Bruce v. National City Mortgage

January 15 2013
DA 12-0350
IN THE SUPREME COURT OF THE STATE OF MONTANA
2013 MT 7N
JOSEPH M. BRUCE AND ANGELA A. BRUCE,
Plaintiffs and Appellants,
v.
NATIONAL CITY MORTGAGE, A DIVISION
OF NATIONAL CITY BANK,
Defendant and Appellee.
APPEAL FROM: District Court of the Eleventh Judicial District,
In and For the County of Flathead, Cause No. DV 11-137
Honorable Ted O. Lympus, Presiding Judge
COUNSEL OF RECORD:
For Appellants:
Darrell S. Worm; Ogle & Worm, PLLP; Kalispell, Montana
For Appellee:
Mark C. Sherer; Mackoff Kellogg Law Firm; Dickinson, North Dakota
Submitted on Briefs: December 19, 2012
Decided: January 15, 2013
Filed:
__________________________________________
Clerk
Justice Beth Baker delivered the Opinion of the Court.
¶1 Pursuant to Section I, Paragraph 3(d), Montana Supreme Court Internal Operating
Rules, this case is decided by memorandum opinion and shall not be cited and does not
serve as precedent. Its case title, cause number, and disposition shall be included in this
Court’s quarterly list of noncitable cases published in the Pacific Reporter and Montana
Reports.
¶2 Plaintiffs Joseph and Angela Bruce appeal the District Court’s grant of summary
judgment in favor of Defendant National City Mortgage, which was a division of
National City Bank (National). We affirm.
¶3 The Bruces took out a loan with National in June 2007 to finance construction of
and payment for their new home. The loan documents called for a one-year construction
phase followed by a thirty-year permanent mortgage. During the construction phase of
the loan, which specified five draws based on percentage of completion, the Bruces were
to make interest-only payments on the amounts of the loan that were disbursed for
construction costs. If construction was completed and the final draw received by April 1,
2008, the Bruces could lock in at a 7.875% or lower interest rate for their thirty-year
mortgage. Before the final draw could be disbursed, however, the Bruces had to be
current on their construction phase interest-only payments. If those conditions were not
met, the interest rate could be raised to 11.75% at National’s “sole discretion.” National
notified the Bruces by letter in September 2008 that the interest rate would be increased,
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effective November 1, 2008, to 11.75% since there had been no disbursements for
construction since May 8, 2008. The letter advised that the Bruces could prevent the rate
increase by taking a draw from the construction loan prior to the effective date or, if
construction was complete, “by locking and modifying to your permanent mortgage.” In
any event, all other terms and conditions of the loan remained in full force and effect.
¶4 The Bruces allege that National failed and refused to convert the initial
construction financing to permanent financing under the terms of the Promissory Note
and Deed of Trust. They claim that National advised them that they did not qualify for
the permanent loan since they had not completed construction on time. The Bruces failed
to make the $5,512.50 payment due on June 1, 2008. They made a payment in
September 2008, which was applied to interest, and subsequently stopped making
payments.
¶5 National instituted foreclosure proceedings under the Bruces’ Deed of Trust.
Approximately one week before the Trustee Sale, the Bruces filed a complaint in the
Eleventh Judicial District Court seeking declaratory and injunctive relief and damages for
breach of contract, breach of the implied covenant of good faith and fair dealing, and
fraud. The Bruces did not file a motion for preliminary injunction and the sale occurred
as scheduled. National moved for summary judgment on all claims in the complaint and
the matter was submitted on the parties’ briefs and affidavits.
¶6 The District Court found as an undisputed fact that the Bruces failed to pay all
interest-only construction loan payments timely as agreed. Although the parties disputed
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whether the project was completed by the deadline and whether the Bruces timely
attempted to obtain a final disbursement, the court concluded that they could not have
qualified for the lower interest rate even if they did complete construction on time
because they were not current in the construction loan’s interest-only payments.
¶7 We review a district court’s ruling on motions for summary judgment de novo,
applying the same M. R. Civ. P. 56(c) criteria as does the district court. We review for
correctness a district court’s legal conclusion that no genuine issue of material fact exists
and that the moving party is entitled to judgment as a matter of law. Turner v. Wells
Fargo Bank, N.A., 2012 MT 213, ¶ 11, 366 Mont. 285, ___ P.3d ___ (citations omitted).
¶8 On appeal, the Bruces maintain that the District Court ignored the disputed fact
whether they completed construction and requested the final disbursement on time, a fact
they claim is pivotal to National’s contention that they were disqualified from the terms
of their permanent loan and to the Bruce’s contention that National breached its contract
with them. National, however, points out that the date of completion was important only
for the Bruces’ ability to take advantage of a more favorable interest rate on their
permanent loan and that they never were disqualified from their permanent loan. The
September 17, 2008 letter on which both parties rely makes clear that National was
increasing the interest rate to 11.75% and that “all other terms and conditions” of the loan
remained in effect.
¶9 Although the Bruces dispute numerous facts, they do not dispute that they agreed
in the Construction/Permanent Loan Agreement that all payments would be current prior
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to the last advance on their construction loan. Nor do they dispute that they were
twenty-two days late in making the interest payment that was due March 25, 2008, the
last payment required before the April 1 “lock-in” deadline. Their payment was not
made until April 16, 2008. National was within its contract rights to raise the interest rate
on the loan and, when the Bruces were unable to make required payments, to institute
foreclosure proceedings.
¶10 We have determined to decide this case pursuant to Section I, Paragraph 3(d) of
our Internal Operating Rules, which provides for noncitable memorandum opinions. In
response to National’s documentary evidence, the Bruces did not submit contrary
evidence demonstrating a genuine factual issue for trial on their breach of contract claim
or the related claims made in their complaint. The District Court ruled correctly that any
factual disputes between the parties were not material to the Bruces’ claims for relief and
that National was entitled to judgment as a matter of law.
¶11 The judgment is affirmed.
/S/ Beth Baker
We concur:
/S/ Mike McGrath
/S/ Patricia O. Cotter
/S/ Michael E Wheat
/S/ Jim Rice
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