Justia Banking Opinion Summaries

Appellants, owners and/or managers of Big Drive Cattle, LLC, appealed the district court's dismissal of their counterclaims against Farm Credit. Big Drive executed various promissory notes and loan agreements with Farm Credit. Farm Credit subsequently filed suit against appellants to enforce appellants' guarantees. Appellants filed counterclaims against Farm Credit for negligence, negligent misrepresentations, and breach of the duty of good faith and fair dealing. The court concluded that appellants could not rely on the loan agreements, the notes, the guarantees, or any other contracts for the source of the legal duty of accurate reporting they alleged Farm Credit owed to them; appellants' allegations that Farm Credit ignored an "express directive" to remove a particular employee from Big Drive's line of credit was not relevant to their amended counterclaims; and appellants failed to state a claim for negligence where appellants have not plead any plausible duty requiring Farm Credit to provide appellants with accurate reports on the loan collateral, negligent misrepresentation where appellants did not plead the element of intent, and breach of the duty of good faith and fair dealing where appellants failed to plead sufficient specific facts to establish damages arising from Farm Credit's breach. Accordingly, the court affirmed the judgment of the district court. View "Page, et al. v. Farm Credit Services, etc., et al." on Justia Law

Watson’s companies, Cyberco and Teleservices, defrauded lending institutions and other businesses that provided funding for Cyberco to purchase computer equipment from Teleservices. Cyberco never actually received any equipment, but the lending institutions forwarded funds to Teleservices based on phony invoices Watson arranged. Watson packed Cyberco’s computer room with fake servers and swapped serial numbers among those servers to deceive the victims when they attempted to audit their collateral. Teleservices “funneled” the funds back to Cyberco, which used them to make payments to allow the fraud to continue and to pay Watson and others substantial salaries. The payments were made through Huntington Bank, which also facilitated payments through its cash management services, but Cyberco owed Huntington more than $16 million. Teleservices, which had no banking relationship with Huntington, made payments so that Huntington could reduce its exposure to about $600,000 in a few months, just weeks before the FBI raided Cyberco. After that raid, creditors commenced an involuntary Chapter 7 proceeding against Cyberco. A state-appointed receiver filed a voluntary Chapter 7 bankruptcy petition for Teleservices. The bankruptcy court dismissed Huntington’s motions for substantive consolidation of the Chapter 7 petitions. The Bankruptcy Appellate Panel determined that the denials were not final appealable orders. The Sixth Circuit affirmed. View "In re: Cyberco Holdings, Inc." on Justia Law

In case no. 1111525, M & F Bank ("M & F") appealed a summary judgment entered in favor of First American Title Insurance Company ("FATIC") on negligence, breach-of-contract, and bad-faith-failure-to-pay claims M&F asserted against FATIC related to a title-insurance policy ("the title policy") FATIC issued M & F in connection with a mortgage loan made by M & F to a developer of property in Auburn. In case no. 1111568, FATIC appealed the grant of summary judgment entered in favor of M & F on FATIC's counterclaims asserting abuse of process, conspiracy, breach of contract, and negligence. Upon review of both cases, the Supreme Court affirmed both judgments. View "M & F Bank v. First American Title Insurance Company " on Justia Law

At the heart of this appeal was a mechanic's lien filed against the Black Rock North Development in Coeur d?Alene, Idaho, and an uncompleted golf course community development. American Bank (the Bank) was the lender to BRN Development, Inc. (BRN). BRN hired Wadsworth Golf Construction Company of the Southwest (Wadsworth) to construct a golf course. BRN failed to pay Wadsworth for a portion of the work it performed, and Wadsworth filed a mechanic's lien against the property. BRN defaulted on the loan, and the Bank initiated foreclosure proceedings. Wadsworth's claim of lien was subordinate to the Bank's mortgage interest in the property. In order to proceed with a foreclosure sale, the Bank posted a lien release bond in order to secure the district court's order releasing Wadsworth's lien. The Bank was the successful bidder at the foreclosure sale. The district court ruled that priority of the parties? claims against the property was irrelevant once the property was replaced by the lien release bond as security for Wadsworth's claim and the Bank (by way of the bond) was responsible for payment of Wadsworth's lien claim. The Bank appeals that decision, arguing that Wadsworth should have been prevented from recovering against the lien release bond because its interest would have been extinguished if it had attempted to foreclose its mechanic's lien and the bond merely served as substitute security in place of the property. Wadsworth cross-appealed, arguing the district court erred in holding that Wadsworth waived its right to file a lien for the unpaid retainage on the contract. Upon review, the Supreme Court reversed the district court allowing Wadsworth to recover against the lien release bond and vacated the district court's judgment in favor of Wadsworth. View "Americn Bank v. Wadsworth Golf" on Justia Law

In 2004, Plaintiffs refinanced their home by means of a loan from Downey Savings and Loan Association (Downey), a federal insured financial institution. In 2008, Plaintiffs' monthly loan payment doubled. Later that year, Downey was closed and the FDIC was appointed as its receiver. U.S. Bank subsequently assumed all of Downey's loans and mortgages. After Plaintiffs defaulted on their mortgage loan, U.S. Bank conducted a foreclosure sale and recorded a foreclosure deed. Plaintiffs, in turn, sued U.S. Bank, claiming that the loan made by Downey violated various state consumer protection laws and that the foreclosure was unlawful. U.S. Bank removed the case to federal district court, which granted summary judgment to U.S. Bank. The First Circuit Court of Appeals affirmed, holding (1) the Financial Institutions Reform, Recovery, and Enforcement Act's exhaustion requirement applied to Plaintiffs' consumer protection claims, and therefore, Plaintiffs' failure to file those claims with the FDIC divested the district court of subject-matter jurisdiction; and (2) the transfer of a mortgage, authorized by federal law, obviates the need for a specific written assignment of the mortgage that state law would otherwise require, and thus, the foreclosure sale in this case was lawful. View "Demelo v. U.S. Bank Nat'l Ass'n" on Justia Law

