justice done: Countrywide home loans, inc. v. thitchener

By Terry A. Moore, Esq. and Micah S. Echols, Esq.

What is a lifetime of collections worth? If you came home today and discovered that literally everything in your home was stolen (family pictures, your wedding video, a wedding dress, prenatal ultrasound photographs of your kids, your high school memorabilia, your financial records, computers, clothes, etc.), how would you feel? Is it possible to even begin to put a price on that sort of loss? Sure you can figure out what the TVs, beds, and couches cost, but what about the irreplaceable items. Those are precisely the sorts of questions that Jerry and Katrina Thitchener were forced to answer when their mortgage company, Countrywide Home Loans, broke into their home and threw away virtually everything that they owned in this world. How could something like that happen, you might ask? Greed.

Jerry Thitchener is an F-16 mechanic. After serving 12 years on active duty in the Air Force, with the last several years of service at Nellis Air Force Base, Jerry was honorably discharged in April 2001. Jerry, however, wanted to continue to serve his country in some manner utilizing the skills he had developed as an F-16 mechanic, and so he decided to join the Air National Guard. Unfortunately, the only Air National Guard unit that had use of F-16 mechanics was the Tucson Air National Guard. Jerry, however, did not mind, and he promptly signed up for traditional Guard status the same week he was discharged from active duty. As they had recently purchased a condominium not far from Nellis, Jerry and his wife, Katrina, and their two children, Steven and Kaitlyn, decided to stay in Las Vegas following his discharge from active duty.

Shortly thereafter, following the horrific events of September 11, 2001, Jerry’s Guard unit was activated, and Jerry was called up to active duty. Pursuant to his obligations, Jerry reported to Arizona in January 2002 for a twelve month tour of duty.

Six months later, in approximately July 2002, Katrina and the children missed Jerry, so they went to stay with him for the remaining few months until Jerry’s tour of duty was up. Since the Thitcheners had been apart since Jerry’s activation, they decided that Katrina and the children would pack a few bare essentials to make life a little easier on the children, and then they would all return home to Las Vegas in January 2003. Katrina packed up a few bags of essential items for the kids and herself (a few toys, some clothes, and some grooming items) and drove down to Arizona. Everything else was left in their home since they would be coming home again in a few months, and it made no sense for them to move all of their possessions to Arizona just to move them back again a few months later. If only the story stopped here.

In December 2002, Countrywide initiated foreclosure proceedings against a condominium in the same development as the Thitcheners’ home. The foreclosure was against a 1 bedroom, 1 bath, downstairs unit belonging to a third party, James Rangel. Conversely, Jerry and Katrina’s condominium was an upstairs unit with 2 bedrooms and 2 baths. Notably, the Thitcheners were completely current on all monthly obligations with Countrywide at this point in time. In order to complete the foreclosure, Countrywide hired a local Century 21 real estate agent, James Standley, to list and sell the foreclosed residence. Somehow, and Countrywide’s documents and witnesses were never able to adequately explain why it occurred, Countrywide wrongfully and mistakenly believed that the Thitcheners’ home was the one that had been foreclosed upon.

Standley, acting on Countrywide’s behalf and at its instruction, hired a locksmith to break into, and change the locks on the Thitcheners’ home, whereupon he found a home full of furniture and possessions. This fact alone raised a “red flag” with Standley since in his experience people who did not pay their mortgage rarely left behind all of their personal property when they moved. Standley immediately contacted Countrywide to confirm that the Thitcheners’ condo was, in fact, the condo that had been foreclosed upon. Countrywide, through its Asset Manager Jennifer Baldwin, confirmed that the Thitcheners’ address was the correct condo.

Upon Countrywide’s directions, Standley hired David Leyba, a local handyman he knew, to “trash-out” all of the Thitcheners’ personal possessions. Mr. Leyba was not licensed or bonded, and was not qualified in any way to handle this “trash-out.” At trial, Leyba testified that he used his own pickup truck (and not a moving van) and that he hired a couple of migrant workers that he picked up down the street at a local 7-11 to help him trash out the Thitcheners’ home. Leyba did testify that he knew that he was supposed to store the items for 30 days but he could not identify or prove that he had, in fact, stored the Thitcheners property as required by the law. Countrywide then allegedly sent a notice to the Thitcheners’ condo informing them that they had 30 days to claim their possessions. Countrywide allegedly sent this notice to the Thitcheners’ Las Vegas condo, even though Countrywide knew the Thitcheners were in Arizona, where they had received their Countrywide mortgage statements since at least August 2002. As a consequence, the “trash-out” guy, Mr. Leyba, removed and threw away EVERYTHING (baby pictures, wedding videos, military medals Jerry had earned during the first Gulf War, personal financial information, high school pictures and memorabilia, etc.) that the Thitcheners’ owned. There was no evidence that Leyba stored any of the Thitcheners’ possessions. On the other hand, a neighbor of the Thitcheners testified that he saw Leyba and the migrant workers dispose of many of the Thitcheners’ possessions in the community dumpster.

