White v. Aamg Constr. Lending Ctr.

• Decision Date: 16 September 2010
• Docket Number: No. 35286.,35286.
• Citation: 226 W.Va. 339,700 S.E.2d 791
• Court: West Virginia Supreme Court
• Parties: Anissa WHITE, Plaintiff Below, Appellant, v. AAMG CONSTRUCTION LENDING CENTER; RG Crown Mortgage/RG Crown Bank; White Family Properties, LLC; Stephen L. White, II, Individually; Allied Home Mortgage Capital Corporation; and ABN AMRO Mortgage Group, Inc., Defendants Below, Appellees.

226 W.Va. 339
700 S.E.2d 791

Anissa WHITE, Plaintiff Below, Appellant,
v.
AAMG CONSTRUCTION LENDING CENTER; RG Crown Mortgage/RG Crown Bank; White Family Properties, LLC; Stephen L. White, II, Individually; Allied Home Mortgage Capital Corporation; and ABN AMRO Mortgage Group, Inc., Defendants Below, Appellees.

No. 35286.

Supreme Court of Appeals ofWest Virginia.

Submitted Sept. 7, 2010.
Decided Sept. 16, 2010.

700 S.E.2d 792

Syllabus by the Court

1. “A circuit court's entry of summary judgment is reviewed de novo.” Syllabus Point 1, Painter v. Peavy, 192 W.Va. 189, 451 S.E.2d 755 (1994).

2. “Where the terms of a contract are clear and unambiguous, they must be applied and not construed.” Syllabus Point 2, Bethlehem Mines Corp. v. Haden, 153 W.Va. 721, 172 S.E.2d 126 (1969).

3. “It is not the right or province of a court to alter, pervert or destroy the clear meaning and intent of the parties as expressed in unambiguous language in their written contract or to make a new or different contract for them.” Syllabus Point 3, Cotiga Development Co. v. United Fuel Gas Co., 147 W.Va. 484, 128 S.E.2d 626 (1962).

4. “A contract must be considered as a whole, effect being given, if possible, to all parts of the instrument.” Syllabus, Clayton v. Nicely, 116 W.Va. 460, 182 S.E. 569 (1935).

Paul M. Stroebel, Esq., Stroebel & Johnson, PLLC, Charleston, WV, for Appellant.

Kenneth E. Tawney, Esq., Amber L. Hoback, Esq., Kevin R. Waldo, Esq., Jackson Kelly, PLLC, Charleston, WV, for Appellee Fifth Third Bank.

PER CURIAM:

In this appeal from the Circuit Court of Kanawha County, we are asked to examine a construction loan by a bank to build a new house. The plaintiff-the owner of the new house-asserted that the defendant bank had a duty, in contract and in tort, not to distribute any money from the loan to the contractor building the house until the house had been inspected and the inspector had confirmed that the work being paid for was completed and in place. The plaintiff brought the instant suit alleging that the defendant bank had breached both duties, and could be held liable for breach of contract and for negligence. The plaintiff did

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not allege that the bank's inspection failed to reveal any defective construction.

The circuit court, however, entered an order granting summary judgment to the defendant bank on both the contract and the tort claims. The plaintiff now appeals.

As we discuss below, after careful consideration of the record, the briefs, and the arguments of the parties, we reverse, in part, the circuit court's summary judgment order and find that the plaintiff has established sufficient questions of material fact to support her allegation that the bank may have breached its contract with the plaintiff. However, we affirm the circuit court's order dismissing the plaintiff's tort claims.

I. Background and Procedure

In mid-2004, appellant and plaintiff-below Anissa White hired White Family Properties (“WFP”) to build a new house on her land in Lincoln County, West Virginia. The total cost of construction by WFP was projected to be $193,500.00. The plaintiff gave WFP a check for $40,000.00 before construction commenced, to pay for the initial costs of construction.

To finance the remaining costs to build the new house, on January 28, 2005, plaintiff White signed a construction loan agreement to borrow up to $150,000.00 from a combination of entities (including ABN AMRO Mortgage Group, Inc., AAMG Construction Lending Center, Allied Home Mortgage Capital Corporation, and RG Crown Mortgage/RG Crown Bank). Those entities later sold the construction loan to the appellee and defendant-below, Fifth Third Bank (“the Bank”).

The loan agreement signed by the plaintiff provided that the Bank would only disburse loan money in measured increments as construction progressed, and only for work that had been finished and was “in place.” ¹ Importantly, to ensure that construction work was “in place,” the Bank repeatedly stated in the loan documents that it would inspect the plaintiff's new house to gauge the extent of progress, and would only disburse money for completed work “based on the inspection.” For example, the loan agreement states, in all capital letters:

IF THE PROGRESS OF THE WORK IN PLACE IS NOT CONSISTENT WITH THE DRAW SCHEDULE, THE LENDER SHALL DISBURSE ONLY THE AMOUNT OF FUNDS THAT IT DETERMINES IS APPROPRIATE BASED ON THE INSPECTION OF THE PROGRESS OF THE WORK.

