Justia Banking Opinion SummariesArticles Posted in U.S. 1st Circuit Court of Appeals
Mills v. U.S. Bank N.A.
In 2006, Plaintiff refinanced her home in Massachusetts. The mortgage contract identified MortgageIT as the lender and Mortgage Electronic Registration Systems (MERS) as the mortgagee. MortgageIT sold Plaintiff’s note, which changed hands several times before being deposited into a Trust, of which U.S. Bank was trustee. MERS assigned the mortgage to OneWest Bank. Following the 2011 foreclosure on her home, Plaintiff filed suit against U.S. Bank, OneWest, and MERS, contending that OneWest was never assigned valid legal title, rendering the foreclosure void. The district court dismissed Plaintiff’s suit for failure to state a claim, finding that the First Circuit’s decision in Culhane v. Aurora Loan Services of Nebraska was fatal to Plaintiff’s claim. Plaintiff appealed, challenging the district court’s reliance on Culhane. The First Circuit affirmed, holding that Culhane was on point, as Plaintiff’s argument was a variation of the same challenge raised in Culhane. View "Mills v. U.S. Bank N.A." on Justia Law
Butler v. Deutsche Bank Trust Co. Ams.
Plaintiff obtained a loan secured with a promissory note and mortgage on his Massachusetts home. The mortgage document listed Mortgage Electronic Registration Systems (MERS) as mortgagee and nominee for the lender’s successors and assigns. MERS subsequently assigned Butler’s mortgage to Deutsche Bank Trust Company Americas (Deutsche Bank). Deutsche Bank foreclosed on Plaintiff’s home. Plaintiff filed suit against Deutsche Bank for wrongful foreclosure, slander of title, and unfair and deceptive business practices under Massachusetts law, alleging that Deutsche Bank lacked legal possession over both his mortgage and accompanying note, making it an improper party to foreclose. The district court dismissed Plaintiff’s complaint for failure to state a claim, concluding that the foreclosure sales were in accordance with the relevant statutory law. The First Circuit Court of Appeals affirmed the district court’s decision to dismiss Plaintiff’s complaint, holding (1) Deutsche Bank need not have possessed Plaintiff’s note, and (2) Plaintiff failed to state any other colorable claim on which relief might be granted. View "Butler v. Deutsche Bank Trust Co. Ams." on Justia Law
W Holding Co., Inc. v. AIG Ins. Co. – P.R.
After Westernbank of Puerto Rico was ordered closed in the late 2000s and the Federal Deposit Insurance Corporation (“FDIC”) was appointed receiver, the FDIC discovered that certain bank directors and officers had breached their fiduciary duty by jeopardizing the bank’s financial soundness, causing over $176 million in damages to the bank. The directors and officers asked their insurer, Chartis Insurance Company, to confirm coverage under a directors’ and officers’ liability-insurance policy issued by Chartis to Westerbank’s owner, W Holding Company, Inc. Chartis denied coverage. The directors and officers and the FDIC sued Chartis. In this “procedurally complicated” case, a district judge eventually issued an order requiring Chartis to advance defense costs to the directors and officers. The First Circuit Court of Appeals affirmed, holding (1) the Court had jurisdiction to hear the parties; and (2) the district judge did not err in making its cost-advancement ruling. View "W Holding Co., Inc. v. AIG Ins. Co. - P.R." on Justia Law
Serra v. Quantum Servicing Corp.
Plaintiff refinanced his residential home mortgage, taking out a loan secured by his home. The mortgage listed Mortgage Electronic Registration Systems, Inc. (“MERS”) as the mortgagee of record. MERS subsequently transferred the mortgage. Wells Fargo Bank, N.A. as Trustee for RMAC Pass-Through Trust, eventually obtained the mortgage. After Wells Fargo sold Serra’s property at foreclosure, Serra brought suit in Massachusetts state court asserting, among other claims, claims for wrongful foreclosure and unfair or deceptive business practices based on his theory that MERS lacked the authority to transfer his mortgage. Serra’s suit was removed on the basis of diversity, and summary judgment as to all claims was entered against Serra. The First Circuit Court of Appeals affirmed, holding (1) under Massachusetts law, MERS may validly possess and transfer a legal interest in a mortgage; (2) subsequent mortgage assignees cannot incur liability for the allegedly predatory practices of their predecessor-in-interest; and (3) Plaintiff’s argument that his right to rescission was improperly cut short by the sale of his property was without merit. View "Serra v. Quantum Servicing Corp." on Justia Law
Calderon-Serra v. Banco Santander P.R.
Plaintiffs filed a complaint against their bank and others, asserting a cause of action under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), among other claims, asserting that Defendants engaged in an unlawful scheme to lend Plaintiffs money in violation of federal margin requirements limiting the extent to which securities can be used as collateral for funds loaned to purchase the securities. The district court (1) dismissed the complaint as to two defendants for failure of service, and (2) dismissed the remainder of the suit for failure to state a claim upon which relief could be granted, finding that the alleged misconduct was not actionable under RICO, which does not encompass private claims that would have been actionable as securities fraud. The First Circuit Court of Appeals affirmed, holding that the district court (1) correctly concluded that Plaintiffs failed to state a claim for relief under RICO; and (2) did not abuse its discretion in dismissing the complaint as to two defendants for failure of service. View "Calderon-Serra v. Banco Santander P.R." on Justia Law
Wilson v. HSBC Mortgage Servs., Inc.
