Case Title: RONALD E. PINTHER V. JAMES D. DITZEL

Citation: 

Docket Number: 06-231

State: wyoming

Court: Wyoming Supreme Court

Date: 2007-07-27T00:00:00Z

Document:
RONALD E. PINTHER V. JAMES D. DITZEL2007 WY 116163 P.3d 816Case Number: 06-231Decided: 07/27/2007
APRIL 
TERM, A.D. 2007

 
 
RONALD E. 
PINTHER,

 
 
Appellant

(Defendant),

 
 
v.

 
 
JAMES D. 
DITZEL,

 
 
Appellee

(Plaintiff).

 
 
Appeal from the 
DistrictCourtofLaramieCounty

The Honorable Wade E. 
Waldrip, Judge

 
 
Representing Appellant:

Donald 
Eugene Miller, of Graves, Miller & Kingston, PC, Cheyenne, Wyoming.

 
 
Representing Appellee:

Terry Wynn 
Connolly, of Patton & Davison, Cheyenne, Wyoming.

 
 
Before 
VOIGT, C.J., and GOLDEN, HILL, KITE, and BURKE, 
JJ.

 
 
BURKE, 
Justice.

 
 

[¶1]          
Mr. Ditzel wanted to 
pay off the loan and extinguish the mortgage on his property in Cheyenne, Wyoming, but he and Mr. Pinther, who held 
the note and mortgage, could not agree on the payoff amount.  Mr. Ditzel filed a declaratory judgment 
action asking the district court to determine the payoff amount.  The district court chose the lower 
amount urged by Mr. Ditzel.  
Mr. Pinther appealed, claiming that the district court improperly 
applied the tort of negligent misrepresentation to reduce the payoff 
amount.  We agree, and so reverse 
the judgment and remand the case to the district court for recalculation of the 
payoff amount.

 
 
ISSUE

 
 

[¶2]          
We find this issue to be 
dispositive:  Did the district court 
properly apply the tort of negligent misrepresentation to reduce the payoff 
amount on the mortgage?

 
 
STANDARD OF 
REVIEW

 
 

[¶3]          
Following a bench trial, 
this Court reviews a district court's decision using a clearly erroneous 
standard for factual findings, but a de novo standard for conclusions of 
law.  Belden v. Thorkildsen, 2007 WY 68, ¶ 11, 
156 P.3d 320, 323 (Wyo. 2007).  The 
issue in this case presents a question of law, so we do not defer to the 
district court's conclusion, and uphold it only if it is correct.  Eklund v. Farmers Ins. Exch., 
2004 WY 24, ¶ 10, 86 P.3d 259, 262 (Wyo. 
2004).

 
 
FACTS

 
 

[¶4]          
Clarence Rogers owned a 
house in Cheyenne, 
Wyoming, subject to a mortgage held 
by Countrywide Home Loans, Inc.  In 
2000, Mr. Rogers obtained a loan from Conseco Finance Servicing 
Corporation.  This loan was secured 
by second and third mortgages on the property.  Later, the house suffered damage from 
two separate fires.  The insurance 
company issued two checks, totaling $65,323.50, to cover the damage.  Both checks were jointly payable to the 
two mortgage holders, Countrywide and Conseco.  The mortgage holders agreed on a 
division of the insurance proceeds, though the record does not provide details 
of their agreement.  A short time 
later, Countrywide released its mortgage on the property.  Conseco continued holding the two 
remaining mortgages, but after Conseco declared bankruptcy, the mortgages were 
transferred to Green Tree Servicing LLC.  

 
 

[¶5]          
In 2003, following 
Mr. Rogers death, the mortgages went into default.  About a year later, Mr. Pinther 
purchased the mortgages from Green Tree.  
Mr. Pinther then initiated foreclosure proceedings.  He published notice stating that the 
payoff amounts were $37,609.73 on the senior mortgage and $21,706.64 on the 
junior mortgage.