In addition to the first “red flag,” Standly also testified that there were numerous other circumstances which raised “red flags” to him. For instance, when he went to change the power into his name (so that he could list and sell the house with the power on), Standley discovered that the Thitcheners were current on their power bill and their other utilities. The third red flag occurred when Standley had a conversation with the homeowners’ association president, who informed Standley that the Thitcheners were current on their homeowners association dues. This information was especially concerning to Standley since in his experience, people who did not pay their mortgage certainly did not pay their HOA dues. After each of these red flags, Standley contacted Countrywide to repeatedly re-confirm that the Thitcheners’ condo was the correct condo that had gone to sale in the foreclosure. And each time, Countrywide purportedly checked its records and confirmed that it was the correct condo and reiterated the instructions that Standley was to proceed with listing and selling the home. Standley testified at trial that he had approximately 60 communications with Baldwin about his concerns.

Standley complied with Countrywide’s instructions and proceeded to list and sell the Thitcheners’ condo, despite having an independent duty of his own as a licensed real estate agent. Additionally, Countrywide’s Asset Manager in charge of the Thitchener’s property admitted at trial that she reviewed numerous documents that contained the Thitcheners’ name, but she consciously chose to ignore all the red flags. Instead she chose to blindly proceed down the foreclosure route in conscious disregard of what the potential consequences of her actions might be on the Thitcheners. Moreover, Baldwin also admitted at trial that she had an incentive to flip the Thitcheners’ home as quickly as possible since she would get a bigger bonus the quicker she turned the property. In fact, the only reason that Countrywide eventually stopped attempting to try and sell the Thitcheners’ home to a third party was because the Thitcheners had hired Marquis & Aurbach, and our firm had finally gotten Countrywide to realize that it could not proceed with the sale since Countrywide had not actually foreclosed on and taken title to the Thitcheners’ property.

Unfortunately, by the time Countrywide actually acknowledged its error and eventually allowed the Thitcheners access to their own home, the only thing that the Thitcheners were left with was a barren home with a lot of nicks, scrapes, dings, holes, and scratches due to the careless “trash-out.”

To add insult to injury, and as further evidence of its arrogant indifference in this case, shortly after recognizing the gravity of what it had done, Countrywide attempted to require the Thitcheners to obtain additional vacancy insurance since they were no longer living in their trashed-out home, even though the Thitcheners continued making their mortgage payments. Throughout the litigation, Countrywide believed that the Thitcheners’ damages were limited to the garage-sale value of their possessions. And, it was not until the middle of trial that Countrywide actually admitted liability.

The case was tried before a jury over the course of 5 days. The Honorable Elizabeth Gonzalez was the trial judge. Judge Gonzalez made the threshold finding on three occasions that there was enough evidence for the jury to consider the amount of punitive damages to be awarded to the Thitcheners. After the compensatory phase of the trial, the jury awarded the Thitcheners the following damages: (1) $1,000.00 for real property; (2) $321,690.00 for personal property; (3) $300,000.00 for Countrywide’s negligence; and (4) $300,000.00 for Countrywide’s breach of contract and breach of the covenant of good faith and fair dealing, for a total award of $922,690.00. Judge Gonzalez and all counsel agreed that the verdict form would list out these sections to avoid a duplication of damages.

The jury also concluded that there was clear and convincing evidence demonstrating that Countrywide “acted with conscious disregard,” “malice, express or implied,” or “oppression” sufficient to award the Thitcheners $2,500,000.00 in punitive damages during the second phase of trial. Countrywide then filed a post-trial motion to amend the judgment. Judge Gonzalez initially ruled that the punitive damages award did not violate the NRS 42.005(1)(b) cap since the trebled amount of real property and personal property under NRS 40.170 was $965,370.00. And, three times this compensatory amount would be $2,896,110.00, which was within the jury’s punitive damages award. So, after adding in prejudgment interest to the compensatory components, and adding in awards for attorney fees and costs, the total Judgment was $4,577,088.80.

