Turner v. Wells Fargo Bank, N.A.

Decision Date25 September 2012
Docket NumberNo. DA 11–0678.,DA 11–0678.
Citation291 P.3d 1082,366 Mont. 285
PartiesJohn Duncan TURNER, Christina Turner and Sandy Couch, Plaintiffs and Appellants, v. WELLS FARGO BANK, N.A., Defendant and Appellee.
CourtMontana Supreme Court

OPINION TEXT STARTS HERE

For Appellants: John R. Christensen, Timothy A. Filz; Christensen Fulton & Filz, PLLC; Billings, Montana.

For Appellee: Thomas E. Smith, Emily Jones; Moulton Bellingham PC; Billings, Montana.

Justice BETH BAKER delivered the Opinion of the Court.

[366 Mont. 286]¶ 1 Appellants John Duncan Turner, Christina Turner, and Sandy Couch (“the John Turners) appeal an order of the Thirteenth Judicial District Court, Yellowstone County, denying their motion for summary judgment and granting summary judgment in favor of Appellee Wells Fargo Bank, N.A. (Wells Fargo). We affirm.

¶ 2 We address the following issues on appeal:

¶ 3 1. Whether the District Court correctly concluded that Wells Fargo was not contractually obligated to release the Deed of Trust the bank holds on real property owned by the John Turners.

¶ 4 2. Whether the District Court correctly concluded that the doctrines of promissory estoppel and equitable estoppel do not require Wells Fargo to release the Deed of Trust.

PROCEDURAL AND FACTUAL BACKGROUND

¶ 5 In 1977, James Duncan Turner and his wife Suzanne K. Turner built a home located at 6543 Frey Road in Shepherd, Montana (“the Shepherd property”). James later divorced Suzanne and the Shepherd property was titled solely in his name. On April 30, 2005, James married Julie A. Viers, and Julie's home in Montana City served as the couple's principal residence. That fall, James and Julie decided to “upgrade” and then sell the Shepherd property.

¶ 6 To finance the upgrade, James and Julie opened a line of credit with Wells Fargo. On December 13, 2005, they signed an agreement to use a financial product called a SmartFit Home Equity Account (“credit line agreement”). James alleges that they met with Wells Fargo agent Deborah Brown, with whom Julie was friends, and informed her that the credit line agreement would serve as a “bridge loan” until he sold the Shepherd property. That same day, James and Julie granted Wells Fargo a Deed of Trust as security for the line of credit, which Wells Fargo recorded on January 23, 2006. Wells Fargo then loaned James and Julie $169,540—the maximum allowed under the credit line agreement—on January 26, 2006.

¶ 7 On August 4, 2006, the John Turners allegedly purchased the Shepherd property by depositing $322,000 into James and Julie's shared bank account. Later that day, James and Julie met with Deborah Brown, informed her that the Shepherd property had been sold, and requested that the sale proceeds be used to pay off their outstanding balance under the credit line agreement. Wells Fargo debited the outstanding balance from James and Julie's shared bank account and Deborah Brown wrote that the charges reflected a “mortgage payoff.” For summary judgment purposes, the District Court assumed that James and Julie paid off the entire outstanding balance.

¶ 8 On September 11, 2006, unbeknownst to James or the John Turners, Wells Fargo advanced Julie, pursuant to her request, another $120,000 under the credit line agreement secured by the Shepherd property. James and Julie formally conveyed title to the Shepherd property to the John Turners by executing a quitclaim deed on October 11, 2006, which the John Turners recorded two days later. On November 21, 2006, Julie requested an additional sum of $42,459 under the credit line agreement and Wells Fargo granted that request. Including other lesser loans that Wells Fargo made, Julie borrowed a total of $169,090.65 under the credit line agreement secured by the Shepherd property after she and James had paid off the balance of that account using the proceeds from the sale of the property to the John Turners.

¶ 9 James did not discover that Wells Fargo still held a Deed of Trust on the Shepherd property until he completed a lien search as part of his bankruptcy proceedings in December 2008. James and John Turner met with Wells Fargo banker Brian Kimble on July 19, 2009, to discuss the Deed of Trust. Kimble initially informed James and John that, in his opinion, Wells Fargo should have closed James and Julie's account when they paid its balance down to zero. Wells Fargo, however, refused to release the Deed of Trust. The John Turners filed a complaint to quiet title to the Shepherd property on August 3, 2010. James and Julie are now divorced and, according to the terms of their divorce settlement, Julie is responsible for the debt she incurred under the credit line agreement.

