HSBC Bank USA, National Ass'n v. Anderson , 2017 Mont. LEXIS 650 ( 2017 )

10/24/2017
Case Number: DA 16-0546
DA 16-0546
IN THE SUPREME COURT OF THE STATE OF MONTANA
2017 MT 257
HSBC BANK USA, National Association,
Plaintiff and Appellee,
v.
RICHARD G. ANDERSON; and
LIMEGROVE OVERSEAS, LTD.,
Defendants and Appellants.
APPEAL FROM: District Court of the Eleventh Judicial District,
In and For the County of Flathead, Cause No. DV-12-614D
Honorable David M. Ortley, Presiding Judge
COUNSEL OF RECORD:
For Appellants:
Elizabeth L. Griffing, Axilon Law Group, PLLC, Helena, Montana
Frederick P. Landers, Axilon Law Group, PLLC, Bozeman, Montana
For Appellee:
Charles E. Hansberry, Jenny M. Jourdonnais, Hansberry & Jourdannais,
PLLC, Missoula, Montana
Submitted on Briefs: August 16, 2017
Decided: October 24, 2017
Filed:
__________________________________________
Clerk
Justice Laurie McKinnon delivered the Opinion of the Court.
¶1 Richard G. Anderson (Anderson) and Limegrove Overseas, Ltd., (Limegrove)
appeal from an Eleventh Judicial District Court, Flathead County, order granting HSBC
Bank USA, N.A.’s (HSBC) two motions for summary judgment and motion to exclude
Anderson’s expert. We affirm.
¶2 Anderson presents the following issues for review:
1. Did the District Court abuse its discretion in excluding Anderson’s expert
witness?
2. Did the District Court err when it concluded Montana law governs HSBC’s
underlying foreclosure and New York law governs any defenses and
counterclaims?
3. Did the District Court err in granting HSBC summary judgment to foreclose?
4. Did the District Court err in granting HSBC summary judgment on Anderson’s
counterclaims?
FACTUAL AND PROCEDURAL BACKGROUND
¶3 Anderson, a Canadian citizen, is the Chairman and Chief Executive Officer of
Wilton Resources, Inc., a publicly traded oil and gas exploration company, headquartered
in Calgary. Limegrove is a corporation organized under the laws of the British Virgin
Islands. Anderson informally runs the day-to-day operations of Limegrove and its sole
shareholder is the Karesmay Trust, an irrevocable offshore trust organized under the laws
of Jersey, Channel Islands. Anderson’s two adult children are the only beneficiaries of the
Karesmay Trust. Limegrove’s only asset is a vacation property located at 3542 East
Lakeshore Drive, Whitefish, Montana (the Limegrove Property). The Limegrove Property
2
consists of “nine (9) cultivated acres of land situated on Whitefish Lake and includes a
10,000-plus square foot vacation home, a four-bay garage, 538 feet of lakeshore, and a
2-boat docking system.” Anderson may use the Limegrove Property under an oral lease
agreement. The ownership arrangement was set up for tax and estate planning purposes at
Anderson’s attorneys’ suggestion. Anderson is not a shareholder in Limegrove and does
not own property in Montana. Anderson spends no more than 90 days per year at the
Limegrove Property.
¶4 HSBC is a federally chartered bank with offices in various cities throughout the
United States, primarily New York City. Anderson contacted HSBC in the spring of 2006
looking for financing to facilitate the $17.5 million1 acquisition of the Limegrove Property.
Anderson worked with Frank Drury, an HSBC domestic private banking “Relationship
Manager” specializing in customers with high net-worth. After negotiating, HSBC and
Anderson agreed to a two-year loan for $15.5 million with a $2 million down payment.
The loan required Anderson pay down the balance by half during the first year so the
outstanding principal would be no more than $8.75 million. Trust indentures on the
Limegrove Property, the Roxbury Property,2 and 750,000 shares in First Calgary Petroleum
secured the loan as collateral.
1
All references to dollar amounts are in USD unless otherwise indicated.
2
The Roxbury Property was another piece of property located on Whitefish Lake with an
ownership arrangement similar to the Limegrove Property, that is, it was owned by a foreign
corporation with its sole shareholder an offshore trust and Anderson’s children as the trust’s
beneficiaries. At the time it was pledged as collateral, its estimated value was $6.5 million.
3
¶5 In accordance with these terms, three loan documents were drafted and executed.
