Lee v. LPP Mortg. Ltd.

• Decision Date: 12 August 2003
• Docket Number: No. 02-25.,02-25.
• Parties: Jeanne K. LEE, Appellant (Defendant), v. LPP MORTGAGE LTD., Appellee (Plaintiff).
• Court: Wyoming Supreme Court

74 P.3d 152

2003 WY 92

Jeanne K. LEE, Appellant (Defendant), v. LPP MORTGAGE LTD., Appellee (Plaintiff).

No. 02-25.

Supreme Court of Wyoming.

August 12, 2003.

Rehearing Denied September 3, 2003.

John I. Henley of Vlastos, Henley & Drell, P.C., Casper, WY, Representing Appellant. Argument by Mr. Henley.

Dale W. Cottam and Kathleen C. Yarger of Hirst & Applegate, P.C., Cheyenne, WY, Representing Appellee. Argument by Mr. Cottam.

Before HILL, C.J., and GOLDEN, LEHMAN, KITE, and VOIGT, JJ.

LEHMAN, Justice.

[¶ 1] Jeanne K. Lee (Lee) appeals the summary judgment granted to LPP Mortgage Ltd. (LPP). In 1995, Lee signed a personal guaranty for a Small Business Administration (SBA) loan taken out by her son and daughter-in-law. The SBA assigned the loan to LPP, and, in 1998, Lee's son and daughter-in-law defaulted on the loan. The district court concluded that, under the terms of the guaranty, Lee was required to pay the loan. We affirm.

ISSUES

[¶ 2] The issues presented on appeal are:

1. Whether the guaranty was obtained by illegality, misrepresentation, fraud, or mutual mistake.

2. Whether there are genuine issues of material fact as to whether the underlying debt was discharged.

3. Whether LPP failed affirmatively to show by admissible evidence the absence of any issues of material fact and that it is entitled to judgment as a matter of law.

FACTS

[¶ 3] In September 1995, Lee guaranteed an SBA loan for her son and his wife, Johnnie D. (Doug) and Shirley Lee, so that they could purchase a car wash in Lander. Doug and Shirley initially approached Key Bank of Lander about obtaining a loan, and the bank informed the couple that they might qualify for an SBA loan. On March 24, 1995, Doug and Shirley authorized financial services with Frontier Certified Development Company (Frontier CDC) to act as their agent in submitting financial data and information to the SBA to obtain a loan under the SBA 504 program. Frontier CDC is a development company authorized by the SBA to process SBA loan applications and to package SBA loans for resale once they are finalized.

[¶ 4] Frontier CDC and the SBA agreed to approve Doug and Shirley's loan on the condition that Lee and her husband (now deceased) guarantee the loan. The total purchase price was $380,000.00, with Key Bank financing $190,000.00, Frontier CDC/SBA financing $152,000.00,¹ and the borrowers investing $38,000.00. Lee borrowed the $38,000.00 from Key Bank in Lander and loaned it to Doug for the equity injection. The loan application listed the equity injection as a gift from Doug's parents. The annual debt service for the Key Bank and Frontier CDC/SBA loans amounted to $40,932.00.

[¶ 5] By October 1998, Doug and Shirley had defaulted on the loans. After Doug and Shirley defaulted, they each signed a deed in lieu of foreclosure in favor of Community First National Bank (Key Bank's successor). However, Community First would not record the deeds unless Frontier CDC agreed to release its second mortgage. Frontier CDC agreed to release the second mortgage provided Lee consented as the guarantor. Lee then signed a Lender Agreement that provided for the recording of the deeds and release of Frontier CDC's mortgage. Community First then sold the car wash, receiving $23,119.00 less than its first mortgage amount. No proceeds were available to be applied to Frontier CDC's second mortgage.

[¶ 6] On February 22, 2001, Lee was informed that under the terms of the guaranty, payment for the deficiency was due in full. Frontier CDC, the holder of the promissory note, mortgage, and guaranty assigned its rights to LPP on March 12, 2001, and LPP filed a complaint on March 26, 2001, seeking judgment against Lee for the amount of the loan plus interest, costs of suit, and attorney fees. Each party made motion for summary judgment. The district court entered its Order Granting Plaintiff's Motion for Summary Judgment and Denying Defendant's Motion for Summary Judgment on December 13, 2001. Judgment was entered against Lee in the amount of $178,631.62, plus attorney fees and costs. This appeal followed.

