal as compared to the 2007 tax
              assessments of the property of other taxpayers in Monroe
              County, and that the assessments are the result of the
              Assessor’s improper and discriminatory methods in violation
              of the Appellant’s rights to equal and uniform taxation under

                                            12
              the West Virginia Constitution and in violation of the
              Appellant’s rights to equal protection of the law under the
              United States Constitution.

Id. at 674, 687 S.E.2d at 773. This Court noted that there was no evidence in the record to

suggest that the lots in Walnut Springs were excessively valued by the Monroe County

Tax Assessor:

              Mountain America had the burden of proving that the
              Assessor’s valuation was excessive, but it did not offer any
              evidence of the true and actual value of the residual property.
              At the hearing before the County Commission, Mountain
              America did not offer an appraiser’s opinion of the value of
              its residue, any evidence as to what it paid to purchase this
              residue, or any evidence as to the listing price for any of the
              unsold residue property.

Id. at 687, 687 S.E.2d at 786.

              This Court noted that the calculated unit price per acre as determined by the

Assessor was $29,236.00 and that as an accommodation to the landowners, the Assessor

lowered the amount to $26,900.00 by striking the two highest sales and the two lowest

sales out of the development - which was properly determined by the Assessor to be

based on “market value” and “true and actual value.” Id. at 675, 687 S.E.2d at 774. This

Court found no abuse of the Assessor’s discretion and affirmed the circuit court’s order

affirming the County Commission’s decision upholding the assessment. Id. at 688, 687

S.E.2d at 787.

                                            13

              In short, there was no evidence of record presented to this Court in

Mountain America, LLC that the subject properties were overvalued. Mountain America,

LLC was about challenging tax assessments and methodology. There were no allegations,

or representations, that the landowners overpaid for their properties. They were

challenging the increase of assessments from being minimal one year, to being increased

exponentially the next. The central component of the case sub judice is that the

Petitioners allege they never paid real market value for their properties because the

market was fabricated - a fact that was never revealed in the 2007 tax assessment appeals.

Petitioners maintain that it was never revealed because the primary perpetrators of the

fraud, the developers, were prosecuting the tax appeal. The Petitioners allege that the

circuit court mischaracterized the Petitioners’ as merely people who are upset that they

overpaid for real estate. However, Petitioners now contend that they were defrauded and

were induced to buy into a fraudulent real estate scheme.

              In syllabus point three of Dunn v. Rockwell, 225 W.Va. 43, 689 S.E.2d 255

(2009), this Court held as follows:

              “In tort actions, unless there is a clear statutory prohibition to
              its application, under the discovery rule the statute of
              limitations begins to run when the plaintiff knows, or by the
              exercise of reasonable diligence, should know (1) that the
              plaintiff has been injured, (2) the identity of the entity who
              owed the plaintiff a duty to act with due care, and who may
              have engaged in conduct that breached that duty, and (3) that
              the conduct of that entity has a causal relation to the injury.”
              Syllabus Point 4, Gaither v. City Hosp., Inc., 199 W.Va. 706,
              487 S.E.2d 901 (1997).

                                             14

              In syllabus point five of Dunn, 225 W.Va. 43, 689 S.E.2d 255, we stated

              A five-step analysis should be applied to determine whether a
              cause of action is time-barred. First, the court should identify
              the applicable statute of limitation for each cause of action.
              Second, the court (or, if questions of material fact exist, the
              jury) should identify when the requisite elements of the cause
              of action occurred. Third, the discovery rule should be
              applied to determine when the statute of limitation began to
              run by determining when the plaintiff knew, or by the
              exercise of reasonable diligence should have known, of the
              elements of a possible cause of action, as set forth in Syllabus
              Point 4 of Gaither v. City Hosp., Inc., 199 W.Va. 706, 487
S.E.2d 901 (1997). Fourth, if the plaintiff is not entitled to the
              benefit of the discovery rule, then determine whether the
              defendant fraudulently concealed facts that prevented the
              plaintiff from discovering or pursuing the cause of action.
              Whenever a plaintiff is able to show that the defendant
              fraudulently concealed facts which prevented the plaintiff
              from discovering or pursuing the potential cause of action, the
              statute of limitation is tolled. And fifth, the court or the jury
              should determine if the statute of limitation period was
              arrested by some other tolling doctrine. Only the first step is
              purely a question of law; the resolution of steps two through
              five will generally involve questions of material fact that will
              need to be resolved by the trier of fact.

