Justia Banking Opinion Summaries

Belmont did not pay subcontractors and suppliers on some projects. Gad, its CEO, disappeared. West Bend Mutual paid more than $2 million to satisfy Belmont’s obligations and has a judgment against Belmont, Gad, and Gizynski, who signed checks for more than $100,000 on Belmont’s account at U.S. Bank, payable to Banco Popular. Gizynski told Banco to apply the funds to his outstanding loan secured by commercial real estate. Banco had a mortgage and an assignment of rents and knew that Belmont was among Gizynski’s tenants; it did not become suspicious and did not ask Belmont how the funds were to be applied. Illinois law requires banks named as payees to ask the drawer how funds are to be applied. The district judge directed the parties to present evidence about how Belmont would have replied to a query from the Bank. Gizynski testified that Gad, as CEO, would have told the Bank to do whatever Gizynski wanted. The judge found Gizynski not credible, but that West Bend, as plaintiff, had the burden of production and the risk of non-persuasion. The Seventh Circuit affirmed, rejecting an argument based on fiduciary duty, but reversed an order requiring Banco to pay West Bend’s legal fees View "W. Bend Mut. Ins. Co v. Belmont St. Corp." on Justia Law

Plaintiffs granted Eastern Savings Bank, FSB (Eastern) a mortgage on property as security for a loan. Plaintiffs defaulted on the loan, and Eastern filed an action to foreclose the mortgage. The circuit court foreclosed on the mortgage, and a public auction was held to sell the property. Eastern purchased the property and filed a motion for confirmation of sale. Plaintiffs subsequently filed a complaint in the U.S. district court seeking a declaratory judgment that the promissory note and mortgage had been timely cancelled pursuant to the federal Trust-in-Lending Act (TILA). The circuit court took judicial notice of Plaintiffs' pending federal case but declined to stay confirmation of the foreclosure sale in the meantime. Thereafter, the circuit court concluded Plaintiffs' pending TILA case did not bar confirmation of the sale of the property, confirmed the sale of the property to Eastern, and entered a deficiency judgment against Plaintiffs. The Supreme Court affirmed, holding that res judicata principles prohibit a debtor from asserting TILA rescission rights after a foreclosure judgment has become final, despite the rescission attempt being held within the time limit provided by TILA. View "E. Savings Bank, FSB v. Esteban" on Justia Law

First Commercial Bank of Huntsville appealed the grant of summary judgment in favor of various defendants on claims alleged by the Bank against those defendants. Because the summary judgment did not resolve all claims against all parties and because no part of the summary judgment was certified as final pursuant to Rule 54(b), Ala. R. Civ. P., the Supreme Court dismissed the appeal as being from a nonfinal judgment. View "First Commercial Bank of Huntsville v. Nowlin, III." on Justia Law

The underlying action was brought in California state court by plaintiff, who sued the Bank, a federally-insured, FDIC-supervised bank, for wrongful termination stemming from her complaints about the Bank's lending practices. At issue on appeal was the construction of 12 U.S.C. 1819(b)(2)(B), a statute that gave the FDIC the right to remove actions from state court to federal court. Here, in the underlying case in state court, the FDIC had neither been sued nor was it a party. The court concluded that Congress granted the FDIC far broader access to the federal courts than was available to ordinary litigants, but that access was not unlimited. Whether the FDIC's access should be broader was a question for Congress, not the court. As drafted, the statute did not authorize removal by the FDIC where it was not a party to the state court action and its role in the litigation was limited to a prospective, would-be intervenor. Accordingly, the court affirmed the district court's order remanding the case to state court. View "Allen v. One United Bank" on Justia Law

Homeowners challenged the validity of the foreclosure of their home mortgages. The district court dismissed the suit under Rule 12(b)(6). The court affirmed the district court's dismissal of the law firm as fraudulently joined and concluded that the court had subject matter jurisdiction over the appeal because the doctrine of prior exclusive jurisdiction was inapplicable. The court concluded that Homeowners' pleadings mirrored those in Karnatcheva v. JPMorgan Chase Bank, N.A. and affirmed the district court's dismissal. Homeowners have failed to plead factual content that permitted the court to infer more than the mere possibility of misconduct where the pleadings contained nothing but naked assertions that one or more of the named defendants suspected that Wells Fargo lacked legal title to the mortgages yet chose to publish statements to the contrary. The district court was well within its discretion to file sanctions. Accordingly, the court affirmed the district court's judgment. View "Dunbar, et al v. Wells Fargo Bank, N.A., et al" on Justia Law

