Case Title: Kilmer v. Citicorp Mortg., Inc.

Citation: 

Docket Number: 93-10

State: wyoming

Court: Wyoming Supreme Court

Date: 1993-10-08T00:00:00Z

Document:
Kilmer v. Citicorp Mortg., Inc.1993 WY 130860 P.2d 1165Case Number: 93-10Decided: 10/08/1993Supreme Court of Wyoming
 
Russell 
A. KILMER and Nadine Kilmer, husband and wife; and Larry Martin, a single 
person, Appellants (Defendants),

v.

CITICORP 
MORTGAGE, INC.,

 Appellee 
(Plaintiff).

Appeal 
from The District Court, Goshen County, John T. Langdon, 
J.

Jerry 
M. Smith and Ann T. Schnelzer of Sigler and Smith Law Office, Torrington, for 
appellants.

Peter 
G. Arnold of Riske & Arnold, P.C., Cheyenne, for 
appellee.

Before 
MACY, C.J., and THOMAS, CARDINE, GOLDEN and TAYLOR, JJ. 

MACY, 
Chief Justice.

[¶1]      Appellants 
Russell A. Kilmer, Nadine Kilmer, and Larry Martin (the mortgagors) appeal from 
the district court's summary judgment order granting a deficiency judgment to 
Appellee Citicorp Mortgage, Inc. (the mortgagee).

[¶2]      We 
affirm.

[¶3]      The mortgagors 
present the following issues for our review:

I. 
Citicorp Mortgage, Inc. has no right of subrogation to pursue a deficiency 
against the Mortgagors.

II. 
Citicorp Mortgage, Inc. was not entitled to a Summary Judgment as a matter of 
law.

III. 
Citicorp Mortgage, Inc. was not entitled to a Summary Judgment as there were 
genuine issues as to material facts.

[¶4]      The mortgagee 
states the issues somewhat differently:

     A. Does the status claimed by the 
Defendants as, "Insureds" amount to a material fact, which if unresolved 
warrants the reversal of the summary judgment rendered in the Plaintiff's 
favor?

     B. Does the Plaintiff, 
as the assignee of the United States Department of Housing and Urban Development 
have an enforceable subrogation claim against the 
Defendants?

C. 
Was summary judgment appropriately rendered in favor of the 
Plaintiff?

[¶5]      In early 1985, 
the mortgagors borrowed $57,920 from WestAmerica Mortgage Company. They used the 
proceeds of the loan to purchase a four-unit apartment building located in 
Torrington, Wyoming. A mortgage note and a mortgage on the property secured the 
loan.

[¶6]      The mortgage 
required that the note and mortgage be insured under the National Housing Act by 
the Department of Housing and Urban Development (HUD). Accordingly, the parties 
submitted a HUD/FHA application for a commitment for insurance under the 
National Housing Act. HUD issued a mortgage insurance certificate on May 13, 
1985.

[¶7]      On April 26, 
1985, WestAmerica Mortgage Company assigned its interest in the mortgage and 
note to Citicorp Homeowners Services, Inc. Citicorp Homeowners Services, Inc. 
subsequently merged with several other Citicorp entities and formed Citicorp 
Mortgage, Inc., the mortgagee in this action.

[¶8]      On or about 
August 1, 1989, the mortgagors defaulted in the repayment of the loan. On March 
16, 1990, the mortgagee foreclosed on the mortgage by advertisement and sale of 
the property. The mortgagee purchased the property at the foreclosure sale with 
a bid of $42,773.50. The bid amount was calculated by applying a formula to 
determine HUD's adjusted fair market value of the property. On the date of the 
sale, the mortgagors owed $63,395.05 on the debt. Thus, the mortgagee realized a 
deficiency of $20,621.55, the difference between the debt and the bid 
amount.

[¶9]      After the 
redemption period had expired, the mortgagee submitted its claim for payment 
under the mortgage insurance policy and conveyed its title in the property to 
HUD. HUD paid $70,088.13 to the mortgagee as mortgage insurance proceeds. HUD, 
therefore, incurred a loss of $27,314.63, the difference between the mortgage 
insurance payment and the adjusted fair market value of the property it 
received. On January 23, 1992, the mortgagee assigned the note to HUD. HUD later 
reassigned its rights against the mortgagors back to the mortgagee for 
collection.

