McCulley v. American Land Title Co.

McCulley v. American Land Title Co., 2013 MT 89 (April 9, 2013) (5-0) (Cotter. J.)

Issue: Whether the district court properly granted summary judgment to the bank and the title company.

Short Answer: (1) Yes to the title company; (2) yes to the contract and negligence claims against the bank; (3) no as to the fraud claim against the bank.

Affirmed in part and reversed in part

Facts: Mary McCulley bought a condo in Bozeman in 2006 for $395,000. She sought a $300,000 loan from Heritage Bank, predecessor to defendant U.S. Bank of Montana. American Land Title Co. provided a commitment for title insurance. McCulley signed a promissory note and deed of trust as collateral. The deed indicated the condo was for residential purposes only. Subsequently, and without McCulley’s knowledge, the title company changed the designated use of the condo from residential to commercial. After closing, McCulley discovered the bank had issued her an 18-month, $300,000 commercial property loan rather than the 30-year residential loan for which she had applied. When she was unable to find long-term financing for the property, McCulley transferred the property to the Central Asia Institute, and used the proceeds to pay off the loan. She then sued the title company and U.S Bank, alleging several tort and contract claims. The bank asserts that is informed McCulley prior to closing that because the lot upon which the building sat was zoned commercial, it could not issue a residential loan, and therefore proposed an 18-month “consumer bridge” loan. McCulley denies this. The disclosure statement McCulley signed at closing states the $300,000 loan would mature 18 months later. McCulley made monthly payments through 2006 and 2007 until she received notice that a balloon payment was due in a few months. While trying to resolve the dispute with the bank, she twice renegotiated the loan to extend the maturity date. Unable to find long-term financing, she eventually sold the condo and paid off the note.

Procedural Posture & Holding: All parties moved for summary judgment. The district court granted the defendants’ motions and denied McCulley’s. McCulley appeals, and the Supreme Court affirms summary judgment for the contract and negligence claims against the bank, and the negligence and fraud claims against the title company, but reverses and remands on the fraud claim against the bank.

Reasoning: Although it is undisputed that the title company changed the deed of trust after McCulley signed it to say that the condo could be used only for commercial purposes, instead of only for residential purposes, the district court properly found that this act did not cause McCulley’s damages. The deed does not affect a property’s use. Additionally, the deed was revised when McCulley extended the maturity date of her loan to properly reflect the condo use as residential. McCulley presents no authority to support her claim of fraud against the title company. Summary judgment is affirmed.

McCulley’s breach of contract claim against the bank fails because the bank did not alter the deed of trust, and the actual loan contracts were not breached. McCulley signed closing documents stating that the maturity date of the loan was December 2007; the bank did not breach the written contracts. She raises additional arguments not raised below; the Court declines to address those. McCulley finally argues that the bank committed fraud by engaging in a bait and switch by representing to her that she was getting a residential loan and switching it to a short-term commercial loan. The district court found that McCulley failed to assert facts supporting each of the nine elements of fraud. McCulley argues that the bank had the buy-sell agreement indicating the zoning was a condition of purchase, and that the bank therefore should have informed her that the commercial zoning of the property would preclude her from obtaining the 30-year mortgage for which she applied. Both McCulley and her realtor testified under oath that no mention was made at closing that McCulley was closing on an 18-month loan. The bank testified that its customary practice is to go through each document at closing, and that it had no evidence this had not occurred here. This presents a genuine issue of material fact in dispute requiring further proceedings in the trial court.