Justia Banking Opinion Summaries

Defendant was a CEO and director of now bankrupt Agra Services of Canada, Inc (Agra Canada) and an officer and director of Agra USA. Agra Canada entered into a purchase agreement with Cooperative Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank) under which Rabobank purchased and financed certain receivables of Agra Canada. Thereafter, Defendant and Eduardo Guzman Solis, Agra Canada’s president and a manager of both Agra businesses, signed personal guarantees in favor of Rabobank. After Guzman Solis died, an investigation revealed fraudulent receivables based on nonexistent transactions submitted by Guzman Solis. Rabobank sued Agra Canada, Agra USA, and the estate of Guzman Solis seeking to recover the millions of dollars owed to Rabobank under the purchase agreement and guarantees. Defendant appeared represented by counsel but failed to retain counsel for Agra USA. The district court entered default judgment against Agra USA. Rabobank then filed this action in state court alleging that Defendant was liable under the guaranty. The Appellate Division granted Rabobank summary judgment. Defendant appealed, arguing that the default judgment against him was obtained by Rabobank’s collusion. The Court of Appeals affirmed, holding (1) Defendant’s collusion claim constituted a defense barred by the language in the guaranty; and (2) Defendant’s claim of collusion was contradicted by the record. View "Cooperatieve Centrale Raiffeisen-Boerenleenbank, B.A. v. Navarro" on Justia Law

Sergio Acosta petitioned for a writ of mandamus to direct the circuit court to vacate an order granting a motion filed by Trinity Bank to strike Acosta's jury demand with respect to all counts in Acosta's counterclaim and third-party complaint in the bank's action against him. The bank filed filed suit seeking a judgment against Acosta for financial losses it incurred after Acosta defaulted on certain "Multipurpose Note and Security Agreement[s]" he had executed with the bank. The bank alleged that Acosta had executed two secured notes and one unsecured note, which, it said, Acosta had failed and/or refused to pay; that the bank had foreclosed on the properties pledged as collateral on the secured notes; and that proper credit had been applied to the notes. The bank sought a judgment for the balance due on the notes, plus interest, fees, costs, and attorney fees. Acosta filed a counterclaim against the bank, as well as a third-party complaint against two of its officers, alleging that he had entered into a business relationship with R&B Properties under the name of SilverPalm Properties, LLC; that loans from the bank were the principal source of funding for SilverPalm; that the financing plan was for SilverPalm to procure from the bank the funds to construct the properties, for SilverPalm to pay the interest on the notes until the properties were rented, and for SilverPalm to pay off the notes once the properties generated sufficient rental income to do so. Acosta and R&B Properties dissolved SilverPalm because of a downturn in the economy; but the bank induced that Acosta was personally liable for the notes previously secured only by SilverPalm The bank at some point advised Acosta that additional security was required to continue financing the notes, that Acosta declined to pledge additional security. The bank then called the notes due and foreclosed on the properties securing the notes. Acosta requested an accounting for the amounts claimed by the bank on the notes and the mortgages securing the notes, and he sought damages based on allegations of wantonness, breach of good faith and fair dealing, negligence, fraud, breach of fiduciary duty, unjust enrichment, and promissory estoppel. The counterclaim and third-party complaint included a demand for a jury trial. In its motion to strike Acosta's jury demand, the Bank relied on a jury-waiver provision in four Assignments of Rents and Leases that Acosta had executed in consideration of the notes. The trial court initially denied the bank's motion to strike, and then granted it after reconsideration. The Supreme Court concluded that Acosta demonstrated a clear legal right to a jury trial on the claims asserted in his counterclaim and third-party complaint. As such, the Court granted the petition and directed the trial court to vacate its order striking Acosta's jury demand. View "Ex parte Sergio Acosta." on Justia Law

Plaintiff Bank was the owner and holder of note secured by a mortgage on commercial property in Brooklyn. When Defendant, the mortgagor and obligor on the note, defaulted, Bank commenced a mortgage foreclosure action against Defendant. The property was sold at auction to Bank. Bank subsequently retained an appraiser to determine the fair market value of the property. Bank then moved for a deficiency judgment against Defendant in an amount representing the outstanding amount Bank was owed less the alleged fair market value. Supreme Court denied Bank’s motion for a deficiency judgment, holding that Bank failed to meet its burden of establishing the fair market value of the premises because the affidavit from the appraiser was conclusory and lacked specific information about how he reached his fair market value determination. The Appellate Division affirmed. The Court of Appeals modified the order of the Appellate Division, holding that Supreme Court correctly found that the appraiser’s affidavit was insufficient to meet Bank’s burden, but that the court should have permitted Bank to submit additional proof establishing fair market value rather than denying the deficiency judgment motion outright. View "Flushing Savings Bank, FSB v. Bitar" on Justia Law

