Justia Banking Opinion Summaries

Plaintiffs – issuers of collateralized debt obligations secured by certificates in residential-mortgage-backed securities trusts – appealed from three separate judgments dismissing actions brought against The Bank of New York Mellon, Deutsche Bank National Trust Company, and Deutsche Bank Trust Company Americas. In each case, the district courts assumed that Plaintiffs had Article III standing but found that Plaintiffs were precluded from relitigating the issue of prudential standing due to a prior case Plaintiffs had brought against U.S. Bank National Association.   The Second Circuit affirmed the district court’s orders. The court explained that it joined the Ninth Circuit in concluding that the district courts permissibly bypassed the question of Article III standing to address issue preclusion, which offered a threshold, non-merits basis for dismissal. The court also concluded that the district courts’ application of issue preclusion was correct. The court wrote that it fully agreed with the district courts that Plaintiffs were not entitled to a second bite at the prudential-standing apple after the U.S. Bank Action. The district courts, therefore, did not err in taking this straightforward, if not “textbook,” path to dismissal. View "Phx. Light SF Ltd. v. Bank of N.Y. Mellon; Phx. Light SF DAC v. Bank of N." on Justia Law

In 2006, Respondent Jerome Silvernagel took out a second mortgage on a home. He agreed to make monthly payments to pay down the principal and 10% annual interest, with any remaining balance due in 2036. Silvernagel alone signed the promissory note, agreeing to repay the underlying loan. But both he and Respondent Dan Wu signed the deed of trust securing payment of the note. The deed of trust contained an acceleration clause, giving the lender the power to declare the entire loan immediately due and payable upon default. When exercised, acceleration authorized the lender to foreclose on the property to satisfy the outstanding debt and any related fees. In 2012, a bankruptcy court discharged Silvernagel’s personal liability on the mortgage under Chapter 7 of the Bankruptcy Code. Silvernagel had stopped making payments on the note before the discharge and made no payments since. The discharge prohibited creditors from attempting to collect the debt from Silvernagel directly, but it did not extinguish “the right to enforce a valid lien, such as a mortgage or security interest, against the debtor’s property after the bankruptcy.” In 2019, US Bank allegedly threatened to foreclose on the property if Silvernagel did not make payments on his mortgage. Silvernagel and Wu (hereinafter collectively, “Silvernagel”) filed this case in response, requesting declaratory relief to prevent US Bank’s enforcement of the deed of trust. He argued that US Bank’s interest was extinguished by the six-year statute of limitations on debt collection. Alternatively, he asserted that the doctrine of laches prevented enforcement of the agreement. The trial court dismissed the case, determining that US Bank’s claim had not accrued (meaning that the six-year limitation period hadn’t even commenced). A division of the court of appeals reversed, holding that the statute of limitations began to run upon Silvernagel’s 2012 bankruptcy discharge, barring US Bank’s claim. The Colorado Supreme Court reversed the judgment of the court of appeals: when there is no evidence that the lender accelerated payment on the mortgage agreement, a claim for any future payment doesn’t accrue until that payment is missed under the agreement’s original terms. View "US Bank, N.A. v. Silvernagel, et al." on Justia Law

Weichsel's Chase credit card member agreement discloses an “Annual Membership Fee” to be added to his billing statement and that Weichsel may request an additional card for an authorized user. A “Rates and Fees Table” discloses the annual membership fee as $450 plus $75 for each additional card. Weichsel included one additional user. Weichsel alleges that his December 2019 billing statement included a renewal notice, stating that Weichsel’s annual $525.00 membership fee would be billed on 02/01/2020, how the fee would be charged, and how Weichsel could avoid it. The notice did not specify the breakdown: $450 for the primary cardholder and $75 for the additional user. The fee appeared as separate items on Weichsel’s February 2020 billing statement: a $450 charge and another for $75. Weichsel paid $525 but claims that “[h]ad [he] been aware” he could retain his credit card for $450, he would have paid only that amount. Weichsel filed a putative class action, alleging that Chase’s failure to itemize each component of the renewal fee in the December 2019 renewal notice violated the Truth in Lending Act (TILA), 15 U.S.C. 1601, and Regulation Z.The Third Circuit affirmed the dismissal of the suit. Weichsel had standing; he suffered an economic injury based on his assertion that he would not have paid the full $525 if he had known it included the additional card fee. However, neither TILA nor Regulation Z expressly mandates disclosure of each individual component of the total annual fee in a renewal notice. Regulation Z requires itemization of fees on other disclosures but lacks such a requirement for renewal notices. View "Weichsel v. JP Morgan Chase Bank NA" on Justia Law

