After discovering she received an 18-month commercial loan instead of a 30-year residential mortgage, a Montana woman sued the bank and the title company that conducted the closing for fraud, breach of contract, negligence and slander of title. Among other things, she alleged the title company committed fraud when it revised the legal description to describe a commercial condominium rather than a residential one.
The case is Mary McCulley v. American Land Title Co. and U.S. Bank of Montana (Supreme Court of Montana, No. DA 12-0117).
In 2006, Mary McCulley purchased a condominium in Bozeman, Mont., for $395,000. She sought a residential loan from Heritage Bank, predecessor to U.S. Bank of Montana for $300,000. American Land Title Co. (ALTC) provided a commitment for title insurance. McCulley signed a promissory note and signed a deed of trust as collateral. The deed indicated that the condo was for residential purposes only. Subsequently, however, and purportedly without McCulley’s knowledge, ALTC change the designated use of the condo in the deed from residential to commercial.
After closing in June 206, McCulley asserted she discovered the bank had issued her an 18-month, $300,000 commercial property loan rather than the 30-year residential property loan for which she applied. When she was unable to obtain long-term refinancing on the property, McCulley signed a warranty deed transferring ownership of the condo to the Central Asia Institute. She used the proceeds to pay off the loan.
In June 2009, McCulley sued ALTC and U.S. Bank for negligence, breach of contract, fraud, slander of title, intentional infliction of emotional distress and malice. All parties motion for summary judgment. The district court granted ALTC’s and U.S. Bank’s motions for summary judgment and denied McCulley’s. McCulley appealed the court’s opinion.
The Supreme Court of Montana affirmed in part and reversed and remanded in part the lower court’s ruling.
On appeal, McCulley argued that the district court erred in granting summary judgment to ALTC and the U.S. Bank because genuine issues of material fact exist as to each of her claims.
The court noted that it is undisputed that after McCulley signed the original deed stating the condo could be used for residential purposes only, ALTC changed the deed to reflect that the condo was to be used for commercial purposes only. ALTC then recorded the revised deed. McCulley argued that this change, unbeknownst to her, later caused her to be unable to obtain refinancing through a conventional long-term residential loan. However, the court noted that the bank and McCulley executed two subsequent modifications to the deed of trust, both of which expressly reflected in the legal description of the property that the condo was to be used for residential purposes only.
The court agreed with the district court in determining that the legal description in the deed of trust and any subsequent changes thereto did not diminish McCulley’s legal title to the condo nor did it change the use of the property or the zoning classifications of the property.
“As noted by the district court, while a deed of trust contains a legal description of property subject to transfer, such description does not alter the use, nature or zoning of the property,” the court stated. “Zoning in the City of Bozeman and in Gallatin County is controlled by specific ordinances and regulations. Moreover, the deed was subsequently revised—twice—to correctly reflect the use of the condo as residential. Therefore the original deed was no longer controlling. Under these circumstances, McCulley failed to establish that ALTC’s change to the original deed breached a duty owed to her or that such breach caused her injuries warranting damages. Consequently, the district court did not err in granting summary judgment to ALTC on this issue.”
McCulley also claimed on appeal that ALTC committed fraud when it revised the original deed. The court noted that McCulley presented no legal argument or authority to support her contention.
“As we have stated on numerous occasions, under M.R.App. P. 23, we are not obligated to develop arguments on behalf of parties to an appeal, nor are we to guess a party’s precise position or develop legal analysis that may lend support to his position,” the court stated. “Because McCulley has failed to develop any legal argument, authority or analysis for her claim of fraud, we do not address the argument further. We therefore affirm the district court order of summary judgment in favor of ALTC on the issue of fraud.
“We now turn to McCulley’s various claims against U.S. Bank,” the court continued. “McCulley alleges the bank engaged in negligence, fraud, breach of contract, breach of the covenant of good faith and fair dealing, and infliction of emotional distress. To a significant extent, McCulley attempts throughout her arguments to blame the bank for the actions of ALTC. The district court rejected this proposition, as do we. McCulley appeals only the district court’s rulings pertaining to breach of contract and the covenant of good faith and fair dealing, negligence and fraud. We address her claims against the bank in turn.”
Turning to McCulley’s allegation of breach of contract, the court noted the district court ruled that because U.S. Bank did not alter the usage restriction change on the deed of trust, U.S. Bank did not breach its contract with McCulley. The court agreed, further noting that the actual loan contracts were not breached.
“McCulley signed multiple documents at the closing, comprised of close to 100 pages of fine print,” the court stated. “In the three places in the documents where the term of the loan was actually set forth, a maturity date of Dec. 16, 2007, is reflected. Therefore, not withstanding the potential viability of other claims against the bank, the bank cannot be said to have breached the written contracts.”
The court did reverse and remand the district court’s decision as to McCully’s fraud claim. She argued that the bank committed fraud by engaging in bait and switch tactics to change her approved 30-year residential mortgage to an 18-month balloon construction loan without her knowledge. She argues that the bank was in possession of the buy-sell agreement wherein McCulley indicated that the zoning determination was a condition of purchase; therefore, the ban should have informed her from the beginning that the commercial zoning of the property would preclude her from obtaining the residential 30-year mortgage for which she applied.
McCulley further argued that the bank untruthfully claimed to have sent her the letter dated May 26, 2006, outlining the terms of her loan and explaining that she was getting an 18-month consumer bridge loan in the amount of $300,000. She denied ever receiving the letter and argued that the letter is formatted as an interoffice memorandum, in contrary to the terms of the Truth in Lending statement and Good Faith Estimate.
McCulley also testified that she had no idea that the bank was extending only an 18-month commercial loan instead of a 30-year residential loan.
“Along with her Realtor, she attended the closing just three weeks after applying for her loan and receiving documents from the bank outlining the terms of the 30–year mortgage,” the court said. “Both McCulley and her Realtor swore under oath that no mention was made at the closing of the fact that she was receiving an 18–month commercial loan, and that they both assumed that she was closing on the 30–year residential loan as previously contemplated. In fact, she asserts that she was unaware that she had received an 18–month loan until the bank notified her that her balloon payment was coming due in December 2007.
“In light of the foregoing chronology of events, and in particular noting McCulley’s arguably legitimate contention that the May 26 ‘letter’ was not a letter to her at all, we cannot conclude that there is no genuine issue of material fact relative to McCulley’s claim of fraud on the part of the bank,” the court continued. “McCulley maintains that the bank sent her documents outlining the terms of a 30–year residential mortgage and that it closed on the loan not three weeks later without a mention that the terms of the loan were radically different than those initially agreed to between the parties. Although inartfully, McCulley has set forth sufficient facts to raise a genuine issue of whether a false and material representation may have been made to her, that she acted upon it in ignorance of the true facts, and that the bank intended her to do so, resulting in damages. She supported these claims with testimony in her deposition that she never received the ‘letter’ and that the bank did not explain to her the change in the terms of her loan. It bears repeating that summary judgment is precluded in cases in which genuine issues of material fact exist.”