Over four years, Dade, a former licensed real estate agent, with co-defendants, facilitated loans to purchase residential real estate by knowingly providing lenders with false statements and documents. Dade referred potential buyers to loan officers and provided false payroll stubs and W-2 forms from fake companies. Dade (with help) refinanced a mortgage on his own Chicago property, stating that he was paying monthly rent of $1,450 (he did not live in the house), and provided a rental verification from “Jireh,” which did not exist. Dade received a $156,000 loan. He was charged with bank fraud, 18 U.S.C. 1344, wire fraud, section 1343, and mail fraud, section 1341. He pleaded guilty to bank fraud, based on the fraudulent refinancing; the remaining charges were dismissed. The government sought a 2-level upward adjustment for his role as an organizer, leader, manager, or supervisor in the offense, U.S.S.G. 3B1.1(c). When preparing the presentence report, however, the probation officer concluded that a 4-level upward adjustment would be appropriate, stating that the scheme had involved five or more participants and Dade had organized the scheme. The government adopted that position, recounting the facts underlying the charges dismissed as part of Dade’s plea agreement. The Seventh Circuit affirmed his 20-month sentence, upholding the upward adjustment. View "United States v. Dade" on Justia Law

Brown defrauded Chicago-area mortgage lenders in 2004-2008, arranging with home builders and other sellers of new houses to receive fees for locating buyers to purchase their properties at inflated prices. Using his businesses, including Chicago Global, Brown located nominee buyers. To obtain financing, the nominees were referred to loan officers, including Spencer, who fraudulently qualified them for loans through false statements and documentation. Once a purchase was finalized, Brown and his coconspirators kept the surplus amount above what the seller was seeking. As co-owner of Chicago Global, Jackson recruited nominee buyers and provided, or caused to be provided, funds for the purchases and falsely represented the nominees as the source of those funds. Jackson’s participation in the scheme resulted in $8,515,570 losses to lenders. Spencer’s participation as a loan officer, assisting nominee buyers in 12 different fraudulent real estate transactions, resulted in $3,091,050 losses to lenders. Jackson was charged with wire fraud, 18 U.S.C. 1343, and mail fraud, 18 U.S.C. 1341. The Seventh Circuit affirmed Spencer’s conviction for bank fraud, 18 U.S.C. 1344, and mail fraud and her 36-month sentence and affirmed Jackson’s conviction, but vacated her 112-month sentence, finding that an obstruction of justice enhancement was improperly applied. View "United States v. Spencer" on Justia Law

Avon Bank customer Herdering was contacted by "Gibson," who claimed to be the son of an African associate with whom Herdering had done business; that his father had died, leaving a $9 million estate; that the family wanted to transfer the funds to the U.S.; that the money was tied up in the Netherlands; and that the transfer required up-front payments of taxes and fees. Herdering sent Gibson money and approached Avon Assistant Vice President Carlson, who issued Herdering a loan from Avon, but contributed $60,000 of his own money. Avon’s President expressed concern that the estate might be a scam. Herdering later recruited others, telling them that Avon was making the loans and having both men write checks to Avon. Froseth contributed $405,000; Imdieke contributed $80,000. Carlson wired the money in violation of Avon policy that prohibited wiring money to non-customers. When the scheme fell apart, Avon terminated Carlson and sent the investors letters stating that it viewed their investments as related to Carlson’s personal dealing and not involving the bank. They sued Avon for fraudulent misrepresentation. BancInsure agreed to provide coverage under the Directors’ and Officers’ Liability Policy, rather than simply defend Avon, reserving its rights. A jury found that, in the scope of his employment, Carlson had breached his duty to disclose material information. BancInsure asserted that neither the Policy nor a separate Fidelity Bond covered the loss. The Eighth Circuit affirmed the district court holding that the Bond, but not the Policy, covered the loss, and an award of prejudgment interest. View "Avon State Bank v. BancInsure, Inc." on Justia Law

