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Price v. US Bank, N.A.

United States District Court, D. Montana, Billings Division

August 25, 2017

R. MICHAEL PRICE, Plaintiff,
v.
US BANK, N.A., Defendant.

          OPINION AND ORDER

          SUSAN P. WATTERS UNITED STATES DISTRICT JUDGE

         Before the Court is Plaintiff R. Michael's Price's motion to excuse or suspend performance (Doc. 18) and Defendant U.S. Bank's motion to dismiss for failure to state a claim (Doc. 20). For the foregoing reasons, the Court DENIES both motions.

         I. Facts alleged in amended complaint

         On August 4, 2009, Price signed a Term Loan Agreement and Promissory Note ("Term Note") with U.S. Bank. (Doc. 3-1 at 12). The Term Note was secured by an Arizona Deed of Trust, Security Agreement, and Assignment of Rents for property located in Mohave County, Arizona ("Primary Collateral"). (Doc. 3 at ¶ 10).

         On April 4, 2010, U.S. Bank filed a complaint against Price in federal court, alleging Price had defaulted on the Term Note. (Doc. 3 at ¶ 10). On July 26, 2010, Price filed a complaint against U.S. Bank in state court, alleging U.S. Bank had wrongfully instituted foreclosure proceedings against the Primary Collateral. (Doc. 3 at ¶ 11). U.S. Bank removed the state court action to federal court and the cases were consolidated. (Doc. 3 at ¶¶ 12-14). Price and U.S. Bank entered into a settlement agreement ("Agreement") prior to trial. (Doc. 3 at ¶ 15). Pursuant to the Agreement, Price and U.S. Bank executed a Letter Loan Agreement, a new promissory note ("Replacement Note"), an amendment to the Arizona Deed of Trust, and a Colorado Deed of Trust to secure the Replacement Note with additional property located in Douglas County, Colorado ("Secondary Collateral"). (Doc. 3 at ¶ 15).

         The Colorado Deed of Trust provided that if the Secondary Collateral was sold, the cash proceeds would be held as "Cash Collateral" and deposited in a securities account as security for the Replacement Note. (Doc. 3-1 at 28). The Colorado Deed of Trust further provided:

Upon sale and conversion to Cash Collateral, [US Bank] will, within a reasonable time, release that amount of the Cash Collateral that exceeds the amount required to maintain a loan-to-value ratio (expressed as a percentage) not in excess of 70% based on the then current principal balance of the Note and on the then current market value of all Collateral for the Note as determined in accordance with the Loan Agreement, including the Primary Collateral. . . thereafter, on January 1, 2012 and on January 1 of each succeeding year until the Note is paid in full, the Bank will recalculate the value to maintain a loan-to-value ratio (expressed as a percentage) not in excess of 70% based on the then current balance of the Note and will release that amount of Cash Collateral that exceeds such recalculated value.

         (Doc. 3-1 at 28). Section 7 of the Letter Loan Agreement provided:

Solely for the purposes of determining the amount of such Cash Collateral, the Primary Collateral will initially be valued according to the Lender's current appraisal of $1, 390, 000 ... until [a developed parcel] of the Primary Collateral is sold or leased or an undeveloped parcel of the Primary Collateral is sold ...

(Doc. 3-1 at 3-4).

         In 2012, the Secondary Collateral was sold and converted to Cash Collateral equivalent to $850, 000. (Doc. 3 at ¶ 22). Also in 2012, U.S. Bank reappraised the Primary Collateral and valued it at $630, 000. (Doc. 3 at ¶ 30). In January 2015, the principal balance of the Replacement Note was $1, 430, 000. (Doc. 3 at ¶ 23). In February 2015, the value of the Cash Collateral was $933, 567.75. (Doc. 3 at ¶ 25). In 2015, 2016, and 2017, Price requested U.S. Bank release the Cash Collateral in excess of the 70% loan-to-value ratio. (Doc. 3 at ¶¶ 27-29). Price maintained there was Cash Collateral in excess of the 70% loan-to-value ratio based on the combined value of the Cash Collateral and the value of the Primary Collateral set out in Article 7 of the Letter Loan Agreement. (Doc. 3 at ¶¶ 22-29).

         US Bank refused to release any Cash Collateral. (Doc. 3 at ¶ 29). U.S. Bank maintained there was no Cash Collateral in excess of the 70% loan-to-value ratio based on the combined value of the Cash Collateral and U.S. Bank's 2012 reappraisal of the Primary Collateral. (Doc. 3 at ¶¶ 27-30).

         Price filed suit against U.S. Bank, alleging breach of contract and fraud, among other claims. (Doc. 1 ¶¶ 38-84). Price subsequently filed a motion to excuse his performance under the contract. (Doc. 13). U.S. Bank filed a motion to dismiss the complaint for failure to state a claim. (Doc. 20). The parties agree Montana law governs the interpretation of the contracts at issue.

         II. Motion to ...


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