Plaintiffs granted a mortgage on their property in Massachusetts to Ameriquest Mortgage Company, which assigned its interest in the mortgage to Mortgage Electronic Registration System, Inc. (MERS). MERS later purported to assign Plaintiffs’ interest to HSBC Mortgage Services, Inc. (HSBC). HSBC subsequently began foreclosure proceedings on Plaintiffs’ property. Plaintiffs filed an eight-count complaint against HSBC, claiming the assignment was void, and therefore, HSBC never acquired the mortgage to their property and had no right to initiate foreclosure proceedings. The district court dismissed Plaintiffs’ complaint for failure to state a claim, concluding that Plaintiffs did not have standing to challenge the assignment because they were not a party to the assignment, nor were they third-party beneficiaries of the assignment. The First Circuit Court of Appeals affirmed, holding (1) under Massachusetts law, homeowners in Plaintiffs’ position have standing to challenge a prior assignment of their mortgage on the grounds that the assignment was void, but because Plaintiffs did not set forth a colorable claim that the mortgage assignment in question was void, Plaintiffs lacked standing to raise certain claims; and (2) Plaintiffs failed to state a claim for promissory estoppel with respect to a loan modification. View "Wilson v. HSBC Mortgage Servs., Inc." on Justia Law
MacKenzie v. Flagstar Bank, FSB
Plaintiffs, property owners, filed an action against Defendant, a bank, alleging eleven counts of state law violations for Defendant’s decision to deny Plaintiffs’ application for a loan modification under the Home Affordable Modification Program and to foreclose on Plaintiffs’ home. The district court granted Defendant’s motion to dismiss. The First Circuit Court of Appeals affirmed the district court’s dismissal of Plaintiffs’ amended complaint, holding that the district court properly dismissed Plaintiffs’ claims for breach of the implied obligation of good faith and fair dealing, violation of the Massachusetts Consumer Credit Cost Disclosure Act, rescission, negligence, and promissory estoppel. View "MacKenzie v. Flagstar Bank, FSB" on Justia Law
Old Republic Nat’l Title Ins. Co. v. Levasseur
Appellant obtained a loan from a Bank for a home equity line of credit secured by a second mortgage on her home in Rowley, Massachusetts. Appellant later sold her home but did not notify the Bank of the sale. Appellant later took advantage of a mistake made on the part of the Bank and obtained $124,200, the exact limit on the home equity line. After Appellant failed to pay back the $124,200 drawn from the home equity account, the Bank commenced foreclosure proceedings on the Rowley property. The new owners were insured by Old Republic National Title Insurance Company, which paid the debt, took an assignment of all of the Bank's rights against Appellant, and sued Appellant in state court. A default judgment was entered against Appellant. Thereafter, Appellant filed for bankruptcy. Old Republic sought a determination that its pre-petition judgment was excepted from discharge as a debt. The bankruptcy court determined that Appellant's debt was not dischargeable in bankruptcy because it was for money Appellant obtained by false pretenses and because it was a debt arising from willful and malicious injury. The First Circuit Court of Appeals affirmed, holding that the bankruptcy court was correct to find the debt to be non-dischargeable. View "Old Republic Nat'l Title Ins. Co. v. Levasseur" on Justia Law
Easthampton Savings Bank v. City of Springfield
The City of Springfield enacted two local ordinances that imposed new legal duties on (1) property owners to maintain property during the foreclosure process and provide a $10,000 cash bond per foreclosure to the City, and (2) mortgagees to attempt a settlement through negotiations before foreclosing. In dispute was the definition of "owner" in the first ordinance, which included mortgagees who were not in possession and had begun the foreclosure process. The ordinance imposed the duties on the mortgagees whether the mortgagors were still in possession. Six banks sued in state court, seeking to have the ordinances invalidated as inconsistent with and preempted by comprehensive state laws governing foreclosure and property maintenance and as inconsistent with state and federal constitutional guarantees. The case was removed to federal district court, which concluded that the ordinances were valid. The banks appealed. The First Circuit Court of Appeals certified dispositive state law questions to the Massachusetts Supreme Judicial Court because the outcome of the case depended on unresolved questions of Massachusetts law and raised significant policy concerns better suited for resolution by that state court. View "Easthampton Savings Bank v. City of Springfield" on Justia Law
ORIX Capital Markets, LLC v. Cadlerocks Centennial Drive, LLC
Cadlerocks Centennial Drive, LLC entered into a loan secured by a mortgage on its property. Daniel Cadle executed a personal guaranty on the loan. The original lender subsequently assigned the mortgage and related documents to Wells Fargo Bank as trustee for registered holders ("Trust"). ORIX Capital Markets, LLC was the special servicer of the Trust and began servicing the loan. Cadlerocks later defaulted on its loan, after which the Trust commenced foreclosure proceedings. ORIX then filed this lawsuit against Cadlerocks and Cadle, alleging breaches of the various agreements related to the loan. Among those documents was an indemnity agreement, under which Cadle and Cadlerocks agreed to indemnify the original lender and its assignees for liabilities "sought from or asserted against" the indemnitees connected with the presence of hazardous material on or around the property. ORIX conducted environmental tests on the property, and the district court held that ORIX was entitled to recover the majority of the costs associated with the environmental testing under the indemnity agreement. The First Circuit Court of Appeals reversed the part of the district court's order awarding costs associated with environmental testing, holding that the cost of the tests that ORIX conducted fell outside the scope of the indemnity agreement. Remanded. View "ORIX Capital Markets, LLC v. Cadlerocks Centennial Drive, LLC" on Justia Law