Reliance Bank v. Musselman
403 S.W.3d 147
Mo. Ct. App.2013Background
- In 2003 Borrowers (William Musselman and Susan Hall) executed a promissory note with Reliance Bank secured by four properties; original loan required a final balloon payment due May 14, 2006.
- A written change-in-terms extended the maturity to May 14, 2009; the final payment due May 14, 2009 was not made and Musselman admitted he did not make it.
- Reliance sent notice of default by certified mail and commenced foreclosure sales on the four properties; a typographical error required a second sale for one property.
- A deficiency remained after sale; Reliance sued to collect the deficiency and Borrowers counterclaimed for wrongful foreclosure seeking damages (and a general prayer for equitable relief).
- Trial court granted Reliance summary judgment, finding Borrowers were in default when foreclosure commenced and thus could not recover tort damages for wrongful foreclosure; Reliance later dismissed the deficiency suit.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Were Borrowers in default when foreclosure began? | Borrowers: they were not in default because of an oral modification and lack of notice/opportunity to pay. | Reliance: written change-in-terms required final payment May 14, 2009 which was not made; certified notices were sent; oral modification invalid under statute of frauds. | Held: Borrowers were in default; oral modification unenforceable; certified default notice received. |
| Can Borrowers recover tort damages for wrongful foreclosure despite alleged procedural irregularities? | Borrowers: foreclosures were wrongful and sought both damages and equitable relief. | Reliance: tort damages unavailable because Borrowers were in default; alleged irregularities would support equitable relief only if affirmatively pleaded. | Held: Damages denied—because Borrowers were in default. Equitable relief not pleaded adequately (no request to set aside sale or quiet title). |
| Is lack of notice relevant to tort claim for wrongful foreclosure? | Borrowers: lack of notice/denial of opportunity to pay makes foreclosure wrongful. | Reliance: receipt of notice and default are dispositive for tort claim; notice issues more relevant to equitable claims. | Held: Notice receipt irrelevant to tort damages claim; relevant only to equitable claims to set aside sale. |
| Was summary judgment proper? | Borrowers: trial court erred in granting Reliance summary judgment. | Reliance: after discovery Borrowers cannot produce evidence to negate default or plead equitable relief; summary judgment appropriate. | Held: Summary judgment affirmed for Reliance. |
Key Cases Cited
- Fields v. Millsap & Singer, P.C., 295 S.W.3d 567 (Mo. App. W.D.) (distinguishes wrongful-foreclosure claims at law for damages from equitable claims to set aside sale)
- ITT Commercial Fin. Corp. v. Mid-Am. Marine Supply Corp., 854 S.W.2d 371 (Mo. banc) (summary-judgment standards)
- Pacific Carlton Dev. Corp. v. Barber, 95 S.W.3d 159 (Mo. App. W.D.) (statute of frauds bars oral modification of written contracts)
- Dobson v. Mortgage Elec. Registration Sys., Inc./GMAC Mortg. Corp., 259 S.W.3d 19 (Mo. App. E.D.) (wrongful-foreclosure damages lie only where mortgagee lacked right to foreclose when proceedings commenced)
- City of Greenwood v. Martin Marietta Materials, Inc., 311 S.W.3d 258 (Mo. App. W.D.) (general prayer for relief does not suffice to plead unpled causes of action)
- Hampton v. Carter Enterprises, Inc., 238 S.W.3d 170 (Mo. App. W.D.) (summary-judgment burden where defending party shows nonmovant cannot produce necessary evidence)