McCulley v. U.S. Bank
2015 MT 100
| Mont. | 2015Background
- In May–June 2006 Mary McCulley applied to Heritage Bank for a $300,000, 30‑year residential mortgage; Heritage (later merged into U.S. Bank) approved an 18‑month $300,000 commercial/bridge loan without giving her clear notice.
- Pre‑closing disclosures (TILA statement and Good Faith Estimate) reflected a 30‑year loan; at closing McCulley was presented three inconsistent loan applications and other documents and signed, believing she had a 30‑year mortgage.
- Heritage/U.S. Bank internal emails showed the bankers knew the condominium’s commercial zoning would preclude secondary market financing, and that McCulley could not repay an 18‑month balloon loan or realistically refinance it.
- McCulley made payments in 2006–07, later learned the loan was an 18‑month balloon, unsuccessfully tried to obtain restructuring, and ultimately lost her home; she suffered severe emotional distress and attempted suicide.
- McCulley sued for actual fraud (bait‑and‑switch). After an earlier reversal of summary judgment, a jury awarded $1,000,000 compensatory and $5,000,000 punitive damages; the district court affirmed the punitive award but ordered post‑judgment interest from the date of the court’s order.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Exclusion of lay‑witness testimony (Mortensen’s journals) | U.S. Bank should be precluded from using journals it failed to produce; exclusion warranted. | Bank said journals were produced just before trial, M. R. Evid. 612 permits refreshing and inspection, and journals were not within bank’s legal custody. | District court did not abuse discretion: Bank failed to timely supplement discovery; exclusion under M. R. Civ. P. 37(c)(1) proper. |
| Exclusion of McCulley’s medical records | Records were produced in discovery and authenticated; admissible to impeach. | Bank argued records showed she denied suicidal intent and were produced by McCulley. | District court did not abuse discretion: Bank failed to lay foundation/authenticate records under M. R. Evid. 901. |
| Sufficiency of evidence of actual fraud | McCulley: evidence showed false representations, bank’s knowledge, intent to deceive, reliance, and proximate injury. | Bank: no false representation or intent; relitigation of facts. | Sufficient evidence existed for the jury to find actual fraud; verdict affirmed. |
| Successor liability for punitive damages (post‑merger) | McCulley: U.S. Bank assumed Heritage’s liabilities under merger law, including punitive damages. | Bank: punitive damages punish the tortfeasor, not a successor; should not be liable. | Held that under federal Bank Merger Act and Montana law successor liability covers "all liabilities," so U.S. Bank could be liable for punitive damages. |
| Excessiveness of punitive damages (Due Process/Gore guideposts) | $5M punitive on $1M compensatory is reasonable given reprehensibility, 5:1 ratio, and legislative caps. | Bank argued award grossly excessive under Gore/Campbell. | De novo review: award upheld — high reprehensibility, single‑digit ratio (5:1), and legislative context support the award. |
| Post‑judgment interest accrual date | McCulley: interest should run from the jury verdict date (Feb 7, 2014). | Bank/district court: interest should run from the court’s decision affirming award (Apr 14, 2014). | Court reversed district court: interest accrues from the date the verdict was rendered (Feb 7, 2014). |
Key Cases Cited
- Seltzer v. Morton, 336 Mont. 225 (Mont. 2007) (de novo review and application of Gore guideposts for punitive damages)
- Morrow v. Bank of Am., N.A., 375 Mont. 38 (Mont. 2014) (elements of actual fraud under Montana law)
- Drilcon, Inc. v. Roil Energy Corp., 230 Mont. 166 (Mont. 1987) (appellate review looks for sufficient evidence supporting jury verdict)
- Kaiser Aluminum & Chem. Corp. v. Bonjorno, 494 U.S. 827 (U.S. 1990) (federal post‑judgment interest runs from entry of judgment)
- State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408 (U.S. 2003) (Gore guideposts and ratio considerations for punitive damages)
- Gore v. BMW of N. Am., 517 U.S. 559 (U.S. 1996) (three‑part guidepost framework for assessing punitive damages)