Justia Banking Opinion Summaries

Debtor, a construction business, filed a voluntary Chapter 11 bankruptcy petition, which was converted to chapter 7. A The Bank holds a valid, first-priority security interest in all of the Debtor’s assets, including accounts receivable. The Trustee discovered that checks payable to the Debtor had been negotiated and deposited into the personal account of Hartford, the father of Debtor’s principal, totalling $36,389.89. Before initiating adversary litigation, the Trustee engaged in settlement talks with Hartford, who agreed to pay $36,389.89 to the estate and release the estate from all claims involving the transfers. While the Trustee was pursuing settlement., the Bank obtained an order modifying the automatic stay to allow it to exercise its state law remedies with respect to collateral, then filed suit to recover from Hartford the value of the checks. A state court entered judgment in favor of the Bank. The next day, the Trustee successfully moved for approval of the Hartford settlement. The Bank objected. The bankruptcy court rejected the Bank’s argument that the order granting relief from the automatic stay allowed it to pursue the fraudulent transfer action in state court. The district court affirmed. The Seventh Circuit dismissed for lack of jurisdiction, finding that the bankruptcy court entered no final judgment or appealable order. View "Schaumburg Bank & Trust Co. v. Alsterda" on Justia Law

Petitioners executed a promissory note and mortgage in favor of Mortgage Electronic Registrations Systems, Inc. The notary acknowledgment on the mortgage was left blank. The mortgage was subsequently recorded with the county recorder. The interest in the mortgage was later assigned to Bank. Thereafter, Petitioners initiated a Chapter 13 bankruptcy and commenced an adversary proceeding seeking to avoid the mortgage as defectively executed. The bankruptcy court determined that its interpretation of Ohio Rev. Code 1301.401 would be dispositive in this case and certified to the Supreme Court questions of state law concerning whether section 1301.401 has an effect on the case. The Supreme Court answered that section 1301.401 applies to all recorded mortgages in Ohio and acts to provide constructive notice to the world of the existence and contents of a recorded mortgage that was deficiently executed under Ohio Rev. Code 5301.01. View "In re Messer" on Justia Law

Sentinel, a cash-management firm, invested customers' cash in liquid low-risk securities. It also traded on its own account, using money borrowed from BNYM, pledging customers’ securities; 7 U.S.C. 6d(a)(2), 6d(b)), and the customers’ contracts required the securities to be held in segregated accounts. Sentinel experienced losses that prevented it from maintaining its collateral with BNYM and meeting customer demands for redemption of their securities. Sentinel used its BNYM line of credit to meet those demands. In 2007 it owed BNYM $573 million; it halted customer redemptions and declared bankruptcy. BNYM notified Sentinel that it planned to liquidate the collateral securing the loan. The bankruptcy trustee refused to classify BNYM as a senior secured creditor, considering the use of customer funds as collateral to be fraudulent transfers, 11 U.S.C. 548(a)(1)(A) and claiming that BNYM was aware of suspicious facts that should have led it to investigate. The district judge dismissed the claim, finding that Sentinel had not been shown to have intended to defraud its customers. The Seventh Circuit reversed, holding that Sentinel made fraudulent transfers. On remand, the judge neither conducted an evidentiary hearing nor made additional findings, but issued a “supplemental opinion” that BNYM was entitled to accept the collateral without investigation. The Seventh Circuit reversed in part. BNYM remains a creditor in the bankruptcy proceeding, but is an unsecured creditor because it was on inquiry notice that the pledged assets had been fraudulently conveyed. View "Grede v. Bank of New York" on Justia Law

