Wednesday, November 27, 2013

West Virginia's Dead Man's Statue is Buried

Earlier this year the West Virginia Supreme Court of Appeals invalidated the long standing and often-criticized Dead Man’s Statute, a statutory rule of evidence that prevented testimony against a deceased’s estate. Litigators invoked the rule when an interested party attempted to testify about past personal transactions with the deceased. Courts have interpreted these terms differently since the enactment of the rule in the mid-nineteenth century, but generally, an interested party is one that has a personal interest in the outcome of the litigation,3 and personal transactions are any method that derives information from another.

The Supreme Court of Appeals invalidated the rule in State Farm v. Prinz. Prinz involved an attempt by the estate of a passenger killed in a car accident to recover from the umbrella insurance policy of the driver Piper’s grandparents, but there was a question as to Piper’s residence at the time of the accident. If Piper lived with his grandparents, the policy covered the incident; if he lived at home, it did not. At trial, the estate of the passenger introduced considerable evidence that Piper lived with his grandparents, but the court granted the estate’s motion to exclude testimony that Piper lived with his parents. The jury ultimately determined that Piper lived with his parents.

On appeal, the Court noted the many criticisms of the Dead Man’s Statute while explaining past application of the law in West Virginia. Then the Court recognized the rule-making authority granted to the Court by the state constitution. The Court further explained that although the West Virginia Rules of Evidence authorizes legislative statutes that address evidentiary matters, the Court still maintains authority to review a particular statute to determine its continued validity. The Court conclusively found that the Dead Man Statute conflicts with the constitutional rule-making authority of the Court, and invalidated the rule.

Ancient English common law rules prohibited a party in any lawsuit, not just lawsuits involving past transactions with a deceased person, from testifying on their own behalf, or compelling an adversary to testify, because the courts considered juries incompetent to assess the credibility of witnesses. Later legal scholarship questioned this assumption, however, and legislatures began to repeal the disqualification. Dead Man’s Statutes garnered support as the courts and legislatures began to repeal the common law disqualification in the nineteenth century to favor jury assessment of witness credibility. Supporters’ rationale was that even though the legal system was moving toward jury assessment, the estate of a deceased person still needed extra protections, so interested parties should not be allowed to testify to an issue that may otherwise be contradicted by the deceased’s testimony. In essence, courts and legislatures thought that the temptation of an interested party to testify falsely was too great to allow a surviving party to testify against the estate of the deceased.

Courts trust the jury to assess the credibility of testimony in other situations, but the Dead Man’s Statute inexplicably prevents this task of the jury. The Statute sometimes prevents an honest claimant from using testimony that is necessary to prove a claim. For example, the rule prevented the defendant’s testimony about the driving behavior of the deceased in a wrongful death suit, which effectively prevented the defendant from giving his side of the story. The rule also prevented the use of a plaintiff housekeeper’s testimony regarding an oral contract between herself and her deceased employer, and thereby rendering her unable to obtain compensation for years of services. Because of the potential injustices and inefficiencies, the majority of jurisdictions has repealed the law in some way, and have allowed juries to evaluate the credibility of witnesses when testifying against a deceased person’s estate.

In its discussion of the effects of the invalidation, the West Virginia Supreme Court of Appeals cautioned that other evidence and testimony must still be admissible under the Rules of Evidence. In his concurrence, Justice Ketchum noted a possible revision to the Rules of Evidence in light of the Court’s holding. He suggested a new hearsay exception that allows testimony about a past statement of the deceased if the judge determines that the deceased made the statement on her own personal knowledge, in good faith, and under circumstances that indicates the statement is trustworthy. In the meantime, he additionally guided judges to assess admissibility of such evidence under the Rules’ “catch-all” provision.

Invalidating the Dead Man’s Statute allows courts to decide which party is honest the same way it does in cases not involving past transactions with someone who is deceased such as oath, cross-examination, and witness demeanor. Now when a claimant has only her own testimony upon which to rely, anachronistic rules will not prevent the claimant from testifying on her own behalf. The abolition of the rule, though, emphasizes the need for experienced attorneys who can expose perjury through cross-examination. These changes in evidentiary rules are welcome, however, as the results will increase the number of cases decided on the merits, and properly allow juries to evaluate the credibility of interested parties’ testimony. 