Following the entry of Judgment, Countrywide filed another series of post-trial motions asking for a new trial and to further amend the Judgment. Judge Gonzalez rejected all of Countrywide’s requests, except for one. Judge Gonzalez reconsidered her decision to use the trebled amount for calculating the cap on punitive damages, and instead used the un-trebled amount to calculate the cap. So, the punitive damages award was limited to $968,070.00, which was calculated as three times the trespass and conversion damages. This reduction in the award of punitive damages then brought the amended Judgment to $3,077,057.50. Countrywide and the Thitcheners both appealed.

The supreme court clarifies nevada’s punitive damage jurisprudence and establishes new law.

Ironically, on September 11, 2008, the Nevada Supreme Court issued its decision in this case. The appeal raised a number of issues of first impression in Nevada and also sought to clarify Nevada’s punitive damages jurisprudence. Particularly, the Nevada Supreme Court had never ruled on the issue of determining damages for personal property that was irreplaceable. At trial, the Thitcheners argued that they were entitled to recover for the special value of their irreplaceable property (heirlooms, pictures, medals, etc.) and Judge Gonzalez agreed with the Thitcheners’ position. The jury then awarded the Thitcheners $321,690.00 for the property Countrywide had disposed of.

On appeal, Countrywide argued that the jury’s award to the Thitcheners for personal property contained an improper element of special value or sentimental value. Countrywide argued, for example, that converted wedding videos were compensable in the amount of the cost of a blank video tape. Other items that carried only special value or sentimental value to the owner, such as war medals, were either not compensable or compensable only to the extent of specific evidence of the value. Although the Supreme Court adopted the Restatement approach argued by Countrywide, the Court interpreted the Restatement consistent with the Thitcheners’ position. According to the Court, the problem with Countrywide’s jury instruction is that it did not differentiate between special value and ordinary market value. The Supreme Court was concerned that based upon Countrywide’s proposed jury instruction, the jury may have limited its award of the Thitcheners’ personal property to only fair-market value. The Supreme Court also explained that the instruction actually given to the jury was incomplete because it did not specifically exclude consideration of sentimental value. But, the Court also recognized that neither instruction necessarily misstated the law. So, the Court deferred to Judge Gonzalez’ discretion in settling the jury instructions.

Countrywide also argued that mere testimony from the Thitcheners was insufficient to establish the special value of the converted personal property. The Supreme Court sided with the Thitcheners and clarified that mere testimony would have been insufficient to prove value, but the fact that the Thitcheners had identified each item of converted property in a written list was sufficient evidence to uphold the award for converted personal property. The Court also confirmed that a jury has “wide latitude” to award compensatory damages so long as there is evidence supporting the damages. So, the award for the Thitcheners’ converted property was upheld.

The Court also clarified the effect of NRS 40.170 as it pertains to trebling damages to property that result from trespass. At trial, the Thitcheners had argued that the statute allowed all of the damages that resulted from the trespass to be trebled and Judge Gonzalez agreed with this position and trebled all of the Thitcheners’ trespass and conversion damages. In making its ruling, the Supreme Court acknowledged that both parties interpretation of NRS 40.170 were reasonable; however, the Court decided that because the statute appears in a chapter of the Nevada Revised Statutes that relates only to real property, only the amount of $1,000.00 for damages to real property could be trebled. Notably, Countrywide also argued that this trebling statute was punitive in nature, so the Thitcheners were not entitled to treble damages and punitive damages, since Countrywide would be receiving “double” punishment. In rejecting this argument, the Supreme Court explained that there is no mental element in the language of NRS 40.170, and that it serves distinct purposes other than to punish and deter. So, the Court’s holding clarified that treble damages under NRS 40.170 for real property are compensatory in nature.

The most contentious issue raised in the appeal was the propriety of the jury’s punitive damages award. During the appeal, Countrywide argued that it was not guilty of implied malice or oppression as those terms are defined in NRS 42.001, that it could not be held vicariously liable for the acts of its Asset Manager, and that there was insufficient evidence to justify punitive damages being assessed. In rejecting each of Countrywide’s arguments, the Supreme Court completely reevaluated Nevada’s existing punitive damages case law and statutes.

