Justia Banking Opinion Summaries

Articles Posted in California Courts of Appeal
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A qui tam plaintiff alleged that two banks violated the California False Claims Act (CFCA) by failing to report and deliver millions of dollars owing on unclaimed cashier’s checks to the State of California as escheated property. The trial court denied the banks’ motions to dismiss. The banks sought writ relief.The court of appeal denied relief, upholding the denial of the motions to dismiss. The court rejected the banks’ argument that a qui tam plaintiff may not pursue a CFCA action predicated on a failure to report and deliver escheated property unless the California State Controller first provides appropriate notice to the banks under Code of Civil Procedure section 1576. For pleading purposes, the complaints adequately allege the existence of an obligation as required under the CFCA: the plaintiff adequately alleged that the banks were obligated to report and deliver to California the money owed on unredeemed cashier’s checks, Allowing this action to proceed does not violate the banks’ due process rights. View "JPMorgan Chase Bank, N.A. v. Superior Court" on Justia Law

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Young claims her employer told her that it had received a wage garnishment order in 2019. Young then discovered the existence of a 2010 default judgment against her, in favor of Midland, for a purported debt of $8,529.93 plus interest. Young sued to set aside the 2010 default judgment, based on extrinsic mistake or fraud. She sought damages, penalties, and reasonable attorney fees and costs under the Rosenthal Fair Debt Collection Practices Act (Civ. Code, 1788), arguing that Midland was a debt collector of consumer debt and had engaged in false and deceptive conduct in attempting to collect that debt, citing her contention that she was never served with process. Midland denied Young’s allegations, asserted affirmative defenses, and filed an anti-SLAPP motion (section 425.16) to strike Young’s claims.The trial court granted the anti-SLAPP motions, finding Young did not show she would probably prevail on the merits of her claims and awarded Midland attorney fees and costs. The court of appeal vacated. Young showed she would probably prevail on the merits of her Rosenthal Act claim, producing prima facie evidence that Midland falsely represented substituted service on her was accomplished. She was not required to show that Midland knowingly made this false representation. Young’s Rosenthal Act cause of action was not time-barred. View "Young v. Midland Funding, LLC" on Justia Law

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Borrower took out a $5.6 million dollar bridge loan, with 8.5% interest per annum, secured by a deed of trust on real property. They defaulted on a monthly payment of $39,667, triggering late fee provisions: a one-time 10% fee assessed against the overdue payment ($3,967) and a default interest charge of 9.99% per annum assessed against the total unpaid principal balance. Borrower filed a demand for arbitration, alleging the loan was in violation of Business & Professions Code 10240 and the late fee was an unlawful penalty in violation of section 1671. The arbitrator rejected both claims and denied the demand for arbitration. Borrower petitioned to vacate the decision, arguing that the arbitrator exceeded their authority by denying claims in violation of “nonwaivable statutory rights and/or contravention of explicit legislative expressions of public policy.”The court of appeal reversed the denial of that petition. The trial court erroneously failed to vacate an award that constitutes an unlawful penalty in contravention of public policy set forth in section 1671. Liquidated damages in the form of a penalty assessed during the lifetime of a partially matured note against the entire outstanding loan amount are unlawful penalties. There is no precedent upholding a liquidated damages provision where a borrower missed a single installment and then was penalized pursuant to such a provision. View "Honchariw v. FJM Private Mortgage Fund, LLC" on Justia Law

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In 2008, Morris defaulted on her home mortgage. After negotiating a loan modification, she again defaulted in 2009. Morris and her husband, Mazhari, then filed two bankruptcy proceedings. Mazhari died while the second bankruptcy was pending. Morris unsuccessfully tried to obtain another loan modification. Following the 2016 lifting of the automatic stay in her third bankruptcy, Morris’s home was sold at public auction to Chase, the deed of trust beneficiary and successor to the original lender. Morris claims that the trustee’s sale occurred without notice to her because Chase and then Rushmore, the loan servicer, pursued foreclosure secretly while giving her false assurances that loan modification terms were forthcoming and shuttling her between uninformed representatives who gave her inconsistent information about her modification request.Morris sought post-foreclosure relief, including damages, an order setting aside the trustee’s sale, and a declaration quieting title under the California Homeowner Bill of Rights (HBOR) (Civ. Code 2923.6, 2923.7) and other theories. In 2018, the trial court dismissed all claims. After another delay occasioned by another bankruptcy, Morris appealed. The court of appeal reversed in part, with respect to claims alleging failure to appoint a single point of contact (HBOR 2923.7), dual tracking (2923.6), and failure to mail upon request a notice of default and notice of trustee’s sale 2924b). The court otherwise affirmed. View "Morris v. JPMorgan Chase Bank N.A." on Justia Law