    

[¶6]          
Mr. Ditzel saw the 
notice, decided to bid on the property, and attended the foreclosure sale in 
July 2004.    Before the sale began, however, Mr. 
Pinther cancelled the sale on the senior mortgage, apparently on the advice of 
his attorney.  The specific reason 
for the cancellation does not appear in the record.  The foreclosure sale proceeded on the 
junior mortgage alone.  Both Mr. 
Pinther and Mr. Ditzel bid at the sale, with Mr. Pinther making the 
successful bid of $25,000.00, an amount in excess of the payoff amount on the 
junior mortgage.  

 
 

[¶7]          
Mr. Ditzel remained 
interested in the property.  He 
managed to track down the only heir of Mr. Rogers, a niece in California.  After acquiring her interest in the 
property for approximately $4,000.00, he redeemed the junior mortgage.  At that point, Mr. Ditzel sought to 
pay off the remaining loan and extinguish the senior mortgage, but he and 
Mr. Pinther disagreed on the payoff amount.  They could not fully account for how 
Countrywide and Conseco had divided the insurance payments after the fires.  There was also confusion about the 
disposition of the excess Mr. Pinther had paid at the foreclosure sale of 
the junior mortgage.1  In December 2004, Mr. Ditzel filed a 
complaint in the district court seeking a declaratory judgment establishing the 
payoff amount on the senior mortgage.  
Mr. Pinther filed an answer and counterclaim, seeking to foreclose 
on the mortgage and, in effect, also asking the court to establish the payoff 
amount.  

 
 

[¶8]          
The issue that became the 
subject of this appeal was raised by Mr. Ditzel for the first time in his 
pretrial memorandum.  The published 
foreclosure notice stated that the payoff amount on the senior mortgage was 
$37,609.73.  Mr. Ditzel 
contended that Mr. Pinther was bound by that amount, even if it proved to 
be incorrect, and even though the foreclosure sale had been cancelled.  In contrast, Mr. Pinther relied on 
the mortgage agreement, which allowed him to include certain filing fees, 
insurance premiums, attorney's fees, and taxes that he had mistakenly failed to 
include in the published payoff amount.  
Including these items, the payoff amount on the senior mortgage increased 
to $57,675.93 as of the foreclosure sale date.  Mr. Pinther asserted that, because 
the foreclosure sale on the senior mortgage had been cancelled, he was not 
obligated to accept as the payoff amount the mistaken figure published in the 
foreclosure notice.  The district 
court accepted Mr. Ditzel's argument, and ruled that the payoff amount, as 
of the foreclosure sale date, was the lower figure of $37,609.73.  Mr. Pinther 
appealed.

            

DISCUSSION

 
 

[¶9]          
To determine the payoff 
amount, the district court began by interpreting the promissory note and 
mortgage, which constituted the written agreement between the parties.  Mr. Ditzel was not the original 
borrower, and Mr. Pinther was not the original lender.  In this appeal, however, there is no 
dispute that they succeeded to the rights and obligations of their predecessors, 
and were subject to the terms of the original promissory note and mortgage.  

 
 

[¶10]     
In its decision letter, 
the district court observed that the terms of the mortgage may entitle Mr. 
Pinther to include filing fees, insurance premiums, attorney's fees, and taxes 
in the payoff amount, which would increase the payoff amount to $57,675.93.  However, relying on the Restatement (Second) of Torts 
§ 552(1) (1977) and cases discussing the tort claim of negligent 
misrepresentation, the district court concluded that Mr. Pinther was 
required to accept the published payoff amount of $37,609.73, regardless of the 
terms of the mortgage.  In effect, 
the district court used the tort of negligent misrepresentation as the basis for 
varying the terms of the mortgage agreement.

 
 

[¶11]     
Negligent misrepresentation 
is a tort claim.  See Duffy v. Brown, 708 P.2d 433, 437 
(Wyo. 1985) 
(referring to the Restatement (Second) of 
Torts § 552 (1977) for the elements of negligent 
misrepresentation).  However, 
Mr. Ditzel did not assert negligent misrepresentation as a tort claim.  As he recites in his brief, "the 
negligent misrepresentation' issue was not a separate cause of action, but only 
a method for the [district c]ourt to determine the amount necessary to pay the 
note and release the mortgage." 