The loan documents consisted of (1) a Promissory Note (Note); (2) a Term Loan
Agreement (TLA); and (3) a Trust Indenture Security Agreement and Fixture Filing, and
Assignment of Leases, Rents and Agreements (Trust Indenture). The TLA, executed on
May 9, 2006, stated a maturity date of May 8, 2008.
¶6 The Note and TLA contained choice of law provisions indicating New York law
governed the agreements. The Trust Indenture is the only loan document containing a
provision indicating Montana law governed the agreement. HSBC and Limegrove are the
parties to the Trust Indenture and Limegrove’s director signed the agreement. Anderson
was not a party to or signatory of the Trust Indenture. The Trust Indenture pledged the
Limegrove Property as collateral for the obligations under the Note and TLA. The Trust
Indenture provided for certain events of default including if Anderson failed to pay any
obligation or if the closing price of a share of First Calgary Petroleum fell below $6
Canadian (CAD). An event of default entitled HSBC the right to take possession or
foreclose on the Limegrove Property.
¶7 Two events of default occurred by August 16, 2007. Anderson failed to pay down
the outstanding principal amount of the loan by half and the value of a First Calgary
Petroleum share fell below $6 CAD. HSBC transferred Anderson’s loan to its Special
Credit Unit and assigned it to Salvatore Gullo (Gullo) to manage. Anderson and Gullo
discussed entering a forbearance agreement to give Anderson additional time to perform
the loan obligations. HSBC does not have formal policies concerning forbearance
4
agreements, although they are “common practice.” On May 6, 2008, two days prior to the
loan’s maturity date, Anderson and Gullo executed a Forbearance Agreement, in which
HSBC agreed to forbear exercising its rights due to existing defaults until February 9, 2009,
and Anderson agreed to pay down the principal by $2,750,000 and pledge 400,000
additional shares of First Calgary Petroleum as collateral.
¶8 In the Forbearance Agreement, Anderson reaffirmed the obligations under the TLA,
Note, and Trust Indenture. The Forbearance Agreement was subsequently amended seven
times, each time allowing Anderson additional time, ranging from two to nine months, to
perform his obligations. In between the second and third amendments, on September 15,
2009, Anderson signed a Replacement Promissory Note (Replacement Note) subject to the
terms and conditions of the TLA. The Replacement Note contained a choice of law
provision indicating New York law governed the agreement.
¶9 Most of the seven amendments to the Forbearance Agreement required Anderson to
make a payment toward the outstanding principal in exchange for HSBC extending the
maturity date of the loan. Two amendments required Anderson pay an extension fee, one
for $100,000 and another for $5,000. Each of the seven amendments contained a choice
of law provision indicating New York law governed the amendment. Before the seventh
amendment, Anderson had paid down the principal to $9 million. The seventh and final
extension required several payments be made by specific deadlines and matured
completely on January 15, 2012.
5
¶10 During the seventh amendment’s extension period, Anderson and Gullo discussed
an eighth amendment. However, in an email Gullo sent to Anderson, Gullo indicated he
did “not have credit approval to extend” Anderson’s loan. Anderson failed to make one of
the required payments and did not pay off the loan by its January 15, 2012, maturity date.
Anderson acknowledged he had not fulfilled his obligations and that he withheld payment
because he assumed he would get another extension.
¶11 On February 16, 2012, HSBC sent Anderson a formal default letter and demanded
payment in full by February 29, 2012. Anderson did not pay. On June 8, 2012, HSBC
initiated a judicial foreclosure action against Anderson and Limegrove in Montana’s
Eleventh Judicial District Court, Flathead County. Anderson and Limegrove asserted
affirmative defenses of estoppel and waiver and counterclaimed breach of the implied
covenant of good faith and fair dealing, breach of implied contract, and violation of the
Montana Consumer Protection Act.
¶12 The District Court entered a scheduling order and set the close of discovery for
November 24, 2015. At Anderson’s request, the parties informally agreed to delay expert
disclosures from the original deadline of November 13, 2015, by eleven days to coincide
with the close of discovery on November 24, 2015. On that date, HSBC disclosed two
expert witnesses, a banking expert and an appraiser. Anderson disclosed one, an appraiser.
On January 19, 2016, pursuant to a stipulation between the parties, Limegrove dismissed
its affirmative defenses and counterclaims, leaving only Anderson’s. Prior to trial, HSBC
6
moved for summary judgment on the foreclosure, Anderson’s affirmative defenses, and
Anderson’s counterclaims.
