Justia Banking Opinion Summaries

In 2011, Wells Fargo foreclosed on the plaintiffs’ residential mortgage loan and purchased their home at a trustee sale conducted by First American. Plaintiffs sued, alleging, that defendants violated their deed of trust’s incorporation of a pre-foreclosure meeting requirement contained in National Housing Act (NHA) regulations and the Federal Debt Collection Practices Act (FDCPA). The trial court sustained demurrers and denied a preliminary injunction. The court of appeal reversed, finding that plaintiffs pled viable causes of action for equitable cancellation of the trustee’s deed obtained by Wells Fargo based on their allegation that Wells Fargo did not comply with the NHA requirements incorporated into the deed of trust. Because compliance was a condition precedent to the accrual of Wells Fargo’s contractual authority to foreclose on the property, if, as plaintiffs allege, the sale was conducted without such authority, it is either void or voidable by a court sitting in equity. Whether void or voidable, plaintiffs were not required to allege tender of the delinquent amount owed View "Fonteno v. Wells Fargo Bank, N.A." on Justia Law

When purchasing a house, the defendants submitted loan documents containing false incomes and bank statements, and failed to disclose that husband’s company was selling and his wife was buying. The company received $750,000 and rebated money paid above that amount to husband. The $1 million in loans they received resulted in $250,000 extra that was not disclosed as going to the couple. They were able to sell the house four months later for the same inflated amount, without raising any concerns. They failed to disclose on the HUD-1 forms in the second transaction that they would be giving the buyer kickbacks. The buyer received $1,090,573.06 in loans, but defaulted without making a payment. The lender eventually sold the house for $487,500. Defendants were convicted of three counts of wire fraud, 18 U.S.C. 1343 and aiding and abetting wire fraud, 18 U.S.C. 2. The Presentence Investigation Report determined that the lender’s loss was $603,073.06 and recommended a 14-point enhancement under USSG 2B1.1(b)(1)(H). The Seventh Circuit affirmed the convictions but remanded for explanation of why the loss was “reasonably foreseeable” and why the sentencing enhancement was proper. Involvement in a fraudulent scheme does not necessarily mean it was reasonably foreseeable that all the subsequent economic damages would occur; there was no evidence that defendants knew they were selling to what turned out to be a fictional buyer. View "United States v. Domnenko" on Justia Law

Appellant financed the purchase of a car over time pursuant to a loan contract. The car dealer assigned the contract to Appellee, a financial services company. Because Appellant stopped making payments before the loan was paid off, Appellee repossessed and sold the car. Appellant sued Appellee, alleging that the repossession and sale of the car did not comply with the Credit Grantor Closed End Credit Law (CLEC). The circuit court dismissed the complaint, concluding (1) Appellant’s statutory claims were untimely under the Maryland Equal Credit Opportunity Act’s one-year statute of limitations, and (2) Appellant’s complaint did not state a cause of action for breach of contract because the requirements of CLEC were not incorporated into the contract as to Appellee. The Court of Appeals reversed, holding (1) an action alleging a violation of CLEC must be brought no later than six months after the loan is satisfied pursuant to the CLEC’s statute of limitations, and therefore, Appellant’s claims under CLEC on limitations grounds were improperly dismissed; and (2) Appellant may assert a contract claim against Appellee because the loan contract adequately incorporated CLEC as part of the contractual obligations, and Appellee voluntarily accepted that provision in taking the assignment. View "Patton v. Wells Fargo Fin. Md., Inc." on Justia Law

SFG, a Texas firm specializing in distressed‐asset investing, bought a loan portfolio from McFarland State Bank for $1.27 million (28.8% of the face value of the debt). Materials provided by McFarland’s agent indicated that the portfolio was secured by 19 real estate properties in Wisconsin. Both parties were well represented during negotiations. The Sale Agreement provided limited remedies in the event of a breach and disclaimed all other remedies. Soon after purchasing the portfolio, SFG learned that three of the 19 collateral properties that supposedly secured the loans had been released before the sale. SFG contacted McFarland; McFarland disputed liability. Months later, SFG sued, seeking damages beyond the remedies provided in the contract. Applying the contractual remedies limitation, a formula that resulted in zero recovery under the circumstances, the district court granted judgment for McFarland. The Seventh Circuit affirmed. Except in the most extraordinary circumstances, courts hold sophisticated parties to the terms of their bargain. View "S. Fin. Grp. LLC v. McFarland State Bank" on Justia Law

Plaintiffs entered into a loan agreement with Potomac Realty Capital LLC (PRC) to rehabilitate and renovate certain property. As security for the loan, NV One granted a mortgage on the property. Plaintiffs later filed a complaint against PRC, asserting violations of the Rhode Island usury law, among other claims. The trial justice granted summary judgment to Plaintiffs with respect to the usury claim, entered an order declaring the loan usurious and void, and voided the mortgage. At issue on appeal was whether a usury savings clause in the loan document validated the otherwise usurious contract. The Supreme Court affirmed, holding that Plaintiffs were entitled to judgment as a matter of law on their usury claim because (1) the loan was a usury; and (2) the usury savings clause was unenforceable on public policy grounds.View "NV One, LLC v. Potomac Realty Capital, LLC" on Justia Law

