Bertelsen v. CitiMortgage, Inc.
| Decision Date | 07 April 2017 |
| Docket Number | CV 16-2-BU-JCL |
| Parties | JONATHAN CHARLES BERTELSEN, Plaintiff, v. CITIMORTGAGE, INC., and JOHN DOES 1-10, Defendants. |
| Court | U.S. District Court — District of Montana |
Before the Court is Defendant CitiMortgage, Inc.'s ("Citi") Fed. R. Civ. P. 56 motion for summary judgment dismissing Plaintiff Jonathan Bertelsen's claims. For the reasons discussed, the Court deems it appropriate to grant the motion.
Some time prior to 2003 Plaintiff Jonathan Bertelsen purchased a residence in Bozeman, Montana. He and his sons lived in the home.
In 2003 Bertelsen refinanced his residential real property because interest rates had gone down. He obtained a new loan in the amount of $305,000 memorialized in a promissory note and secured by a deed of trust pledging his real property. Thereafter, Citi serviced Bertelsen's loan on behalf of the lender.
The original lender was ABN AMRO Mortgage Group, Inc. ("AMRO"). But in 2007, AMRO merged into Citi.
In 2008 Bertelsen experienced financial difficulties due to a reduction in his income. As a result he defaulted on his loan obligations - falling about 60 days behind in making his loan payments. At that point Bertelsen reached out to Citi for loan assistance, but Citi informed him it could not discuss options for assistance until he was in default for 90 days.
For the next five years Bertelsen submitted applications for loan modifications or assistance programs to Citi. He worked with Citi to provide information and documentation it requested to support his applications. During that time frame, Citi would review his applications, request additional documents, deny his applications for various programs, but then invite him to again apply for a modification or a loan assistance program. This cycle repeated several times over the years. And although Citi told Bertelsen it was considering his applications, it also referred his account for foreclosure several times and set numerous foreclosure sale dates.
In 2009 or 2010 Bertelsen attempted to make additional payments to Citi on his loan, but they were returned to him. Citi points out, however, the deed of trust permitted it to reject payments if they are insufficient to bring the loan obligations current. He has not tried to make any further payments since 2010.
On December 8, 2011, Bertelsen filed a petition for Chapter 13 bankruptcy relief. The petition was dismissed in October 2013. Thereafter, Bertelsen continued to work with Citi in an attempt to secure a modification of his loan payment obligations. For two more years Bertelsen submitted further information and documents as requested by Citi. During that same time frame Citi again scheduled foreclosure sales of the property which were ultimately cancelled. Citi informed Bertelsen he owed attorneys' fees, loan servicing fees and expenses as a result of the default and foreclosure processes.
Although Citi invited Bertelsen to apply for various loan modifications or assistance programs, ultimately Citi decided Bertelsen was not eligible for such programs. Citi never granted Bertelsen a loan modification, but it also has never pursued foreclosure to completion.
Bertelsen alleges all of Citi's recurring conduct - inviting him to apply for loan modifications, but then rejecting his applications - caused him to suffer damages including lost time, lost income, lost money, incidental expenses and emotional distress. And he alleges he will suffer irreparable harm if his home is sold while this case is pending.
Bertelsen advances numerous claims for relief under Montana law: (1) violations of the Montana Consumer Protection Act, (2) negligence, (3) tortiousbad faith, (4) breach of contract, (5) constructive fraud, and (6) punitive damages. He also requests declaratory and injunctive relief barring any foreclosure sale of his property.
Upon Citi's motion to dismiss, the Court entered an order on June 14, 2016, dismissing Bertelsen's claim of negligence, his claims under the Montana Consumer Protection Act, and his claim for breach of contract predicated upon Citi's alleged unreasonable inspections of the property. Also, the Court concluded Bertelsen is judicially estopped from asserting claims that accrued before his bankruptcy petition was dismissed on October 1, 2013. Thus the claims that remain are only those which Bertelsen can demonstrate accrued after October 1, 2013.
Bertelsen subsequently moved for leave to seek reconsideration of the Court's dismissal of the Montana Consumer Protection Act claim. The Court granted him leave to do so, and he filed his motion for reconsideration of that claim. The Court has denied that motion.
In the meantime, Citi has moved for summary judgment on each of Bertelsen's remaining claims for relief.
