Justia Banking Opinion Summaries

Articles Posted in US Court of Appeals for the Sixth Circuit

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Plaintiffs own two dental practices, several properties that generate rental income, a sports bar, and an indoor basketball gymnasium that they rent out as an event center. Around 2009, they began “buying property” and obtained a $300,000 commercial line of credit from First Southern. In 2013, Plaintiffs sought a loan from Southern to convert a vacant former hotel into apartment units and commercial spaces. Southern approved a “maximum total principal balance” that “will not exceed $1,013,519.00.” Plaintiffs later sought additional funds to complete the renovation. A revised total estimated cost was $1,654,648.65, approximately $712,000 above the total cost for the project represented in Plaintiffs’ loan application. Southern then learned about Plaintiffs’ additional debt burden, refused to loan additional funds, and declined to extend the maturity date on the line of credit. After Scott paid off his debts with Southern, Southern’s automated computer system continued to report Scott’s entire prior payment history, including that he had previously been delinquent on his loans. Southern represented to Plaintiffs that it had contacted a consumer credit agency about the error. The Sixth Circuit affirmed summary judgment in favor of the defendants in a suit under the Fair Credit Reporting Act, 15 U.S.C. 1681. Plaintiffs never notified a consumer reporting agency about their dispute, a prerequisite for prevailing under the Act, which preempts state common law claims involving reporting to consumer reporting agencies. View "Scott v. First Southern National Bank" on Justia Law

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Brintley is blind. To navigate the internet, she uses a screen reader that scans webpages and narrates their contents. The technology struggles with some material, especially pictures and video. With some effort, companies can make their websites fully screen-reader compatible. The credit unions, established under Michigan law, maintain a limited brick-and-mortar presence; both operate websites. Brintley tried to browse these websites but found her screen reader unable to process some of their content. A “tester” of website compliance with the Americans with Disabilities Act, Brintley sued the credit unions, seeking compensatory and injunctive relief, arguing that the websites were a “service” offered through a “place of public accommodation,” entitling her to the “full and equal enjoyment” of the websites. 42 U.S.C. 12182(a). The district court rejected an argument that Brintley failed to satisfy Article III standing. The Sixth Circuit reversed. To establish standing, Brintley must show that she sustained an injury in fact, that she can trace the injury to the credit unions’ conduct, and that a decision in her favor would redress the injury. Brintley must show an invasion of a “legally protected interest” that is “concrete and particularized” and “actual or imminent” and that affects her in some “personal and individual way.” Brintley lacks eligibility under state law to join either credit union and her complaint does not convey any interest in becoming eligible to do so. View "Brintley v. Belle River Community Credit Union" on Justia Law

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The Real Estate Settlement Procedures Act (RESPA) creates a cause of action for “borrower[s],” 12 U.S.C. 2605(f). Tara and Nathan Keen got a loan and took out a mortgage when they bought their house. Both of them signed the mortgage; only Nathan signed the loan. The pair later divorced. Nathan gave Keen full title to the house. He died shortly afterward. Although Tara was not legally obligated to make payments on the loan after Nathan died, she made payments anyway so she could keep the house. She later ran into financial trouble, fell behind on those payments, and contacted the loan servicer, Ocwen. After unsuccessful negotiations, Ocwen proceeded with foreclosure. The house was sold to a third-party buyer, Helson. Soon after foreclosure, Tara sued both Ocwen and Helson, alleging that Ocwen violated the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. 2601, which requires that loan servicers take certain steps when a borrower asks for options to avoid foreclosure. Tara alleged that Ocwen failed to properly review her requests before it foreclosed on her house. The Sixth Circuit affirmed the dismissal of Keen’s RESPA claims. RESPA’s cause of action extends only to “borrower[s].” Keen was not a “borrower” because she was never personally obligated under the loan agreement. View "Keen v. Helson" on Justia Law

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Fifth Third Bank’s “Early Access” program is a short-term lending option for certain customers who hold eligible checking accounts. Fifth Third deposited Early Access loans straight into borrowers’ accounts, then paid itself back automatically, with a 10% “transaction fee,” after a direct deposit posted or 35 days elapsed, whichever came first. The contract governing the program disclosed the annual percentage rate (APR) as 120% in all cases. Plaintiffs obtained Early Access loans, which were paid back fewer than 30 days later. They contend that the 120% figure is false and misleading. Calculated using a more conventional method, in which the APR is tied to the length of the loan, plaintiffs assert that the APR was actually as high as 3650%. The district court rejected an Ohio law breach-of-contract claim, holding that the contract unambiguously disclosed the method for calculating APR despite admitting that the result “may be misleading.” The Sixth Circuit reversed. The contract was ambiguous because it provided different descriptions of “APR” that cannot be reconciled. The first was a definition, lifted verbatim from a federal regulation, that describes the APR as being “expressed as a yearly rate”; the second was the method used to calculate it, which is not based on any time period. The ambiguity raises a question of fact that should be resolved on remand. View "Laskaris v. Fifth Third Bank" on Justia Law

