Justia Banking Opinion Summaries

The court previously affirmed the district court’s affirmance of the bankruptcy court’s order granting debtor’s motion to strip Bank of America’s junior mortgage lien. The Supreme Court vacated the opinion and remanded the case for consideration in light of Bank of America, N.A. v. Caulkett. In Caulkett, the Supreme Court held “a debtor in a Chapter 7 bankruptcy proceeding may not void a junior mortgage lien under 11 U.S.C. 506(d) when the debt owed on a senior mortgage lien exceeds the current value of the collateral.” Consequently, in light of Caulkett, the court's own holding in In re McNeal and Folendore v. United States Small Business Administration are overruled. Accordingly, the district court erred in affirming the bankruptcy court’s grant of debtor’s motion to strip off Bank of America’s junior lien. The court denied Bank of America’s motion for summary reversal, vacated the district court’s judgment affirming the bankruptcy court, and remanded for further proceedings. View "Bank of America v. Waits" on Justia Law

Kentucky’s statutes require that assignment of a mortgage must be recorded within 30 days. Plaintiffs, landowners with mortgages, argued that, for purposes of that requirement, a transfer of a promissory note is an assignment of a mortgage securing the note, and must be recorded. The issue arose because of the use of the Mortgage Electronic Registration System (MERS), a private company that operates a national electronic registry to track servicing rights and ownership of mortgage loans. When a home is purchased, the lender obtains promissory note and a mortgage naming MERS as the mortgagee (as nominee for the lender and its successors). The borrower assigns his interest in the property to MERS, and the mortgage is recorded in local records with MERS as the named mortgagee. When the note is sold in the secondary mortgage market, the MERS database tracks that transfer. MERS remains the mortgagee of record, avoiding recording and other transfer fees and continues to act as an agent for the new owner of the note. The district court agreed with plaintiffs. The Sixth Circuit reversed. The text, structure, and purposes of Kentucky’s recording statutes (KRS 382.365(5)) indicate that transfer of a promissory note is not, itself, an assignment of a mortgage securing the note. View "Higgins v. BAC Home Loans Servicing, LP" on Justia Law

Petitioner Jennifer Pike appealed a Superior Court order granting summary judgment to respondent Deutsche Bank National Trust Company (as Trustee), in her action to enjoin the foreclosure sale of real property located in New London. On appeal, petitioner argued that the trial court erred when it determined that she lacked standing to challenge the assignment of the mortgage to the Trust, and when it declined to enjoin the foreclosure, notwithstanding her assertion that she had a homestead right. Finding no reversible error, the Supreme Court affirmed. View "Pike v. Deutsche Bank National Trust Co." on Justia Law

Plaintiff, a homeowner, appealed the dismissal of his action against Freddie Mac, for breach of contract and breach of fiduciary duty where Freddie Mac purchased plaintiff's mortgage from Taylor Bean, the loan originator, on a secondary market. Taylor Bean failed to pay the insurance premium from an escrow account and caused plaintiff's insurance to be cancelled. The court concluded that plaintiff failed to allege facts that, if true, would establish that Freddie Mac had a contractual duty to service the loan where the Deed of Trust expressly disavows any assumption of servicing obligations by a subsequent purchaser of the loan, and Freddie Mac never expressly assumed any such obligations. The court concluded that Washington law did not prohibit this arrangement and that this arrangement is typical for such home loans. Finally, the court concluded that plaintiff's breach of fiduciary duty argument failed because Section 20 of the Deed of Trust where the duty to hold the money for the insurance premiums in escrow remained with the loan servicer, Taylor Bean. Accordingly, the court affirmed the judgment. View "Johnson v. FHLMC" on Justia Law