¶13 On March 11, 2016, after the discovery deadline, Anderson filed a supplemental
expert disclosure disclosing an additional expert witness, a banking expert, James Shires
(Shires). Anderson also filed Shires’s declaration. Anderson did not ask for leave to file
the supplemental expert disclosure or declaration. On March 21, 2016, HSBC filed a
pretrial motion to exclude Shires’s testimony at trial and strike his affidavit. HSBC relied
on M. R. Civ. P. 37(c)(1) and argued Anderson’s late disclosure of Shires’s testimony
merited its exclusion. Anderson responded and argued the late disclosure was
“substantially justified due to HSBC’s late disclosure of certain written policies.”
¶14 On March 22, 2016, the District Court held a hearing on the pretrial motions. The
District Court found that Anderson’s “failure to timely disclose Shires[] as an expert
witness was not substantially justified and was not harmless.” Further, the District Court
found Anderson “did not move for or suggest an alternative sanction.” The District Court,
relying on Doherty v. Fannie Mae, 2014 MT 56, ¶ 15, 374 Mont. 151, 319 P.3d 1279,
concluded that absent substantial justification, harmlessness, or a motion for a lesser
sanction, Shires’s testimony must be excluded and his affidavit stricken.
¶15 The District Court granted HSBC’s three pretrial motions in a 42-page order dated
August 30, 2016. On October 12, 2016, the District Court entered its final judgment and
decree of foreclosure. The District Court awarded judgment to HSBC against Anderson
for “$6,434,971.86 in principal, $1,885,689.62 in interest (for a base total amount owing
7
of $8,320,661.48), together with additional interest accruing (at a rate of $1,340.62 per
day) from January 4, 2016 until the present [October 12, 2016,] and HSBC’s reasonable
out-of-pocket expenses (including attorneys’ fees) . . . .”
¶16 Anderson appeals.
STANDARDS OF REVIEW
¶17 A district court’s exclusion of expert witness testimony is reviewed for an abuse of
discretion. Sunburst School Dist. No. 2 v. Texaco, Inc., 2007 MT 183, ¶ 68, 338 Mont.
259, 165 P.3d 1079. A court abuses its discretion if it acts “arbitrarily without
conscientious judgment or exceed[s] the bounds of reason.” Seltzer v. Morton, 2007 MT
62, ¶ 65, 336 Mont. 225, 154 P.3d 561 (quoting Lopez v. Josephson, 2001 MT 133, ¶ 14,
305 Mont. 446, 30 P.3d 326). This Court reviews decisions on choice of law de novo.
Masters Group Intl., Inc. v. Comerica Bank, 2015 MT 192, ¶ 33, 380 Mont. 1, 352 P.3d
1101 (citation omitted) (hereinafter, Comerica). A motion for summary judgment should
be granted, “if the pleadings, the discovery and disclosure materials on file, and any
affidavits show that there is no genuine issue as to any material fact and that the movant is
entitled to judgment as a matter of law.” M. R. Civ. P. 56(c)(3). “We review de novo a
district court’s ruling on summary judgment, applying the criteria of M. R. Civ. P.
56(c)(3).” Mt. Water Co. v. Dept. of Revenue, 2017 MT 117, ¶ 7, 387 Mont. 394, 394 P.3d
922 (citations omitted).
8
DISCUSSION
¶18 1. Did the District Court abuse its discretion in excluding Anderson’s expert
witness?
¶19 The parties initially dispute the appropriate standard of review for this issue.
Relying on Lorang v. Fortis Insurance Company, 2008 MT 252, ¶ 53, 345 Mont. 12, 192
P.3d 186, Anderson contends that this Court reviews decisions to exclude evidence de
novo. HSBC argues that the correct standard of review for M. R. Civ. P. 37(c) sanctions
is for an abuse of discretion. “A district court possesses broad discretion in ruling on the
admissibility of expert testimony, and without a showing of abuse of discretion, the district
court’s ruling will not be disturbed on appeal.” Sunburst, ¶ 68 (citing State v. Vernes, 2006
MT 32, ¶ 14, 331 Mont. 129, 130 P.3d 169); see also McCulley v. U.S. Bank, 2015 MT
100, ¶ 22, 378 Mont. 462, 347 P.3d 247 (“We review a district court’s discovery ruling for
an abuse of discretion.”); Serrania v. LPH, Inc., 2015 MT 113, ¶ 12, 379 Mont. 17, 347
P.3d 1237 (“This Court reviews sanctions orders for abuse of discretion.”); Doherty, ¶ 12
(“We review a district court’s decision regarding the imposition of sanctions for alleged
discovery abuse to determine whether the district court abused its discretion.” (citation
omitted)). We review the imposition of sanctions pursuant to M. R. Civ. P. 37(c) for an
abuse of discretion.