[¶10]   The mortgagee filed its complaint 
on July 11, 1991, seeking a deficiency judgment. Following a series of 
procedural moves, the mortgagee filed a motion for a summary judgment on 
September 25, 1992. After holding a hearing on the motion, the district court 
granted a summary judgment in favor of the mortgagee. The summary judgment order 
found that the mortgagors were jointly and severally liable for the amount of 
HUD's deficiency, accrued interest, and attorney's fees. The mortgagors appeal 
from the district court's order. 

[¶11]   Our general standards governing 
appellate review of summary judgments are 
well-established:

     Summary judgment is 
proper when no genuine issues of material fact exist and the prevailing party is 
entitled to judgment as a matter of law. Baros v. Wells, 780 P.2d 341 (Wyo. 
1989); Farr v. Link, 746 P.2d 431 (Wyo. 1987).

"We 
review a summary judgment in the same light as the district court, using the 
same materials and following the same standards. We examine the record from the 
vantage point most favorable to the party opposing the motion, and we give that 
party the benefit of all favorable inferences which may fairly be drawn from the 
record. A material fact is one which, if proved, would have the effect of 
establishing or refuting an essential element of the cause of action or defense 
asserted by the parties."

Wagner 
v. First Wyoming Bank, N.A. Laramie, 784 P.2d 224, 226 (Wyo. 1989) (citations 
omitted).

Husman, 
Inc. v. Triton Coal Company, 809 P.2d 796, 798-99 (Wyo. 1991), appeal after 
remand, 846 P.2d 664 (Wyo. 1993). In contract cases, a summary judgment is 
appropriate when the language of the agreement is plain and unequivocal. Flying 
J, Inc. v. Booth, 773 P.2d 144, 148 (Wyo. 1989); Dudley v. East Ridge 
Development Company, 694 P.2d 113, 117 (Wyo. 1985).

[¶12]   Because the mortgagors' three 
issues are interrelated, we will discuss them together. The mortgagors insist 
that two material questions of fact existed which precluded the entry of a 
summary judgment. First, they contend that whether HUD had a contractual right 
of subrogation against them was a material question of fact. Secondly, they 
insist that the determination as to who was the insured party under the mortgage 
insurance policy was a material question of fact.

[¶13]   The mortgagors' argument may be 
summarized as follows: Mortgage insurance was purchased with funds supplied by 
the mortgagors; the purpose of the mortgage insurance was to protect the 
mortgagors against liability for a deficiency judgment in case they defaulted; 
the mortgagee received the mortgage insurance proceeds after the mortgagors 
defaulted; the insurance proceeds made the mortgagee whole, and the mortgagee 
had no right to pursue a deficiency judgment; because the mortgagee had no claim 
against the mortgagors, HUD had no right against them by virtue of subrogation; 
HUD had no independent contractual right to pursue a claim against the 
mortgagors; HUD had no rights against the mortgagors, and the mortgagee, 
therefore, could not assert a deficiency claim against the mortgagors under the 
doctrine of subrogation.

[¶14]   In order to discuss this case 
logically, we will determine the parties' relative rights and responsibilities 
as to each contract. Courts interpret contracts by ascertaining the parties' 
intent; the parties' intent to a clear and unambiguous contract is found in the 
words of the agreement. Jackson Hole Racquet Club Resort v. Teton Pines Limited 
Partnership, 839 P.2d 951, 958 (Wyo. 1992); Moncrief v. Harvey, 816 P.2d 97, 103 
(Wyo. 1991). See also Cliff & Co., Ltd. v. Anderson, 777 P.2d 595 (Wyo. 
1989) (applying the basic rules of contract construction to documents involved 
in a real estate transaction).

[¶15]   No material issues of fact were 
present in this case. The language of the various agreements involved in this 
transaction was clear and unambiguous. Because the relevant contractual and 
statutory language controlled the outcome in this case, application of the 
doctrine of subrogation was not necessary.

[¶16]   The note and mortgage required the 
mortgagors to repay the amount of the loan, together with interest. Both 
documents included acceleration clauses whereby the mortgagee could declare the 
entire amount as being due and payable in the event the mortgagors defaulted in 
making payments. The mortgage also stated that, if the property were sold 
through foreclosure and the proceeds were insufficient to discharge the debt, 
the mortgagors would be personally bound to pay the remaining balance and that 
the mortgagee would be entitled to have a deficiency 
judgment.