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FAMC and UNB entered into a 2005 Correspondent Loan Purchase Agreement: FAMC would purchase mortgage loans from UNB; UNB made representations and warranties, including that there would be no fact or circumstance that would entitle a subsequent purchaser to demand repurchase of a loan. UNB agreed to repurchase any loans if a representation or warranty turned out to be false or if a subsequent buyer required that FAMC repurchase the loan. UNB promised to indemnify FAMC for losses due to any misrepresentation or breach of the Agreement. UNB later agreed to perform underwriting for loans it sold to FAMC. The 2006 “Salvino Loan” and the 2007 “Turner Loan” were underwritten by UNB. FAMC resold both to Wells Fargo. In 2010, Wells Fargo notified FAMC that it had identified defects in the underwriting for both loans and demanded that FAMC repurchase the Salvino Loan and indemnify with respect to the Turner Loan. FAMC paid Wells Fargo $231,225.33. UNB refused to repurchase or indemnify. To cut its losses, FAMC resold the Salvino Loan. In 2013, FAMC sued. The district court granted FAMC summary judgment, awarding $188,858.71 in damages. The Sixth Circuit affirmed. The repurchase and indemnification provisions created independent contractual obligations, so the claims did not accrue until 2010 and 2011, when FAMC incurred its losses; the 2013 complaint was timely. FAMC produced sufficient evidence of breach and causation and its mitigation efforts were reasonable. View "Franklin American Mortgage Co. v. The University National Bank of Lawrence" on Justia Law

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Pittman's mortgage note requires that Pittman pay $1,980.42 monthly. iServe initially serviced the loan. Pittman failed to make two payments in 2011. iServe granted Pittman a Trial Modification Plan (TPP) under the Home Affordable Mortgage Program. Pittman was to make three $1,357.80 payments in 2012; “[a]fter all trial period payments are timely made ... your mortgage will be permanently modified.” Pittman made the payments but the TPP was never made permanent in writing. Pittman continued to make reduced payments. Servicing of the loan was assigned to BSI, which sent Pittman a notice of default. Pittman’s attorney, Borman discovered that iServe did not report the modification to the Treasury Department. In January 2013, iServe emailed BSI that“[t]he borrower … made all payments on time, contractually entitling him to a permanent mod [sic] in April 2012.” BSI told Pittman to continue the trial payment amount. In 2014, Pittman obtained a credit report, which showed that both servicers had reported his payments as past due. Pittman sent letters to credit reporting agencies disputing the information. The loan servicers concluded that the payments were untimely as reported. In addition, BSI had not made property tax payments from Pittman's escrow account. Pittman sued, alleging negligent and willful violation of the Fair Credit Reporting Act, 15 U.S.C. 1681n, 1681o. The court granted the servicers summary judgment. The Sixth Circuit reversed in part. The reasonableness of the investigations is a question for the trier of fact to resolve. Pittman’s missed payments did not constitute a substantial breach, so Michigan’s first substantial breach rule does not prevent Pittman from bringing a breach of contract claim against BSI. View "Pittman v. Experian Information Solutions, Inc." on Justia Law

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Lossia used a Flagstar Bank checking account to initiate Automated Clearing House (ACH) transactions--electronic payments made from one bank account to another. Common ACH transactions include online bill pay and an employee’s direct deposit. The account agreement states: Our policy is to process wire transfers, phone transfers, online banking transfers, in branch transactions, ATM transactions, debit card transactions, ACH transactions, bill pay transactions and items we are required to pay, such as returned deposited items, first—as they occur on their effective date for the business day on which they are processed.” National Automated Clearing House Association Operating Rules and Guidelines define an ACH transaction's effective date as “the date specified by the Originator on which it intends a batch of Entries to be settled.” In practice, this date is whatever date the merchant or bank submits the transaction to the Federal Reserve, which includes this settlement date in the batch records that it submits to the receiving institution (Flagstar), which processes the transactions in the order that they were presented by the Federal Reserve in the batch files. Lossia asserted that the order in which Flagstar processed his transactions caused him to incur multiple overdrafts rather than just one. The Sixth Circuit affirmed summary judgment for Flagstar; the plain language of the agreement does not require Flagstar to process transactions in the order that the customer initiated them. View "Lossia v. Flagstar Bancorp, Inc." on Justia Law

