Justia Banking Opinion Summaries

American loaned $429,991 to Saberline to pay an insurance premium; Saberline agreed that, if it defaulted on the loan, American could cancel the policy and obtain return of any unearned premiums. USIG brokered the deal. American would deliver funds to USIG’s account at Cornerstone; USIG would forward the money to the insurer. Instead of placing the money in a trust account for Saberline, USIG told American to deposit the funds in USIG’s general operating account at Cornerstone. USIG was indebted to Cornerstone and had authorized it to sweep the operating account and apply anything over $50,000 to the debt. As a result, when American deposited Saberline’s premiums, Cornerstone reduced USIG’s debt. Saberline defaulted. American canceled the policy and attempted to recover the premium. USIG repaid American with funds drawn from a different bank, but then filed for bankruptcy, turning that transfer into a preference payment. American settled with the bankruptcy trustee, reserving its right to pursue a conversion claim against Cornerstone. A magistrate judge issued a declaratory judgment that American had a superior security interest in the disputed funds and that Cornerstone was liable for conversion. The Sixth Circuit affirmed. The Premium Finance Company Act, Tenn. Code 56-37-101, gave American a senior perfected security interest in the contested funds. View "American Bank, FSB v. Cornerstone Cmty. Bank" on Justia Law

Plaintiffs each filed suit against Darby Bank and various real estate developers and contractors (collectively, the Drayprop Defendants) in state court alleging negligent misrepresentation, fraud, beach of contract, and breach of warranty. Subsequently, the FDIC was appointed receiver of Darby Bank. In consolidated appeals, plaintiffs challenged the denial of their motions for remand to state court after the FDIC removed to federal court, the district court's grant of summary judgment to the FDIC on federal claims, and the district court's refusal to exercise supplemental jurisdiction over remaining state law claims against other defendants. The court concluded that the district court properly granted summary judgment to the FDIC on plaintiffs' claims against Darby Bank. The court concluded, however, that the district court improperly dismissed the remaining claims against the non-FDIC defendants because 12 U.S.C. 1819(b)(2)(A) operated to create original jurisdiction over those claims. Therefore, the court affirmed in part, reversed in part, and remanded for further proceedings. View "Lindley v. FDIC, et al." on Justia Law

Dorothy Urban's estate (Estate) filed suit against Robert Street, asking the circuit court to declare null and void a deed executed by Urban to Street for a residential property on the grounds that the execution of the deed was procured through fraud. Street subsequently executed a deed of trust for a loan that was secured by the property. The majority of the loan was used to pay off a mortgage on the property placed by Urban. Later, the circuit court directed that the property be conveyed in Street's name to the Estate. The court created a constructive trust on the property without expressly declaring the Urban-to-Street deed void ab initio. Street subsequently defaulted on the deed of trust and Petitioners filed a foreclosure action on the property. The Estate filed a motion to dismiss the foreclosure proceedings, which the circuit court denied. The court of special appeals reversed. The Court of Appeals reversed, holding that although Petitioners were not bona fide purchasers of the property, under the doctrine of equitable subrogation, Petitioners were entitled to priority for the amount loaned to Street used to pay off the balance owed on the preexisting Urban mortgage. View "Fishman v. Murphy" on Justia Law

This case involved the allocation of tax refunds pursuant to a Tax Sharing Agreement (TSA) between two members of a Consolidated Group, the parent corporation (the Holding Company), and one of its subsidiaries (the Bank), the principal operating entity for the Consolidated Group. At issue on appeal was whether the Bankruptcy Court erred in declaring the tax refunds an asset of the bankruptcy estate. The court concluded that the relationship between the Holding Company and the Bank is not a debtor-creditor relationship; when the Holding Company received the tax refunds it held the funds intact - as if in escrow - for the benefit of the Bank and thus the remaining members of the Consolidated Group; the parties intended that the Holding Company would promptly forward the refunds to the Bank so that the Bank could, in turn, forward them on to the Group's members; and in the Bank's hands, the tax refunds occupied the same status as they did in the Holding Company's hands - they were tax refunds for distribution in accordance with the TSA. Accordingly, the court reversed the Bankruptcy Court's judgment and directed that court to vacate it decision declaring the tax refunds the property of the bankruptcy estate and to instruct the Holding Company to forward the funds held in escrow to the FDIC, as receiver, for distribution to the members of the Group in accordance with the TSA. View "Zucker, et al. v. FDIC" on Justia Law

Plaintiffs filed a class-action lawsuit in state court, alleging that the defendants had conducted non-judicial foreclosure sales that did not comply with Utah law. After removal, the district court dismissed the complaint for failure to state a claim, concluding that whether federal law “incorporates Utah or Texas law, Recon[Trust] had not operated beyond the law by acting as a foreclosure trustee in Utah.” On the limited record presented on appeal, the Tenth Circuit concluded that the district court erred in determining it had jurisdiction to hear this case. View "Dutcher, et al v. Matheson, et al" on Justia Law