Appellants Branch Banking & Trust Company ("BB&T"), Rusty Winfree, and Todd Fullington appealed a circuit court judgment entered in favor of Rex Nichols ("Sonny") and Claudene Nichols on the Nicholses' claims against appellants and on BB&T's counterclaim against the Nicholses. In late 2005, Sonny began talking to Winfree about obtaining financing from Colonial Bank ("Colonial"), Winfree's employer, for the purchase of approximately 500 acres of real property in Stapleton, Alabama. The Nicholses intended to develop the Stapleton property into a subdivision. In February 2006, the Nicholses executed a loan agreement with Colonial, in which Colonial agreed to lend the Nicholses close to $2.8 million to purchase the property. Sonny testified that in late 2007, as the maturity date on the note approached, he began contacting Colonial regarding renewing the loan; he further testified that, around the same time, Winfree became slow to communicate with him. Sonny also testified that before the February 27, 2008, maturity date on the promissory note, he spoke to Fullington about renewing the loan, with Colonial carrying the interest going forward. A few weeks later, the Nicholses were notified that Colonial would not carry the interest on the loan or provide additional funds for development of the property. Colonial ultimately renewed the terms of the note until Colonial failed in August 2009. The FDIC assumed control of its assets and liabilities. The FDIC sold many of Colonial's assets and liabilities to BB&T, including the Nicholses' loan. Fullington was hired by BB&T; Winfree was not. In early November 2009, BB&T informed the Nicholses that it would not lend them additional funds to develop the property. The Nicholses stopped making interest payments on the loan in November 2009. On March 10, 2010, the Nicholses sued the appellants and fictitiously named defendants, alleging fraud, reformation, negligence, wantonness, and breach of fiduciary duty against all appellants. Against BB&T, the Nicholses also alleged a claim of unjust enrichment and sought damages on a theory of promissory estoppel. The appellants separately moved the circuit court to dismiss the complaint pursuant to Rule 12(b)(6), Ala. R. Civ. P. BB&T also filed a counterclaim, alleging that the Nicholses had defaulted on their obligations under a June 2009 promissory note and seeking damages related to that default. The circuit court denied the motions to dismiss the complaint but granted a motion to strike the request for a jury trial. Upon review, the Supreme Court held that the circuit court erred in entering a judgment in favor of the Nicholses on their claims against the appellants and on BB&T's counterclaim against them. The judgment was reversed and the case remanded with instructions to the circuit court to enter a judgment in favor of the appellants on the Nicholses' claims against them and in favor of BB&T on its counterclaim against the Nicholses and to determine the damages to be awarded on the counterclaim. View "Branch Banking & Trust Company v. Nichols" on Justia Law

Investors who suffered losses when an Arizona golf course and residential development failed, allegedly due to the fraud and mismanagement of the developer, McClung, were unable to recover from the insolvent McClung and sued the development’s principal lender, Hillcrest Bank and its officers and directors. The Kansas Banking Commissioner closed Hillcrest Bank and appointed the FDIC as receiver. The district court dismissed 14 of the 16 counts, dismissed the FDIC because Hillcrest Bank’s bankruptcy rendered claims against the Bank prudentially moot, and granted summary judgment to the remaining defendants on the remaining count. The Eighth Circuit affirmed, noting that the Bank had insufficient assets for distribution to unsecured creditors and that, as to claims against the officers and directors, the investors made only conclusory assertions such as, “each defendant knew about McClung’s bad financial condition, his scam attempts to get more financing, knew that the development had not been completed, and knew that the Bank had engaged in improper banking practices . . . to conceal its own bad financial condition and avoid being shut down by the FDIC.” View "Quintero Cmty. Ass'n Inc. v. Fed Deposit Ins. Corp." on Justia Law

Comar filed suit against vessel-owning LLCs after the LLCs decided to terminate an agreement with Comar in which Comar would manage the vessels on behalf of the LLCs. JPMorgan and Allegiance provided the financing for the vessel purchases and intervened to defend their preferred ship mortgages. The district court granted summary judgment in favor of JPMorgan and Allegiance. The court concluded that the district court correctly concluded that breach of the management agreements did not give rise to maritime liens; the court affirmed the district court’s grant of summary judgment in favor of Allegiance and JPMorgan; and the court did not reach whether the district court’s alternate holding that Comar was a joint venturer and therefore foreclosed from asserting a maritime lien was erroneous. The court also concluded that the district court did not commit reversible error in concluding that the termination-fee provision is unenforceable; the district court’s award to Comar is plausible in light of the record and not clearly erroneous; the district court did not clearly err in finding that Comar acted in bad faith when arresting the vessels and did not rely on legal advice in good faith; the district court did not clearly err in denying lost-profit and lost-equity damages; and the court concluded that the district court did not commit any other errors. Accordingly, the court affirmed the judgment. View "Comar Marine, Corp. v. Raider Marine Logistics" on Justia Law