Appellant FB Acquisition Property I, LLC appealed a district court order affirming the confirmation of a Chapter 11 plan for Appellees and Debtors Larry and Susan Gentry. The Gentrys were the sole shareholders, officers, and directors of Ball Four Inc., a sports complex in Adams County, Colorado. In 2010, Ball Four filed a voluntary Chapter 11 petition, and a year later, the Gentrys filed this Chapter 11 proceeding. This appeal involved aspects of both bankruptcies. In 2005, Ball Four received a $1.9 million loan from FirsTier Bank to expand its sporting facilities and pay off a previous loan. After four years of struggling with construction defects, underfunding of the project, and an economic downturn, Ball Four stopped making interest payments to FirsTier. Ball Four proposed a plan of reorganization that provided the bank’s allowed claim would be repaid in full, plus interest, and that FirsTier would retain its lien on Ball Four’s property until the claim was paid. Before Ball Four’s Chapter 11 plan was approved in 2011, the Colorado Division of Banking closed FirsTier and the Federal Deposit Insurance Corporation (FDIC) was appointed as receiver. Later, the FDIC conveyed all rights under the original promissory note to 2011-SIP 1 CRE/CADC Venture, LLC (SIP). Neither FirsTier, FDIC, nor SIP objected to the Ball Four Plan, and it was confirmed in August 2011, and Ball Four’s case was closed in 2013. In October 2010, a month after Ball Four filed for bankruptcy, FirsTier sued the Gentrys in Colorado state court to collect on the guaranties. In November 2011, the Gentrys filed this Chapter 11 case. The Gentrys filed the necessary disclosures and an amended plan. The amended plan provided that the Gentrys’ liability on the 2005 loan would be satisfied by Ball Four under its confirmed plan. Despite SIP’s objections, the bankruptcy court confirmed the Gentry Plan in 2013. Because the bankruptcy court's feasibility finding of the Gentrys' plan was based on a permissible view of the evidence, the Tenth Circuit concluded the bankruptcy court’s finding of feasibility was not clearly erroneous. However, the Court found the district court erred with regard to limiting the Gentrys' liability as guarantors to the amount Ball Four owed. In light of the Tenth Circuit's ruling, the matter was remanded back to the bankruptcy court in the event the guaranty issue impacted the plan feasibility assessment. View "In re: Gentry" on Justia Law

The Committee appealed a consolidated district court judgment affirming several bankruptcy court judgments. The court held that the bankruptcy court did not abuse its discretion in approving the Settlement Agreement - a compromise the Trustee made in discharge of his fiduciary duty. The court affirmed the Trustee’s conclusion that the estate’s best interests were better served by the Settlement Agreement than by continued litigation to determine the absolute value of Chase’s secured collateral; for purposes of 11 U.S.C. 502(b), although the bankruptcy court did not adequately determine the amount of Chase’s allowed claim, its error was harmless; the bankruptcy court did not abuse the discretion afforded it by Rule 3012 in declining the Committee’s request to undertake a “more precise determination of value;” and the bankruptcy court did not err in denying the Motion to Value simultaneously with its approval of the Settlement Agreement. Accordingly, the court affirmed the district court’s consolidated judgment affirming the bankruptcy court’s orders approving the Settlement Agreement, denying the Claim Objection, and denying the Motion to Value. View "Official Comm. of Unsecured Creditors v. Chase Capital Corp." on Justia Law

In 2004, Laura Sheedy refinanced property she owned. For the transaction, Sheedy executed a promissory note and mortgage in favor of Washington Mutual Bank (WAMU). The mortgage was eventually assigned to Deutsche Bank National Trust Company. JPMorgan Chase National Association (Chase) serviced the loan. Deutsche Bank subsequently commenced foreclosure proceedings. Thereafter, in 2010, Sheedy filed for protection under Chapter 13 of the Bankruptcy Code. As part of her plan, Sheedy raised a series of allegations of lender liability. In 2011, Sheedy filed this adversary proceeding to have the bankruptcy court resolve her lender liability claims, adding that Deutsche Bank and Chase (together, the Secured Creditors) were liable for fraud deceit, and misrepresentation on the basis that WAMU provided her with inaccurate or false information concerning the terms of the note and the mortgage. The bankruptcy court granted summary judgment in favor of the Secured Creditors. The district court affirmed. The First Circuit affirmed, holding that all of Sheedy’s claims were either time-barred or without merit. View "Sheedy v. Deutsche Bank Nat’l Trust Co." on Justia Law

