Valley Bank of Ronan v. Hughes

Decision Date08 November 2006
Docket NumberNo. 05-361.,05-361.
Citation147 P.3d 185,2006 MT 285,334 Mont. 335
PartiesVALLEY BANK OF RONAN, Plaintiff, Counterdefendant and Respondent, v. Charles R. HUGHES, Trustee under Charles R. Hughes Loving Trust, Defendant, Counterclaimant and Appellant.
CourtMontana Supreme Court

For Appellant: G. Patrick HagEstad and Elizabeth A. O'Halloran, Milodragovich, Dale, Steinbrenner & Binney, P.C., Missoula, Montana.

For Respondent: David B. Cotner and Trent N. Baker, Datsopoulos, MacDonald & Lind, P.C., Missoula, Montana.

Justice JIM RICE delivered the Opinion of the Court.

¶ 1 Charles R. Hughes (Hughes) appeals the orders entered in the Twentieth Judicial District Court, Lake County, granting summary judgment to Valley Bank of Ronan (Valley Bank) and granting Valley Bank's motion in limine to exclude the testimony of Hughes' expert witness. We affirm in part, reverse in part, and remand for further proceedings.

¶ 2 The following issues are dispositive on appeal:

¶ 3 Did the District Court err by granting summary judgment against Hughes on his counterclaims?

¶ 4 Did the District Court err by granting summary judgment to Valley Bank on Hughes' promissory note?

¶ 5 Did the District Court abuse its discretion by excluding the testimony of Hughes' banking expert, Cynthia Shea?


¶ 6 The District Court's approach to the factual issues in this matter was set forth in its summary judgment order:

The facts set forth herein are Hughes' "version" of the facts. While several are contested by Valley Bank, the Court has assumed these facts to be true in analyzing the Motion for Summary Judgment presented by Valley Bank.

On appeal, the parties have utilized the same framework. In its appellate briefing, Valley Bank urges us to "likewise . . . test Hughes' facts and determine whether Valley is entitled to judgment as a matter of law." Except for an argument it makes in response to defenses raised by Hughes to foreclosure of the promissory note, wherein it asserts that Hughes has not raised a genuine issue of material fact, Valley Bank urges us to rule that it was entitled to judgment as a matter of law "assuming [Hughes'] facts to be true." Thus, except as otherwise noted, we consider the issues raised herein under that portion of the summary judgment standard of review, see ¶ 14, infra, which requires us to determine whether the movant is entitled to judgment as a matter of law.

¶ 7 Lured by the promise of quick wealth, Hughes was conned by a "Nigerian scam." The swindlers promised Hughes a $3 million to $4.5 million commission for his aid in procuring agricultural equipment for import into Africa and then proceeded to bilk him for hundreds of thousands of dollars in advanced fees. At least some of the funds Hughes advanced were wired via the services of Valley Bank, resulting in a dispute over which party should bear the loss from the flimflam.

¶ 8 On Friday, March 22, 2002, Hughes received four checks from one of the conartists and deposited them into accounts Hughes held at Valley Bank. Two of them were "official" checks, and the other two were personal checks. One official check, for $1 million, was drawn on Colonial Bank. The other official check, for $500,000, was drawn on Firstar. The personal checks were for $62,000—drawn on the account of Maximilian H. Miltzlaff—and for $70,000—drawn on a Capital One credit card account held by Sarah Briscoe and Mary Bullard.

¶ 9 Prior to depositing the checks, Hughes requested that Nancy Smith, a cashier and officer of Valley Bank, verify the validity of the official checks. In his deposition, Hughes described his conversation with Smith:

Well, my question was, how long do you have to hold money to have—how long do you have to hold these checks before they're sufficient funds; I think the bank calls them collected funds. And she said, these are official checks, Chuck. These two big ones are official checks. You will be transferring these? And I said I will be transferring a large sum. We'll have to determine next week what it will be. And she says, official checks, same as cash. You can do whatever you want to do.

Smith also assured Hughes that official checks were "just like" cashier's checks. Milanna Shear, another bank employee, told Hughes to believe whatever Smith said regarding the validity of the checks. According to the deposition testimony of Hughes' wife, Barbara, Hughes had told her that "everybody at the bank assured him that the checks would be good."

¶ 10 On Tuesday, March 26, 2002, Hughes delivered a written request to Valley Bank to wire $800,000 to Ali dh. Abbas, an accountholder at the Housing Bank for Trade and Finance in Amman, Jordan. Valley Bank executed the transfer no later than 1:51 p.m. on the same day. The transfer proceeded through two intermediary banks, Wells Fargo, near Denver, Colorado, and Citibank in New York, before being sent to Amman. Upon receipt in Amman, the funds were promptly withdrawn, never to be seen again.