Initially, the Court recognized that NRS 42.001 allows implied malice as a distinct basis from express malice to award punitive damages. The Court also recognized that conscious disregard is an element of both implied malice and oppression as defined in the statute. The Court then clarified what conduct amounts to “conscious disregard.” In doing so, the Court overruled Craigo v. Circus-Circus Enterprises, 106 Nev. 1, 786 P.2d 22 (1990) and Granite Construction v. Rhyne, 107 Nev. 651, 817 P.2d 711 (1991) and other related cases. The Court further reiterated that to prove the mental element of conscious disregard, there must be some conduct that goes beyond mere recklessness or gross negligence. The Court also retreated from the term “unconscionable irresponsibility” as it was used in First Interstate Bank v. Jafbros Auto Body, 106 Nev. 54, 787 P.2d 765 (1990). Proof of conscious disregard requires no evidence of intent to harm, since actual knowledge of intent to harm is a mental element of express malice.

Upon a review of the evidence under the clarified standard, the Court upheld the $968,070.00 punitive damages award because although Countrywide’s conduct may have started as a mistake, a series of red flags demonstrated that Countrywide did not want to see the truth: (1) The Thitcheners’ name appeared in James Rangel’s foreclosure file (the property that Countrywide should have foreclosed upon); (2) Jennifer Baldwin (Countrywide’s Asset Manager) reviewed documents from Rangel’s file with the Thitcheners’ name; (3) James Standley (Countrywide’s real estate agent) also contacted Baldwin by telephone on various occasions to confirm that the Thitcheners’ property was in foreclosure after Standley confirmed that the property was occupied, the power was on, and the HOA dues were current. As such, the Court concluded that Countrywide acted with conscious disregard sufficient to justify the jury’s imposition of punitive damages.

The Court then clarified the correct standard for imposing vicarious liability for punitive damages. In doing so, the Supreme Court affirmed NRS 42.007 as the correct standard and overruled Smith’s Food & Drug Centers v. Bellegarde, 114 Nev. 602, 958 P.2d 1208 (1998) which adopted the Restatement approach for purposes of employment relationships. The Restatement approach remains intact for imposing punitive damages based upon complicity when the agency relationships are not between an employer and an employee. Notably, even after completely revising Nevada’s standards on this point, the Court found that even under the more stringent NRS 42.007 standard, the facts of this case demonstrated that vicarious liability for punitive damages against Countrywide were still proper. Specifically, the Court found given the amount of control that Baldwin had as an Asset Manager she was a “managerial agent” of Countrywide. As such, the jury instruction based upon Bellegarde and the Restatement was harmless error and the punitive damages award, as adjusted by Judge Gonzalez, was also completely upheld. Notably, the Court also determined that the 1 to 3 ratio in NRS 42.005(1)(b) was controlling in this circumstance, thereby appearing to limit Nevada’s adoption of the federal guideposts as previously stated in Bongiovi v. Sullivan, 122 Nev. 556, 138 P.3d 433 (2006).

Finally, Countrywide argued that post-judgment interest should not be allowed to run on the entire amended Judgment since post-judgment interest accruing on prejudgment interest would improperly compound the interest. The Supreme Court rejected this argument since post-judgment interest runs on the entire amount of the unsatisfied judgment to compensate a plaintiff for loss of the use of the money. The Thitcheners relied upon Waddell v. L.V.R.V., Inc., 125 P.3d 1160 (Nev. 2006) for this argument.

Thus, after 5 years of litigation, the Thitcheners will now finally receive compensation for their losses. The total award is calculated as follows: (1) compensatory amount for trespass and conversion ($321,690.00); (2) compensatory amount for trebled real property damages ($3,000.00); (3) prejudgment interest on compensatory damages at 8.25% legal interest rate ($49,684.24); (4) punitive damages ($968,070.00); (5) attorney fees (previously awarded by Judge Gonzalez and unchallenged on appeal) ($248,740.00); (6) costs (previously awarded by Judge Gonzalez and unchallenged on appeal) ($22,104.00); and (7) post-judgment interest adjusted biannually since November 30, 2005 ($408,436.16) and accruing at the rate of $408.85 per day since September 11, 2008 until paid). So, the total award equals $2,021,726.36, with post-judgment interest accruing since September 11, 2008. In the end, justice was done.