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Plaintiff appeals two concurrent orders denying his petition to confirm an arbitration award and granting Comerica Bank's petition to vacate the award on the ground that the arbitrator made a material omission or misrepresentation in his disclosure of prior cases involving the parties' lawyers.The Court of Appeal concluded that, because the bank failed to seek the arbitrator's disqualification within 15 days of discovering the facts requiring disqualification and before the arbitrator decided the pending fee motion, it forfeited the right to demand disqualification. Accordingly, the court reversed the order vacating the award based on the arbitrator's disqualification. Because the bank identified no other grounds for denying the petition to confirm the award, the court granted that petition. View "Goodwin v. Comerica Bank, N.A." on Justia Law

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Over the course of a few years, an employee of Severin Mobile Towing Inc. (Severin) took about $157,000 in checks made payable to Severin’s d/b/a, endorsed them with what appears to be his own name or initials, and deposited them into his personal account at JPMorgan Chase Bank N.A. (Chase). Because the employee deposited all the checks at automated teller machines (ATM’s), and because each check was under $1,500, Chase accepted each check without “human review.” When Severin eventually discovered the embezzlement, it sued Chase for negligence and conversion under California’s version of the Uniform Commercial Code (UCC), and for violating the unfair competition law. Severin moved for summary judgment on its conversion cause of action, and Chase moved for summary judgment of all of Severin’s claims, asserting affirmative defenses under the UCC, and that claims as to 34 of the 211 stolen checks were time- barred. The trial court granted Chase’s motion on statute of limitations and California Uniform Commercial Law section 3405 grounds; the court did not reach UCL section 3406. The court denied Severin’s motion as moot, and entered judgment for Chase. On appeal, Severin argued only that the court erred in granting summary judgment to Chase on Severin’s conversion cause of action (and, by extension, the derivative UCL cause of action). Specifically, Severin argued the court erroneously granted summary judgment under section 3405 because Chase failed to meet its burden of establishing that Severin’s employee fraudulently indorsed the stolen checks in a manner “purporting to be that of [his] employer.” Severin further argued factual disputes about its reasonableness in supervising its employee precluded summary judgment under section 3406. The Court of Appeal agreed with Severin in both respects, and therefore did not reach the merits of Chase’s claim that its automated deposit procedures satisfied the applicable ordinary care standard. Accordingly, judgment was reversed and the matter remanded for further proceedings. View "Severin Mobile Towing, Inc. v. JPMorgan Chase etc." on Justia Law

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Metaxas was the president and CEO of Gateway Bank in 2008, during the financial crisis. Federal regulators categorized Gateway as a “troubled institution.” Gateway tried to raise capital and deal with its troubled assets. Certain transactions resulted in a lengthy investigation. The U.S. Attorney became involved. Metaxas was indicted. In 2015, she pleaded guilty to conspiracy to commit bank fraud. Gateway sued Metaxas based on two transactions involving Ideal Mortgage: a March 2009 $3.65 million working capital loan and a November 2009 $757,000 wire transfer. A court-appointed referee awarded Gateway $250,000 in tort-of-another damages arising from “the fallout” from the first transaction, and $132,000 in damages for the second.The court of appeal affirmed, rejecting arguments that the first transaction resulted in “substantial benefit” to Gateway and that Metaxas had no alternative but to approve the wire transfer. Gateway did not ask for any purported “benefit.” The evidence showed that the Board would not have approved either the toxic asset sale or the working capital loan if Metaxas had disclosed the true facts. Metaxas damaged Gateway’s reputation. Metaxas knew that the government was trying to shut Ideal down but approved the wire transfer on the last business day before Ideal was shut down, by expressly, angrily, overruling the CFO. View "Gateway Bank, F.S.B. v. Metaxas" on Justia Law

