Anderson v. ReconTrust Co.

• Decision Date: 19 December 2017
• Docket Number: DA 16-0618
• Citation: 407 P.3d 692,2017 MT 313,390 Mont. 12
• Parties: Kenneth ANDERSON and Bobbie Anderson, Plaintiffs and Appellants, v. RECONTRUST COMPANY, N.A. BAC Home Loans Servicing, LP f/k/a Countrywide Home Loans Servicing, LP, Federal National Mortgage Association and John Doe Corporations/LLCS/Partnerships/Business Trusts/Any Other Type Organization or Business Entity Nos. I-V, Defendants and Appellees.
• Court: Montana Supreme Court

390 Mont. 12

407 P.3d 692

2017 MT 313

Kenneth ANDERSON and Bobbie Anderson, Plaintiffs and Appellants,

v.RECONTRUST COMPANY, N.A. BAC Home Loans Servicing, LP f/k/a Countrywide Home Loans Servicing, LP, Federal National Mortgage Association and John Doe Corporations/LLCS/Partnerships/Business Trusts/Any Other Type Organization or Business Entity Nos. I-V, Defendants and Appellees.

DA 16-0618

Supreme Court of Montana.

Submitted on Briefs: July 26, 2017

Decided: December 19, 2017

For Appellants: Paul A. Sandry, Johnson, Berg, & Saxby, PLLP; Kalispell, Montana

For Appellees: Mark D. Etchart, Browning, Kaleczyc, Berry & Hoven, P.C.; Helena, Montana

Justice Dirk Sandefur delivered the Opinion of the Court.

¶ 1 Kenneth and Bobbie Anderson (Andersons) appeal the judgment of the Montana Eleventh Judicial District Court, Flathead County, dismissing their asserted negligence, negligent misrepresentation, fraud, and Montana Consumer Protection Act¹ (MCPA) claims against Bank of America, N.A. (Bank of America) and ReconTrust Company N.A. (ReconTrust) pursuant to M. R. Civ. P. 12(b)(6). We restate and address the following issues on appeal:

1. Did the District Court erroneously dismiss Andersons' negligence, negligent misrepresentation, fraud, and MCPA claims pursuant to M. R. Civ. P. 12(b)(6) ?

2. Did the District Court err by not sua sponte converting ReconTrust's Rule 12(b)(6) motion to dismiss into a motion for summary judgment pursuant to M R. Civ. P. 12(d) upon the filing of an affidavit in support of Andersons' brief in opposition?

¶ 2 We affirm.

PROCEDURAL AND FACTUAL BACKGROUND

¶ 3 On March 23, 2007, Andersons took out a loan from Mountain West Bank for the purchase of a home in Kalispell, Montana, secured by a residential trust indenture. As of July 2010, Mortgage Electronic Registration Systems, Inc. (MERS) owned the beneficial interest in the loan and mortgage. ReconTrust was the trustee under the trust indenture. In September 2011, after experiencing financial difficulty and defaulting on their mortgage, Andersons contacted Bank of America to inquire about a loan modification. At that time, a trustee's foreclosure sale of Andersons' property was previously scheduled for October 3, 2011. Later in September 2011, following a series of telephone calls and exchanges of information, Bank of America informed Andersons that they preliminarily qualified for a loan modification under the Home Affordable Modification Program (HAMP).

¶ 4 HAMP is a federal program introduced in 2009 in response to the subprime mortgage crisis. The program assists qualified homeowners to avoid mortgage foreclosure by modifying monthly loan payments to affordable levels. To qualify for a HAMP loan modification, homeowners must satisfy various threshold eligibility requirements and then make lower mortgage payments on a trial basis for three consecutive months. Upon successful completion of the trial period, the modification becomes permanent.

¶ 5 Andersons assert on appeal that, despite repeated assurances from Bank of America in September 2011 that they qualified for a HAMP loan modification and that the conditional approval would preempt the scheduled foreclosure sale, the bank ultimately denied the requested loan modification. In the absence of a loan modification, the trustee's foreclosure sale proceeded as previously scheduled, at which the trustee sold the property to the Federal National Mortgage Association (FNMA a/k/a Fannie Mae). Andersons then sued Bank of America, ReconTrust, and FNMA based on alleged violations of the Montana Small Tract Financing Act, breach of contract, HAMP-related violations, negligence, fraud, negligent misrepresentation, and unfair or deceptive practices in violation of the Montana Consumer Protection Act.

¶ 6 On April 16, 2012, Bank of America and ReconTrust filed a motion to dismiss pursuant to M. R. Civ. P. 12(b)(6) on the asserted ground that Andersons' First Amended Complaintstated insufficient facts to entitle them to relief on their asserted claims. Andersons filed a brief in opposition to the motion with a supplemental affidavit setting forth additional facts in support of their claims. Andersons did not move for conversion of the motion to dismiss into a motion for summary judgment pursuant to M. R. Civ. P. 12(d). The District Court ultimately dismissed all of Andersons' claims pursuant to M. R. Civ. P. 12(b)(6) without consideration of the facts set forth in Andersons' supplemental affidavit. Andersons timely appealed, challenging only the dismissal of their negligence, negligent misrepresentation, fraud, and Montana Consumer Protection Act claims.