Rogers’s 2005 mortgage on her Minnesota home was executed in favor of Countrywide and it listed Mortgage Electronic Registration Systems (MERS) as the mortgagee. In 2008, MERS transferred its interest in the mortgage to a securitized mortgage trust by assigning the mortgage to Bank of New York as Trustee for the Certificate holders. Bank of New York was party to a Pooling and Servicing Agreement between various entities. According to Rogers, that Agreement governed the mortgage trust and required “that all mortgages to be included in the corpus of the Mortgage Trust were to be transferred into the Mortgage Trust between June 1, 2005 and August 8, 2005.” In 2012, Bank of New York commenced foreclosure proceedings on Rogers’s house, and purchased the house at a sheriff’s sale. Rogers sought a declaratory judgment that the foreclosure was invalid, claiming that the 2008 assignment of her mortgage to the trust violated the Agreement. The district court dismissed, holding Rogers did not have standing to challenge the foreclosure on the ground that the defendants violated an agreement to which Rogers was not party. The Eighth Circuit affirmed, finding that Rogers lacked standing. View "Rogers v. Bank of America, N.A." on Justia Law

Plaintiff filed a putative class action alleging that defendants violated the Fair Debt Practices Act (FDCPA), 15 U.S.C. 1692e, 1692f, by charging and attempting to collect interest at a rate higher than permitted under the law of her home state and that defendants violated New York's usury law, N.Y. Gen. Bus. Law 349; N.Y. Gen. Oblig. Law 5-501; N.Y. Penal Law 190.40. The district court entered judgment in favor of defendants. The court reversed the district court's holding that the National Bank Act (NBA), 12 U.S.C. 85, preempts plaintiff's claims because neither defendant is a national bank nor a subsidiary or agent of a national bank, or is otherwise acting on behalf of a national bank, and because application of the state law on which plaintiff's claim relies would not significantly interfere with any national bank’s ability to exercise its powers under the NBA. Accordingly, the court vacated the judgment and remanded to the court to address in the first instance whether the Delaware choice-of-law precludes plaintiff's claims. Finally, the court also vacated the district court's denial of class certification. View "Madden v. Midland Funding, LLC" on Justia Law

Lake Street was obligated under a $1.5 million loan made by American Chartered Bank, secured by a mortgage. Unable to repay, Lake Street negotiated several forbearance-to-foreclose agreements. One required Lake Street to give the deed to the mortgaged property (its only significant asset) to an escrow agent who, in the event of default, would give the deed to Scherston, the bank’s affiliate. The bank’s charter forbids it to own real estate. Lake Street defaulted, Scherston recorded the deed. Lake Street, a debtor in possession in a Chapter 11 bankruptcy, brought an adversary proceeding against the bank and Scherston. The district court granted the bank summary judgment. The Seventh Circuit affirmed, noting that Lake Street focused on the deed rather than on the mortgage, claiming that the deeded property is worth more than the mortgage. It was Lake Street’s decision to give the deed to the bank; it did so to induce the bank’s forbearance, by giving additional security. There is no contention that the bank employed unlawful or unethical practices to the transfer, or that any unsecured creditors were harmed by the transaction—there is only one unsecured creditor and his claim is worth less than a thousand dollars. View "1756 W. Lake St. LLC v. Am. Chartered Bank" on Justia Law

Borrower, a hotel, obtained a loan from Bank in exchange for a promissory note and mortgage on the hotel. To further secure the obligation, Bank obtained separate commercial guaranties from individual Guarantors. Borrower subsequently defaulted on the note. Bank filed an amended complaint for foreclosure and receivership against Borrower. Borrower did not answer the complaint, and the circuit court entered a default judgment against Borrower and ordered that the mortgaged premises be sold at public auction. After obtaining the property, Bank filed a complaint against the Guarantors alleging that each Guarantor owed Bank over $3 million and other expenses associated with Bank having to run the hotel. The trial court granted the Guarantors summary judgment, concluding that Bank’s choice to bid the entire amount of Borrower’s obligation at the auction left no deficiency on Borrower’s obligation to Bank, and therefore, there was no indebtedness for the Guarantors to guarantee. The Supreme Court affirmed, holding that the guaranties were unenforceable because the Borrower’s obligation had been extinguished. View "First Dakota Nat’l Bank v. Graham" on Justia Law