Federal Rule of Civil Procedure 56(a) entitles a party to summary judgment "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." A movant may satisfy this burden where the documentary evidence produced by the parties permits only one conclusion. Anderson v. Liberty Lobby Inc., 477 U.S. 242, 251 (1986). Once the moving party has satisfied his burden, he is entitled to summary judgment if the non-moving party fails to designate by affidavits, depositions, answers to interrogatories, or admissions on file, "specific facts showing that there is a genuine issue for trial." Celotex Corp. v. Cattrett, 477 U.S. 317, 324 (1986). In deciding a motion for summary judgment, the Court views the evidence in the light most favorable to the non-moving party and draws all justifiable inferences in the non-moving party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986); Betz v. Trainer Wortham & Co., Inc., 504 F.3d 1017, 1020-21 (9th Cir. 2007).
In this diversity action, the Court applies the substantive law of Montana, the forum state. Medical Laboratory Mgmt. Consultants v. AmericanBroadcasting Companies, Inc., 306 F.3d 806, 812 (9th Cir. 2002).
Citi moves for summary judgment dismissing all of Bertelsen's breach of contract claims on the ground that Bertelsen had first materially breached the promissory note and deed of trust in the first instance when he defaulted on his obligations to repay the loan, and to pay taxes and insurance. As a matter of law, "a party in material breach [cannot maintain] a breach of contract action against the other contracting party." AAA Constructions of Missoula, LLC v. Choice Land Corp. et al., 264 P.3d 709, 715 (Mont. 2011). See also R.C. Hobbs Enterprises, LLC v. J.G.L. Distributing, Inc., 104 P.3d 503, 508 (Mont. 2004) (defining material breach). Specifically, a party's failure to satisfy a contractual obligation to make a payment to the other party constitutes a "material breach" and, under Montana law, relieves the other party from further performance under the contract. James Talcott Construction, Inc. v. P & D. Land Enterprises, 141 P.3d 1200, 1206-07 (Mont. 2006), and Rogers v. Relyea, 601 P.2d 37, 40 (Mont. 1979).
But as discussed in the June 14, 2016 Order, Bertelsen's default does not excuse any subsequent duties imposed upon Citi that were triggered by Bertelsen'sdefault. (Doc. 29 at 25-26 (citing Mullins v. GMAC Mortgage, LLC, 2011 WL 1298777 (D. W. Va. 2013)). Because all of Bertelsen's breach of contract claims arise from alleged contractual duties imposed upon Citi triggered by Bertelsen's default, they are not precluded by his initial breach.
Bertelsen contends Citi breached its contractual obligations by failing to comply with the Small Tract Financing Act of Montana, Mont. Code Ann. § 71-1-301 et seq. ("Financing Act").1 Bertelsen asserts Citi failed to record with the county clerk and recorder an assignment of the beneficial interest from the original lender, AMRO, to Citi when that interest transferred to Citi when AMRO merged into Citi. Indeed, Montana law requires that as a condition precedent to foreclosure "any assignments of the trust indenture by the trustee or the beneficiary" must be recorded. Mont. Code Ann. § 71-1-313(1).
But under the express terms of section 71-1-313 the obligation to record an assignment is triggered only when a trustee or beneficiary actually assigns the respective interest. Here, Bertelsen does not dispute that AMRO merged into Citi.As a matter of law, the merger of AMRO and Citi operated to vest title to real estate and other property interests in Citi, the surviving corporate entity. Mont. Code Ann. § 35-1-817(1)(b). See also Polich v. Burlington Northern, Inc., 942 F.2d 1467, 1471 (9th Cir. 1991) ( Montana law). Thus, because the transfer of the beneficial interest to Citi occurred upon the merger, there existed no assignment for Citi to record.
Bertelsen further asserts Citi breached the Financing Act when it charged him attorneys' fees in excess of the amount permitted under the Financing Act at Mont. Code Ann. § 71-1-320. The Court disagrees.
The Financing Act permits a grantor who is in default to reinstate the loan. A defaulted grantor may pay to the beneficiary "the entire amount then due[,]" including costs, expenses, trustee's fees and attorney's fees, at which point all the foreclosure proceedings and the trustee's sale must be cancelled, and the deed of trust is "reinstated[.]" Mont. Code Ann. § 71-1-312(1) & (2). If the entire amount due is paid and the deed of trust is reinstated under section 71-1-312, then the fees to be paid under section 71-1-312 are limited as follows:
If prior to the trustee's sale the obligation and the trust indenture shall be reinstated in accordance with provisions of 71-1-312, the reasonable trustees' fees and attorneys' fees to be charged to the grantor shall not exceed the lesser of $1,000 or 1% of the amount...
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