Justia Banking Opinion Summaries

Riegel, seeking to build a condominium development in Isla Mujeres, formed ISLA and borrowed millions of dollars from the Hovdes. The project failed. More than 10 years later, the Hovdes sued ISLA and Riegel.The district court granted the defendants summary judgment on the claim based on the Mortgage Note, citing the 10-year limitations period, and later holding that the limitations defense could be asserted against Riegel as the guarantor. The Seventh Circuit affirmed. An acceleration clause provided that if a Default occurred, the outstanding unpaid principal and interest would automatically become immediately due, triggering the 10-year limitations period. One such “Default” was an “Act of Bankruptcy,” defined to include admitting in writing the inability to pay debts as they mature. Two emails sent by Riegel to the Hovdes constituted an admission in writing of inability to pay debts: an August 7, 2008 email, asking for an advance to pay a tax bill, and a subsequent email indicating that all construction workers had been suspended. The language does not require actual insolvency; it merely requires an admission of an inability to pay the debts, whether or not true. The terms “continuing, absolute, and unconditional” are terms of art when used in guarantees and do not waive the limitations defense. View "Hovde v. ISLA Development LLC" on Justia Law

In 2004, Foster, a real estate investor, purchased Florida property, with a $1.1 million loan secured by a PNC mortgage. Foster and PNC had multiple disputes. PNC acquired force‐placed insurance. While the parties disputed that issue, Foster only made payments in the amount originally specified in a 2010 modification although the payments had increased as a result of the force‐placed insurance policies. In 2012, PNC began returning Foster’s payments as incomplete payments. As of May 2019, PNC claimed Foster owed more than $1.75 million. PNC reported delinquent payments to credit agencies; Foster’s credit score dropped.Foster’s lawsuit included a claim under the Fair Credit Reporting Act (FCRA) for PNC’s failure to investigate the two credit reporting disputes; a breach of contract claim regarding the force‐placed insurance policies; a breach of the implied duty of good faith and fair dealing claim for the insurance; and a breach of fiduciary duty claim for the alleged mishandling of the escrow account. PNC counterclaimed to seek judgment on the loan. After determining that Foster’s affidavit was conclusory and speculative as to proof of insurance and his loan payments and that his evidence of damages was too general and conclusory, the district court granted PNC judgment. The Seventh Circuit affirmed but found that the FCRA claim should be dismissed for lack of standing. Foster did not establish an injury-in-fact fairly traceable to PNC’s conduct. View "Foster v. PNC Bank, National Association" on Justia Law

Young claims her employer told her that it had received a wage garnishment order in 2019. Young then discovered the existence of a 2010 default judgment against her, in favor of Midland, for a purported debt of $8,529.93 plus interest. Young sued to set aside the 2010 default judgment, based on extrinsic mistake or fraud. She sought damages, penalties, and reasonable attorney fees and costs under the Rosenthal Fair Debt Collection Practices Act (Civ. Code, 1788), arguing that Midland was a debt collector of consumer debt and had engaged in false and deceptive conduct in attempting to collect that debt, citing her contention that she was never served with process. Midland denied Young’s allegations, asserted affirmative defenses, and filed an anti-SLAPP motion (section 425.16) to strike Young’s claims.The trial court granted the anti-SLAPP motions, finding Young did not show she would probably prevail on the merits of her claims and awarded Midland attorney fees and costs. The court of appeal vacated. Young showed she would probably prevail on the merits of her Rosenthal Act claim, producing prima facie evidence that Midland falsely represented substituted service on her was accomplished. She was not required to show that Midland knowingly made this false representation. Young’s Rosenthal Act cause of action was not time-barred. View "Young v. Midland Funding, LLC" on Justia Law