An Ohio tax lien on real property is enforced through a foreclosure action, which may result in a sale of the property at auction. If such a sale occurs and the price exceeds the amount of the lien, the excess funds may go to junior lienholders or the owner. If the tax-delinquent property is abandoned, an auction may not be required; the property may be transferred directly to a land bank, free of liens. When that happens, the county gives up its right to collect the tax debt, and any junior lienholders and the owner get nothing. The properties at issue were transferred directly to county land banks. US Bank owned one foreclosed property and claims to have held mortgages on the other two. US Bank alleges that at the time of the transfers, the fair market value of each property was greater than the associated tax lien and that the transfers to the land banks constituted takings without just compensation.The Supreme Court of Ohio affirmed the dismissals of the suits. US Bank lacks standing in one case; it did not hold the mortgage at the time of the alleged taking. As to the other properties, US Bank had adequate remedies in the ordinary course of the law. It could have redeemed the properties by paying the taxes; it could have sought transfers of the foreclosure actions from the boards of revision to the common pleas courts; it could have appealed the foreclosure adjudications to those courts. View "US Bank Trust, National Association v. Cuyahoga County" on Justia Law

The Supreme Court reversed the judgment of the trial court granting a motion to compel arbitration brought by Defendant Star Financial Group, Inc. in this class-action complaint alleging that Defendant collected improper overdraft fees, holding that Plaintiffs' account agreement did not allow Defendant to add an addendum to the terms and conditions of the account agreement.When Plaintiffs opened their checking account they assented to an account agreement detailing the terms and conditions of their relationship with Defendant. Before Plaintiffs brought this suit Defendant added an arbitration and no-class-action addendum to the terms and conditions of Plaintiffs' account agreement. When Plaintiffs filed this lawsuit Defendants cited the addendum and filed a motion to compel arbitration. The trial court granted the motion. The Supreme Court reversed, holding that Plaintiffs were not bound by the arbitration addendum to their account agreement because the account agreement's change-of-terms provision did not allow Plaintiff to add the addendum. View "Decker v. Star Financial Group Inc." on Justia Law

4201 2nd Ave. W., LLC, d.b.a. Safari Fuels 105 (“4201”) appealed a district court’s judgment finding First State Bank & Trust, formerly First National Bank & Trust Company (“the bank”), held a valid and enforceable security interest in a liquor license and other collateral. In 2015, the bank loaned approximately $4.34 million to Racers Store 102, LLC (“Racers”) under a promissory note for its operation of a convenience store. As security for the loan, Racers signed the bank a leasehold mortgage, security agreement, and fixture filing against real and personal property including a liquor license, coffee kiosk, walk-in freezer, and Kohler generator, among other collateral. In 2016, Racers defaulted on its loan, and the bank commenced a foreclosure action. During foreclosure proceedings, the bank took control of the convenience store and contracted with 4201 to operate the store while the foreclosure action was pending. Racers transferred its rights, titles, and interests in the ground lease and assets of the store to 4201; 4201 entered into a forbearance agreement with the bank. The parties subsequently discovered the liquor license could not be transferred until delinquent property taxes were paid. The bank and 4201 executed an addendum to the forbearance agreement agreeing to pay equal shares of the property taxes whereby the liquor license would become an asset of 4201 subject to the existing lien held by the bank. The parties also entered into a personal property pledge in which 4201 pledged to give the bank a continuing first-priority interest in the liquor license, 4201 agreed not to sell, assign, or transfer the license, and 4201 agreed to reimburse the bank for costs associated with defending its interest in the license. In 2021, the bank decided to cease operations of the store and offered to sell the liquor license to 4201. 4201 commenced legal action seeking a declaratory judgment that the bank no longer held a valid and enforceable lien on the liquor license, coffee kiosk, walk-in freezer, and Kohler generator. Following a bench trial, the district court determined the bank held a valid and enforceable security interest in the liquor license and other collateral. The court dismissed the bank’s counterclaim. Finding no reversible error in the district court's judgment, the North Dakota Supreme Court affirmed. View "4201 2nd Ave W v. First State Bank & Trust, et al." on Justia Law

In this foreclosure proceeding, the Supreme Court vacated the judgment of the intermediate court of appeals (ICA) affirming the circuit court's order granting Deutsche Bank's motion for summary judgment on its complaint to foreclose a mortgage, holding that Deutsche Bank did not establish that it had standing to foreclose.In 2006, Blaine Yata executed a note and mortgage to New Century Mortgage Corporation. The mortgage was later assigned to Deutsche Bank National Trust Company, as trustee for Morgan Stanley ABS Capital I Inc. Trust 2006-NC4 (Deutsche Bank). When Yata defaulted on the note, Deutsche Bank brought a complaint to foreclose on the mortgage. The circuit court granted summary judgment for Deutsche Bank. The ICA affirmed. The Supreme Court vacated the ICA's judgment on appeal, holding (1) the ICA misapplied U.S. Bank Trust, N.A. v Verhagen, 489 P.3d at 419 (2021) in determining that Deutsche Bank's documents were admissible; and (2) even if the documents were admissible, they would not establish that Deutsche Bank had possession of the note when it filed the complaint. View "Deutsche Bank National Trust Co. v. Yata" on Justia Law