Construction Company contracted with Subcontractor for construction of elements of an HVAC system. As partial collateral for a revolving line of credit, Subcontractor assigned to Bank its right to receive payment under the contract with Construction Company. Construction Company instead made twelve payments to Subcontractor. Subcontractor subsequently ceased business operations, leaving an outstanding debt to Bank on its line of credit. Bank filed an action against Construction Company for breach of contract and violation of the UCC. A jury found (1) Construction Company liable on both counts for ten of the twelve checks that it had delivered to Subcontractor, and (2) Bank was estopped from recovering with respect to the final two checks. The judge entered judgment on the statutory claim in the amount of $3,015,000, the full face value of the ten checks. The Supreme Court affirmed in part and reversed in part, holding that the trial judge (1) properly entered judgment on Bank's statutory claim in the amount of the wrongfully midirected payments; but (2) erred in denying the bank's motion for partial judgment notwithstanding the verdict with respect to the final two checks, as there was insufficient evidence to support Construction Company's defense of estoppel. View "Reading Coop. Bank v. Constr. Co." on Justia Law

Defendant bought a custom-made yacht with the help of a loan from Barclays Bank. When Defendant stopped making payments on the loan, Barclays repossessed the yacht and sold it pursuant to the Florida UCC. Barclays got less than what Defendant owed on the yacht, and therefore, Barclays sued Defendant for the deficiency. Defendant moved for summary judgment, arguing that Barclays was barred from recovering the deficiency because, in violation of the mortgage's terms, it did not provide Defendant with proper notice of the sale. The district court denied Defendant's motion and sua sponte granted summary judgment in favor of Barclays. The First Circuit Court of Appeals affirmed, holding that the notice Barclays provided to Defendant was sufficient. View "Barclays Bank PLC v. Poynter" on Justia Law

Between 1982 and 1997, Alfes took out student loans funded by FFELP. Alfes consolidated his student-loan debt; SunTrust was the lender and obligee on the consolidated note and the Pennsylvania Higher Education Assistance Agency was the guarantor. Alfes sought relief under Chapter 7 of the Bankruptcy Code. The bankruptcy court entered a general discharge in 2005. Subsequently, Alfes sought a declaration that the debt under the consolidated note had been discharged, arguing that the consolidated note no longer constituted an “educational loan” under 11 U.S.C. 523(a)(8)(A) and had been discharged with his ordinary debt. The bankruptcy court initially entered a default judgment against the defendants. Following a series of transfers, reopening, and various motions, the bankruptcy court ultimately held that a holder of consolidated student loans is an educational lender and that the consolidated loan was, therefore, not dischargeable absent a showing of undue hardship. The district court and Sixth Circuit affirmed. View "Alfes v. Educ. Credit Mgmt. Corp." on Justia Law

In 1996, Terri Cole and her husband financed the purchase of a home through a loan secured by a deed of trust on the home and the underlying property. In 2005, Vanderbilt Mortgage and Finance, Inc. became the servicer of the loan. Code defaulted on her loan in 2010. Vanderbilt foreclosed and purchased the home and real property at a trustee's sale. Thereafter, Cole refused to vacate the home. Vanderbilt filed an unlawful detainer action. Cole counterclaimed, alleging that Vanderbilt had violated the West Virginia Consumer Credit and Protection Act (WVCCPA). Regarding the unlawful detainer claim, the circuit court found in favor of Vanderbilt. As to the remaining issues, the jury found Vanderbilt engaged in several violations of the WVCCPA. The circuit court subsequently awarded civil penalties to Cole totaling $32,125, and, some weeks later, granted Cole's motion for attorney fees and costs. The Supreme Court affirmed the circuit court's civil penalties order and award of attorney fees, holding that the circuit court did not commit error with regard to either the civil penalties order or the attorney fees order. View "Vanderbilt Mortgage & Fin., Inc. v. Cole" on Justia Law

In 2005, Tonya Bass executed an adjustable rate promissory note with Mortgage Lenders Network USA. The Note was then transferred several times: from Mortgage Lenders to Emax Financial Group, from Emax to Residential Funding Corporation, and from Residential Funding to U.S. Bank. The Note evidenced these transfers by three stamped imprints. In 2009, U.S. Bank filed this foreclosure action after Bass failed to make timely payments. The trial court dismissed the foreclosure action, concluding that because the Note was not properly indorsed and conveyed to Emax or Residential Funding, U.S. Bank was not the rightful holder of the Note. The court based its ruling that the first stamp was "unsigned" and failed to establish negotiation from Mortgage Lenders to Emax. The Supreme Court reversed, holding (1) the indorsements on the Note unambiguously indicated the intent to transfer the Note from each preceding lender and finally to U.S. Bank; and (2) therefore, U.S. Bank was the holder of the Note and had the authority to bring this foreclosure action against Bass. View "In re Foreclosure of Bass" on Justia Law