Justia Banking Opinion Summaries

The Bank filed a claim with Travelers for the loss incurred with a long-time customer's default. The customer had pledged various assets as collateral for a loan including stock certificates representing shares in The Securance Group. The court held that, under Alabama law, a financial institution bond's definition of "counterfeit" - "an imitation which is intended to deceive and to be taken as an original" - does not encompass a duly authorized stock certificate procured under false pretenses. In this case, Certificate No. 11 at issue was fraudulently procured and, as such, valueless, it was an authentic document and thus not "counterfeit" under the terms of the bond. Accordingly, the court affirmed the district court's grant of summary judgment to Travelers. View "Bank of Brewton v. The Travelers Companies" on Justia Law

Defendants Barrett and Linda Gregoire, sought to amend or set aside judgments of foreclosure in favor of plaintiff bank based on claims of fraud and misrepresentation. The dispute underlying this case concerned four multi-family rental properties: three in Washington County and one in Caledonia County that were part of defendants' rental-property business. The bank's loans to defendants were secured by the properties and were cross-collateralized with each other. In March and April 2010, the bank filed foreclosure complaints with respect to the properties. The parties executed a forbearance agreement under which defendants retained control of the properties as landlords, but the tenants were to pay rent directly to the bank. The parties stipulated to the appointment of a receiver to collect rent for the bank. The receiver filed a report with the court stating that defendant Barrett Gregoire was renting to new tenants and collecting rents and security deposits without turning over the funds to the receiver. Shortly thereafter, the bank filed an emergency motion to enforce the receivership order based on allegations that defendant Barrett Gregoire was substantially interfering with the receivership. The court issued a supplemental order, expanding the receiver's authority and placing the receiver in full control of the properties. The bank notified the court that the forbearance was no longer in place, and that it would proceed with foreclosure. The trial court denied the Gregoires' motions to set aside the trial court's grant of the bank's motions. On appeal, defendants argued that there was no final judgment so the order could have been amended without resort to post-judgment proceedings, and even if it was a final order, the court erred in denying their request for relief and in entering judgment of default. Finding no reversible error in the trial court's decision, the Supreme Court affirmed. View "TBF Financial, LLC v. Gregoire" on Justia Law

Plaintiffs purchased a home subject to a deed of trust. After they defaulted on their loan, nonjudicial foreclosure proceedings were initiated, and the beneficiary of the deed of trust, OneWest, purchased the property at the foreclosure sale. Plaintiffs sued, alleging that the sale was void due to irregularities in the foreclosure proceedings: the predicate notice of default was executed and recorded by an entity claiming to be the trustee of OneWest several weeks before OneWest signed and recorded documents formally designating that entity as such. The trial court dismissed. The court of appeal affirmed. There was no statutory defect in the manner or timing of the trustee substitution, but even if so, the entity was otherwise authorized to act for OneWest in filing the notice of default because it was alleged that the entity was at all times acting as the agent of OneWest. Alternatively, any alleged defect or omission was not substantial within the meaning of the law of foreclosure, making the subsequent sale at most voidable, and not void. Because the sale was, at worst, only voidable, the borrowers in default were required to allege tender and prejudice, which they did not do. View "Ram v. OneWest Bank" on Justia Law

The Borrower defaulted on a nonrecourse Commercial Mortgage-Backed Securities (CMBS) loan secured by property located in Detroit. CMBS loans are packaged as a trust to attract investors; in return for nonrecourse liability, CMBA borrowers promise to refrain from certain financial behavior likely to increase the risk of default and bankruptcy; the loan at issue included a solvency clause. Michigan’s 2012 Nonrecourse Mortgage Loan Act applies retroactively to render solvency covenants in nonrecourse loans unenforceable, declaring them “an unfair and deceptive business practice . . . against public policy [that] should not be enforced.” The lender foreclosed. Purchaser bought the property at auction with a winning bid of $756,000, and, standing in the lender’s shoes and citing the solvency clause, sued Borrower and its guarantor to collect a $6 million deficiency. The district court granted summary judgment in favor of Borrower. The Sixth Circuit affirmed, agreeing that that the NMLA: rendered the solvency covenant in Borrower’s CMBS loan unenforceable; violated neither the Contract nor Due Process Clauses of the United States and Michigan Constitutions; and comported with Michigan’s constitutional provision mandating the separation of governmental powers. View "Borman, LLC v. 18718 Borman, LLC" on Justia Law

Cottage Capital, LLC brought this action to enforce a guaranty agreement against Red Ledges Land Development. The district court dismissed the enforcement action with prejudice, concluding that the enforcement action was precluded as a compulsory counterclaim because it arose out of the same transaction or occurrence as a previously filed declaratory judgment action between the parties, and there could be no waiver of the preclusive effect of Utah R. Civ. P. 13(a). The Supreme Court reversed, holding that Rule 13(a) was not implicated in this case because (1) Rule 13(a) does not extend to a counterclaim that has not yet matured at the time of a civil proceeding; and (2) Cottage Capital’s enforcement claim had not matured at the time of the earlier proceedings between the parties, and therefore, this claim was not precluded. Remanded. View "Cottage Capital, LLC v. Red Ledges Land Dev." on Justia Law