The Disputed Instruments, prepaid financial instruments used to transfer funds to a named payee, are sold by banks on behalf of MoneyGram and others. When these instruments are not presented for payment within a certain period of time, they are deemed abandoned. MoneyGram applies the common-law escheatment practices outlined in 1965 by the Supreme Court: The proceeds of abandoned financial products should escheat to the state of the creditor’s last known address, or where such records are not kept, to the state in which the company holding the funds is incorporated. MoneyGram does not keep records of creditor addresses but transmits the abandoned proceeds to its state of incorporation. States invoked the Supreme Court’s original jurisdiction to determine whether the abandoned proceeds of the Disputed Instruments are governed by the Disposition of Abandoned Money Orders and Traveler’s Checks Act (FDA), which provides that a money order or “similar written instrument (other than a third-party bank check)” should generally escheat to the state in which the instrument was purchased, 12 U.S.C. 2503.The Court held that the Disputed Instruments are sufficiently similar to money orders to fall within the FDA’s “similar written instrument” category. Being prepaid makes them likely to escheat. The FDA was passed to abrogate common law because, for instruments like money orders, the entities selling such products often did not keep records of creditor addresses, resulting in a “windfall” to the state of incorporation. Bank liability is not a trigger for exclusion, given that banks can be liable on money orders, which are expressly covered. Whatever the intended meaning of “third-party bank check,” it cannot be read broadly to exclude prepaid instruments that escheat inequitably due to the business practices of the company holding the funds. View "Delaware v. Pennsylvania" on Justia Law

The Bank Secrecy Act requires U.S. persons with financial interests in foreign accounts to file an “FBAR” annual Report of Foreign Bank and Financial Accounts; 31 U.S.C. 5314 delineates legal duties while section 5321 outlines the penalties, with a maximum $10,000 penalty for non-willful violations. Bittner—a dual citizen of Romania and the U.S.—learned of his reporting obligations in 2011 and subsequently submitted reports covering 2007-2011. The government deemed Bittner’s late reports deficient because they did not address all accounts as to which Bittner had either signatory authority or a qualifying interest. Bittner filed corrected FBARs providing information for 61 accounts in 2007, 51 in 2008, 53 in 2009 and 2010, and 54 in 2011. The government asserted that non-willful penalties apply to each account not accurately or timely reported. Bittner’s reports collectively involved 272 accounts; the government calculated a $2.72 million penalty. The Fifth Circuit affirmed.The Supreme Court reversed. The $10,000 maximum penalty for non-willful failure to file a compliant report accrues on a per-report, not a per-account, basis. Section 5314 does not address accounts or their number. An individual files a compliant report or does not. For cases involving willful violations, the statute tailors penalties to accounts. When one section of a statute includes language omitted from a neighboring section, the difference normally conveys a different meaning. The Act's implementing regulations require individuals with fewer than 25 accounts to provide details about each account while individuals with 25 or more accounts do not need to list each account or provide account-specific details unless requested by the Secretary. View "Bittner v. United States" on Justia Law

In March 2021, Riverside County, California District Attorney sued Credit One Bank in Riverside County Superior Court. The lawsuit (the “state action”) alleged that Credit One, a national bank, violated California law by employing a vendor to make extensive harassing debt collection phone calls to California residents. In a related federal case (the “federal action”), Credit One requested that the United States District Court for the Central District of California enjoin the state action on the ground that it was an unlawful exercise of “visitorial powers,” which the National Bank Act (“NBA”) and its associated regulations grant exclusively to the Office of the Comptroller of the Currency (“OCC”). The district court ultimately decided to abstain under Younger v. Harris, 401 U.S. 37 (1971), in favor of the state action and dismissed the federal action. Credit One appealed that dismissal.   The Ninth Circuit affirmed. The panel held that the district court correctly abstained because all four Younger factors were met. First, the state action qualified as an “ongoing” judicial proceeding because no proceedings of substance on the merits had taken place in the federal action. Second, the state court action implicated the important state interest of protecting consumers from predatory business practices. The panel held that the state court action was not an exercise of “visitorial powers,” and nothing in federal law prevents a district attorney from vindicating a state interest in consumer protection by suing a national bank. Third, Credit One had the ability to raise a federal defense under the National Bank Act. And fourth, the injunction Credit One sought would interfere with the state court proceeding. View "CREDIT ONE BANK, N.A. V. MICHAEL HESTRIN" on Justia Law