Likewise, a rider to the loan agreement (signed contemporaneously with the loan agreement) says:

2. Work In Place

The Lender has agreed to make the loan herein described to be paid in installments as the work is completed and to disburse funds only FOR WORK IN PLACE, based upon inspection.

Additionally, the Bank provided the plaintiff with a “Construction Loan Disbursement Information Sheet”-a copy of which the plaintiff signed and left with the Bank-which again makes it clear that the Bank agreed to only release money for work on the house that an inspection had established had been completed:

Disbursements will be made only after inspection of the property has been made to determine the status of completion ...

Lender shall not release any draw unless: ...

E. An inspector selected by Lender has certified that the WORK supporting the draw request is “IN PLACE”.

The loan agreement states that the inspections were solely for the Bank's benefit to measure the extent of work that was “in place.” The loan agreement makes it clear that the inspections were not to measure the quality of the construction work, and that the

700 S.E.2d 794

inspections were not for plaintiff White's benefit. The loan agreement says:

Inspections of Apparent Status, Not Quality of Work: All inspection services, if any, by Lender ... are or shall be rendered solely for the benefit of Lender, and said inspections are not made for the benefit of, and shall not be construed to have been made for the benefit of Borrower.... Borrower acknowledges that such inspections shall not regard nature and quality of the work, but are intended only to appraise the Lender of the apparent progress thereof. Consequently, Borrower hereby exonerates, excuses and releases Lender from any and all claims of loss or damage that may be suffered by Borrower, which relate in any way to the quality of construction or lack thereof.

A rider to the loan agreement states to the same effect (with emphasis in the original):

INSPECTION FOR STATUS OF COMPLETION ONLY

The Lender shall inspect the project in order to ascertain the status of completion and the progress of the construction improvements. The sole purpose for Lender's inspection is to determine the approximate amount and value of the work which has been done, so that Lender may disburse funds for such work in place. Such inspections shall not require a review by Lender of the quality of the construction. As Borrower, I will not rely on the Lender's inspection for any purpose whatsoever. Rather, I will be solely responsible for the progress and quality of construction, and the discovery of all delays, defects, faults, imperfections and deviations from the Plans and Specifications shall be my sole responsibility as Borrower.

In spring 2005, WFP began construction on the plaintiff's new house. The construction contract between the plaintiff and WFP allowed the contractor to make five “draws” against the construction loan in tranches when the house was 20%, 45%, 70%, and 90% complete, with the final 10% to be drawn upon the completion of the house.

On July 18, 2005, plaintiff White signed ² and submitted the first draw request form requesting that the Bank pay $48,375.00 for “work in place.” The draw request form indicated that various tasks in the construction of the house had been completed. The Bank's inspection report showed the progress of construction to be at 30% completion, and a week later the Bank approved the first draw request and wire-transferred $48,375.00 to WFP.

On September 22, 2005, a second draw request in the amount of $48,395.00 was submitted for the Bank's approval. The Bank's inspection report showed the progress of construction to be at 55% completion, and on September 26, 2005, the second tranche of $48,395.00 was wired to WFP.

Plaintiff White's claims against the Bank appear to be based, in part, on the next three draw requests submitted in November and December 2005. As we understand the plaintiff's position, the plaintiff largely asserts that the Bank breached its contractual obligations, and was negligent, in its handling of these last three draw requests.

On November 7, 2005, the third draw request was submitted to the Bank in the amount of $34,393.00, which requested that the money be paid directly to WFP. ³ Like before, the draw request lists various tasks that had ostensibly been completed, and the contractual prices for those tasks.

The next day, the Bank deducted $6,125.00 from the draw request because the total price for the ostensibly completed construction tasks only added up to $28,268.00. The Bank then performed an inspection and found that much of the construction tasks had, in fact, not been completed. On November

700 S.E.2d 795

11, 2005, the Bank deducted another $27,693.00 from the draw, further reducing the amount of payment to just $575.00. ⁴

The record then indicates that-despite the Bank's records and inspection showing that only $575.00 of work was “in place”-on November 15, 2005, the Bank wire-transferred $5,477.00 to WFP.

On November 28, 2005, the November 7^th draw request for $34,393.00 was resubmitted to the Bank by WFP with the same inaccurate certifications regarding the work completed on the jobsite. The Bank refused to pay this request. ⁵

On December 28, 2005, the November 7^th draw request was again submitted to the Bank, but this time with several hand-written amendments. For instance, the total amount requested was only $32,650.00.

An inspection performed on January 4, 2006, revealed...