In May 2006, Mary McCulley agreed to purchase a condominium in downtown Bozeman, Montana. The condo was located on the top floor of a commercial building and was priced at $395,000. McCulley approached Heritage Bank (later purchased by U.S. Bank) on May 25, 2006, and applied for a 30–year (360 month) residential loan for $300,000, later revised to $200,000. On that same day, Heritage Bank generated a Federal Truth–In–Lending Disclosure Statement indicating the estimated monthly payment for the first 60 months, the estimated payment for the next 299 months, and the final payment due on July 1, 2036. It also issued a Good Faith Estimate that expressly referenced 360 payments for McCulley’s proposed loan.
On the following day, the bank ostensibly prepared an informational document (“the letter”) utilizing a format typically used for internal interoffice correspondence or documentation. There was no salutation, introductory paragraph, or signature line. The document noted that while the condo was “residential,” the lot upon which it was built was zoned commercial B2. The bank stated in the document that such commercial zoning precluded “the use of standard secondary market sources for financing a residential condominium.” Consequently, the bank categorized the proposed loan as an 18–month “consumer bridge” loan. The Bank professes this “letter” was sent to McCulley at the time it was generated and that she agreed to the new terms, including a loan maturity date of December 16, 2007. McCulley strongly denied ever receiving this document or agreeing to an 18–month finance term.
The loan closing was conducted less than three weeks later, on June 16, 2006. The Promissory Note and the Disclosure Statement signed by McCulley at closing stated that the $300,000 loan matured on December 16, 2007. Additionally, the Deed of Trust signed by McCulley at closing indicated that the condo was to be used for residential purposes only. It was undisputed, however, that without McCulley’s knowledge, the title company subsequently changed the Deed prior to recording it to reflect that the Condo was to be used for commercial purposes only.
McCulley made monthly payments to the Bank throughout 2006 and 2007. She claimed she thought she was making normal mortgage payments. The Bank claims she was making the required monthly interest payments. In the fall of 2007, McCulley received notice that a balloon payment on her 18–month loan was due in December 2007. McCulley claimed not to have known until that time that she did not have the 30–year residential mortgage for which she had applied. Ultimately, unable to find suitable long-term residential financing, McCulley signed a Warranty Deed transferring the condo to another, and paid off the note.
In June 2009, McCulley sued U.S. Bank and American Land Title Co. in Gallatin County District Court, alleging they were negligent in their loan dealing with her, breached contracts, committed fraud by misrepresenting the nature of the loan, slandered the title on her property and intentionally inflicted emotional distress. The trial court granted judgment in favor of the defendants and McCulley appealed.
In McCulley v. American Land Title Co., 300 P.3d 679 (Mont. 2013), the Supreme Court of Montana reinstated McCulley’s claim that the Bank committed fraud by engaging in “bait and switch” tactics to change her approved 30–year residential mortgage to an 18–month balloon construction loan without her knowledge.
The Montana Supreme Court noted that, generally speaking, once an agreement is reduced to writing, it is considered to contain all terms of the agreement and extrinsic evidence concerning the intentions of the parties is not admissible. The documents prepared by the Bank and signed by McCulley did in three locations reference an 18–month loan as opposed to a 30–year loan. However, the Supreme Court found that factor did not necessarily preclude McCulley from presenting her fraud claims, because the relevant Montana statute “does not exclude other evidence of the circumstances under which the agreement was made or to which it relates … or other evidence to explain an extrinsic ambiguity or to establish illegality or fraud.”
McCulley maintained that the Bank sent her documents outlining the terms of a 30–year residential mortgage and that it closed on the loan not three weeks later without a mention that the terms of the loan were radically different than those initially agreed to between the parties. In particular noting McCulley’s arguably legitimate contention that the May 26 “letter” was not a letter to her at all, the Supreme Court found a genuine issue of material fact relative to McCulley’s claim of fraud on the part of the Bank.
Thus, the fraud claim was remanded for trial. The case went to trial this month and the jury found for McCulley on her fraud claim against the bank. The jury awarded jury McCulley $1 million in compensatory damages and $5 million in punitive damages for fraud.
Heygood, Orr & Pearson fighting for consumer rights
The attorneys at Heygood, Orr & Pearson have represented numerous plaintiffs in consumer fraud and consumer class action lawsuits. For example, we have represented individuals who allege they were misled by claims made by Samsung regarding the memory capacity of its Galaxy S4 phone and dozens of consumers who claim they were defrauded into investing in life settlements. In that case, we are challenging Samsung’s attempts to force the case into arbitration based on an arbitration provision buried in a user manual and a health, safety and warranty guide. The issue is likely to be decided by the Federal Ninth Circuit Court of Appeals.
Our law firm has represented clients across the country in class action lawsuits against multimillion dollar companies, making sure that when consumers are hurt by corporate wrongdoing, the companies that do so are held accountable for their actions. Heygood, Orr & Pearson is AV-rated, the highest rating available from Martindale-Hubble, the top law firm rating service. Our partners Michael Heygood, Jim Orr, and Eric Pearson are all Board Certified in Personal Injury Trial Law by the Texas Board of Legal Specialization and have all been voted by their peers as “Super Lawyers” in the state of Texas for several consecutive years.*
If you have been a victim of false or misleading advertising, contact the law firm of Heygood, Orr & Pearson for a free consultation so we can help you determine the best way to protect your legal rights and interests. You can reach us by calling our toll-free hotline at 1-877-446-9001, or by following the link to our free case evaluation form located on this website.
* Michael Heygood, James Craig Orr, Jr. and Eric Pearson were selected to the Super Lawyers List, a Thomson Reuters publication, for the years 2003 through 2014.