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In 2008, Purdy borrowed from Citizens First, using his dairy cattle as collateral. Purdy refinanced in 2009, executing an “Agricultural Security Agreement" that granted Citizens a purchase money security interest in “all . . . Equipment, Farm Products, [and] Livestock (including all increase and supplies) . . . currently owned [or] hereafter acquired.” Citizens perfected this security interest by filing with the Kentucky Secretary of State. Purdy and Citizens executed two similar security agreements in 2010 and 2012, which were perfected. After the 2009 refinancing, Purdy increased the size of his herd, entering into “Dairy Cow Lease” agreements with Sunshine. The parties also executed security agreements and Sunshine filed financing statements. In 2012, milk production became less profitable. Purdy sold off cattle, including many bearing Sunshine’s brand, and filed a voluntary Chapter 12 bankruptcy petition. Both Citizens and Sunshine sought relief from the stay preventing the removal of the livestock. In 2014, the Sixth Circuit held that Citizens failed to demonstrate that the "Leases” were actually security agreements in disguise. On remand, the bankruptcy court determined that all cattle sold at a 2014 auction were subject to Citizens’ security interest. The district court affirmed, awarding Citzens $402,354.54. The Sixth Circuit affirmed; the bankruptcy court did not contravene its mandate by holding a hearing on the question of ownership. View "Sunshine Heifers, LLC v. Citizens First Bank" on Justia Law

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In 1990, Stan and Bara Jurcevic opened an account at the St. Paul Croatian Federal Credit Union (SPCFU). The National Credit Union Administration Board (NCUAB) charters and insures credit unions, 12 U.S.C. 1766, and can place a credit union into conservatorship or liquidation. From 1996-2010, Stan obtained $1.5 million in share-secured loans from SPCFU. Federal auditors discovered that SPCFU’s COO had been accepting bribes in exchange for issuing loans and disguising unpaid balances. SPCFU had $200 million in unpaid debts. NCUAB placed SPCFU into conservatorship and eventually liquidated its assets. NCUAB alleged that Jurcevic failed to disclose a $2,500,000 loan from PNC and an impending decrease in his income; and that he planned to use the loan funds to save his company, Stack. PNC obtained a $2,000,000 judgment against Jurcevic and Stack. NCUAB sued the Jurcevics and Stack and obtained an injunction, freezing the Jurcevics’ and Stack’s assets, except for living expenses. The district court dismissed claims of fraud, conspiracy, and conversion as time-barred and dismissed claims against Bara and Stack as a matter of law. Jurcevic appealed and filed for Chapter 7 bankruptcy. The Board cross-appealed and intervened in the Chapter 7 proceedings. The Sixth Circuit affirmed the asset freeze; the court properly employed the preliminary injunction factors. The court reversed the dismissals because the court did not consider the date of the NCUAB’s appointment and the date of discovery as possible accrual dates for the limitations statute. View "National Credit Union Administration Board v. Jurcevic" on Justia Law

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In 2004, Baker Lofts purchased an abandoned building for renovation. Loans of more than $5 million from Huntington were secured by two mortgages on the building and by personal property, including a tax-increment-financing agreement, rental income, and Baker’s liquor license. Baker defaulted in 2011. Huntington assigned the 2005 mortgage to its subsidiary, Fourteen, which foreclosed by public auction. The Notice stated that “[t]he balance owing on the Mortgage is $5,254,435.04,” but did not mention the senior 2004 mortgage, which Huntington retained. Fourteen, the only bidder, purchased the property for $1,856,250. Huntington released the 2004 mortgage. Fourteen sold the property for $2,355,000. Huntington thought that Baker still owed $3.5 million and invoked its security interests in the remaining collateral. At a public sale, Huntington bought the rights to Baker's tax-increment-financing agreement for $1,107,000; began collecting rents; and asserted its security interest in the liquor license, which Baker had sold before it declared bankruptcy. Assignees of Baker's legal claims sought a declaratory judgment that the sale of the building extinguished all of Baker’s debt. They also raised conversion and tortious interference claims and a claim under Michigan’s secured transactions statute. The Sixth CIrcuit affirmed Huntington's judgment. The district court correctly concluded that Baker’s debt exceeded the value of the foreclosed building and that excess permitted Huntington to take possession of the other property securing its loans. View "DAGS II, LLC v. Huntington National Bank" on Justia Law