(Emphasis added). “The ‘discovery rule’ is generally applicable to all torts, unless there

is a clear statutory prohibition to its application.” Syl. Pt. 2, Dunn, 689 S.E.2d 258.

              In the second amended complaint, the Petitioners allege facts which

sufficiently demonstrate that the discovery rule applies. The Petitioners allege that they

were unaware until the initiation of this litigation that the fraud had occurred; that the

                                             15

“appraisals contained information which was camouflaged and nearly devoid of

identifying information . . .”; and that the bank, the appraisers, and Walnut Springs

Mountain Reserve could have known of the fraud and misconduct which occurred. The

only issue as a matter of law for the circuit court to decide was what underlying statute

applied. It is undisputed that the underlying statute of limitations for Petitioners’ fraud in

the inducement, negligence, intentional or negligent infliction of emotional distress,

breach of fiduciary duty, and constructive fraud claims is two years.8 Thus, the circuit

court correctly invoked the discovery rule. However, by erroneously taking judicial

notice of the tax appeal matter previously before this Court, it arbitrarily initiated the

statute of limitation for a date which is factually different from the allegations made by

the Petitioners in the second amended complaint.

              As this Court has previously noted, motions to dismiss under Rule 12(b)(6)

are “viewed with disfavor and [should be] rarely granted.” John W. Lodge Distributing

Co., Inc. v. Texaco, Inc., 161 W.Va. 603, 606, 245 S.E.2d 157, 159 (1978). More

specifically, “[t]he trial court should not dismiss a complaint merely because it doubts

       8
          Pursuant to W. Va. Code § 55-2-12, a two-year statute of limitations applies to
Petitioners’ fraud in the inducement claim, negligence, claim, intentional or negligent
infliction of emotional distress claim, breach of fiduciary duty claim, and constructive
fraud claim. Under W. Va. Code § 55-2-6, a five-year statute of limitations applies to a
breach of implied covenant of good faith and fair dealing. As to Petitioners’ detrimental
reliance claim, “our law is clear that there is no statute of limitation for claims seeking
equitable relief.” Dunn, 225 W. Va. at 54, 689 S.E.2d at 266.

                                             16

that the plaintiff will prevail in the action, and whether the plaintiff can prevail is a matter

properly determined on the basis of proof and not merely on the pleadings.” Id. (citing

Wright & Miller, Federal Practice and Procedure: Civil § 1216 (1969)).

              Given that under 12(b)(6) the complaint is construed in the light most

favorable to the plaintiff, we conclude that the court erroneously imposed the February 7,

2007, date as the point at which Petitioners should have known of their claims.

Accordingly, we reverse the circuit court’s dismissal of these claims.

   B) Breach of Implied Covenant of Good Faith and Fair Dealing

              Next, Petitioners allege that the circuit court erred in dismissing their

claims for breach of the implied covenant of good faith and fair dealing under the

conclusion that no such tort cause of action exists under West Virginia law.9 The second

amended complaint alleges that

              United Bank, due to its contractual and fiduciary relationship
              with the Plaintiffs, owed the Plaintiffs an implied covenant of
              good faith and fair dealing. Specifically, this duty arose when
              Defendant United Bank accepted the Plaintiffs as
              customers/clients and entered into agreements to loan them
              money secured by the subject lots in WSMR.

       9
        The Petitioners’ claim for breach of the implied covenant of good faith and fair
dealing was asserted only against United Bank, not McQuade.

                                              17

              Petitioners do not assert that United Bank breached any of those contracts.

In dismissing the claim, the circuit court noted that federal courts in West Virginia have

held that an implied covenant of good faith and fair dealing does not exist in West

Virginia absent a breach of contract claim.        See Powell v. Bank of Am., N.A., 842
F. Supp. 2d 966, 981 (S.D.W.Va. 2012)(“The West Virginia Supreme Court of Appeals

has declined to recognize an independent claim for a breach of the common law duty of

good faith, and has instead held that such a claim sounds in breach of contract.”)(Internal

citations omitted); see also Wittenberg v. Wells Fargo Bank, N.A., 852 F. Supp. 2d 731,

750 (N.D.W.Va. 2012)(“West Virginia does not recognize a stand-alone cause of action

for failure to exercise contractual discretion in good faith. As such, a claim for breach of

the implied covenant of good faith and fair dealing can only survive if the borrower

pleads an express breach of contract claim.”)(Internal citations omitted).