This case involved the foreclosure sale of certain property owned by plaintiffs. Plaintiffs appealed the district court's dismissal with prejudice of their claims against BAC and NDE under the Texas Debt Collection Act (TDCA), Tex. Fin. Code 392.304(a), the Texas Deceptive Trade Practices Act (DTPA), Tex. Bus. & Com. Code 17.41 et seq., and Texas common law. The court concluded that plaintiffs have alleged sufficient facts to state a claim against BAC for misrepresenting the status or nature of the services that it rendered. Accordingly, the court reversed the district court's dismissal of the TDCA claims under section 392.304(a)(14) as to that basis, remanding for further proceedings. Consequently, the court also reversed the district court's dismissal of plaintiffs' request for an accounting from NDE. The court affirmed in all other respects. View "Miller, et al. v. BAC Home Loans Servicing, L.P., et al." on Justia Law

Danou is a naturalized U.S. citizen from Iraq. He, his family, and his trust own several real estate ventures, including Southfield, Triple Creek, and Danou Technical. In 2006 Southfield borrowed $13 million from Flagstar Bank. Danou, Triple Creek and Danou Technical guaranteed the loan; Southfield and Triple Creek put up collateral. Southfield did not repay the loan in full when it came due in 2009 and the parties restructured the loan. In 2011, Chambless, a Flagstar employee charged with work on the bank’s “troubled assets” and loans, investigated Southfield’s finances, although Southfield claims it was current on all of its restructured obligations. Chambless told Danou that Flagstar “would under no circumstances ever consider an application” to refinance the loan again. The following year, when Danou requested an extension, the bank refused to provide an application, despite Danou’s offer of additional collateral and his wife’s guarantee. The district court dismissed a claim of national origin discrimination under the Equal Credit Opportunity Act, 15 U.S.C. 1691. The Sixth Circuit affirmed. Between the obvious alternative explanation for the denial and purposeful, invidious discrimination a court will not infer discrimination. View "16630 Southfield Ltd. P'ship v. Flagstar Bank, FSB" on Justia Law

Rosen, as owner of Kully Construction, submitted a development plan to the city of East St. Louis for a $5,624,050 affordable housing project to be constructed with a combination of private and public funds: $800,000 in federal grant funds, $1,124,810 in Tax Increment Financing (TIF), and $3,699,240 from Rosen and Kully. Rosen constructed elaborate lies about his credentials and history. After obtaining a contract for 32 units, Rosen learned that the project was under-funded by about $2.7 million dollars. To conceal the problem, Rosen misrepresented to the city that he could build 56 units without increasing construction costs, then substituted less-expensive prefab modular housing units in place of the promised new construction; he nonetheless submitted an itemized list of materials and expenses related to construction. He also submitted falsified tax returns to obtain financing and falsified statements that he had obtained financing. After the scheme was discovered, Rosen pleaded guilty to seven counts of wire fraud, and based on the court’s calculation of the loss amount and determination that Rosen was an organizer or leader of criminal activity, was sentenced to 48 months in prison. The Seventh Circuit affirmed. View "United States v. Rosen" on Justia Law

African-American and Hispanic borrowers under National City Bank mortgages, 2006-2007, sued, alleging violation of the Fair Housing Act, 42 U.S.C. 3605, and the Equal Credit Opportunity Act, 15 U.S.C. 1691, by an established pattern or practice of racial discrimination in the financing of home purchases. They cited National’s “Discretionary Pricing Policy,” under which brokers and loan officers could add a subjective surcharge of points, fees, and credit costs to an otherwise objective, risk-based rate, so that minority applicants were “charged a disproportionately greater amount in non-risk-related charges than similarly-situated Caucasian persons.” During discovery, National provided data on more than two million loans issued from 2001 to 2008. After mediation, the parties reached a proposed settlement: National did not concede wrongdoing, but would pay $7,500 to each named plaintiff, $200 to each class payee, $75,000 to two organizations for counseling and other services for the class, and $2,100,000 in attorneys’ fees. After granting preliminary approval and certification of the proposed class, the district court considered the Supreme Court’s 2011 decision, Wal-Mart Stores, Inc. v. Dukes, and held that the class failed to meet Rule 23(a)’s commonality and typicality requirements and denied certification. The Third Circuit affirmed, noting that the proposed class is national, with 153,000 plaintiffs who obtained loans at more than 1,400 branches; significant disparity in one branch or region could skew the average, producing results indicating national disparity, when the problem may be more localized. View "Rodriguez v. Nat'l City Bank" on Justia Law

Lamesa filed suit against Liberty Mutual alleging that Liberty Mutual was liable under a federally-required surety bond for the alleged misconduct of its principal, a trustee in a Chapter 7 bankruptcy proceeding. On appeal, Liberty Mutual appealed the district court's decision to affirm the bankruptcy court's judgment that the trustee had committed gross negligence and Liberty Mutual, as the trustee's surety, was liable for damages under the terms of the bond. The court held that the controlling limitations period in this case was provided by 11 U.S.C. 322(d). Because Liberty Mutual did not contest that Lamesa's claim was timely under that provision, the court affirmed the bankruptcy court's conclusion that Lamesa's suit was not time-barred. On the merits, the court concluded that the bankruptcy court's finding that the trustee was grossly negligent in performing her duties was not clearly erroneous; expert testimony was not necessary to establish that the trustee failed to meet her standard of care; and Liberty Mutual failed to demonstrate that the district court's damage award was clearly erroneous. Accordingly, the court affirmed the judgment of the district court. View "Liberty Mutual Ins. Co. v. USA by Lamesa National Bank" on Justia Law