STANDARD OF REVIEW

¶ 7 Whether an asserted claim fails to sufficiently state a claim upon which relief may be granted is a question of law reviewed de novo for correctness under the standards of M. R. Civ. P. 12(b)(6). Sinclair v. BNSF Ry. Co., 2008 MT 424, ¶ 25, 347 Mont. 395, 200 P.3d 46. Whether a district court properly converted, or failed to convert, a motion to dismiss into a motion for summary judgment pursuant to M. R. Civ. P. 12(d) is a discretionary matter reviewed for an abuse of discretion.

DISCUSSION

¶ 8 An asserted claim is subject to dismissal if, as pled, it is insufficient to state a cognizable claim entitling the claimant to relief. M. R. Civ. P. 12(b)(6). Under Rule 12(b)(6), the court must take all well-pled factual assertions as true and view them in the light most favorable to the claimant, drawing all reasonable inferences in favor of the claim. Kleinhesselink v. Chevron, U.S.A., 277 Mont. 158, 161, 920 P.2d 108, 110 (1996) ; Boreenv. Christensen, 267 Mont. 405, 408, 884 P.2d 761, 762 (1994) ; Willson v. Taylor, 194 Mont. 123, 126, 634 P.2d 1180, 1182 (1981). A claim is subject to M. R. Civ. P. 12(b)(6) dismissal only if it either fails to state a cognizable legal theory for relief or states an otherwise valid legal claim but fails to state sufficient facts that, if true, would entitle the claimant to relief under that claim. See Kleinhesselink, 277 Mont. at 161, 920 P.2d at 110 ; Fandrich v. Capital Ford Lincoln Mercury, 272 Mont. 425, 428-29, 901 P.2d 112, 114 (1995) ; Boreen, 267 Mont. at 408, 884 P.2d at 762. See also Ryan v. City of Bozeman, 279 Mont. 507, 511-13, 928 P.2d 228, 230-32 (1996) (claimant burden to "adequately plead a cause of action"); Mysse v. Martens, 279 Mont. 253, 266, 926 P.2d 765, 773 (1996) (complaint must state factual basis of all elements of a cognizable legal claim); M. R. Civ. P. 8(a) (complaint must set forth a short and plain statement of a cognizable legal claim showing that the pleader is entitled to relief). The liberal notice pleading requirements of M. R. Civ. P. 8(a) and 12(b)(6) do "not go so far to excuse omission of that which is material and necessary in order to entitle relief," and the "complaint must state something more than facts which, at most, would breed only a suspicion" that the claimant may be entitled to relief. Jones v. Montana University System, 2007 MT 82, ¶ 42, 337 Mont. 1, 155 P.3d 1247 ; Ryan, 279 Mont. at 512, 928 P.2d at 231 ; Mysse, 279 Mont. at 266, 926 P.2d at 773.

¶ 9 1. Did the District Court erroneously dismiss Andersons' negligence, negligent misrepresentation, fraud, and MCPA claims pursuant to M. R. Civ. P. 12(b)(6) ?

¶ 10 In the context of loan applications and servicing, the nature of the relation between lender and borrower is generally a non-fiduciary, arms-length contractual relationship limited to express contract duties and the implied duty of good faith and fair dealing. Morrow v. Bank of America N.A., 2014 MT 117, ¶¶ 34-35, 375 Mont. 38, 324 P.3d 1167. Unless otherwise provided by contract, a lender generally has no duty to modify or renegotiate a loan to provide more favorable terms to help a debtor avoid default and foreclosure. Morrow, ¶¶ 34, 39. The mere offering and administration of HAMP loan modifications in accordance with program rules and guidelines is insufficient alone to give rise to any special relationship or duty between a lender and borrower. Morrow, ¶¶ 34-40. "HAMP does not provide a private right of action and does not itself create a duty of care." Morrow, ¶ 39. Thus, a lender generally has no duty to forego or prevent foreclosure and may "refuse to modify or renegotiate a loan" for legitimate business reasons. Morrow, ¶ 36.

¶ 11 However, extraordinary circumstances or interaction between a lender and borrower or applicant may nonetheless independently give rise to a general or fiduciary duty of care to the borrower or applicant. See Fisher v. Swift Transp. Co., Inc., 2008 MT 105, ¶ 16, 342 Mont. 335, 181 P.3d 601 (distinguishing between general common law duty of reasonable care and heightened duty arising from special relationships). All individuals have a general common law duty to use reasonable care under the circumstances to avoid causing foreseeable harm to others. Sections 1-1-204, 27-1-701, and 28-1-201, MCA (codification of common law duty and negligence theory); Fisher, ¶ 16 ; Busta v. Columbus Hosp., 276 Mont. 342, 360-71, 916 P.2d 122, 133-39 (1996) (discussing duty as a function of reasonable foreseeability of harm). Moreover, based on the relative disparity of knowledge and the objectively reasonable expectation that the recipient should be able to trust and rely upon a professional advisor, the provision of professional advice intended to guide another in the conduct of the other's affairs regarding a technically complex subject matter generally gives rise to a fiduciary relationship, with attendant fiduciary duties of loyalty, trust, and competence owed to the recipient of the advice. Turkey Creek, LLC v. Rosania, 953 P.2d 1306, 1312 (Colo. App. 1998) (fiduciary relationship "arises when one party has a high degree of control over the property or subject matter of another" or when a party "places a high level of trust and confidence in the fiduciary to look out for the beneficiary's best interest"); Matter of Cooperman, 83...