[¶17]   The mortgagors contend that no 
written insurance contract existed. We disagree. An agreement may consist of 
more than one document. Dawson v. Lohn, 705 P.2d 853, 856 (Wyo. 1985). The 
procurement of mortgage insurance was a condition precedent to the mortgagors 
obtaining the loan. The mortgagors and the mortgagee signed the application for 
a commitment for insurance which provided in part:

[U]nless 
[the mortgagors] are able to sell the property to a buyer who is acceptable to 
the VA or to HUD/FHA and who will assume the payment of [the mortgagors'] 
obligation to the [mortgagee], [the mortgagors] will not be relieved from 
liability to repay any claim which the VA or HUD/FHA may be required to pay [the 
mortgagee] on account of default in [the mortgagors'] loan payments. The amount 
of any such claim payment will be a debt owed by [the mortgagors] to the Federal 
Government. This debt will be the object of established collection 
procedures.

HUD 
issued the mortgage insurance certificate. Together, the documents involved in 
this transaction formed an agreement, and the mortgagors were, therefore, bound 
by the provisions of the application for a commitment for 
insurance.

[¶18]   The application for a commitment 
for insurance tracks the relevant federal statute. Pursuant to 12 U.S.C. § 
1710(g) and 1713(l) (1988), the secretary of HUD has the power to pursue to a 
final collection all claims against mortgagors which have been assigned to him 
by mortgagees. See also Little Earth of United Tribes, Inc. v. U.S. Department 
of Housing and Urban Development, 675 F. Supp. 497 (D.Minn. 1987), amended, 691 F. Supp. 1215 (1988), aff'd, 878 F.2d 236 (8th Cir. 1989), and cert. denied, 494 U.S. 1078, 110 S. Ct. 1805, 108 L. Ed. 2d 936 (1990) (holding that, after the 
mortgage insurance proceeds have been paid and the claims have been assigned by 
the mortgagee, HUD assumes all rights of the original 
lender).

[¶19]   Applying the relevant contractual 
and statutory language, we conclude that HUD and the mortgagee had the right to 
pursue a claim for deficiency against the mortgagors. The mortgagors were 
contractually bound to both the mortgagee and HUD for any deficiency resulting 
from a default in their loan payments. When HUD remitted the insurance proceeds, 
the mortgagee assigned its rights against the mortgagors to HUD. At that point, 
HUD had authority to pursue a claim against the mortgagors by virtue of its own 
contractual rights and the rights assigned to it by the mortgagee. HUD, in turn, 
properly assigned its rights against the mortgagors to the mortgagee for 
collection.

[¶20]   The mortgagors also contend that a 
material issue of fact existed concerning who the insured party was under the 
federal mortgage insurance policy because the mortgage insurance documents did 
not specify who was insured. In making this contention, the mortgagors 
misunderstand the nature of mortgage insurance. Congress set up a system under 
the National Housing Act, whereby private mortgagees are given the opportunity 
to insure certain loans through HUD. 12 U.S.C. § 1701 to 1750 (1988 & Supp. 
1993). See also Regulations Relating to Housing and Urban Development, 24 C.F.R. 
§ 200.5 (1992). Mortgage insurance protects a mortgagee when it loans money to 
what would normally be considered a higher risk mortgagor. See S.S. Silberblatt, 
Inc. v. East Harlem Pilot Block - Building 1 Housing Development Fund Company, 
Inc., 608 F.2d 28 (2d Cir. 1979). "[F]ederal mortgage insurance is not an 
alternate mechanism for the repayment of defaulted loans which extinguishes a 
mortgagor's obligation thereon or its liability for a deficiency judgment." 
Platte Valley Savings by Resolution Trust Corporation v. Crall, 821 P.2d 305, 
307 (Colo. Ct.App. 1991) (holding that, without the proper assignments being 
made between the mortgagee and HUD, the mortgagee could not pursue a deficiency 
judgment against the mortgagor because it was not the real party in interest). 
Accordingly, the mortgagee was the insured party under the federal mortgage 
insurance policy.

[¶21]   No material issues of fact existed 
in this case. Summary judgment was properly granted as a matter of law. The 
mortgagors are liable to the mortgagee for the deficiency.

[¶22]   Affirmed.