In 2003, the Meyers signed a revolving credit note and agreement and later signed term notes and loan agreements with U.S. Bank, to finance their swine production business. In 2006, the Meyers transferred all their business assets to a revocable trust, naming themselves as grantors and trustees. The revolving credit loan went into default in 2008. U.S. Bank agreed not to exercise its default rights. The lending relationship continued until the Meyers withheld proceeds from the sale of collateral (hogs). U.S. Bank filed suit; the Meyers sought Chapter 11 bankruptcy protection in 2010. In 2011 the Meyers, individually, sued U.S. Bank, alleging breach of contract, fraud, violations of the Nebraska Uniform Deceptive Trade Practices Act, and unjust enrichment. The Eighth Circuit affirmed dismissal. The Trust then commenced another suit, alleging that U.S. Bank tortiously interfered with the Trust’s contractual relations with a feed supplier. The district court granted summary judgment and imposed a $5,000 sanction against the Trust and its attorneys. The Trust appealed. U.S. Bank sought additional sanctions under Federal Rule of Appellate Procedure 38, arguing that appeal was frivolous. The Eighth Circuit affirmed the rulings, held that appeal was not frivolous but was frivolously argued, and granted double costs as a Rule 38 sanction. View "David M. Meyer & Nancy R. Meyer Trust v. U.S. Bank Nat'l Ass'n" on Justia Law

In "Vinings Bank v. Brasfield & Gorrie, LLC," (759 SE2d 886 (2014)), the Court of Appeals affirmed, among other rulings, the trial court’s determination that Vinings Bank was not entitled to summary judgment with regard to a counterclaim for conversion brought against the Bank by Brasfield & Gorrie, LLC ("B&G"). This case stemmed from a defaulted $1.4 million business loan. The bank made the loan to Wagner Enterprises, Inc., which used as collateral, a security interest in all of its accounts and accounts receivable, including Wagner's contract to provide drywall services for general contractor B&G. Wagner defaulted on the loan, and the Bank filed suit against B&G seeking to collect on Wagner's accounts receivable. B&G counterclaimed for conversion, and the parties filed cross-motions for summary judgment. The bank appealed the denial of its motion. The Supreme Court affirmed in part, reversed in part, and remanded. In affirming the trial court's judgment, the Court of Appeals did not consider whether B&G had any right to assert a counterclaim against the bank for conversion of funds due to Wagner's subcontractors. The Supreme Court found that B&G had no direct relationship with the Bank, B&G was not, itself, a subcontractor of Wagner entitled to any of Wagner's funds, B&G did not have direct contractual relationships with any of Wagner's subcontractors, and B&G had no fiduciary relationship with any of Wagner's subcontractors. Furthermore, there was no evidence that Wagner or Wagner's affected subcontractors assigned B&G any of their rights. "Therefore, even if we assume without deciding that funds in [Wagner's] account were held in a constructive trust for the benefit of [Wagner's] subcontractors, B&G is not the party to assert those rights and had no standing to do so." View "Vinings Bank v. Brasfield & Gorrie, LLC" on Justia Law

Under Nev. Rev. Stat. 104.4406, a customer generally must exercise reasonable promptness in examining a bank statement and within thirty days notify the bank of any unauthorized transactions. Plaintiff, a law firm, sued Bank of America after discovering that the firm’s employee had used unauthorized signatures to withdraw funds from the firm’s operating account with the bank. The district court granted summary judgment in favor of Bank of America, concluding that all claims were time-barred under section 104.4406 because there was no dispute that the bank statements received by the firm were sufficient to notify it of the unauthorized activity on the firm’s account. The Supreme Court reversed, holding (1) genuine issues of material fact remained as to the delivery method of the bank statements, the content of online and received-in-branch statements, and Bank of America’s exercise of due care in paying certain unauthorized transactions; and (2) unauthorized account transactions that occur within the one-year period before the customer gives notice to the bank are not time-barred under section 104.4406(6)’s one-year period of repose because the statute does not differentiate between a single forgery and multiple forgeries by the same wrongdoer, and therefore, the one-year period of repose begins to run with each successive forgery. View "C. Nicholas Pereos, Ltd. v. Bank of Am." on Justia Law