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PNC Bank, National Association v. Wilson

United States District Court, D. Montana, Butte Division

June 4, 2015



JEREMIAH C. LYNCH, Magistrate Judge.

Before the Court is Plaintiff PNC Bank, National Association's Fed.R.Civ.P. 12(b)(6) motion to dismiss Defendant Michael Wilson's counterclaims. For the reasons discussed, the Court recommends the motion be granted in part, and denied in part.

I. Background

A. PNC Bank's Claims

In March 2009, PNC Bank's predecessor in interest, National City Mortgage, loaned $186, 800 to Defendants Michael Wilson and Karen Sell for the purchase of real property in Gallatin County, Montana. On March 20, 2009, Wilson and Sell signed a promissory note agreeing to make principal and interest payments on the loan in the amount of $974.44 per month until April 1, 2039, when the balance due is to be paid in full. They also signed a deed of trust to secure their loan payment obligations under the promissory note. The deed of trust identifies National City Mortgage as both the lender and the beneficiary under the trust. The deed of trust was executed pursuant to the Small Tract Financing Act of Montana, Mont. Code Ann. § 71-1-301 et seq.

On November 6, 2009, National City Mortgage merged with PNC Bank, resulting in PNC Bank becoming the successor in interest with respect to the subject promissory note and deed of trust.

Wilson and Sell made monthly payments pursuant to the promissory note through May 2011. But thereafter they failed to make any payments on the loan. PNC sent notices of default to Wilson and Sell informing them of the total amount due to cure their default on the loan, but they have not made any further payment on the loan. Interest on the loan and late charges continue to accrue against Wilson and Sell.

As a result of Wilson and Sell's default, and pursuant to the terms of the promissory note and the deed of trust, PNC Bank commenced this action to foreclose on its interest in the deed of trust. It requests the Court order a judicial sale of the subject real property and allow distribution of the proceeds to pay the balance due on the promissory note including principal, interest, fees and costs.

B. Wilson's Counterclaims

In 2009 Wilson suffered a disabling work-related injury and was unable to work after October 2009. In December 2009, while still making monthly payments on the loan, Wilson requested assistance from PNC Bank to modify his loan payments due to his loss of employment and resulting financial hardship. PNC Bank requested that Wilson provide certain financial information in support of his request for a loan modification. Wilson submitted the requested information to PNC Bank, but on January 4, 2010, it rejected Wilson's request for a loan modification.

According to Wilson, PNC Bank invited him to resubmit certain financial information in support of his request for a loan modification. In March 2010 Wilson responded with the financial information requested, but PNC Bank again rejected Wilson's request. This process repeated multiple times initiated by PNC Bank's repeated invitation to Wilson to request a loan modification and to resubmit supporting financial information. PNC Bank suggested to him that he "might" qualify for a loan modification if he submitted his request and supporting financial information. (Doc. 28 at ¶¶ 19 and 59.) But each time Wilson submitted his request PNC Bank declined to modify the loan. Wilson's requests and PNC Bank's rejections occurred in 2010, 2011, and in March and April of 2012.

Wilson contends PNC Bank never reviewed the substance of his requests or the financial information he submitted to it, and it never entered any meaningful negotiations with Wilson to modify the loan. Instead, PNC Bank made repeated allegedly empty suggestions to Wilson that if he would resubmit supporting financial information there were programs available to assist him and that it would consider his eligibility for a loan modification so that he could continue to own his home. Wilson asserts PNC Bank thereby unlawfully misled him to believe he might qualify for a loan modification.

Wilson notes that at some point in the process of requesting a loan modification, he received written correspondence from PNC Bank that informed him that PNC Bank did not have the contractual authority to modify his loan.

In April 2012, prior to this action in federal court, PNC Bank commenced a foreclosure action against Wilson and Karen Sell in the Montana Eighteenth Judicial District Court, Gallatin County regarding the same promissory note and real property. ( PNC Bank v. Sell and Wilson, DV-12-296A (" PNC Bank I ")). The PNC Bank I case proceeded to trial, and on the first day of trial the presiding state court judge encouraged the parties to engage in settlement discussions. Wilson alleges that during those discussions PNC Bank's attorney represented to Wilson that he could submit a request for a loan modification, leading him to believe PNC Bank would consider the request and that it had authority to make a modification. In response, Wilson gathered all the requested financial information and submitted his request for a modification to PNC Bank's attorney on July 26, 2013. On that same date, PNC Bank's attorney informed Wilson that PNC Bank rejected his request.[1] Wilson alleges that despite PNC Bank's attorney's representations, PNC Bank did not give his request for a modification any consideration.

Wilson alleges that as a result of PNC Bank's conduct in repeatedly inviting Wilson to request loan modifications and its refusal to modify the loan, he has incurred damages in the form of additional interest and penalties, a bad credit rating, and emotional distress. But, significantly, Wilson also states that due to both his financial hardship, and Karen Sell's failure to contribute to further loan payments, he was unable to comply with his financial obligations under the promissory note. (Doc. 28 at ¶ 35.)

Wilson advances counterclaims under Montana law for fraud, constructive fraud, and violations of the Montana Unfair Trade Practices and Consumer Protection Act of 1973, Mont. Code Ann. ...

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