¶20 On appeal, Anderson argues disclosing Shires late was substantially justified by
HSBC’s late production of certain policies and entries in its online Credit and Accounts
Receivable Management System (CARMS). Anderson argues the District Court
inappropriately relied on dicta from Doherty to conclude Shires’s information must be
9
excluded and its exclusion of Shires was “extremely harsh.” Instead of Doherty, Anderson
argues this Court should apply the three-part test outlined in Maloney v. Home &
Investment Center, Inc., 2000 MT 34, ¶ 35, 298 Mont. 213, 994 P.2d 1124, used to
determine the appropriateness of excluding witnesses. Relying on Maloney, Anderson
argues this Court should reverse the District Court’s decision to exclude Shires.
¶21 HSBC responds by arguing that its late production of credit policies and CARMS
does not provide Anderson “substantial justification.” HSBC points out that Anderson
initially asked for HSBC’s credit policies in January 2013, and HSBC objected to the
disclosure on the basis that the request was “overly broad, vague and unlimited in scope or
time” and sought “proprietary, trade secret and/or confidential business information.”
Anderson never responded to HSBC’s argument that the credit policies were
undiscoverable, but three years later, on January 18, 2016, requested the policies again. On
appeal, HSBC argues that by then it decided to just provide the policies in order to avoid a
discovery dispute. Further, HSBC argues that the late-disclosed policies do not provide
any justification for Anderson’s late expert disclosure because the policies were not
identified, quoted, or analyzed in Shires’s disclosure and only mentioned once in his
declaration. HSBC argues the CARMS were produced multiple times and for the first time
in March 2013, well before the close of discovery. At Anderson’s request, they were
reproduced after. HSBC distinguishes Maloney and asserts that its test is no longer
applicable because M. R. Civ. P. 37 was amended in 2011 and is now self-executing,
10
meaning the sanction of exclusion is automatic. HSBC argues the District Court correctly
excluded Shires’s testimony.
¶22 During discovery, litigants can be required, by scheduling order, to disclose their
expert witnesses, their opinions, and the basis for those opinions. M. R. Civ. P.
26(b)(4)(A)(i); Sunburst, ¶ 70.
If a party fails to provide information requested in accordance with these
rules or fails to disclose information regarding opinions of a witness as
required by Rule 26(b)(4), the party is not allowed to use that information or
witness to supply evidence on a motion, at a hearing, or at a trial, unless the
failure was substantially justified or is harmless.
M. R. Civ. P. 37(c)(1). On motion, the court may impose other appropriate sanctions in
addition to exclusion or instead of exclusion. M. R. Civ. P. 37(c)(1)(C). “If the court does
not find the failure substantially justified or harmless, and if there is no motion for
alternative sanctions, the information must be excluded.” Doherty, ¶ 15, (citing M. R. Civ.
P. 37(c)(1); accord Fed. R. Civ. P. 37(c)(1); Yeti by Molly, Ltd. v. Deckers Outdoor Corp.,
259 F. Supp. 3d 1101, 1106 (9th Cir. 2001) (describing Fed. R. Civ. P. 37(c)(1) as self-
executing and automatic); Olson v. Mont. Rail Link, Inc., 227 F.R.D. 550, 552 (D. Mont.
2005) (noting exceptions to automatic sanctions under Fed. R. Civ. P. 37(c)(1) if failure is
substantially justified or harmless)).
¶23 Here, Anderson does not argue that the late expert disclosure was harmless and did
not move the District Court for an alternative sanction. Anderson contends the late
disclosure was substantially justified by HSBC’s late production. We disagree. HSBC
produced CARMS and credit policies after the close of discovery; however, the CARMS
11
were also timely produced and HSBC timely objected to producing the credit policies.
Further, Anderson does not explain why he could not disclose Shires until HSBC produced
the CARMS and credit policies. He does not, for example, claim that Shires’s examination
of those documents was somehow critical and, without them, he would not have selected
or required an expert. We conclude the District Court did not abuse its discretion in
excluding Shires’s information and testimony.
¶24 Anderson asserted affirmative defenses of estoppel and waiver and counterclaimed
breach of the implied covenant of good faith and fair dealing, breach of implied contract,
and violation of the Montana Consumer Protection Act. Anderson bore the burden of
proving these affirmative defenses and counterclaims. The District Court found, “It is
reasonable to think that Anderson should have anticipated, from the outset, that in a case
such as this, the opinions of an expert on banking practices would be required.” We agree
with the District Court. Even excluding the evidence provided by HSBC in January 2016,
Anderson should have known that he would need a banking expert and timely disclosed
one. The District Court did not abuse its discretion in concluding that Anderson’s late
disclosure was not substantially justified. The District Court did not err in excluding
Anderson’s expert witness.