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Plaintiffs Charles Best Jr. and Robbie Johnson Best alleged that defendants (collectively the Bank), attempted to collect a debt secured by the Bests’ home, despite having no legal right to do so. They alleged that, in the process, the Bank engaged in unlawful, unfair, and fraudulent debt collection practices. Based on these allegations, they raised six causes of action, including one under the Rosenthal Fair Debt Collection Practices Act. The trial court sustained the Bank’s demurrer to the entire complaint on the ground of res judicata; it ruled that the Bests were asserting the same cause(s) of action as in a prior federal action that they brought, unsuccessfully, against the Bank. In the nonpublished portion of its opinion, the Court of Appeal held that, as to three of the Best’s causes of action (including their Rosenthal Act cause of action) the trial court erred by sustaining the demurrer based on res judicata. As to the other three, the Court found the Bests did not articulate any reason why res judicata does not apply; thus, they have forfeited any such contention. In the published portion of its opinion, the Court held that the Rosenthal Act could apply to a nonjudicial foreclosure; the lower federal court opinions on which the Bank relied were superseded by controlling decisions of the United States Supreme Court, the Ninth Circuit, and the California Courts of Appeal. View "Best v. Ocwen Loan Servicing, LLC" on Justia Law

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The Court of Appeal affirmed the district court's judgment sustaining CIT's demurrer without leave to amend based on res judicata. The court explained that appellant's present lawsuit involves the same primary right as three prior lawsuits that she brought against CIT, and plaintiff lost on the merits in all three prior lawsuits: one in the Los Angeles County Superior Court and two in the United States District Court. The court further explained that the prior adverse decisions by three trial and two appellate courts were not advisory opinions suggesting how appellant should proceed in the future. The court concluded that, pursuant to the doctrine of res judicata, the decisions constitute final judgments on the merits precluding further litigation against respondent concerning the same primary right. The court noted that, although the present appeal is frivolous, it will not order sanctions to be imposed on appellant. However, the court cautioned appellant that further attempts to litigate the subject matter of this lawsuit will result in sanctions. View "Colebrook v. CIT Bank, N.A." on Justia Law

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Appellant and his wife obtained a home mortgage in 2006, but only the wife signed the promissory note. After appellant's wife died, appellant defaulted on the loan. Appellant alleged that the mortgage servicer, Specialized Loan Servicing, refused to communicate with him about the loan because he was not the named borrower. Specialized subsequently initiated foreclosure proceedings by causing a notice of default to be recorded. Appellant filed suit under the California Homeowner Bill of Rights (HBOR), Civil Code section 2923.4 et seq., seeking to enjoin the foreclosure proceedings. After Specialized agreed to postpone the foreclosure sale and appellant failed to make his payment, the foreclosure sale proceeded as planned and the property was purchased by a third party. Appellant then filed an amended complaint against Specialized. Specialized moved for summary judgment, which the trial court granted.The Court of Appeal affirmed, concluding that, by its terms, the HBOR creates liability only for material violations that have not been remedied before the foreclosure sale is recorded. The court held that where a mortgage servicer's violations stem from its failure to communicate with the borrower before recording a notice of default, the servicer may cure these violations by doing what respondent did here: postponing the foreclosure sale, communicating with the borrower about potential foreclosure alternatives, and fully considering any application by the borrower for a loan modification. After such corrective measures, any remaining violation relating to the recording of the notice of default is immaterial, and a new notice of default is therefore not required to avoid liability. Therefore, appellant has provided no basis for liability under the HBOR. The court also concluded that Specialized complied with section 2923.6 as a matter of law by conducting the foreclosure sale only after appellant failed to accept an offered trial-period modification plan. Finally, given the court's conclusions and the trial court's consideration of the merits of appellant's claims, the reinstatement of sections 2923.55 and 2923.6 did not warrant reconsideration. View "Billesbach v. Specialized Loan Servicing LLC" on Justia Law