¶ 11 At about 2:00 p.m.—approximately ten minutes after initiation of the transfer—Valley Bank and Hughes learned that one of the personal checks was being returned marked "nonsufficient funds." Hughes immediately requested the wire to be stopped. No later than 3:26 p.m. Valley Bank requested that Wells Fargo reverse the wire transfer. The record is unclear about what happened during the interim between Hughes' request for cancellation and Valley Bank's attempts to comply with the request. The efforts of the several banks involved in the transfer to reverse the transaction were unsuccessful, and the later discovery that the two official checks were counterfeit resulted in Hughes' account being overdrawn by $800,000.

¶ 12 Valley Bank subsequently exercised its right to charge back the account and collect the $800,000 from Hughes. Allen Buhr (Buhr), Valley Bank's president, met with Hughes on March 29, 2002, to discuss Hughes' liability and suggested at that time that Hughes could be involved in a criminal prosecution for fraud. On April 11, 2002, Hughes deposited $607,838, which he had withdrawn from his retirement account, into the Valley Bank account. Also, on April 30, 2002, Hughes executed a promissory note to Valley Bank on behalf of his trust in the amount of $400,000, secured by mortgaged property. Of the $400,000 in proceeds generated by the secured note, $202,751.21 was used to pay off a previous loan against the mortgaged property, and the balance, $197,248.79, was applied to satisfy the charge-back liability in Hughes' account. Hughes was under the impression, given by Buhr, that the bank needed the note and loan agreement because it expected to be the subject of a government audit in the near future, and though Hughes thought that a new agreement might be reached after resolution of the "fraud situation," he understood that the loan may not be forgiven. The trust subsequently made the first interest payment on the note on August 1, 2002, though it was one month late. The trust made no other payments on the note, and Valley Bank sent a notice of default and acceleration on October 15, 2002. Hughes requested that the bank forebear foreclosure until the end of the year, and the bank complied. However, when Hughes failed to make any more payments on the note, Valley Bank initiated an action for judicial foreclosure. Hughes asserted counterclaims of negligence, negligent misrepresentation, constructive fraud, unjust enrichment, breach of contract, breach of the implied covenant of good faith and fair dealing, promissory estoppel, and intentional infliction of emotional distress (which was later abandoned).

¶ 13 On April 15, 2005, the District Court granted Valley Bank's motion in limine to exclude Cynthia Shea as an expert witness for Hughes. In an order dated April 20, 2005, the District Court granted Valley Bank summary judgment on Hughes' counterclaims. On the same day, the District Court granted Valley Bank summary judgment on its claims regarding the promissory note. From these orders Hughes appeals.


¶ 14 This Court articulated the standard of review we apply to grants of summary judgment in Grimsrud v. Hagel, 2005 MT 194, ¶ 14, 328 Mont. 142, ¶ 14, 119 P.3d 47, ¶ 14 (citations and quotation marks omitted):

This Court's review of a district court's grant of summary judgment is de novo. Our evaluation is the same as that of the trial court. We apply the criteria contained in Rule 56, M.R.Civ.P. According to this rule, the moving party must establish both the absence of a genuine issue of material fact and entitlement to judgment as a matter of law. If this is accomplished, the burden then shifts to the non-moving party to prove, by more than mere denial and speculation, that a genuine issue does exist. If the court determines that no genuine issues of fact exist, the court must then determine whether the moving party is entitled to judgment as a matter of law.

¶ 15 We review conclusions of law for correctness. Galassi v. Lincoln County Bd. of Comm'rs, 2003 MT 319, ¶ 7, 318 Mont. 288, ¶ 7, 80 P.3d 84, ¶ 7.

¶ 16 This Court described the standard of review for evidentiary rulings in McDermott v. Carie, 2005 MT 293, ¶ 10, 329 Mont. 295, ¶ 10, 124 P.3d 168, ¶ 10:

We review a district court's evidentiary rulings for an abuse of discretion. Busta v. Columbus Hosp. Corp. (1996), 276 Mont. 342, 353, 916 P.2d 122, 128. Absent a showing of such abuse we will not overturn a district court's ruling on the admissibility of evidence. Christofferson v. City of Great Falls, 2003 MT 189, ¶ 8, 316 Mont. 469, ¶ 8, 74 P.3d 1021, ¶ 8 (citation omitted). A court abuses its discretion if it acts "arbitrarily without employment of conscientious judgment or exceed[s] the bounds of reason resulting in substantial injustice." VonLutzow v. Leppek, 2003 MT 214, ¶ 14, 317 Mont. 109, ¶ 14, 75 P.3d 782, ¶ 14 (citation omitted).


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