¶25 2. Did the District Court err when it concluded Montana law governs HSBC’s
underlying foreclosure and New York law governs any defenses and counterclaims?
¶26 The parties agree Montana law governs the foreclosure action. The parties disagree
on which state’s law governs Anderson’s defenses and counterclaims. The District Court
applied the Comerica choice of law test and concluded New York law governed
12
Anderson’s affirmative defenses and counterclaims. Comerica, ¶ 55. On appeal, Anderson
argues Montana law was the parties’ choice in the Trust Indenture, which allowed HSBC
to foreclose, and his defenses and counterclaims are “part and parcel” to the foreclosure
action. Montana law should, Anderson argues, govern the entire dispute despite the choice
of law provisions in the other loan documents. HSBC argues Anderson’s defenses and
counterclaims arise from the other loan documents, which Anderson is a party to and all
contain New York choice of law provisions. Further, HSBC argues Anderson cannot rely
on the Trust Indenture because he was not a party to or signatory of it. Additionally, HSBC
indicates that Limegrove was a party to the Trust Indenture; however, in a document filed
on January 19, 2016, Limegrove dismissed its affirmative defenses and counterclaims with
prejudice.
¶27 Statute dictates choice of law as to real property. “Real property within this state is
governed by the law of this state . . . .” Section 70-1-107, MCA. “A court may not act
directly upon the title to real property in a foreign jurisdiction.” Aetna Life Ins. Co. v.
McElvain, 221 Mont. 138, 147, 717 P.2d 1081, 1086 (1986). Judicial foreclosures must
occur in the jurisdiction where the property is located. Here, Montana law must govern
the Trust Indenture in order to allow foreclosure of the Limegrove Property as a remedy.
¶28 “We recognize and enforce a clear and unambiguous contract term, unless that term
‘violates public policy or is against good morals.’” Comerica, ¶ 54 (quoting Youngblood
v. Am. States Ins. Co., 262 Mont. 391, 395, 866 P.2d 203, 205 (1993)).
In the construction of an instrument, the office of the judge is simply to
ascertain and declare what is in terms or in substance contained therein, not
13
to insert what has been omitted or to omit what has been inserted. Where
there are several provisions or particulars, such a construction is, if possible,
to be adopted as will give effect to all.
Section 1-4-101, MCA.
¶29 In Comerica, we recognized the test Montana courts apply to choice of law disputes.
We apply the law of the state chosen by the parties to govern their contractual rights unless
the following three factors are met:
(1) but for the choice of law provision, Montana law would apply under
[Restatement (Second) of the Conflict of Laws § 188]; (2) Montana has a
materially greater interest in the particular issue than the parties[’] chosen
state; and (3) application of the chosen state’s law would contravene a
Montana fundamental policy.
Comerica, ¶ 55 (quotation and citations omitted). All three factors must be met and if a
clear choice of law provision does not violate Montana public policy, there is no reason to
analyze factors (1) and (2). Comerica, ¶ 55 (citations omitted). If the parties’ chosen
state’s law does not contravene Montana public policy, it will be applied.
¶30 To determine whether the terms in the loan documents are clear and unambiguous,
we first examine the provisions. Ten contracts explicitly state New York law governs
them. The TLA states:
Section 8.5. Governing Law. This Agreement and the Loan Documents
shall be governed by and construed in accordance with the laws of the State
of New York without giving effect to the conflicts of law principles thereof
(other than Section 5-1401 of the New York General Obligations Law), and
except as otherwise specifically set forth in the Mortgages with respect to
each Mortgage and the Mortgaged Premises (in which event the laws of the
jurisdiction in which the Mortgaged Premises is located shall apply).
14
(Emphasis in original.) The Note states “THIS PROMISSORY NOTE SHALL BE
GOVERENED BY THE LAWS OF THE STATE OF NEW YORK.” (Emphasis in
original.) The Replacement Note states “THIS REPLACEMENT PROMISSORY NOTE
SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.”
(Emphasis in original.) Each of the seven amendments to the Forbearance Agreement
include the same provision stating, “[t]his Amendment shall be governed by, and construed
under, the internal laws of the State of New York, without regard to principles of conflicts
of law.” These contracts clearly and unambiguously indicate the parties agree to the
application of New York law.
¶31 The Trust Indenture is the only document indicating Montana law governs it.