              In its order, the circuit court stated that the federal district courts have based

this opinion on this Court’s logic in Highmark West Virginia, Inc. v. Jamie, 221 W. Va.
487, 492, 655 S.E.2d 509, 514 (2007):

              In that regard, while we recognize that it has been held that an
              implied covenant of good faith and fair dealing does not
              provide a cause of action apart from a breach of contract
              claim, Stand Energy Corp. v. Columbia Gas Transmission,
              373 F. Supp. 2d 631, 644 (S.D.W.Va. 2005), and that “[a]n
              implied contract and an express one covering the identical
              subject matter cannot exist at the same time,” syl. pt. 3, in
              part, Rosenbaum v. Price Construction Company, 117 W. Va.
160, 184 S.E. 261 (1936), the allegations of Count 3
              construed in the light favorable to the appellant demonstrate

                                              18
              that, while inartfully drafted as a claim upon an implied
              covenant, Count 3 is, in reality, a breach of contract claim
              covering matters not identical to those specified in Counts 1
              and 2.

Id. at 492, 655 S.E.2d at 514.

              Petitioners allege that in Highmark, the Court ultimately held that the cause

of action for breach of the implied covenant of good faith and fair dealing would proceed

under the guise of breach of contract since there was already a breach of contract claim

which did not contain identical allegations. Id. Petitioners assert that Highmark did not

hold that there is no independent cause of action for breach of implied covenant of good

faith and fair dealing. Rather, the issue was not addressed definitively one way or the

other.

              Our federal district court has observed that West Virginia law “implies a

covenant of good faith and fair dealing in every contract for purposes of evaluating a

party’s performance of that contract.” Stand Energy Corp. v. Columbia Gas

Transmission, 373 F. Supp. 2d 631, 644 (S.D.W.Va. 2005) (quoting Hoffmaster v.

Guiffrida, 630 F. Supp. 1289, 1291 (S.D.W.Va. 1986)). However, by the same token, this

Court has observed that “[t]he implied covenant of good faith and fair dealing cannot

give contracting parties rights which are inconsistent with those set out in the contract.”

Barn–Chestnut, Inc. v. CFM Dev. Corp., 193 W.Va. 565, 457 S.E.2d 502, 509 (1995).

                                            19

Most recently in Gaddy Engineering Co. v. Bowles Rice McDavid Graff & Love, LLP,

231 W.Va. 577, 587, 746 S.E.2d 568, 578 (2013), this Court reiterated that

              this covenant “does not provide a cause of action apart from a
              breach of contract claim.” Highmark West Virginia, Inc. v.
              Jamie, 221 W.Va. 487, 492, 655 S.E.2d 509, 514 (2007). It
              has been observed “that the West Virginia Supreme Court of
              Appeals has declined to recognize an independent claim for a
              breach of the common law duty of good faith and has instead
              held that such a claim sounds in breach of contract.” Corder
              v. Countrywide Home Loans, Inc., No. 2:10-0738, 2011 WL
289343 at *3 (S.D.W.Va.2011) (internal quotation marks and
              citation omitted).

              Based upon our review of the applicable law, we affirm the circuit court’s

ruling that the Petitioners’ failure to allege a breach of contract was fatal to their claim for

a breach of the implied covenant of good faith and fair dealing.

   C) Detrimental Reliance

              Petitioners lastly assert that the circuit court erred in dismissing the

Petitioners’ claims for detrimental reliance pursuant to Rule 12(b)(6) for the same reasons

that the circuit court erred in dismissing their fraud claim. Petitioners contend that to the

extent that the detrimental reliance claim is a restatement of the fraud claim, or another

count for fraud, they reassert their arguments against the dismissal of the fraud claim as

were argued supra.