American loaned $429,991 to Saberline to pay an insurance premium; Saberline agreed that, if it defaulted on the loan, American could cancel the policy and obtain return of any unearned premiums. USIG brokered the deal. American would deliver funds to USIG’s account at Cornerstone; USIG would forward the money to the insurer. Instead of placing the money in a trust account for Saberline, USIG told American to deposit the funds in USIG’s general operating account at Cornerstone. USIG was indebted to Cornerstone and had authorized it to sweep the operating account and apply anything over $50,000 to the debt. As a result, when American deposited Saberline’s premiums, Cornerstone reduced USIG’s debt. Saberline defaulted. American canceled the policy and attempted to recover the premium. USIG repaid American with funds drawn from a different bank, but then filed for bankruptcy, turning that transfer into a preference payment. American settled with the bankruptcy trustee, reserving its right to pursue a conversion claim against Cornerstone. A magistrate judge issued a declaratory judgment that American had a superior security interest in the disputed funds and that Cornerstone was liable for conversion. The Sixth Circuit affirmed. The Premium Finance Company Act, Tenn. Code 56-37-101, gave American a senior perfected security interest in the contested funds. View "American Bank, FSB v. Cornerstone Cmty. Bank" on Justia Law

Plaintiffs each filed suit against Darby Bank and various real estate developers and contractors (collectively, the Drayprop Defendants) in state court alleging negligent misrepresentation, fraud, beach of contract, and breach of warranty. Subsequently, the FDIC was appointed receiver of Darby Bank. In consolidated appeals, plaintiffs challenged the denial of their motions for remand to state court after the FDIC removed to federal court, the district court's grant of summary judgment to the FDIC on federal claims, and the district court's refusal to exercise supplemental jurisdiction over remaining state law claims against other defendants. The court concluded that the district court properly granted summary judgment to the FDIC on plaintiffs' claims against Darby Bank. The court concluded, however, that the district court improperly dismissed the remaining claims against the non-FDIC defendants because 12 U.S.C. 1819(b)(2)(A) operated to create original jurisdiction over those claims. Therefore, the court affirmed in part, reversed in part, and remanded for further proceedings. View "Lindley v. FDIC, et al." on Justia Law

Dorothy Urban's estate (Estate) filed suit against Robert Street, asking the circuit court to declare null and void a deed executed by Urban to Street for a residential property on the grounds that the execution of the deed was procured through fraud. Street subsequently executed a deed of trust for a loan that was secured by the property. The majority of the loan was used to pay off a mortgage on the property placed by Urban. Later, the circuit court directed that the property be conveyed in Street's name to the Estate. The court created a constructive trust on the property without expressly declaring the Urban-to-Street deed void ab initio. Street subsequently defaulted on the deed of trust and Petitioners filed a foreclosure action on the property. The Estate filed a motion to dismiss the foreclosure proceedings, which the circuit court denied. The court of special appeals reversed. The Court of Appeals reversed, holding that although Petitioners were not bona fide purchasers of the property, under the doctrine of equitable subrogation, Petitioners were entitled to priority for the amount loaned to Street used to pay off the balance owed on the preexisting Urban mortgage. View "Fishman v. Murphy" on Justia Law

This case involved the allocation of tax refunds pursuant to a Tax Sharing Agreement (TSA) between two members of a Consolidated Group, the parent corporation (the Holding Company), and one of its subsidiaries (the Bank), the principal operating entity for the Consolidated Group. At issue on appeal was whether the Bankruptcy Court erred in declaring the tax refunds an asset of the bankruptcy estate. The court concluded that the relationship between the Holding Company and the Bank is not a debtor-creditor relationship; when the Holding Company received the tax refunds it held the funds intact - as if in escrow - for the benefit of the Bank and thus the remaining members of the Consolidated Group; the parties intended that the Holding Company would promptly forward the refunds to the Bank so that the Bank could, in turn, forward them on to the Group's members; and in the Bank's hands, the tax refunds occupied the same status as they did in the Holding Company's hands - they were tax refunds for distribution in accordance with the TSA. Accordingly, the court reversed the Bankruptcy Court's judgment and directed that court to vacate it decision declaring the tax refunds the property of the bankruptcy estate and to instruct the Holding Company to forward the funds held in escrow to the FDIC, as receiver, for distribution to the members of the Group in accordance with the TSA. View "Zucker, et al. v. FDIC" on Justia Law

Plaintiffs filed a class-action lawsuit in state court, alleging that the defendants had conducted non-judicial foreclosure sales that did not comply with Utah law. After removal, the district court dismissed the complaint for failure to state a claim, concluding that whether federal law “incorporates Utah or Texas law, Recon[Trust] had not operated beyond the law by acting as a foreclosure trustee in Utah.” On the limited record presented on appeal, the Tenth Circuit concluded that the district court erred in determining it had jurisdiction to hear this case. View "Dutcher, et al v. Matheson, et al" on Justia Law