Section 13. Law Governing. This Indenture of Trust shall be governed
by and construed in accordance with the laws of the jurisdiction in which the
Land is located.
(Emphasis in original.) It is undisputed the land at issue, the Limegrove property, is located
in Montana. This provision is clear and unambiguous. The Forbearance Agreement does
not contain a choice of law provision but does contain a provision reaffirming the
obligations set forth in the TLA and other loan documents. If possible, our goal will be to
give effect to each choice of law provision in each instrument. Section 1-4-101, MCA.
¶32 The District Court found it significant that Anderson was not a party to the Trust
Indenture, the only contract selecting Montana law, and was a party to each of the loan
documents selecting New York law:
Although they relate to the foreclosure, none of Anderson’s defenses or
claims raise questions or issues that concern or directly affect interest in the
15
property. Rather Anderson’s defenses and counterclaims are based on
allegations concerning HSBC’s conduct with respect to the underlying debt.
Issues which do not affect interest in the land, although they relate to the
foreclosure, are determined by the law which governs the debt for which the
mortgage was given. Restatement (Second) of Conflict of Laws [§] 229 cmt.
e. Anderson’s affirmative defenses and counterclaims arise out of the
contracts that establish the underlying debt—the Note, Replacement Note,
TLA, Forbearance and forbearance amendments (extensions). Anderson is
a party to all of these contracts and all of these contracts either contain or
incorporate New York choice of law provisions.
¶33 Litigants lack standing to enforce obligations of a contract if they are not a party to,
or third-party beneficiary of, that contract. See Turner v. Wells Fargo Bank, N.A., 2012
MT 213, ¶ 15, 366 Mont. 285, 291 P.3d 1082. Anderson is not a party to the Trust
Indenture and cannot enforce its choice of law provision.3 Anderson asserted affirmative
defenses and counterclaims. However, Anderson’s defenses and counterclaims cannot
arise from the Trust Indenture he is not a party to.
¶34 Anderson is a sophisticated businessperson and CEO of a publicly traded
corporation. He has experience orchestrating similar ownership arrangements for other
vacation properties in order to accomplish his tax and estate planning goals. Multiple
attorneys represented Anderson during the formation, review, and execution of the loan
documents between Anderson, Limegrove, and HSBC. Based on Anderson’s
sophistication, experience, and access to legal representation, the District Court found “[i]t
is reasonable to interpret Anderson’s and HSBC’s action of including a choice of (New
3
Anderson does not argue he is a third-party beneficiary to the Trust Indenture. He does argue he
owes obligations under the Trust Indenture and is named as “borrower,” but fails to develop this
argument.
16
York) law provision in the contracts as their intention that the provision apply to claims
and affirmative defenses arising from those contracts.” (Citation omitted.) We agree with
the District Court. Anderson agreed, ten separate times, to the application of New York
law, and was not a party to the only instrument indicating Montana law applied. He cannot
now invoke a provision of a contract he was not a party to in order to avoid a choice of law
selection he explicitly, and repeatedly, agreed to unless that provision contravenes Montana
public policy.
¶35 We now consider whether New York law contravenes Montana public policy.
Comerica, ¶ 55. The District Court found “Anderson has not identified any aspect of []
either his affirmative defenses or claims to which application of New York law would
somehow contravene Montana’s public policy.” On appeal, Anderson does not suggest
New York law contravenes Montana’s public policy, he maintains only that the parties
chose Montana law. We disagree that the parties chose Montana law. Instead, we believe
the parties chose New York law, as evidenced by the ten separate and explicit provisions.
New York law was generally the parties’ choice, but they were required by statute to
include a Montana choice of law provision in the Trust Indenture to facilitate foreclosure
within the state.
¶36 The District Court found New York and Montana law comparable as it relates to
Anderson’s defenses and counterclaims. The District Court found “there is no substantive
difference between Montana and New York law on the defenses of equitable estoppel” or
waiver. In Montana, a prima facie claim of equitable estoppel is established by six
17
elements outlined in Turner, ¶ 30. Likewise, in New York, courts recognize six similar
elements to establish equitable estoppel (three elements concerning the party estopped and
three concerning the party asserting the doctrine). Wallace v. BSD-M Realty, LLC, 142
A.D.3d 701, 703 (N.Y. App. Div. 2016). In both Montana and New York, waiver is a
voluntary and intentional relinquishment of a known right. Comerica, ¶ 81; Nassau Trust
Co. v. Montrose Concrete Products Corp., 56 N.Y.2d 175, 184 (N.Y. 1982).