¶ 10 On October 11, 2011, the District Court denied the John Turners' motion for summary judgment and granted Wells Fargo's motion for summary judgment. The court concluded that the John Turners could not enforce the terms of the credit line agreement because they were not intended beneficiaries of the agreement. The court concluded further that the John Turners had failed to establish a prima facie case for either promissory or equitable estoppel. The John Turners appeal.

STANDARD OF REVIEW

¶ 11 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 the district court. Ternes v. State Farm Fire & Cas. Co., 2011 MT 156, ¶ 18, 361 Mont. 129, 257 P.3d 352. Summary judgment is appropriate only when the moving party demonstrates both the absence of any genuine issue of material fact and entitlement to judgment as a matter of law. Parish v. Morris, 2012 MT 116, ¶ 10, 365 Mont. 171, 278 P.3d 1015. A district court's conclusion that no genuine issue of material fact exists and that the moving party is entitled to judgment as a matter of law is a legal conclusion we review for correctness. Parish, ¶ 10.

DISCUSSION

¶ 12 1. Whether the District Court correctly concluded that Wells Fargo was not contractually obligated to release the Deed of Trust the bank holds on real property owned by the John Turners.

¶ 13 The John Turners contend on appeal that the terms of the credit line agreement establish that Wells Fargo has a “direct contractual obligation ... to release the Deed of Trust” and that the John Turners can enforce that obligation as third-party beneficiaries. The John Turners argue that there are “no provisions in the [Deed of Trust] stating how to go about obtaining a release” of the lien on the Shepherd property. In the “face of a clear lack of clarity or specific instructions in the Wells Fargo drafted documents pertaining to the procedure to get the Deed of Trust released,” the John Turners argue that when James and Julie “d[id] it the old-fashioned way” and made an in-person, oral request to have their outstanding balance paid off, Wells Fargo became contractually bound to release the Deed of Trust.

¶ 14 Wells Fargo counters by asserting that James and Julie failed to terminate the credit line agreement in accordance with the specific procedures outlined in the agreement and, alternatively, that the John Turners lack standing to enforce the credit line agreement. Wells Fargo points out that Section 29 of the Deed of Trust provides that [a]lthough the Secured Debt may be reduced to a zero balance, this Security Instrument will remain in effect until released.” It therefore argues that an oral request that the outstanding balance be paid down to zero was not sufficient to secure the Deed of Trust's release. Wells Fargo instead argues that, under Section 18 of the credit line agreement, James and Julie were required to send a signed letter to the Bank requesting that their account be closed and that neither did so.

¶ 15 We conclude that, even if a colorable claim exists that Wells Fargo was contractually obligated to release the Deed of Trust, the John Turners are not the ones to make such a claim since they had no contractual relationship with Wells Fargo. A stranger to a contract “lacks standing to sue for breach of that contract unless he is an intended third-party beneficiary of the contract.” Kurtzenacker v. Davis Surveying, Inc., 2012 MT 105, ¶ 20, 365 Mont. 71, 278 P.3d 1002 (citing Dick Anderson Constr., Inc. v. Monroe Constr. Co., LLC, 2009 MT 416, ¶ 46, 353 Mont. 534, 221 P.3d 675). If anyone was wronged by Wells Fargo's handling of this matter, it was James Turner, the Bank's client, who is not a party to the case. We agree with Wells Fargo that the John Turners lack standing to enforce the contract.

¶ 16 The John Turners admit that they were not parties to the credit line agreement when it was signed. They maintain instead that they became third-party beneficiaries of the original contract when James and Julie paid the outstanding balance on the credit line agreement and Wells Fargo debited James and Julie's shared bank account for “mortgage pay off” purposes. As Wells Fargo points out, that argument does not accurately reflect our jurisprudence on third-party beneficiaries. We emphasized in Dick Anderson that a person must be an intended beneficiary in order to seek enforcement of a contract to which it is not a party. Dick Anderson Constr., Inc., ¶ 46 (quoting Palmer v. Bahm, 2006 MT 29, ¶ 13, 331 Mont. 105, 128 P.3d 1031).

¶ 17 This Court, relying upon the Restatement (Second) of Contracts § 302 (1981), has described an intended third-party beneficiary as follows:

(1) Unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and either

(a) the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary; or

(b) the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.

Diaz v. Blue Cross & Blue Shield, 2011 MT 322, ¶ 18, 363 Mont. 151, 267 P.3d 756 (...

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