Justia Banking Opinion Summaries

After Deutsche Bank National Trust Company (Deutsche Bank) brought a foreclosure action against the home owned by Appellants Mark and Jamileh Miller and obtained an Order Authorizing Sale (OAS) from a Colorado court, the Millers filed a Chapter 13 bankruptcy petition. Upon the filing of their petition, an automatic stay entered, halting the foreclosure proceedings. Deutsche Bank obtained an order from the bankruptcy court relieving it from the stay to permit the foreclosure to continue. The Tenth Circuit Bankruptcy Appellate Panel (BAP) affirmed the bankruptcy court’s order granting Deutsche Bank relief from the automatic stay. The Millers appealed the BAP’s order affirming relief from stay. The issue before the Tenth Circuit was whether Deutsche Bank established that it was a "party in interest" entitled to seek and obtain relief from the stay. Because the Court concluded that Deutsche Bank did not meet its burden of proof on this issue, the Court reversed the BAP’s order and remanded for further proceedings.

IFS and 17 affiliated organizations (collectively, Interamericas) were debtors in a series of Chapter 7 cases. This appeal arose from eight collective adversary proceedings, which a trustee of IFS brought against appellants for avoidance of fraudulent transfers under Chapter 5 of the Bankruptcy Code and Chapter 24 of the Texas Business and Commerce Code. Appellants appealed the district court's affirmance of the bankruptcy court judgment of over $3 million in favor of the trustee. The court held that control could be sufficient to show ownership of what was ultimately a fact-based inquiry that would vary according to the peculiar circumstances of each case. The court also held that the lower courts' findings of ownership were not clearly erroneous and, moreover, comported with precedent and the court's holding today where IFS exercised control over the accounts at issue such that it had de facto ownership over the accounts, as well as the funds contained. The court further held that the record supported the lower courts' findings of fraudulent transfer. Specifically, IFS faced pending lawsuits and mounting debts just as it liquidated nearly all Interamericas' assets and evidence that IFS operated as a fraudulent enterprise at the time of transfer supported this finding of fraudulent intent. Accordingly, the judgment was affirmed.

Vegas Diamond and Johnson Investments appealed from the district court's order granting the Ex Parte Motion to Dissolve Temporary Restraining Order filed by the FDIC as receiver for La Jolla Bank. The district court determined that 12 U.S.C. 1821(j), the anti-injunction provision of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 precluded a court from enjoining the FDIC from conducting a trustee's sale of the real properties. The court held that the appeal was moot because the real properties were sold during the pendency of the appeal.

The debtors bought their house in 1994 and, after a Chapter 7 discharge in 2004, refinanced. The loan closed in California, although the house was in Michigan, and the debtors signed a note, but did not sign a mortgage. The loan was funded and assigned to appellant. A few months later, they filed a Chapter 13 petition and the lender produced a recorded mortgage, ostensibly signed by the debtors in Michigan. The Bankruptcy Court found that the signatures were forged. On remand from the district court, it imposed an equitable mortgage on the house. The district court reversed, finding the mortgage void ab initio. The Sixth Circuit affirmed. The district court properly considered the issue, held that the mortgage was void, and declined to impose an equitable mortgage because the assignee is subject to the defense of unclean hands, as was the original lender.

Defendant appealed the order of the bankruptcy court granting a motion for summary judgment filed by the trustee of debtor's bankruptcy estate. The trustee sought, and the bankruptcy court entered, an order determining that defendant did not have a security interest in certain of debtor's personal property. The court held that the record supported the bankruptcy court's determination that Wells Fargo had the authority to terminate defendant's successor in interest's (NSB) financing statements. The court also affirmed on the basis that termination of the financing statements was unnecessary because NSB's security interest in the property was extinguished when Loan No. 7 was paid in full in September 2007.

Plaintiff sued individual defendants and a bank alleging violations of Wisconsin Statute section 134.01, which prohibits conspiracies to willfully or maliciously injure the reputation, trade, business or profession of another. Defendants had caused appointment of a receiver for plaintiff's business and had sued, claiming that plaintiff "looted" the business. A jury verdict against plaintiff was reversed. The receivership is still on appeal. The district court dismissed plaintiff's subsequent suit for failure to state a claim. The Seventh Circuit affirmed. While plaintiff did plead malice adequately to support a claim, the claim was barred by issue preclusion. Plaintiff was attempting to relitigate whether the imposition and ends of the receivership were proper.