                                              20

              In dismissing Petitioners’ claim for detrimental reliance, the circuit court

found that it lacked jurisdiction because the detrimental reliance claim sounded in equity

and Petitioners were not seeking equitable relief, but rather sought to recover monetary

damages. See Syl. Pt. 4, Mountain State Coll. v. Holsinger, 230 W. Va. 678, 742 S.E.2d
94 (2013)(“A court of equity is without jurisdiction to entertain a suit based on an alleged

fraudulent misrepresentation to the prejudice of the complaining party, where the sole

relief sought therein is the recovery of damages. In such a case the remedy of the injured

party at law is plain, adequate and complete.”)10 Additionally, the circuit court found

that:

              Plaintiffs’ detrimental reliance claim is essentially a
              restatement of their fraud in the inducement claims under
              Count One. Accordingly, the Court finds that the Plaintiffs
              had an adequate remedy at law, albeit untimely filed, pursuant
              to their fraud in the inducement claims and are precluded
              from bringing an equitable claim for detrimental reliance.

              United Bank asserts that Petitioners’ argument fails to meet the

requirements of Rule 10(c)(7) of the West Virginia Rules of Appellate Procedure because

it fails to address the circuit court’s first basis for dismissal of the detrimental reliance

claim for lack of a proper claim for equitable relief. Therefore, United Bank contends that

any alleged error on this ruling should be deemed waived for the purposes of this appeal.

        10
         See Syl. Pt. 2, Miller v. Robinson, 171 W. Va. 653, 301 S.E.2d 610 (1983) (“The
procedural distinctions between law and equity have been abolished under Rule 2 of our
Rules of Civil Procedure.”)

                                             21

Noland v. Virginia Ins. Reciprocal, 224 W.Va. 372, 378, 686 S.E.2d 23, 29 (2009)

(“Issues not raised on appeal or merely mentioned in passing are deemed waived.”)

(citing Tiernan v. Charleston Area Med. Ctr., Inc., 203 W.Va. 135, 140 n.10, 506 S.E.2d
578, 583 n.10 (1998)).      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 circuit court’s ruling dismissing the

Petitioners’ detrimental reliance claim is therefore affirmed.

                                    IV. CONCLUSION

              For the foregoing reasons, the circuit court’s rulings dismissing 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 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.11

       11
          Respondent United Bank contends that Petitioners’ brief only substantively
addresses the dismissal of the fraud and breach of the implied covenant of good faith and
fair dealing claims, and that Petitioners present no independent argument pertaining to
the dismissal of their claims for negligence, intentional or negligent infliction of
emotional distress/tort of outrage, breach of fiduciary duty, civil conspiracy and
respondeat superior or their claim for punitive damages. Therefore, United Bank claims
that any error in regard to the circuit court’s ruling as to these claims should be deemed
                                                                             (continued . . .)

                                              22

                                     Affirmed in part, reversed in part, and remanded.

waived for purposes of this appeal. See Noland v. Virginia Insurance Reciprocal, 224
W.Va. 372, 378, 686 S.E.2d 23, 29 (2009). The Petitioners reply that they challenged the
circuit court’s dismissal of all the tort claims which were dismissed on statute of
limitations grounds and are seeking a reversal of that ruling, in its entirety. While
Petitioners’ brief discusses, at length, the dates surrounding their discovery of the alleged
fraud, we find that they have not relegated their appeal only specifically to the fraudulent
inducement claim. It is clear from the briefing that Petitioners challenge the entirety of
the circuit court’s ruling.

       Furthermore, McQuade alleges that Petitioners Mike and Vivian Hollandsworth,
Jan Jerge, James Carroll, Jr., and Jim and Shayna Mackey all purchased their properties
before the Schonberger transaction. Because Petitioners’ fraud theory begins with the
Schonberger transaction, Respondents allege that the fact that these purchases preceded
the Schonberger transaction necessarily defeats the claims of these Petitioners. Moreover,
they claim that the Mackeys did not finance their purchase through United Bank, but
instead used a home equity loan. Therefore, their property was not appraised by
McQuade or anyone else, and thus, McQuade could not have committed fraud as to them.
To the extent that the circuit court did not address the merits of these arguments below, it
is premature for the Court to address them at this juncture. The circuit court will have
opportunity to address these arguments on remand and issue a ruling accordingly.

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