STANDARD OF REVIEW

[¶ 7] The district court resolved this case by a grant and a denial of cross motions for summary judgment. A denial of a motion for summary judgment is an interlocutory order and is generally not subject to appeal. Wolter v. Equitable Resources Energy Co., Western Region, 979 P.2d 948, 953 (Wyo.1999). This court has, however, recognized an exception to this rule when the district court grants one party's motion for summary judgment, denies the opposing party's motion for summary judgment, and the district court's decision completely resolves the case. In this type of situation, both the grant and the denial of the motions for summary judgment are appealable. Lieberman v. Wyoming.com LLC, 11 P.3d 353, 356 (Wyo.2000).

[¶ 8] Rulings on summary judgment motions are governed by language found in W.R.C.P.56(c):

The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

Our standard for the appellate review of a summary judgment was reiterated in Rino v. Mead, 2002 WY 144, ¶ 12, 55 P.3d 13, ¶ 12 (Wyo.2002) (quoting Hasvold v. Park County Sch. Dist. No. 6, 2002 WY 65, ¶ 11, 45 P.3d 635, ¶ 11 (Wyo.2002)):

Summary judgment is proper only when there are no genuine issues of material fact and the prevailing party is entitled to judgment as a matter of law.... We review a summary judgment in the same light as the district court, using the same materials and following the same standards. "We examine the record from the vantage point most favorable to the party opposing the motion, and we give that party the benefit of all favorable inferences which may fairly be drawn from the record." ... Summary judgment serves the purpose of eliminating formal trials where only questions of law are involved.... We review a grant of summary judgment by deciding a question of law de novo and afford no deference to the district court's ruling on that question....

... A material fact is any fact that, if proved, would have the effect of establishing or refuting an essential element of a claim or defense asserted by a party.

DISCUSSION

Fraud, Mistake, Misrepresentation, Illegality

[¶ 9] We begin our discussion by recognizing that federal common law governs the rights and obligations of the parties when disputes arise from SBA loan agreements. United States v. Kimbell Foods, Inc., 440 U.S. 715, 726, 99 S.Ct. 1448, 1457, 59 L.E.2d 711 (1979). However, we also recognize Kimbell Foods established that as long as a national rule is not needed to protect Federal interests, courts may look to and adopt state law in fashioning the appropriate governing law. Id. at 728-730, 99 S.Ct at 1458-59. Following Kimbell Foods, it appears clear that as long as state law does not hinder the administration of the SBA loan program, courts apply state law. United States v. Agri Serv., Inc., 81 F.3d 1002, 1005 (10th Cir.1996) ("absent federal statutes to the contrary, rights arising under SBA program are determined by state law." (citing Kimbell Foods, 440 U.S. at 739-740,99 S.Ct. at 1464-65)). Because neither party has directed us to differing federal common law and, more importantly, because the application of state law to the facts of this case presents no foreseeable hindrance to the SBA loan program, we will apply state law just as federal courts often have when presented with disputes arising from SBA loan agreements. See United States v. New Mexico Landscaping, Inc., 785 F.2d 843 (10th Cir.1986)

; United States v. Kelley, 890 F.2d 220 (10th Cir. 1989); United States v. Stump Home Specialties Mfg., Inc., 905 F.2d 1117 (7th Cir. 1990).

[¶ 10] Lee first argues that the guaranty she executed was obtained by fraud, mistake, misrepresentation, or illegality and is therefore void. Lee alleges she felt pressured to make the guaranty and did not want to sign it, but did so because she and her husband were told that Doug and Shirley would not get the SBA loan unless they guaranteed it. Lee argues she and her husband were not advised that the business would not produce a sufficient cash flow or that the SBA was violating its own regulations. In addition, Lee contends Key Bank represented to her and her husband that the car wash was a good investment for Doug, and that Doug and Shirley's balance sheet was altered by Frontier CDC/SBA to reflect that their equity was nearly $76,000.00 rather than the original $40,761.00 reported by the couple. Lee claims documents were repeatedly modified, a loan was characterized as a gift, and misrepresentations were made so that Doug and Shirley could falsely qualify under SBA regulations.

[¶ 11] Under our standard of review, we are required to view the record from the perspective most favorable to the party opposing the motion for summary judgment. However, this review is limited by the substantive law that actions sounding in fraud must be pled with particularity and proved by clear and convincing evidence. Bender v. Phillips, 8 P.3d 1074, 1078 (Wyo. 2000). W.R.C.P. 9(b) requires: "In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." This requires reference to matters such as the time, place, and contents of false representations, the identity of the person making the representation, and what he obtained thereby. Johnson v. Aetna Cas. & Sur. Co. of Hartford, Conn., 608 P.2d 1299, 1302-03 (Wyo.1980).

[¶ 12] When determining if a genuine issue of material fact exists regarding a claim of fraud, a trial judge must bear in mind the actual quantum and quality of proof necessary to support liability. In ruling on a motion for summary judgment, "the judge must view the...