 
 

[¶12]     
We have previously 
indicated that tort theories may not be used to change the terms of a written 
agreement.  Where the parties have a 
contractual agreement, "the contractual relationship controls, and parties are 
not permitted to assert actions in tort in an attempt to circumvent the bargain 
they agreed upon."  Snyder v. Lovercheck, 992 P.2d 1079, 
1087 (Wyo. 1999); see also Lee v. LPP Mortgage Ltd., 2003 WY 92, ¶ 
27, 74 P.3d 152, 162 (Wyo. 2003) ("[W]e have been rightfully hesitant to find 
tort causes of actions where a contract exists.").  Snyder involved a real estate 
purchaser's negligent misrepresentation claim against the seller, and Lee dealt with a guarantor's negligent 
nondisclosure claim against the lender, so they are not precisely applicable 
here.  However, they clearly point 
toward the conclusion that a negligent misrepresentation tort claim cannot be 
used to circumvent the terms of a written agreement.

 
 

[¶13]     
Mr. Ditzel has not 
referred us to any precedent, from Wyoming or any other jurisdiction, supporting 
his argument that the tort of negligent misrepresentation may serve to alter the 
terms of a written agreement.  The 
cases cited in the district court's decision letter are not applicable.  For example, in Richey v. Patrick, 904 P.2d 798 
(Wyo. 1995), 
Verschoor v. Mountain West Farm Bureau 
Mut. Ins. Co., 907 P.2d 1293 (Wyo. 1995), 
and Husman v. Triton Coal Co., 809 P.2d 796 (Wyo. 
1991), the question in each was a party's ability to maintain a separate cause 
of action for negligent misrepresentation.  
Nothing in those decisions suggests that the tort of negligent 
misrepresentation can be used to vary the terms of a contract.  The district court cited one case, City of East Orange v. Kynor, 383 N.J. 
Super. 639, 893 A.2d 46 (2006), to indicate that a foreclosing party has a duty 
to exercise due care in representing the amount due.  However, that decision rested on 
constitutional due process grounds.  
The municipality had foreclosed on a tax lien.  If the municipality misrepresented the 
amount of taxes legally due, the court said, that could violate its duty to 
provide interested parties with notice and opportunity to be heard.  The legal reasoning of this decision 
does not apply to a private party foreclosing on a 
mortgage.

 
 

[¶14]     
East 
Orange is also distinguishable 
on one significant fact:  the 
municipality actually conducted the foreclosure sale, while Mr. Pinther did 
not.  Wyoming precedent 
suggests that, if the foreclosure sale had taken place, Mr. Pinther might 
have been bound to accept the lower payoff amount.  See McNeill Family Trust v. Centura 
Bank, 2003 WY 2, 60 P.3d 1277 (Wyo. 2003) (Mortgagee could not have 
foreclosure sale set aside based on its own unilateral mistakes.).  But compare Peterson v. Johnson, 46 
Wyo. 473, 28 P.2d 487 (1934) (Foreclosure sale set aside because of mortgagee's "gross 
overstatement" of the payoff amount.).  
However, Mr. Pinther cancelled the foreclosure sale on the senior 
mortgage.  Absent a completed 
foreclosure sale, we find no source for any duty that Mr. Pinther owed to 
Mr. Ditzel in representing the payoff amount on the senior mortgage.  Accordingly, we find no foundation for 
the conclusion that the tort of negligent misrepresentation justifies a 
departure from the terms of the mortgage agreement.

 
 
CONCLUSION

 
 

[¶15]     
The district court erred 
when it used the tort of negligent misrepresentation to vary the terms of a 
written agreement.  The payoff 
amount should have been calculated in accordance with the parties' written 
agreement.  We reverse the judgment, 
and remand to the district court to recalculate the payoff amount and enter 
judgment accordingly.

 
 

FOOTNOTES

 
 

1On appeal, the 
parties do not challenge the district court's application of the insurance 
proceeds or the overpayment on the junior mortgage.  These issues are mentioned to explain 
the original bases of the parties' disagreement.