At issue in this appeal was Eaton v. Fed. Nat’l Mortgage Ass’n, which held that a foreclosure by power of sale is invalid unless a foreclosing party holds the mortgage and also holds either the underlying mortgage note or acts on behalf of the note holder. In the instant case, Plaintiffs defaulted on their mortgage payments, and Mortgage Electronic Registration Systems (MERS) sought to foreclose on the property. Plaintiffs filed a complaint against MERS claiming that MERS did not have standing to initiate foreclosure proceedings because it was not the holder of the promissory note or an authorized agent of any note holder. The superior court dismissed the complaint. Before Plaintiffs’ appeal was heard, the Supreme Court decided Eaton. The Supreme Court subsequently vacated the dismissal of Plaintiffs’ claim alleging a lack of authority to foreclose, holding (1) Eaton applies to cases, such as the instant case, that preserved the issue presented in Eaton and that were pending on appeal as of June 22, 2012; and (2) therefore, Plaintiffs’ complaint should not have been dismissed for failure to state a claim on the grounds that MERS lacked the authority to foreclose. Remanded.View "Galiastro v. Mortgage Elec. Registration Sys., Inc." on Justia Law

In 2006, Joseph and Mary Romero signed a mortgage contract with the Mortgage Electronic Registration Systems (MERS) as nominee for Equity One, Inc. They pledged their home as collateral for the loan. The Romeros alleged that Equity One urged them to refinance their home for access to the home's equity. The terms of the new loan were not an improvement over their then-current loan: the interest rate was higher and the loan amount due was higher. Despite that, the Romeros would receive a net cash payout they planned to use to pay other debts. The Romeros later became delinquent on their increased loan payments. A third party, Bank of New York (BONY), identified itself as a trustee for Popular Financial Services Mortgage, filed suit to foreclose on the Romeros' home. BONY claimed to hold the Romeros' note and mortgage with the right of enforcement. The Romeros defended by arguing that BONY lacked standing to foreclose because nothing in the complaint established how BONY held their note and mortgage, and that the contracts they signed were with Equity One. The district court found that BONY had established itself as holder of the Romeros' mortgage, and that the bank had standing to foreclose. That decision was appealed. Upon review, the Supreme Court concluded the district court erred in finding BONY's evidence demonstrated that it had standing to foreclose. Accordingly, the Court reversed the district court and remanded the case for further proceedings.View "Bank of New York v. Romero" on Justia Law

Downing, Thorpe & James Design, Inc. (DTJ) was an architectural firm incorporated in Colorado. Thomas Thrope, one of DTJ’s three founding principals, was allowed to practice individually as a foreign architect in Nevada, but DTJ was not allowed to practice as a foreign corporation in Nevada. In 2004, DTJ contracted with a Nevada developer to provide architectural services for a Las Vegas subdivision owned by Prima Condominiums, LLC (Prima). Prima obtained a loan from First Republic Bank in exchange for a promissory note secured by a deed of trust on one of the subdivision’s units. After Prima defaulted on its payments, DTJ recorded a notice of mechanic’s lien against the property for unpaid services. First Republic then foreclosed and purchased the property. DTJ subsequently brought an action against First Republic for lien priority and unjust enrichment. The district court granted summary judgment for First Republic. The Supreme Court affirmed, holding (1) because DTJ had failed to comply with Nevada’s statutory registration and filing provisions, it was barred from maintaining an action in Nevada for compensation for its architectural services; and (2) Thorpe’s individual status had no bearing on whether DTJ could bring or maintain an action for compensation for its services.View "DTJ Design, Inc. v. First Republic Bank" on Justia Law

Bangor Savings Bank filed a foreclosure complaint against Robin Richard. The district court granted summary judgment in favor of the Bank. Richard appealed, arguing, that the district court erred in granting the Bank’s motion for summary judgment for several reasons. The Supreme Court vacated the judgment of the district court, holding that, under strict application of the rules of summary judgment in the context of a residential mortgage foreclosure, the Bank did not set forth a properly supported statement of fact regarding the amount due on the mortgage note, and therefore, there remained a genuine issue of material fact as to the amount owed under the mortgage. Remanded. View "Bangor Savings Bank v. Richard" on Justia Law

Debtors executed a promissory note in favor of First State Bank to purchase a condominium. After Debtors defaulted on their loan, First State subsequently filed a complaint against Debtors, the loan’s guarantor, and the condominium property owners’ association (Metro POA), claiming that it was entitled to collect money owed it from the Debtor and guarantor, and that any interest Metro POA had in the real property related to unpaid assessments was inferior to and subject to State Bank’s mortgage. The circuit court granted First State judgment against Debtors and the guarantor, gave First State the right to foreclose on the property, and ruled that Metro POA’s interest would survive the foreclosure action and become the liability of the purchaser. Thereafter, First State purchased the property at a foreclosure sale. On appeal, First State argued that the circuit court erred in refusing to extinguish Metro POA’s lien for unpaid assessments and in awarding Metro POA attorney’s fees. The Supreme Court affirmed, holding that the circuit court did not err in refusing to extinguish Metro POA’s interest and in awarding attorney’s fees to Metro POA. View "First State Bank v. Metro Dist. Condos. Prop. Owners' Ass’n, Inc." on Justia Law