Lightning, a Delaware start-up company that owns intellectual property protecting designs for a pallet used for transporting cold foods, sought $26 million in outside funding to retire debt, cover operational expenses, and purchase equipment to begin production. GrowMI, an entity created by the Michigan Economic Development Corporation, agreed to loan Lightning $5 million and used its relationship with Flagstar Bank to secure an additional $7 million loan. GrowMI and Flagstar conditioned their loans on Lightning’s securing the rest of the $26 million by selling equity and securing lines of credit from Lightning shareholders. Lightning’s creditor LT sent GrowMI a letter indicating that Lightning owed LT $3.3 million, secured by an interest in Lightning’s intellectual properties. GrowMI allowed Lightning to use a portion of GrowMI’s loan to repay LT, ensuring GrowMI’s first secured position on Lightning’s intellectual properties.GrowMI subsequently became aware of wrongdoing at Lightning, which defaulted on its debt to GrowMI. GrowMI sued LT and its principals, Lightning shareholders, Lightning employees, and a consulting company, alleging violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1962, by a pattern of racketeering activity that included bank fraud, transactions involving money derived from that bank fraud, trade secrets misappropriation, and wire fraud. The Sixth Circuit affirmed the dismissal of the suit. GrowMI’s claims rest on its status as Lightning’s creditor, making its injury derivative of the harm incurred by Lightning. GrowMI does not plausibly allege that it was directly injured by reason of the alleged racketeering activities. View "Grow Michigan, LLC v. LT Lender, LLC" on Justia Law

Fannie Mae purchases mortgage loans from commercial banks, which enables the lenders to make additional loans, finances those purchases by packaging the mortgage loans into mortgage-backed securities, then sells those securities to investors. In 1968, Fannie Mae became a publicly-traded, stockholder-owned corporation. Freddie Mac also buys mortgage loans and securities and sells those mortgage-backed securities to investors. In 1989, Freddie Mac became a publicly traded, stockholder-owned corporation. In the 2008 recession, both entities suffered precipitous drops in the value of their mortgage portfolios. The Federal Housing Finance Agency (FHFA) was established and authorized to undertake extraordinary measures to resuscitate the companies, 12 U.S.C. 4511(b)(1).Fannie Mae and Freddie Mac shareholders sought to nullify an agreement (the “third amendment”) between FHFA and the Treasury Department that “secured unlimited funding" from Treasury in exchange for "almost all of Fannie’s and Freddie’s future profits.” The third amendment was authorized by FHFA’s Acting Director, who was serving in violation of the Appointments Clause. Shareholders also claimed that they are entitled to retrospective relief because the Supreme Court held in 2021 that FHFA’s enabling statute contained an unconstitutional removal restriction. The district court dismissed the complaint. The Sixth Circuit reversed, holding that the Acting Director was not serving in violation of the Constitution when he signed the third amendment. The court remanded for determination of whether the unconstitutional removal restriction inflicted harm on shareholders. View "Rop v. Federal Housing Finance Agency" on Justia Law

Borrower took out a $5.6 million dollar bridge loan, with 8.5% interest per annum, secured by a deed of trust on real property. They defaulted on a monthly payment of $39,667, triggering late fee provisions: a one-time 10% fee assessed against the overdue payment ($3,967) and a default interest charge of 9.99% per annum assessed against the total unpaid principal balance. Borrower filed a demand for arbitration, alleging the loan was in violation of Business & Professions Code 10240 and the late fee was an unlawful penalty in violation of section 1671. The arbitrator rejected both claims and denied the demand for arbitration. Borrower petitioned to vacate the decision, arguing that the arbitrator exceeded their authority by denying claims in violation of “nonwaivable statutory rights and/or contravention of explicit legislative expressions of public policy.”The court of appeal reversed the denial of that petition. The trial court erroneously failed to vacate an award that constitutes an unlawful penalty in contravention of public policy set forth in section 1671. Liquidated damages in the form of a penalty assessed during the lifetime of a partially matured note against the entire outstanding loan amount are unlawful penalties. There is no precedent upholding a liquidated damages provision where a borrower missed a single installment and then was penalized pursuant to such a provision. View "Honchariw v. FJM Private Mortgage Fund, LLC" on Justia Law

