Justia Banking Opinion Summaries

Plaintiffs, evicted from their home following a state court foreclosure judgment, sought relief in federal court. The district court rejected all claims. The Seventh Circuit affirmed. The district court correctly considered the Rooker-Feldman doctrine and concluded that the doctrine applied to only two of the 22 claims: those that claimed injury caused by the state-court judgment of foreclosure, as opposed to injury caused by the defendants’ actions in enforcing the judgment. Plaintiffs offered no evidence of discriminatory motive with respect to their race or disabilities and did not allege specific facts establishing that there were material facts in dispute.

Petitioners appealed from a Memorandum and Order and Final Order of Forfeiture entered by the district court dismissing their petition for an ancillary hearing and rejecting their claim as beneficiaries of a putative constructive trust in defendant's forfeiture assets. At issue was whether the remission provision of 21 U.S.C. 853(i) precluded the imposition of a constructive trust in petitioners' favor and whether imposing a constructive trust would be consistent with a forfeiture statutory scheme provided by section 853. Because the court concluded that section 853(i) did not preclude, as a matter of law, recognizing a constructive trust and because a constructive trust was not inconsistent with the forfeiture statute, the court vacated the Final Order of Forfeiture and remanded the case to the district court to consider whether, pursuant to Vermont law, a constructive trust should be recognized in favor of petitioners.

Defendant is one of several investors (underwriters) in a mortgage bankers blanket bond issued to plaintiff to insure against financial loss resulting from employee misconduct. One of plaintiff's employees engaged in a scheme by which, for a kickback, he caused plaintiff to fund mortgages below its standards. Not knowing the loans were substandard, plaintiff sold them, warranting that they met its standards. Plaintiff was forced to repurchase the loans. The underwriters denied the claim. The district court dismissed a suit, finding that the bond did not cover the loss. The Seventh Circuit affirmed. The fidelity bond at issue contains direct-loss causation language. A financial loss resulting from contract liability to third parties is not directly caused by employee misconduct, even if employee misconduct is the source of the contract liability. Plaintiff's loss resulted from its contractual repurchase obligations; the employee misconduct did not directly cause the eventual financial loss. In addition, a specific exclusion in the bond bars coverage for losses resulting from loan-repurchase obligations.

Plaintiff obtained a mortgage in 1999 and refinanced four times over six years, each time pulling out more equity. The last refinancing and a mortgage obtained for a new house, (the first house was for sale), were based on documents inaccurately describing plaintiff's income and position. Plaintiff, who claimed to be unaware of the inaccurate information, defaulted on payments. The district court rejected his suit, alleging a violation of Mass. Gen. Laws ch. 93A (unfair or deceptive practices), unjust enrichment, a violation of the implied covenant of good faith and fair dealing, negligence, and entitlement to rescission of the loan and an injunction ordering the removal of the loan from his credit history. The First Circuit affirmed dismissal of the covenant claim relating to one loan, the negligence claim, and the rescission/equitable relief claim, but vacated dismissal of the other claims. Whether plaintiff or the loan officer deliberately falsified the loan application and whether default was foreseeable are questions of fact suitable for trial.

These two consolidated appeals arose from actions taken by American National Bank (ANB) to execute on a judgment against Michael Medved, an Arizona resident with business interests in Nebraska. Medved's wife, Laura, unsuccessfully sought to intervene in an action ANB filed against Medved in the district court for Douglas County. The district court denied her motion and issued charging orders against Medved's transferable interest in three Nebraska limited liability companies. Laura also unsuccessfully sought to intervene in an action filed in the district court for Sarpy County. The Sarpy County action resulted in a garnishment of Medved's wages. Medved appealed and Laura cross-appealed, arguing that the Nebraska order violated their rights under Arizona community property law because the earnings and distributions from the limited liability companies were Medved and Laura's community property and were protected by Arizona law. The Supreme Court affirmed, concluding that under either Arizona or Nebraska law, there was no error in the enforcement of the judgment.

