Eckmann v. Northwestern Federal Sav. & Loan Ass'n, 880184

• Decision Date: 20 February 1989
• Docket Number: No. 880184,880184
• Citation: 436 N.W.2d 258
• Parties: Juli M. ECKMANN, Plaintiff and Appellant, v. NORTHWESTERN FEDERAL SAVINGS & LOAN ASSOCIATION, Defendant and Appellee. Civ.
• Court: North Dakota Supreme Court

Page 258

436 N.W.2d 258

Juli M. ECKMANN, Plaintiff and Appellant, v. NORTHWESTERN FEDERAL SAVINGS & LOAN ASSOCIATION, Defendant and Appellee.

Civ. No. 880184.

Supreme Court of North Dakota.

Feb. 20, 1989.

Brian W. Nelson (argued), and Tom E. Eastman, of Eastman Law Offices, Fargo, for plaintiff and appellant. Appearance by Tom E. Eastman, Fargo.

Franklyn G. Gokey, of Vogel, Brantner, Kelly, Knutson, Weir & Bye, Ltd., Fargo, for defendant and appellee.

VANDE WALLE, Justice.

Juli Eckmann appealed from a summary judgment dismissing her action against Northwestern Federal Savings and Loan Association [Northwestern]. We affirm.

In June of 1983 Eckmann agreed to purchase a townhouse in Fargo from Carey and Anne Pavlish. The agreement was contingent on Eckmann assuming the Pavlishes' loan, which was subsidized under a program administered by the Department of Housing and Urban Development [HUD]. In addition, the Pavlishes took back a second mortgage in the amount of $8,000.

The Pavlishes' loan with Northwestern was what is known generally as a "Section 235" loan. Under this program, the Federal government subsidizes a portion of the interest payable by qualified borrowers on home loans obtained through conventional lenders. When the home is subsequently sold to a nonqualifying purchaser or is rented for a period of more than one year, HUD may recapture from the borrower the amount of interest assistance it has actually paid on behalf of the borrower or fifty percent of the net appreciation of the property, whichever is less. 12 U.S.C.A. Sec. 1715z(c)(2)(A) (Supp.1988); 24 C.F.R. Sec. 235.12 (1988). See also, Thibodeau v. Pierce, 683 F.Supp. 15, 17 (D.R.I.1988).

Because Eckmann also qualified for assistance under the Section 235 program, she was eligible to assume the Pavlishes' loan and the recapture provisions would not be triggered. Northwestern prepared the documents necessary for Eckmann's assumption of the loan and mortgage, and the closing occurred on July 8, 1983. At the closing, Eckmann signed a "Notice to Buyer" which explained the recapture provisions. Eckmann also signed a note payable to the Secretary of HUD which provided for payment of recapture up to a total amount of $91,489.49, but limited to the lesser of assistance actually provided by HUD or one-half of the net appreciation of the property. This note also provided that the amount of recapture would include the amount of any assistance "paid by the Secretary on behalf of any homeowner, other than the borrower," pursuant to the assumed mortgage. Thus, in assuming the loan and mortgage, Eckmann also assumed the contingent liability for recapture of the amount of assistance previously paid by HUD on the Pavlishes' loan on the property.

At the time of the closing HUD had provided assistance on the Pavlish mortgage in the amount of $5,943.06. This figure was not contained in any of the documents provided to Eckmann at the closing, and she was not otherwise advised of the amount.

Eckmann lived in the townhouse while attending college and, as graduation approached, she decided to sell it. Eckmann discussed the sale of the property with some friends involved in real estate, who advised her that she had paid too much for the property and that she had been "ripped off." They also advised Eckmann that she could recoup some of her loss on the property by discontinuing payments on her loan and "holding over" for up to a year. ¹ Eckmann conceded in her deposition that she took her friends' advice, stopped making payments in July of 1985, and continued living in the townhouse until May of 1986 in an effort to recover some of her down payment. Eckmann also admitted that she never got a written appraisal of the property, never listed the property for sale, never placed ads in newspapers, and never placed a "For Sale" sign in front of the townhouse. Northwestern eventually foreclosed its mortgage.

Eckmann commenced this tort action for deceit, alleging that Northwestern had a duty to inform her of the amount of the contingent liability she was assuming. She asserts that she would not have entered into the agreement if she had known the amount of the contingent liability, and as damages she seeks recovery of her down payment, all monthly payments she made, her payments made on the second mortgage to the Pavlishes, her costs in defending the foreclosure action, damages for injury to her reputation and credit standing, and punitive damages. Northwestern moved for summary judgment. The district court determined that there was no genuine issue of material fact and granted the motion. On appeal Eckmann asserts that Northwestern had a duty to disclose the exact amount of the contingent liability she was assuming and that material issues of fact exist which should preclude summary judgment. ²

Summary judgment under Rule 56, N.D.R.Civ.P., is a procedural device available for the prompt and expeditious disposition of cases without trial when, after viewing the evidence in a light most favorable to the opposing party and giving that party the benefit of all inferences, there is no genuine dispute as to either the material facts or the inferences to be drawn from undisputed facts. E.g., Hellman v. Thiele, 413 N.W.2d 321 (N.D.1987). Although the party seeking summary judgment has the burden of showing that there is no genuine issue of material fact, the party resisting the motion may not simply rely upon his pleadings but must present competent evidence by affidavit or other comparable means which raises an issue of material fact. E.g., Hillesland v. Federal Land Bank Association of Grand Forks, 407 N.W.2d 206 (N.D.1987). The plain language of Rule 56 requires the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to establish the existence of a factual dispute as to an essential element of his claim and on which he will bear the burden of proof at trial. Union State Bank v. Woell, 434 N.W.2d 712 (N.D.1989); Production Credit Association of Fargo v. Foss, 391 N.W.2d 622 (N.D.1986). When no pertinent evidence on an essential element is presented to the trial court in resistance to the motion for summary judgment, it is presumed that no such evidence exists. North Dakota Public Service Commission v. Valley Farmers Bean Association, 365 N.W.2d 528 (N.D.1985).

Northwestern asserts that Eckmann failed to present any evidence of damage caused by Northwestern's alleged nondisclosure. Proof of actual damage proximately caused by the misrepresentation or nondisclosure is an essential element of a tort action for deceit. Olson v. Fraase, 421 N.W.2d 820 (N.D.1988); Buehner v. Hoeven, 228 N.W.2d 893 (N.D.1975); Verry v. Murphy, 163 N.W.2d 721 (N.D.1968); Beare v. Wright, 14 N.D. 26, 103 N.W. 632 (1905); Prosser, Law of Torts Sec. 110 (5th ed. 1984). It was therefore incumbent upon Eckmann to present competent evidence of actual damage proximately caused by Northwestern's alleged nondisclosure in order to prevent the entry of summary judgment. See Union State Bank v. Woell, supra; Production Credit Association of Fargo v. Foss, supra.

The general injuries pleaded by Eckmann all relate directly to the loss...