2 Ton Plumbing, LLC recorded a notice of mechanics’ lien against a lot in a development (Lot 30). Gregory and Kendra Thorgaard later purchased Lot 30 and executed a trust deed in favor of Washington Federal. Thereafter, 2 Ton recorded amended notices of mechanics’ lien against Lot 30 and filed a lien foreclosure claim against the Thorgaards and Washington Federal. Washington Federal, meanwhile, recorded its notice of release of lien and substitution of alternate security purporting to release 2 Ton’s original notice of lien. The district court ultimately entered judgment against Lot 30, which included principal and fees and costs. The Supreme Court reversed, holding (1) 2 Ton’s amended notices of lien were invalid because they included attorney fees and costs in the value of the mechanics’ lien, but 2 Ton’s original notice of lien remained valid; (2) the Thorgaards’ notice of release of lien and substitution of alternate security complied with the statutory requirements, and therefore, the district court erred in refusing to release Lot 30 from the lien; but (3) because the Thorgaards stipulated to the accuracy of the original lien claim, 2 Ton was entitled to recover its costs and a reasonable attorney fees award. Remanded. View "2 Ton Plumbing, LLC v. Thorgaard" on Justia Law

Plaintiff obtained a default judgment against Barker & Little, Inc. (BLI). BLI was a general partner in Barker & Little Limited Partnership III (BLLP) and the operating entity for the management of rental properties, including property titled to BLLP. Doug Hamilton owned BLI, BLLP and Barker & Little Manufactured Homes, Inc. (BLMHI). Great Western Bank extended a line of credit to BLI secured by mobile homes and rent-to-own contracts owned by BLMHI. The Bank later initiated foreclosure proceedings against BLMHI and BLLP. BLI was named as a codefendant in each action. The Bank, however, did not join Plaintiff as a defendant or notify her of the foreclosure actions. The Bank and Hamilton privately negotiated a settlement agreement. When she learned of the Bank’s foreclosure actions, Plaintiff initiated this action against the Bank. The circuit court granted summary judgment for the Bank. The Supreme Court affirmed, holding that Plaintiff did not have an interest in, or lien on, the foreclosure property on the date the Bank filed its foreclosure actions, and therefore, there were no genuine issues of material fact, and the Bank was entitled to judgment as a matter of law. View "Peters v. Great Western Bank, Inc." on Justia Law

BADD, L.L.C. purchased three warehouse units in Myrtle Beach. To finance the transaction, BADD executed two promissory notes. A personal guaranty was also executed by William McKown, who was a member of BADD. After BADD defaulted, the Bank brought this foreclosure action and included McKown as a party based on his status as a guarantor. In McKown's amended answer and counterclaim, he demanded a jury trial because the Bank sought a money judgment for the breach of a guaranty arrangement. McKown further sought an accounting and a determination that the guaranty agreement was unconscionable. McKown then asserted two counterclaims: (1) civil conspiracy and (2) breach of contract, both based on an alleged conspiracy between the Bank and William Rempher. Finally, McKown asserted third-party claims against Rempher. The Bank moved for an order of reference. The circuit granted the motion, referring the matter in its entirety to the master-in-equity. The Court of Appeals reversed, holding McKown was entitled to a jury trial because the Bank's claim on the guaranty agreement was a separate and distinct legal claim. The Bank appealed, challenging the Court of Appeals' finding that McKown was entitled to a jury trial. The Supreme Court reversed, finding that McKown was not entitled to a jury trial solely because the Bank exercised its statutory right to join him as a party in the event of a deficiency judgment. Furthermore, the Court held McKown was not entitled to a jury trial based on his counterclaims, which, while legal, were permissive. McKown waived his right to a jury trial by asserting permissive counterclaims in an equitable action. View "Carolina First Bank v. BADD, L.L.C." on Justia Law

Appellant filed an action against a Bank seeking to foreclose his judgment lien against property owned by the Bank. Wells Fargo subsequently filed a motion to dismiss Appellant’s complaint because the judgment lien had expired while the foreclosure action was pending. The district court granted the Bank’s motion and dismissed the complaint. On appeal, Appellant argued that the Court should overturn its precedent holding that a foreclosure action does not toll the expiration of a judgment or hold that the Bank should be estopped from asserting the expiration of the judgment because the Bank unfairly extended the foreclosure litigation past the judgment’s expiration. The Supreme Court affirmed, holding (1) filing a foreclosure action does not toll the expiration of a judgment; and (2) principles of equity do not support tolling the expiration of Appellant’s judgment. View "Gildea v. Wells Fargo Bank" on Justia Law

CLC’s principal, Erwin, was general counsel for the bank. CLC deferred invoicing the bank in 2008 when it fell on hard times. In 2009 the Office of Thrift Supervision put the bank into receivership. CLC claims that, days before the takeover, the bank granted it security interests in bank properties. CLC waited months to record attorney liens for the security interests. CLC sought $176,750 in deferred legal fees. The FDIC denied the claim. CLC initially denied possessing the original retainer agreement, claiming oral agreements, until, in 2013, Erwin produced a 1989 agreement. The district court granted the FDIC summary judgment, finding the evidence prejudicial and the delay not “substantially justified.” The fees arrangement did not comply with 12 U.S.C. 1823(e)’s documentation requirements and the security interests were similarly deficient and “taken in contemplation of” insolvency. The court rejected CLC’s argument that the statutory documentation requirements and the D’Oench doctrine (an estoppel rule shielding the FDIC from claims and defenses based on unwritten agreements that reduce bank assets) apply only to secret agreements affecting traditional banking transactions, like loans. The court acknowledged evidence indicating that Erwin and the bank may have backdated the security interests. The Sixth Circuit reversed; D’Oench and its statutory progeny do not apply to its legal services arrangement with the bank. View "Commercial Law Corp., P.C. v. Fed. Deposit Ins. Corp." on Justia Law