NJBA, a non-profit trade association representing 88 New Jersey banks, sought to make independent expenditures and contributions to political parties and campaigns for state and local offices. NJBA has not made these payments because of N.J. Stats. 19:34-45, which provides that, “[n]o corporation carrying on the business of a bank . . . shall pay or contribute money or thing of value in order to aid or promote the nomination or election of any person, or in order to aid or promote the interests, success or defeat of any political party.” NJBA brought a facial challenge on its own behalf and on behalf of third-party banks.The district court held that section 19:34-45’s prohibition on independent expenditures violates the First Amendment but that the ban on political contributions by certain corporations does not violate the First Amendment and passes intermediate scrutiny. The Third Circuit reversed, declining to address the First Amendment issues. The statute does not apply to trade associations of banks. NJBA is not “carrying on the business of a bank.” With respect to the facial challenge, NJBA does not satisfy the narrow exception to the general rule against third-party standing. View "New Jersey Bankers Association v. Attorney General New Jersey" on Justia Law

Lutz received a Capital One credit card, made purchases, and obtained cash advances with the card. Under the credit card agreement, Lutz could make minimum installment payments with interest at an annual rate of up to 22.90% on any unpaid monthly balance. His account balance rose to $2,343.76, including at least $341.67 in interest that had accrued at an annual rate of 22.90%. When Lutz failed to pay, Capital One sold the charged-off account to PRA, which is not a bank and cannot issue credit cards. PRA holds a license from the Pennsylvania Department of Banking and Securities to make motor vehicle loans and to charge interest at 18-21% on those loans but PRA’s sole business involves purchasing defaulted consumer debt at a discount and then attempting to collect the debt. PRA obtained a default judgment against Lutz.Lutz filed a putative class action against PRA under the Fair Debt Collection Practices Act, 15 U.S.C. 1692e, 1692f, alleging that PRA made false statements about debt and attempted to collect a debt not permitted by law, citing alleged violations of Pennsylvania’s Consumer Discount Company Act. The Third Circuit affirmed the dismissal of the suit. Lutz did not plausibly allege that Pennsylvania law prohibited PRA from collecting interest that had previously accrued at greater than 6% annually. PRA is not in the business of negotiating loans or advances and is not subject to the CDCA and its limitations on collecting interest. View "Lutz v. Portfolio Recovery Associates LLC" on Justia Law

Plaintiffs in two putative class actions took out home mortgage loans from Bank of America, N.A. (“BOA”), one before and the other after the effective date of certain provisions of the DoddFrank Wall Street Reform and Consumer Protection Act (“DoddFrank”). The loan agreements, which were governed by the laws of New York, required Plaintiffs to deposit money in escrow accounts for property taxes and insurance payments for each mortgaged property. When BOA paid no interest on the escrowed amounts, Plaintiffs sued for breach of contract, claiming that they were entitled to interest under New York General Obligations Law Section 5-601, which sets a minimum 2% interest rate on mortgage escrow accounts. BOA moved to dismiss on the ground that GOL Section 5-601 does not apply to mortgage loans made by federally chartered banks because, as applied to such banks, it is preempted by the National Bank Act of 1864 (“NBA”). The district court disagreed and denied the motion.   The Second Circuit reversed and remanded. The court held that (1) New York’s interest-on-escrow law is preempted by the NBA under the “ordinary legal principles of pre-emption,” Barnett Bank of Marion Cnty., N.A. v. Nelson, 517 U.S. 25, 37 (1996), and (2) the Dodd-Frank Act does not change this analysis. GOL Section 5-601 thus did not require BOA to pay a minimum rate of interest, and Plaintiffs have alleged no facts supporting a claim that interest is due. View "Cantero v. Bank of Am., N.A." on Justia Law

The Supreme Court reversed the judgment of the circuit court in favor of Barbara and Alexis Branch on the Central Trust Bank's petition for a deficiency judgment in relation to a promissory note and security agreement financing the Branches' vehicle, holding that the circuit court erred.The Bank's pre-sale notice of disposition in this case stated the vehicle would be sold at a private sale. The circuit court, however, held that the dealer-sonly auction at which the vehicle was sold was a public sale and that the Bank failed to provide the Branches with "reasonable notification" after the sale of the vehicle. The Supreme Court reversed, holding (1) the circuit court's finding that the Branches did not receive any pre-sale notice of the disposition was not supported by substantial evidence; and (2) the circuit court misstated the law when it required the Bank to provide the Branches with "reasonable notification" of the sale of the collateral. View "Central Trust Bank v. Branch" on Justia Law