¶37 As to Anderson’s counterclaims, the District Court found, “[l]ike Montana, New
York recognizes claims for breach of the implied covenant and breach of implied contract
and also has its own consumer protection statute.” Citing 19 Recordings Ltd. v. Sony Music
Enter., 97 F. Supp. 3d 433, 438 (S.D.N.Y. 2015) (implied covenant); Maas v. Cornell
Univ., 721 N.E.2d 966, 970 (N.Y. App. Div. 1999) (implied contract); N.Y. Gen. Bus. Law
§ 349 (footnote omitted). The law governing Anderson’s defenses and counterclaims are
similar in Montana and New York and the District Court held “application of New York
law to Anderson’s affirmative defenses and claims would not contravene Montana public
policy.”
¶38 We agree with the District Court. Based on the similarity between New York and
Montana law relating to Anderson’s defenses and counterclaims we conclude that applying
New York law does not offend Montana public policy. Further examination of the
remaining two factors is not required. Comerica, ¶ 55. The District Court did not err in
concluding Montana law governed HSBC’s judicial foreclosure action and New York law
governed Anderson’s defenses and counterclaims.
18
¶39 3. Did the District Court err in granting HSBC summary judgment to foreclose?
¶40 “The party moving for summary judgment bears the initial burden of establishing
the absence of any genuine issue of material fact and entitlement to judgment as a matter
of law.” Semenza v. Kniss, 2008 MT 238, ¶ 18, 344 Mont. 427, 189 P.3d 1188 (citation
omitted). If met, “the burden shifts to the non-moving party” to avoid summary judgment
by “establish[ing] with substantial evidence, as opposed to mere denial, speculation, or
conclusory assertions, that a genuine issue of material fact does exist or that the moving
party is not entitled to prevail under the applicable law.” Semenza, ¶ 18 (quotation and
citations omitted). The evidence must be viewed in the light most favorable to the non-
moving party and all reasonable inferences are to be drawn in favor of the party opposing
summary judgment. Redies v. Attys. Liab. Protec. Socy., 2007 MT 9, ¶ 26, 335 Mont. 233,
150 P.3d 930 (quotation and citations omitted).
¶41 In Montana, “[t]o make a prima facie case for foreclosure, the bank is obligated to
prove the following three elements: (1) the debt of defendants [Anderson and Limegrove];
(2) non-payment of the debt; and (3) ownership of the debt by the complaining party
[HSBC].” Farm Credit Bank v. Hill, 266 Mont. 258, 264, 879 P.2d 1158, 1161 (1993)
(citing First Natl. Bank v. Quinta Land and Cattle Co., 238 Mont. 335, 339, 779 P.2d 48,
50 (1989). The District Court concluded HSBC, the moving party, proved all three
elements. At the District Court, Anderson argued against summary judgment, claiming
principles of equitable estoppel and waiver precluded HSBC’s foreclosure. On appeal,
19
Anderson argues HSBC failed to prove the second element—non-payment of the debt—
because HSBC waived its right to payment.4
¶42 Waiver is a relinquishment of a known right. Nassau, 56 N.Y.2d at 1269. Anderson
argues HSBC waived its right to payment by continuing to give him extensions. Anderson
argues he did not pay off the loan at the end of the seventh extension because he assumed
he would get another extension. However, evidence provided to the District Court
indicated HSBC only waived its rights as to maturity of the debt for the defined period
indicated in the Forbearance Agreement and its amendments and had not waived its right
to full, eventual payment. Each amendment to the Forbearance Agreement stated a specific
maturity date, that it was the parties’ “entire agreement,” and that it could not be modified
except by a signed, written agreement. Anderson acknowledged he was never promised
an eighth extension period. Additionally, email correspondence between Anderson and
Gullo indicated Gullo told Anderson he did not have credit approval to extend the loan
again.
¶43 The District Court found, “Anderson has not submitted any evidence which raises a
question of material fact as to the second element, non-payment of the debt. In his
deposition testimony, Anderson acknowledged that, although he was making payments on
the interest, he had not paid off the principal.” The District Court also found, “Anderson
4
Anderson also claims “HSBC was first to breach the TLA,” but does not explain how this would
excuse Anderson’s payment. It is not this Court’s job to conduct legal research on Anderson’s
behalf, to guess as to his precise position, or to develop legal analysis that may lend support to that
position. See Johansen v. Dept. of Nat. Resources & Conserv, 1998 MT 51, ¶ 24, 288 Mont. 39,
955 P.2d 653 (citations omitted). We do not consider this argument.
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has not provided any evidence that raises a question of fact as to whether HSBC waived its
rights for all time or for any period of time after the January 15, 2012 maturity date under
the Seventh Forbearance Amendment.” Viewing the evidence in Anderson’s favor, we
conclude no issue of material fact existed to dispute or excuse Anderson’s non-payment of
the debt. The District Court did not err in granting HSBC summary judgment to foreclose.
