Morrow v. Bank of America, N.A.
2014 MT 117
| Mont. | 2014Background
- Morrows seek modification of their Bank of America–serviced mortgage under HAMP; Montana home, originally financed by Quicken Loans and later Countrywide, now BOA successor.
- Oral modification allegedly offered to extend term to 40 years and reduce interest; terms never reduced to writing; Morrows relied on a phone conversation with BOA employee Sunil Kumar claiming approval.
- Morrows paid a trial modification amount of $1,239.99 starting December 2009 for about 14 months; notices of default and acceleration issued by BOA during processing; modification denied January 11, 2011, and trustee’s sale scheduled February 2011.
- District Court granted BOA summary judgment on breach of contract and other claims; court treated Statute of Frauds as bar to contract claims and found no fiduciary duty, among other rulings.
- Court concludes oral modification not enforceable as written, but permits fiduciary duty/causation issues to proceed on non-contract theories; remanded for trial on negligence, negligent misrepresentation, actual fraud, constructive fraud, and MCPA claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Existence and enforceability of oral loan modification | Morrow argues an executed oral modification existed and JOAs extended term with reduced interest. | Bank contends oral modification was not fully executed and thus unenforceable under 28-2-1602, MCA and requires writing. | Oral modification not fully executed; contract modification not valid. |
| Duty of care: fiduciary/common-law duty owed by bank | Bank owed fiduciary duty to manage modification process; prolonged advisement breached duties. | Bank argues no fiduciary duty; debtor/creditor relationship generally not fiduciary. | Facts could show fiduciary duty in processing modification; remand for trial on duty, breach, and damages. |
| Negligent misrepresentation | Bank provided false statements about modification and servicing; failures to communicate and misled borrower. | Statements denied; no misrepresentation or miscommunication proven; disclaimers apply. | Genuine issues of material fact on negligent misrepresentation; reversed summary judgment. |
| Statute of Frauds preclusion of fraud and MCPA claims | Fraud theories independent of contract should survive; statute not a bar to fraud or MCPA. | Statute of Frauds bars enforcement but not admissibility of oral agreement evidence; fraud claims barred if tied to unenforceable contract. | SOF does not bar fraud or MCPA claims; trial on merits warranted. |
| Actual fraud, constructive fraud, and MCPA claims | Bank knowingly or negligently misrepresented loan status and modification prospects; damages from reliance. | No intent to deceive or improper advantage shown; constructive fraud not properly pleaded under contract statutes. | Actual fraud viable under common law; constructive fraud requires duty and unjust enrichment; issues for trial; MCPA claims also viable; remanded. |
Key Cases Cited
- Kitchen Krafters v. Eastside Bank, 242 Mont. 155, 789 P.2d 567 (1990) (elements of negligent misrepresentation adopted)
- Deist v. Wachholz, 208 Mont. 207, 678 P.2d 188 (1984) (bank fiduciary duty when advisor role beyond ordinary lending)
- Gliko v. Permann, 2006 MT 30, 331 Mont. 112, 130 P.3d 155 (2006) (special relationship and fiduciary duty; summary judgment standard)
- Durbin v. Ross, 276 Mont. 463, 916 P.2d 758 (1996) (intent element in actual fraud; circumstantial proof allowed)
- State ex rel. Farm Credit Bank v. Dist. Ct., 267 Mont. 1, 881 P.2d 594 (1994) (SOF limits; fraud avoidance; statutary interpretation)