Justia Banking Opinion Summaries

Heritage Bank sued Jerome Bruha on promissory notes that it had purchased from the FDIC. The FDIC had obtained the notes after it became a receiver for the failed bank that had initially lent the money to Bruha. The notes secured lines of credit for Bruha's benefit. The district court granted summary judgment to Heritage and awarded it $61,384 on one of the notes. The primary issues on appeal were whether the holder-in-due-course rule of Nebraska's Uniform Commercial Code or federal banking law barred Bruha's defenses to the enforcement of the note. The Supreme Court (1) affirmed in part, concluding that federal law barred Bruha's defenses; and (2) reversed in part because of a minor error in the court's calculation of interest. Remanded.

Peoples Federal, a community bank that operates exclusively in Eastern Massachusetts, was chartered in 1888 and became a federally insured savings and loan in 1937. It has used the term "Peoples" in its name and service marks since 1937 and claims to be the only continuous user of the mark for banking services in Eastern Massachusetts since that time. It owns six Massachusetts registrations for its marks. Defendant, People's United, was founded in 1842 in Connecticut, and has used the word "People" in its name for at least 80 years. After acquiring branches in Massachusetts, defendant re-opened them under the name "People's United Bank." Peoples Federal filed suit alleging trademark infringement, trademark dilution, and unfair competition under the Lanham Act, 15 U.S.C. 1125(a), and Massachusetts statutory and common law. The district court denied a preliminary injunction. The First Circuit affirmed, finding that the court properly weighed plaintiff's likelihood of success on the merits, likelihood of irreparable harm, the balance of relevant equities, and the effect of the court's action on the public interest.

Plaintiff sought rescission of her loan secured by a trust deed with the Bank for alleged violations of disclosure requirements under the federal Truth in Lending Act (TILA), 15 U.S.C. 1601 et seq. The district court dismissed the suit as untimely because it was filed after the three-year period set by 15 U.S.C. 1635(f). Plaintiff argued that because she gave the Bank timely notice of rescission, she was not required to bring suit within the three-year period, and the district court erred in dismissing the case. The court held that, under the court's precedent and Supreme Court precedent, the time limit established by section 1635(f) was applicable here. Moreover, as explained in Miguel v. Country Funding Corp., section 1635(f) was a three-year statute of repose, requiring dismissal of a claim for rescission brought more than three years after the consummation of the loan secured by the first trust deed, regardless of when the borrower sent notice of rescission. Accordingly, the court affirmed the judgment of the district court.

This action was before the court on a motion for a temporary restraining order (TRO) to enjoin the consummation of a proposed restructuring of a mortgage loan secured by certain resorts properties in Mexico and the Bahamas. Holders of more senior participations claim that the proposed transaction unfairly benefited the junior holder at the expense of the more senior holders in direct contravention of the terms of the agreements controlling the debt. The senior holders further claimed that if the proposed transaction was allowed to close, they would suffer irreparable harm through the loss of certain rights and guaranties under the new terms of the loan. The court concluded that the senior holders have stated colorable claims and made a sufficient showing that they would suffer imminent harm if the proposed transaction were allowed to close. Further, the court found that this potential irreparable harm outweighed the harm that would result to the junior holders by delaying the closing for a few weeks until a preliminary injunction could be heard. Accordingly, the court granted the TRO.

Defendant, a businessman, was convicted on 10 counts of bank fraud (18 U.S.C. 1344) involving creation of 10 fraudulent entries on the books of a small bank in Benton, Tennessee. At trial, the government offered the theory that defendant and the bank's president jointly created the phony entries in an effort to disguise earlier, troubled loans to defendant's business. The Sixth Circuit reversed, finding that the evidence was insufficient to prove guilt beyond a reasonable doubt. The court improperly excluded evidence that the bank president had, unassisted, previously engaged in a large number of identical frauds. The prosecutor suggested to the jury that acquittal would deliver a financial windfall to defendant. The government offered no direct evidence and insufficient circumstantial evidence to show that defendant knew about or participated in the bank president's fraud, a fraud that the bank president had independent reasons for creating.