Falco sold insurance for Farmers, under a 1990 Agent Agreement, which provided that Falco would be paid Contract Value upon termination of the Agreement. As a Farmers agent, Falco was entitled to borrow money from the Credit Union. In 2006, Falco obtained a $28,578.00 business loan and assigned his interest in his Agreement receivables—including Contract Value—as security. The loan document gave the Credit Union authority to demand payments that Farmers owed Falco; it could tender Falco’s resignation to levy on Falco’s Contract Value. Falco failed to make payments and filed a Chapter 7 bankruptcy petition, listing the loan on his schedules. Falco received a discharge in February 2011, covering his liability under his Credit Union loan. In April 2011, the Credit Union notified Farmers that Falco had defaulted and exercised the power of attorney to terminate his Agent Agreement. Farmers notified Falco that the resignation had been accepted, calculated Contract Value as $104,323.30, paid the Credit Union $29,180.92, and paid the balance to Falco. The Eighth Circuit affirmed summary judgment in favor of defendants, finding that the Credit Union’s secured interest survived bankruptcy; it did not tortuously interfere with Falco’s Agreement because it had a legal right to terminate the Agreement; and Falco failed to show an underlying wrongful act or intentional tort as required under civil conspiracy. View "Falco v. Farmers Ins. Grp." on Justia Law

Appellants filed a promissory note that was secured by a deed of trust on their property. At the time that Appellants defaulted, Respondent was the holder of the note and Mortgage Electronic Registration Systems, Inc. (MERS) was the beneficiary of the deed of trust securing the note. After Appellants filed for bankruptcy, MERS assigned its interest in the deed of trust to Respondent. Before the assignment was recorded, Respondent filed a proof of claim in Appellants’ bankruptcy claiming that it was a secured creditor. Respondent then filed a motion for relief from the automatic bankruptcy stay so that it could foreclose on Appellants’ property. Appellants argued that Respondent was not a secured creditor because it did not have a unified note and deed of trust when the bankruptcy petition was filed. The United States Bankruptcy Court certified two questions of law to the Supreme Court concerning the legal effect on a foreclosure when the promissory note and deed of trust are split at the time of foreclosure. The Supreme Court concluded (1) when the promissory note is held by a principal and the beneficiary under the deed of trust is the principal’s agent at the time of foreclosure, reunification of the note and the deed of trust is not required to foreclose; and (2) as a matter of law, the recording of an assignment of a deed of trust is a ministerial act. View "In re Montierth" on Justia Law

Appellants filed a promissory note that was secured by a deed of trust on their property. At the time that Appellants defaulted, Respondent was the holder of the note and Mortgage Electronic Registration Systems, Inc. (MERS) was the beneficiary of the deed of trust securing the note. After Appellants filed for bankruptcy, MERS assigned its interest in the deed of trust to Respondent. Before the assignment was recorded, Respondent filed a proof of claim in Appellants’ bankruptcy claiming that it was a secured creditor. Respondent then filed a motion for relief from the automatic bankruptcy stay so that it could foreclose on Appellants’ property. Appellants argued that Respondent was not a secured creditor because it did not have a unified note and deed of trust when the bankruptcy petition was filed. The United States Bankruptcy Court certified two questions of law to the Supreme Court concerning the legal effect on a foreclosure when the promissory note and deed of trust are split at the time of foreclosure. The Supreme Court concluded (1) when the promissory note is held by a principal and the beneficiary under the deed of trust is the principal’s agent at the time of foreclosure, reunification of the note and the deed of trust is not required to foreclose; and (2) as a matter of law, the recording of an assignment of a deed of trust is a ministerial act. View "In re Montierth" on Justia Law

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