West Virginia Consumer Credit Protection Act Exposes Creditors to Penalties Even if a Person Does Not Suffer Actual Damage

Creditors should take note of a recent decision from the West Virginia Supreme Court of Appeals that exposes them to monetary penalties for violations of the West Virginia Consumer Credit and Protection Act (WVCCPA). In Vanderbilt Mortgage and Finance, Inc. v. Cole, 740 S.E.2d 562 (W. Va. 2013), West Virginia’s highest court held that a person does not need to suffer actual damages in order for a creditor to be monetarily penalized for violations of the WVCCPA.

In 1996, the debtor purchased a manufactured home with a thirty-year mortgage loan. The debtor had continuous trouble making her scheduled payments. In 2005, Vanderbilt Mortgage and Finance became the servicer of the debtor’s mortgage. The debtor failed to make a single payment to Vanderbilt that was on time. The debtor would often tell Vanderbilt that her contact information changed, although the court noted she was not trying to avoid Vanderbilt. When the debtor did not have a phone to call Vanderbilt, the debtor would call from phones owned by her relatives and acquaintances. Vanderbilt would then call these telephone numbers to contact the debtor because it was difficult to contact the debtor any other way.

In 2010, the debtor defaulted on her loan. Vanderbilt foreclosed on the property and purchased the home at a trustee’s sale. The debtor refused to leave and Vanderbilt filed an unlawful detainer action. The debtor turned around and filed a counterclaim against Vanderbilt for fifty-seven violations of the WVCCPA. Specifically, the debtor alleged that Vanderbilt insulted her, revealed private details of the loan to third parties without her permission, and repeatedly called relatives and acquaintances after receiving requests that the calls stop.

Although Vanderbilt won on the unlawful detainer action, the jury found that Vanderbilt violated the WVCCPA on thirteen occasions. However, the jury did not award the debtor any actual damages for these violations, presumably because the violations did not actually harm the debtor. The trial court took matters into its own hands, ordering Vanderbilt to pay penalties that totaled $32,125.24. The WVCCPA includes penalties for creditors who violate the Act and the jury found Vanderbilt guilty of (1) failing to provide account documents upon written request; (2) placing repeated and unsolicited phone calls to third parties; (3) using abusive language over the telephone; and, (4) communicating private details of the loan to a third party. Further, pursuant to the WVCCPA, the trial court decided to award $30,000 in attorney fees to the debtor even though the debtor only prevailed on thirteen of her fifty-seven alleged violations.

On appeal, Vanderbilt argued that the WVCCPA required actual damages for awarding civil penalties, and that West Virginia case law has found punitive damages as improper without a finding of actual damages. However, West Virginia’s Supreme Court explained that an award of civil penalties does not require a finding of actual damages under the WVCCPA. To reinforce its holding, the Court cited the interpretations of equivalent statutes by other jurisdictions. The Court also determined that the West Virginia Legislature’s intent in creating the civil penalty was to deter this sort of activity on the part of lenders. The Court then clarified that civil penalties are not punitive damages, explaining that punitive damages are conditioned on actual harm suffered and civil penalties are conditioned only on a violation of the law.

The cumulative effect of penalties should caution any debt collector to make sure its employees are aware of consumer protections under the WVCCPA. While not a conclusive list, debt collectors should avoid these activities:
• Making any sort of threats of violence or threats that a person has committed fraud
• Telling a debtor that his or her wages will be garnished without explaining that a judicial order must be in effect to do so
• Using profane language or making any sort of insult
• Calling at inconvenient times
• Disclosing indebtedness to anyone not authorized to the information
• Failing to disclose the name and address of the business to which the debt is owed
• Claiming that a call is an emergency
• Calling third-parties in an attempt to reach a debtor, especially after a person requests such calls to stop

The court’s interpretation of the law should caution any loan service provider or debt collector because it can expose them to liability even if their actions did not cause any actual damage to a consumer. In Cole, the court entered statutory damages for Vanderbilt’s violations of the WVCCPA because it wanted to deter such conduct in the future. Loan service providers and debt collectors should certainly avoid the type of conduct described in Cole, but should also make sure they are generally familiar with WVCCPA’s provisions regulating the communications and services provided to a debtor.