Justia Banking Opinion Summaries

After Plaintiff defaulted on a mortgage loan secured by her property, a complaint was filed in the Massachusetts land court as a preliminary step to foreclose on Plaintiff’s house. Plaintiff subsequently filed this case in federal district court against Defendants, asserting multiple claims arising from the purportedly invalid transfer and assignment of the mortgage on her home. The district court granted summary judgment in favor of Defendants. While this appeal was pending, the parties reached an agreement, which resulted in the mortgage loan becoming current and Plaintiff no longer being subject to any actual or threatened foreclosure proceedings. The First Circuit dismissed this appeal as moot, holding that the circumstances evolved in such a way that there was no longer a live case or controversy. View "Matt v. HSBC Bank USA, N.A." on Justia Law

At issue in this case was a 2006 amendment to the “obsolete mortgage” statute, under which a mortgage becomes unenforceable after a certain number of years. A mortgage in which the term or maturity date is stated becomes unenforceable five years after the expiration of the term, and a mortgage in which the term or maturity date is not stated becomes unenforceable thirty-five years after recording. Here, Defendant conducted a foreclosure auction purporting to sell certain property that secured two mortgages held by Defendant. At the time, both mortgages would be unenforceable under the amended obsolete mortgage statute if the five-year statute of limitations was applicable. Plaintiff sought a declaration that the mortgages were discharged under the obsolete mortgage statute and that the foreclosure auction was null and void. A land court judge granted partial summary judgment for Plaintiff, concluding that a reference in the mortgages to the term of the underlying debt was sufficient to state the “term or maturity date of the mortgage.” The Supreme Judicial Court affirmed, holding (1) the two mortgages were subject to the five-year period and thus were discharged under the obsolete mortgage statute; and (2) the application of the statute in this case did not violate due process and contracts clause protections. View "Deutsche Bank Nat’l Trust Co. v. Fitchburg Capital, LLC" on Justia Law

After Defendants fell behind on their mortgage payments, their lender (“the Bank”) commenced a non-judicial foreclosure sale of the property, acquired the property at auction, and filed an ejectment action. The circuit court granted summary judgment for the Bank, judgment for possession, and a writ of possession (“the April 12th orders”). Defendants filed a motion to reconsider. Defendant later filed an amended Haw. R. Civ. P. 60(b) motion for relief from judgment. The circuit court denied Defendants’ motion to reconsider but did not dispose of the amended Rule 60(b) motion. Defendants appealed. The intermediate court of appeals (ICA) determined that the appeal from the April 12th orders and motion to reconsider was untimely and ruled that the appeal was premature with respect to the amended Rule 60(b) motion. The Supreme Court (1) vacated the portion of the ICA dismissal order concluding that it lacked appellate jurisdiction over the appeal of the April 12th orders and the motion to reconsider, holding that the ICA had appellate jurisdiction over this portion of the appeal; and (2) affirmed the portion of the ICA dismissal order dismissing any appeal of the amended Rule 60(b) motion, holding that the ICA lacked jurisdiction over this portion of the appeal. View "Deutsche Bank Nat’l Trust Co. v. Amasol" on Justia Law

At issue in this case was the effect of a subordination agreement between fewer than all of the creditors who hold an interest in the same collateral. Appellant VCS, Inc. provided labor and materials to improve real property located in a planned unit development. The developer, Acord Meadows, secured funding for the project from America West Bank and Utah Funding Commercial. The loans were secured with trust deeds to the development properties, and the lenders entered into subordination agreements among themselves that altered the priority arrangement of their trust deeds. Because VCS was never paid for its work, it filed a mechanic’s lien covering several lots of the development, four of which were sold through a foreclosure sale after Acord defaulted on its loans from Utah Funding. VCS claimed it was entitled to payment of its mechanic’s lien because its lien had priority over Utah Funding’s liens. The district court ruled that VCS’s mechanic’s lien was extinguished by the foreclosure of Utah Funding’s liens. The Supreme Court affirmed after adopting the partial subordination approach to the issue in this case, holding that under the partial subordination approach, VCS’s mechanic’s lien was extinguished once Utah Funding’s lien was foreclosed upon. View "VCS Inc. v. Countrywide Home Loans, Inc." on Justia Law

Respondents obtained a home-equity loan from Wells Fargo Bank. After Respondents stopped making loan payments, Wells Fargo filed an application in the district court for an expedited court order authorizing foreclosure. Respondents filed a separate and original declaratory judgment action that invoked the automatic stay and dismissal provisions of Tex. R. Civ. P. 736.11. Wells Fargo filed an amended answer asserting a counterclaim for declaratory judgment and requesting attorney’s fees pursuant to the Uniform Declaratory Judgments Act. The trial court granted Wells Fargo’s motion for summary judgment and awarded attorney’s fees, concluding that Respondents had defaulted on their home-equity loan. The court of appeals affirmed the trial court’s summary judgment but reversed the attorney’s fee award, concluding that neither party had pleaded a cognizable claim for declaratory relief, and the non-recourse status of the home-equity loan prohibited a personal judgment for attorney’s fees against Respondents. The Supreme Court reversed in part, holding (1) because Respondents failed to preserve any challenge to the characterization of their own claim for declaratory relief, the trial court was authorized to enter a judgment awarding Wells Fargo its attorney’s fees; and (2) neither the parties’ loan agreement nor the Texas Constitution prohibited a personal judgment against Respondents for attorney’s fees. View "Wells Fargo Bank, N.A. v. Murphy" on Justia Law