After Deutsche Bank National Trust Company (Deutsche Bank) brought a foreclosure action against the home owned by Appellants Mark and Jamileh Miller and obtained an Order Authorizing Sale (OAS) from a Colorado court, the Millers filed a Chapter 13 bankruptcy petition. Upon the filing of their petition, an automatic stay entered, halting the foreclosure proceedings. Deutsche Bank obtained an order from the bankruptcy court relieving it from the stay to permit the foreclosure to continue. The Tenth Circuit Bankruptcy Appellate Panel (BAP) affirmed the bankruptcy court’s order granting Deutsche Bank relief from the automatic stay. The Millers appealed the BAP’s order affirming relief from stay. The issue before the Tenth Circuit was whether Deutsche Bank established that it was a "party in interest" entitled to seek and obtain relief from the stay. Because the Court concluded that Deutsche Bank did not meet its burden of proof on this issue, the Court reversed the BAP’s order and remanded for further proceedings.

This case arose from a landlord-tenant dispute in the wake of the WaMu failure in September 2008. GE alleged that Chase failed to pay rent on two properties under lease agreements that Chase assumed after it purchased WaMu's assets and liabilities from the FDIC pursuant to terms of a written Purchase & Assumption Agreement (P&A Agreement). GE filed suit against Chase alleging breach of the lease agreements and the district court granted Chase's motion to dismiss GE's complaint on the grounds that GE lacked standing to enforce or interpret the terms of the P&A Agreement. The court held that because GE was not an intended third-party beneficiary of the P&A Agreement, GE had no enforceable rights under that contract. Accordingly, the judgment was affirmed.

IFS and 17 affiliated organizations (collectively, Interamericas) were debtors in a series of Chapter 7 cases. This appeal arose from eight collective adversary proceedings, which a trustee of IFS brought against appellants for avoidance of fraudulent transfers under Chapter 5 of the Bankruptcy Code and Chapter 24 of the Texas Business and Commerce Code. Appellants appealed the district court's affirmance of the bankruptcy court judgment of over $3 million in favor of the trustee. The court held that control could be sufficient to show ownership of what was ultimately a fact-based inquiry that would vary according to the peculiar circumstances of each case. The court also held that the lower courts' findings of ownership were not clearly erroneous and, moreover, comported with precedent and the court's holding today where IFS exercised control over the accounts at issue such that it had de facto ownership over the accounts, as well as the funds contained. The court further held that the record supported the lower courts' findings of fraudulent transfer. Specifically, IFS faced pending lawsuits and mounting debts just as it liquidated nearly all Interamericas' assets and evidence that IFS operated as a fraudulent enterprise at the time of transfer supported this finding of fraudulent intent. Accordingly, the judgment was affirmed.

When Morgan Joseph Holdings, an investment bank in which Petitioners held preferred stock, merged with another investment bank, Petitioners demanded appraisal instead of exchanging their shares. At issue was (1) the correct interpretation of Morgan Joseph's certificate of incorporation and whether the automatic redemption of the stock under the certificate was a mandatory redemption that was not subject to a requirement that Morgan Joseph have excess cash available; and (2) whether the automatic redemption right afforded to the stock holders was irrelevant to the fair value analysis in an appraisal. The Chancery Court granted Petitioners' motion for partial summary judgment, holding (1) under the certificate, automatic redemptions were not subject to an excess cash requirement; and (2) the automatic redemption was relevant to the Court's determination of fair value in an appraisal proceeding.

Plaintiff-Appellant Vernon was a homeowner in default on his home loan. ReconTrust, the holder of Plaintiff's deed of trust, initiated a nonjudicial foreclosure on the deed. Upon receiving notice of the trustee's sale, Plaintiff sued ReconTrust, Mortgage Electronic Registration Systems, Inc., and Bank of New York Mellon. He alleged that none of the defendants had standing to initiate the foreclosure. Bank of New York moved to dismiss for failure to state a claim on the claims that it complied with the statutory requirements to foreclose, and that standing was not a requirement for nonjudicial foreclosures. The district court granted the motion, and Plaintiff appealed. He argued that before a party may initiate a nonjudicial foreclosure it must affirmatively show it has standing by having an interest to both the deed of trust and the promissory note. Finding that a trustee was not required to prove it had standing before foreclosing on a deed of trust, the Supreme Court affirmed the district court's dismissal of Plaintiff's complaint.