¶44 4. Did the District Court err in granting HSBC summary judgment on Anderson’s
counterclaims?
¶45 At the District Court, Anderson asserted three counterclaims. On appeal, Anderson
argues the District Court erred in granting summary judgment to HSBC regarding only
two: breach of the implied covenant of good faith and fair dealing and violation of the
Montana Consumer Protection Act. Like at the District Court level, Anderson cites only
to Montana authority to support his contentions on appeal because he disagrees that New
York law governs his counterclaims. However, New York law governs Anderson’s
counterclaims.
¶46 Anderson argues HSBC breached the implied covenant of good faith and fair
dealing by acting dishonestly in negotiating and granting him extensions. On appeal,
Anderson does not cite to any specific dishonest action, instead arguing generally that he
had “presented more than sufficient evidence to show that Gullo’s actions displayed actual
dishonesty and HSBC’s actions were outside of accepted commercial practices.” The
District Court granted HSBC summary judgment because Anderson failed to present
admissible evidence to raise an issue of fact regarding his breach of implied covenant
claim.
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¶47 Evidence considered for summary judgment purposes must be admissible. Hiebert
v. Cascade Co., 2002 MT 233, ¶ 29, 311 Mont. 471, 56 P.3d 848. A party opposing
summary judgment cannot create an issue of material fact by contradicting prior sworn
statements. Kaseta v. N.W. Agency, 252 Mont. 135, 138, 827 P.2d 804, 806 (1992) (citation
omitted). Referring to its exclusion of Shires’s testimony, the District Court cited M. R.
Civ. P. 56(e)(2) and held “Anderson cannot rely on inadmissible evidence to raise a
question of fact in opposition to a motion for summary judgment.” Additionally, the
District Court refused to consider a sworn statement of Anderson because it directly
contradicted an earlier sworn statement.
¶48 The covenant of good faith and fair dealing “embraces a pledge that neither party
shall do anything which will have the effect of destroying or injuring the right of the other
party to receive the fruits of the contract.” 19 Recordings Ltd., 97 F. Supp. 3d at 438
(quoting Dalton v. Educ. Testing Serv., 87 N.Y.2d 384, 389 (N.Y. 1995)). “The implied
covenant cannot be used to create independent obligations beyond the contract.” 19
Recordings Ltd., 97 F. Supp. 3d at 438 (quotation omitted). Anderson does not argue
HSBC destroyed or injured his right to receive the fruits of any of the contracts he entered
into. Anderson’s argument that HSBC breached the implied covenant by failing to grant
an eighth extension must fail because the implied covenant does not create obligations
beyond the contract. See 19 Recordings Ltd., 97 F. Supp. 3d at 438. HSBC was not
obligated by the implied covenant of good faith and fair dealing to amend the forbearance
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agreement an eighth time. Therefore, HSBC did not breach the implied covenant of good
faith and fair dealing.
¶49 Anderson also counterclaimed HSBC violated the Montana Consumer Protection
Act, a Montana specific statute. On appeal, Anderson cites § 30-14-103, MCA, which
prohibits “[u]nfair methods of competition and unfair or deceptive acts or practices in the
conduct of any trade or commerce . . . .” As set forth above, New York law, not Montana
law, governs Anderson’s counterclaims. The District Court noted New York law also
prohibits “deceptive acts or practices” under N.Y. Gen. Bus. Law § 349(a). However,
Anderson did not allege a violation of New York law. Anderson does not allege HSBC
violated an applicable law. The District Court did not err in granting HSBC summary
judgment on Anderson’s counterclaims.
CONCLUSION
¶50 The District Court did not abuse its discretion in excluding Shires’s expert testimony
pursuant to M. R. Civ. P. 37(c). The District Court did not err in its conclusion on choice
of law. The District Court did not err in granting HSBC summary judgment to foreclose
and did not err in granting HSBC summary judgment on Anderson’s counterclaims.
¶51 Affirmed.
/S/ LAURIE McKINNON
We Concur:
/S/ MIKE McGRATH
/S/ DIRK M. SANDEFUR
/S/ JAMES JEREMIAH SHEA
/S/ JIM RICE
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