Justia Banking Opinion Summaries

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.

n 2007, Plaintiff-Respondent Leslie Benz entered into a contract to purchase a townhouse that was to be constructed. The contract required her to make three nonrefundable payments of earnest money, which were to be applied to the purchase price. The property's seller sought a construction loan from Defendant-Appellant D.L. Evans Bank. As security for the loan, the seller executed a deed of trust granting the Bank a lien in the property upon which the townhouse would be constructed. The townhouse was substantially completed when Plaintiff was notified that the seller had filed for bankruptcy. The seller failed to pay construction expenses, and as a result, the closing did not occur as scheduled. Numerous mechanics' and materialmen's liens were filed against the property. Plaintiff negotiated with the seller in an attempt to clear the title and purchase the townhouse. Negotiations broke down, Plaintiff notified the seller that she was rescinding the contract, and demanded the return of the earnest money she paid. When the earnest money was not refunded, Plaintiff sued. The trial court held that Plaintiff's lien which was created in connection with the rescinded contract had priority over a deed of trust that the Bank had in the property. The Supreme Court reversed part of the trial court's judgment that awarded accrued interest from the earnest money, but affirmed the trial court's judgment in favor of Plaintiff.

The issue presented in this case arose in connection with a motion to rank creditors in a suit for executory process. DDS Construction, LLC developed a subdivision in Reserve. To fund that development, DDS obtained various loans from First National Bank. To secure its repayment of those loans, DDS granted First National a "Multiple Indebtedness Mortgage" over individual lots located in the subdivision. One property, Lot 8 Square A, was at the center of this controversy. The district court held a notarial act which cancelled the lot's mortgage could be corrected by an act of correction under La. R.S. 35:2.1 and First National, the lender which erroneously cancelled the mortgage, maintained its rank relative to a subsequent mortgage under the statute's provisions. The court of appeal disagreed, holding that under these facts the subsequent mortgage primed the mortgage by the First National, which must be ranked as of the time of the act of correction. After review, the Supreme Court held that the court of appeal erred and reversed, reinstating the ruling of the district court.

The claims in these consolidated cases were largely identical in that they shared similar allegations of violations of the Maryland Secondary Mortgage Loan Law (SMLL), the Maryland Consumer Protection Act (CPA), and common law breach of contract. Appellees in these cases were mortgage companies, who were assignees of the original lenders, and Appellants were individual borrowers. The Supreme Court affirmed the dismissals of each of the cases by the circuit courts, holding (1) the SMLL does not restrict a lender to a single loan origination fee, as long as the aggregate fees charged and collected do not exceed the statutory maximum; (2) Appellees were not required by the SMLL to provide borrowers, who did not intend to use the proceeds of their secondary mortgage loans for commercial purposes, a disclosure form designed expressly to advise commercial borrowers only under the SMLL; and (3) certain Appellants failed to support sufficiently their allegations of breach of contract, CPA violations, and claims in accounting with specific facts.

Azhar Said on behalf of Plaintiff-Appellant Abbasid, Inc. sued the Los Alamos National Bank and First National Bank of Santa Fe for negligence in paying and accepting checks intended for the business but that his now ex-wife Bina Shahani had deposited in her cousin's account for personal use. The case was removed from Texas state to federal court, then removed to the U.S. District Court for the district of New Mexico. The district court dismissed the negligence claim on the grounds that the Bank owed no duty of care to Abbasid and that the claim and was preempted by statute which imposed strict liability. After trial, the jury returned a special verdict that the Bank did not convert any of Abbasid's checks. Abbasid timely filed a motion for a new trial which was denied. Among the issues Abbasid raised on appeal: (1) the district court improperly denied its motion for new trial claiming that the verdict was against the weight of the evidence; and (2) the court improperly excluded evidence of the Bank’s check-handling policies. Finding that most of Abbasid's claims of error were not properly preserved or that any error was mooted by the verdict, the Tenth Circuit affirmed the district court's decision in the case.

The United States appealed from a judgment of the district court invalidating two notices of Final Partnership Administrative Adjustments issued by the IRS. The district court so ruled because it concluded that the taxpayer's characterization of two tax-exempt Dutch banks as its partners in Castle Harbour LLC was proper under Internal Revenue Code 704(e)(1). The district court also concluded that, even if the banks did not qualify as partners under section 704(e)(1), the government was not entitled to impose a penalty pursuant to Internal Revenue Code 6662. The court held that the evidence compelled the conclusion that the banks did not qualify as partners under section 704(e)(1), and that the government was entitled to impose a penalty on the taxpayer for substantial understatement of income. Accordingly, the judgment of the district court was reversed.

This case concerned a Railcar Contract with TriMet that required Colorado Railcar to secure a $3 million standby letter of credit, which Colorado Railcar arranged through Collateral II, a bankruptcy remote entity. TrimMet certified Collateral II's default and drew on the Letter of Credit when Colorado Railcar defaulted. At issue was whether Collateral II was a surety to Colorado Railcar, entitled to the defense of discharge. The court held that it was not. Because the standby letter of credit issued by KeyBank required TriMet to certify Collateral II's default, TriMet sought clarification that should Colorado Railcar default, TriMet's authority to certify Collateral II's default would be triggered. In response to TriMet's concern, Collateral II agreed to become a part of the Railcar Contract via Modification No. 1, but it undertook no new obligation nor did it subject itself to any additional liability beyond what it previously undertook by securing the Letter of Credit at Colorado Railcar's direction. Thus, no suretyship was created. Because Collateral II was not entitled to the protections of a surety, it was error for the district court to grant summary judgment in its favor.