Plaintiffs obtained a home loan and granted a mortgage that was eventually assigned to Bank of America (BOA). Plaintiffs defaulted in 2007. In 2011, plaintiffs received a letter explaining the right to seek a loan modification. Plaintiffs sought assistance from NMCA; met with BOA’s counsel; provided information and forms prepared with help from NMCA; and were offered reduced payments for a three-month trial period. If all trial period payments were timely, the loan would be permanently modified. Plaintiffs allege that they made the three payments, but did not receive any further information, and that BOA returned two payments. BOA offered plaintiffs a permanent loan modification, instructing plaintiffs to execute and return a loan modification agreement. Plaintiffs do not allege that they returned the agreement. BOA never received the documents. BOA sent a letter informing them that because they were in default and had not accepted the modification agreement, a nonjudicial foreclosure would proceed. Notice was published. The property was sold at a sheriff’s sale. BOA purchased the property, and executed a quitclaim deed to Federal National Mortgage Association, which filed a possession action after the redemption period expired. Six months later, plaintiffs sued, claiming Quiet Title; violations of due process rights; and illegal/improper foreclosure and sheriff’s sale. The district court dismissed all claims. The Sixth Circuit affirmed, holding that the Michigan foreclosure procedure does not violate due process. View "Garcia v. Fed. Nat'l Mortg. Ass'n" on Justia Law

Respondent borrowed money from Bank pursuant to a construction loan agreement and promissory note. Defendant secured his obligations by executing a deed of trust on property. After Respondent defaulted on the note, Bank foreclosed its contractual deed of trust lien on the property. Bank purchased the property for less than the secured debt. Respondent sued Bank, arguing that Tex. Prop. Code Ann. 51.003 required Bank to offset the property’s fair market value on the date of foreclosure against any judgment in favor of Bank. Bank counterclaimed for damages and attorney’s fees. The trial court rendered judgment for Bank, concluding that section 51.003 did not apply. The court of appeals reversed, determining (1) Respondent’s deficiency must be calculated pursuant to section 51.003, and the term “fair market value” as used in the statute is the historical willing-seller/willing-buyer definition of fair market value; and (2) a factual question existed requiring further proceedings. The Supreme Court reversed, holding (1) section 51.003 applies to this case, but the term “fair market value” in that section does not equate precisely to the historical definition; and (2) the trial court did not err in its finding as to the section 51.003 fair market value of the property on the date of the foreclosure sale. View "PlainsCapital Bank v. Martin" on Justia Law

After an LLC defaulted on a loan that had been used to purchase property for a section 1031 exchange, the lender’s successor brought a deficiency action to enforce commercial guaranty agreements executed by defendants Bradley and Yates, the managers of the LLC. They argued the guaranties were shams, and therefore unenforceable, due to their close relationship with the borrower on the subject loan, the LLC. Defendants filed a counterclaim, asserting that attempts to enforce the guaranties constituted an unfair business practice in violation of the Unfair Competition Law (UCL) (Bus. & Prof. Code, 17200). Under California law, a lender may not pursue a deficiency judgment against a borrower where the sale of property securing a debt produces proceeds insufficient to cover the amount of the debt. Lenders may pursue deficiency judgments against guarantors, but only true guarantors. Where the borrower and the guarantor are the same, the guaranty is considered an unenforceable sham. The jury found in favor of defendants on the sham issue, but the court rejected defendants’ UCL counterclaim. The court of appeal reversed, holding that substantial evidence did not support the finding that the guaranties were shams. View "CADC/RAD Venture v. Bradley" on Justia Law

The Boyces signed a $1.155 million promissory note payable to Pacific Mortgage, secured by a deed of trust on their Santa Barbara house. Pacific Mortgage endorsed the note to Option One, which endorsed the note in blank and put it in a mortgage investment pool, of which Wells Fargo was trustee. Pacific Mortgage assigned the deed of trust to Option One. The trust deed was later assigned to Wells Fargo. Boyces stopped making payments and filed an emergency bankruptcy petition to stay foreclosure. Wells Fargo moved for relief from the automatic stay. The bankruptcy court inspected the note and allonges; found a valid "chain of control and title of the note,” rejecting a claim that the assignment was invalid; and granted relief from the stay. The district court affirmed. Wells Fargo purchased the property at the trustee's sale and filed suit to evict the Boyces. The court rejected claims that the mortgage was invalid and that Wells Fargo did not perfect title and granted summary judgment for Wells Fargo, which sold the property. The Boyces filed claims for wrongful foreclosure, violation of the Unfair Practices Act (Bus. & Prof. Code, 17200), and quiet title. The court of appeal affirmed dismissal, citing res judicata and collateral estoppel. View "Boyce v. T.D. Serv. Co." on Justia Law

A large commercial development in Kansas City, Missouri was aborted in the middle of construction due to cost overruns. When the developer would not cover the shortfall, the construction lender stopped releasing committed loan funds, and contractors filed liens against the property for their unpaid work on the unfinished project. Bankruptcy followed, and the contractors’ liens were given priority over the lender’s security interest in the failed development, leaving little recovery for the lender. The lender looked to its title insurer for indemnification. The title policy generally covers lien defects, but it also contains a standard exclusion for liens “created, suffered, assumed or agreed to” by the insured lender. The Seventh Circuit affirmed judgment in favor of the title company. The exclusion applies to the liens at issue, which resulted from the lender’s cutoff of loan funds, so the title insurer owed no duty to indemnify. The liens arose from insufficient project funds, a risk of loss that the lender, not the title company, had authority and responsibility to discover, monitor, and prevent. View "BB Syndication Servs, Inc. v. First Am. Title Ins. Co" on Justia Law