SYNOPSIS OF THE CASE
2015 MT
100, DA 14-0267: Mary McCulley, Plaintiff and Cross-Appellant v. U.S. Bank , Defendant, Appellant
and Cross-Appellee.1
Mary McCulley bought a condominium in Bozeman and sought a 30-year, residential loan for $300,000 from Heritage Bank, which later merged with U.S.
Bank. She later sued the Bank, alleging the Bank defrauded her by
instead issuing an 18-month, $300,000 commercial
loan, and failing to notify her of the change. When McCulley
could not obtain refinancing
and the condominium went into foreclosure, she attempted suicide. The jury found
that the Bank defrauded McCulley and awarded her $1,000,000 in compensatory damages and $5,000,000 in punitive damages, which the District
Court approved.
On appeal, U.S. Bank argued that testimony it had offered from a former
bank officer and McCulley’s medical records were
improperly excluded from evidence; challenged
the sufficiency of the evidence
to support the jury’s finding
of fraud; argued that U.S. Bank could not be held liable
for punitive damages
arising out of Heritage Bank’s
conduct that preceded the merger of the banks;
and challenged the propriety of the punitive
damages award. McCulley
cross-appealed the date set by the District Court for interest to begin accruing on the
judgment.
The Montana Supreme Court concluded that, because U.S. Bank had failed to provide the
bank officer’s journals to McCulley during the discovery process, the officer was prohibited from testifying with
respect to the journals. The Court further concluded that because U.S. Bank failed
to lay a proper
evidentiary foundation for McCulley’s medical records,
they were properly excluded. The Court held that fraud was demonstrated because evidence at trial established that the Bank falsely represented it would provide
a 30-year, residential loan to McCulley,
the Bank knew the representation was false, and the Bank intended McCulley to rely on the false representation, which she did to her detriment. The Court also held that, because the federal Bank
Merger Act required U.S. Bank to assume “all liabilities” of
Heritage Bank, U.S. Bank was properly held liable for all damages, including punitive
damages, arising out of Heritage Bank’s conduct, and that circumstances proven during the trial supported the punitive damages
award because the Bank’s conduct
was reprehensible, the ratio
between compensatory damages and punitive damages fell within the guidelines provided
by the United States Supreme Court,
and the statutory
cap on punitive damages
provided by the Montana Legislature
was not exceeded. Lastly, the Court concluded that interest
on the judgment must accrue from the date of the jury’s verdict, not the date of District Court’s
post-trial decision approving the award. Thus, the Court affirmed the damages
judgment, and reversed the calculation of interest on the judgment.
1 This synopsis has been prepared for the
convenience of the reader. It constitutes no part of the Opinion of the Court and may not be cited as precedent.