First Union National Bank of Florida (First Union) appealed a judgment in favor of the Lee County Commission (Commission) and Philip Summers. Mr. Summers executed a mortgage on property he owned within the County on which he built a summer home. The home was ultimately subject to a tax sale by the County. The trustee for Mid-State Trust IV sued the Commission and Mr. Summers in 2009 seeking the excess redemption proceeds from the tax sale of the Summers property. The trustee later filed a motion to substitute First Union as the real party in interest. The trial court eventually entered a judgment finding that Mr. Summers was entitled to the excess funds from the tax sale because he was the last "owner" as defined by state law against whom the taxes were assessed. Upon careful consideration of the trial court’s record and the applicable legal authority, the Supreme Court affirmed the lower court’s decision.

Countrywide Home Loans, a mortgage holder on certain real estate, foreclosed its mortgage, took title to the property at a sheriff's sale, and then sold the property to a third party. Before these events, the property owners executed a promissory note in favor of Citizens State Bank. When the property owners failed to pay the note, Citizens Bank obtained a judgment in trial court, which was properly recorded. At the time Countrywide filed its foreclosure action, it did not name Citizens Bank as a party. After Countrywide discovered Citizens Bank's judgment lien on the property, Countrywide filed an action to foreclose any interest Citizen Bank may have had on the property. Citizens Bank filed a separate complaint seeking to foreclose its judgment lien. The trial court directed Citizens Bank to redeem Countrywide's mortgage or be barred from asserting its judgment lien. The court of appeals reversed. The Supreme Court also reversed the judgment of the trial court but on different grounds, holding that because Citizen Bank's lien on the property was properly recorded and indexed and because Countrywide did not explain why the lien was overlooked, Countrywide failed to demonstrate that it was entitled to the remedy of strict foreclosure.

Petitioner Monica Ware appealed a summary judgment in favor of Respondent Deutsche Bank National Trust Company, the trustee for HSI Asset Securitization Corporation. The Bank foreclosed on Petitioner and published notice of the foreclosure in a local Birmingham newspaper. The court entered summary judgment against her. Petitioner then filed a motion to amend or vacate the judgment and requested a hearing. The trial court refused to rule on Petitioner’s motion or hold a hearing. The motion was deemed denied by operation of law. On appeal to the Supreme Court, Petitioner challenged the timing and propriety of the summary judgment and its refusal to rule on her motion to amend or vacate. In affirming the trial court’s judgment, the Supreme Court "searched [Petitioner’s] briefs in vain for the argument that she actually made in the trial court, namely, that the foreclosure was "null and void. . . .[A] remand . . . would serve no purpose other than to afford her a 'second bite at the apple.'" The Court affirmed the lower court’s decision.

This case involved a residential construction scheme, which required the investor, the mortgage broker, the builder, and the bank providing the builder with the funds to construct the house to enter into certain independent contractual arrangements. Petitioners, investors whose builders went under and left them with unfinished houses or vacant lots, sought a writ of mandamus asking the court to order the district court to require respondent, the bank's executive vice-president for mortgage lending, to make a restitution in an amount equivalent to one point of their construction loans. The court held that the cause of petitioners' loss was not respondent, but the fact that the builders became insolvent and were unable or unwilling to complete their work. Therefore, the writ of mandamus was denied where petitioners assumed the risk that the builder might walk off the job; that if it did, the bank would declare the construction loan in default; and that, as the bank's borrower, they would be liable for the draws the builders had received plus interest.

Homeowners fell behind on their mortgage and the bank initiated foreclosure. The homeowners filed a Chapter 13 bankruptcy. The judge denied their motion for rescission of the mortgage and for damages, based on noncompliance with state laws. The district court and First Circuit affirmed. The homeowners signed right-to-cancel forms required under the Massachusetts Consumer Credit Cost Disclosure Act, modeled after the federal Truth in Lending Act (15 U.S.C. 1635); technical flaws in the form cannot serve as a basis for invalidating a transaction five years later. Similarly, a slight delay in receipt of a required high-cost loan disclosure did not justify rescission five years later.