Justia Banking Opinion Summaries

This action was before the court on a motion for a temporary restraining order (TRO) to enjoin the consummation of a proposed restructuring of a mortgage loan secured by certain resorts properties in Mexico and the Bahamas. Holders of more senior participations claim that the proposed transaction unfairly benefited the junior holder at the expense of the more senior holders in direct contravention of the terms of the agreements controlling the debt. The senior holders further claimed that if the proposed transaction was allowed to close, they would suffer irreparable harm through the loss of certain rights and guaranties under the new terms of the loan. The court concluded that the senior holders have stated colorable claims and made a sufficient showing that they would suffer imminent harm if the proposed transaction were allowed to close. Further, the court found that this potential irreparable harm outweighed the harm that would result to the junior holders by delaying the closing for a few weeks until a preliminary injunction could be heard. Accordingly, the court granted the TRO.

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.

When Morgan Joseph Holdings, an investment bank in which Petitioners held preferred stock, merged with another investment bank, Petitioners demanded appraisal instead of exchanging their shares. At issue was (1) the correct interpretation of Morgan Joseph's certificate of incorporation and whether the automatic redemption of the stock under the certificate was a mandatory redemption that was not subject to a requirement that Morgan Joseph have excess cash available; and (2) whether the automatic redemption right afforded to the stock holders was irrelevant to the fair value analysis in an appraisal. The Chancery Court granted Petitioners' motion for partial summary judgment, holding (1) under the certificate, automatic redemptions were not subject to an excess cash requirement; and (2) the automatic redemption was relevant to the Court's determination of fair value in an appraisal proceeding.

The issue presented in this case arose in connection with a motion to rank creditors in a suit for executory process. DDS Construction, LLC developed a subdivision in Reserve. To fund that development, DDS obtained various loans from First National Bank. To secure its repayment of those loans, DDS granted First National a "Multiple Indebtedness Mortgage" over individual lots located in the subdivision. One property, Lot 8 Square A, was at the center of this controversy. The district court held a notarial act which cancelled the lot's mortgage could be corrected by an act of correction under La. R.S. 35:2.1 and First National, the lender which erroneously cancelled the mortgage, maintained its rank relative to a subsequent mortgage under the statute's provisions. The court of appeal disagreed, holding that under these facts the subsequent mortgage primed the mortgage by the First National, which must be ranked as of the time of the act of correction. After review, the Supreme Court held that the court of appeal erred and reversed, reinstating the ruling of the district court.

Azhar Said on behalf of Plaintiff-Appellant Abbasid, Inc. sued the Los Alamos National Bank and First National Bank of Santa Fe for negligence in paying and accepting checks intended for the business but that his now ex-wife Bina Shahani had deposited in her cousin's account for personal use. The case was removed from Texas state to federal court, then removed to the U.S. District Court for the district of New Mexico. The district court dismissed the negligence claim on the grounds that the Bank owed no duty of care to Abbasid and that the claim and was preempted by statute which imposed strict liability. After trial, the jury returned a special verdict that the Bank did not convert any of Abbasid's checks. Abbasid timely filed a motion for a new trial which was denied. Among the issues Abbasid raised on appeal: (1) the district court improperly denied its motion for new trial claiming that the verdict was against the weight of the evidence; and (2) the court improperly excluded evidence of the Bank’s check-handling policies. Finding that most of Abbasid's claims of error were not properly preserved or that any error was mooted by the verdict, the Tenth Circuit affirmed the district court's decision in the case.

The United States appealed from a judgment of the district court invalidating two notices of Final Partnership Administrative Adjustments issued by the IRS. The district court so ruled because it concluded that the taxpayer's characterization of two tax-exempt Dutch banks as its partners in Castle Harbour LLC was proper under Internal Revenue Code 704(e)(1). The district court also concluded that, even if the banks did not qualify as partners under section 704(e)(1), the government was not entitled to impose a penalty pursuant to Internal Revenue Code 6662. The court held that the evidence compelled the conclusion that the banks did not qualify as partners under section 704(e)(1), and that the government was entitled to impose a penalty on the taxpayer for substantial understatement of income. Accordingly, the judgment of the district court was reversed.

This appeal was from the grant of summary judgment in a diversity case in which plaintiff was a limited partner in a partnership that received a loan from defendant. The dispute stemmed from a limited guaranty agreement between the Bank and plaintiffs, who became a guarantor of the loan received by the partnership. At issue was whether the guaranty agreement only required payment from the guarantor once the balance of the outstanding loan was $500,000 or less. The district court ruled that the payment was immediately due regardless of whether the balance of the loan had been reduced to $500,000. Because the court found the language of the guaranty agreement ambiguous, the court held that the district court erred by accepting the Bank's interpretation and granting summary judgment. Therefore, the court vacated the summary judgment and remanded to the district court. Further, the court affirmed the district court's denial of the motion for leave to file a supplemental claim. Finally, the court vacated the order awarding attorney's fees.

The title company provided real estate closing services. From 1984 through 1995, it served as exclusive agent for defendant and managed an escrow account that defendant contractually agreed to insure. The title company was not profitable and its managers used escrow funds in a "Ponzi" scheme. In 1989, there was a $26 million shortfall. To fill the hole, the managers began looting another business, Intrust, to pay defendant's policyholders ($40.9 million) and to pay defendant directly ($27 million), so that defendant was a direct and indirect beneficiary of the title company's arrangement with Intrust. In 2000 the state agency learned that the funds were missing, took control of Intrust and placed it in receivership. In July 2010, the Receiver filed suit for money had and received, unjust enrichment, vicarious liability), aiding and abetting breach of fiduciary duty, and conspiracy. The district court dismissed based on the statute of limitations. The Seventh Circuit affirmed. The Illinois doctrine of adverse domination does not apply. That doctrine tolls the statute of limitations for a claim by a corporation against a nonboard-member co-conspirator of the wrongdoing board members.

Appellant, a former shareholder in Wachovia, sought to recover personally for the decline in value of his shares of Wachovia stock during the recent financial crisis. The district court dismissed the suit, concluding that appellant's complaint stated a claim derivative of injury to the corporation and that he was therefore barred from bringing a direct or individual cause of action against defendants. The court held that because appellant's varied attempts to recast his derivative claim as individual were unavailing, the judgment of the district court was affirmed.

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.