Debtors borrowed $157,291.77, secured by their home and took a second loan for $15,870, using their truck as security. They filed Chapter 7 bankruptcy protection and signed a reaffirmation agreement committing to pay those two debts. They stopped making payments; the truck had been stolen. The bank filed an unsecured claim. The trustee sought to avoid the mortgage as not properly perfected; the matter was resolved by agreement. The bank bought the property at auction, re-sold it at a profit of $33,400 and filed an unsecured claim for the full balance of the mortgage. The bankruptcy court allowed the claim; the bank received a total of about $37,000 in payments as an unsecured creditor on the two loans. The bank then sued the debtors in Kentucky state court, seeking about $89,000 on the real property loan and about $11,500 on the truck loan. The bankruptcy court reopened the case and voided the reaffirmation agreement on the ground of mutual mistake because the parties signed the agreement based on the false assumption that the bank held secured interests in the real property and the truck, which would have allowed debtors (rather than the bankruptcy estate) to retain ownership. The district court and Sixth Circuit affirmed.

In 1999 Debtor borrowed $75,558.93 secured by a recorded mortgage lien, encumbering real property and all improvements and fixtures. The property contains a manufactured home, with a plate indicating compliance with federal manufactured home standards. The lender's notes indicated that in 1997, the mobile home was gutted and rebuilt as a house. Debtor did not acquire a separate title to the manufactured home; it is unclear whether such a certificate ever issued. In 2009, Debtor filed a petition for chapter 13 relief. He sought to avoid the lien pursuant to 11 U.S.C. 544 because the Bank failed to perfect its lien on the manufactured home pursuant to Kentucky law. The bankruptcy court granted summary judgment to Debtor. The Sixth Circuit affirmed, first holding that Debtor had derivative standing to seek to avoid the lien. Regardless of the issuance of a certificate of title, Debtor has an interest in the home that is part of the bankruptcy estate. Under Kentucky law, a mobile home is personal property; perfection of a lien requires notation on the certificate of title. The mobile home had not been converted to real property and the lender did not perfect a lien on personal property.

In 2008 debtor purchased a 2003 auto, financed the purchase, and granted the dealership a security interest that was transferred to a finance company and noted on the title. The security interest was later transferred to WFB, which did not record the assignment or note it on the title. Debtor defaulted in 2010 and WFB repossessed the vehicle on January 4, 2011. Debtor filed her chapter 7 petition on January 28, 2011. WFB filed a motion for relief from stay, claiming that debtor did not have equity in the vehicle and it was entitled to relief pursuant to 11 U.S.C. 361, 362, 363 and 554. The court concluded that WFB did not have a perfected security interest. The Sixth Circuit reversed and remanded. Ohio law does require that assignment of a security interest in a motor vehicle be noted on the certificate of title for that interest to remain properly perfected. WFB has a properly perfected security interest in the vehicle and is the party entitled to enforce the security interest.

When Rita Fix's son and daughter-in-law, Jeff and Marie, secured a loan from the First State Bank of Roscoe by obtaining a warranty deed for the property, the Bank assured Fix she could retain possession of the house. After Jeff and Marie conveyed the house and property to the Bank, the Bank sold the property and sought to remove Fix from the house. Fix sued the Bank for, inter alia, intentional infliction of emotional distress (IIED). Meanwhile, Fix, Jeff, and Marie were indicted on multiple criminal counts. The State attorney who brought the charges and who represented the Bank civilly offered to dismiss the criminal charges against Fix if she would deed the house back to the Bank. Fix then amended her complaint to include a claim of abuse of process against the Bank. The trial court granted summary judgment against Fix on her IIED claim. A jury then returned a verdict finding the Bank liable for abuse of process but awarded no damages to Fix. The Supreme Court reversed on the abuse of process claim, holding that the trial court provided the jury with the incorrect legal standard for the recovery of emotional damages. Remanded for a new trial.