Justia Banking Opinion Summaries

This case arose when Commerzbank agreed to acquire Dresdner Bank in September 2008. As part of the deal, Commerzbank also acquired Dresdner Bank's trust preferred structures, and holders of Dresdner's trust preferred securities received distributions in both 2009 and 2010. Plaintiff claimed that paying those distributions "pushed," or required Commerzbank to make distributions on, a class of its owned preferred securities in which plaintiff had an interest, and, by the complaint, plaintiff asked the court to enforce that alleged obligation. Plaintiff also sought specific performance of a support agreement that was argued to require the elevation of the liquidation preference of Commerzbank's trust preferred securities in response to a restructuring of one class of the Dresdner securities. The parties filed cross-motions for summary judgment. The court held, among other things, that because the DresCap Trust Certificates did not qualify as either Parity Securities, defendants were entitled to judgment in their favor as a matter of law regarding plaintiff's claim under the Pusher Provision. The court also held that because DresCap Trust Certificates did not qualify as either Parity Securities or Junior Securities, Section 6 of the Support Undertaking was not triggered by amendment of the DresCap Trust IV Certificates. Accordingly, defendants were entitled to judgment in their favor as a matter of law regarding plaintiff's claim that the amendment of the DresCap Trust IV Certificates required defendants to amend the Trusted Preferred Securities.

Central Mortgage Company (CMC) sued Morgan Stanley after mortgages for which CMC purchased servicing rights from Morgan Stanley began to fall delinquent during the early financial crisis of 2007. CMC subsequently appealed the dismissal of its breach of contract and implied covenant of good faith and fair dealings claims. The court held that the Vice Chancellor erroneously dismissed CMC's breach of contract claims on the basis of inadequate notice where CMC's pleadings regarding notice satisfied the minimal standards required at this early stage of litigation. The court also held that the Vice Chancellor erroneously dismissed CMC's implied covenant of good faith and fair dealings claim where the claims were not duplicative. Accordingly, the court reversed the Vice Chancellor's judgment dismissing all three of CMC's claims and remanded for further proceedings.

The Educational Credit Management Corporation (ECMC) appealed from the judgment of the bankruptcy court, later affirmed by the Bankruptcy Appellate Panel (BAP), which discharged the student loan debt of debtor under the "undue hardship" provision of 11 U.S.C. 523(a)(8). The court held that it was not clear error to consider debtor's financial condition from the date of discharge to the date debtor sought undue hardship relief. The court also held that there was no clear error in not calculating debtor's husband's part time income where debtor and her husband stipulated their adjusted gross income in 2007. Even when the payroll deductions were excluded, the expenses of the debtor and her dependents outstripped her available resources. Therefore, the court held that, in light of the overall circumstances, excepting debtor's student loan debt from discharge would impose an undue hardship on her.

Plaintiffs Aviva Life & Annuity Company and American Investors Life Insurance Company (collectively, "Aviva") contended the Federal Deposit Insurance Corporation (FDIC) acted in an arbitrary and capricious manner in rendering insurance determinations concerning certain of Plaintiffs’ bank deposit accounts. They appealed a district court’s order upholding the FDIC’s determinations. In 2008, the Kansas Bank Commissioner closed Columbian Bank & Trust Company and appointed the FDIC as receiver. At that time, Plaintiffs maintained twelve deposit accounts at Columbian. The bulk of those funds were held in two accounts (the “Challenged Accounts”). The remaining accounts bore a variety of titles. Shortly after its appointment as receiver, the FDIC determined that each Plaintiffs’ respective accounts identified as “operating” accounts, which included the Challenged Accounts, would be aggregated as corporate accounts. The FDIC further determined that the accounts designated as “benefits” accounts would be separately insured as annuity contract accounts. Upon review of the FDIC's determination and the applicable legal authority, the Tenth Circuit found that the FDIC ultimately concluded the deposit account records clearly and unambiguously indicated the Challenged Accounts were owned in the manner of “corporate accounts.” Plaintiffs’ extrinsic evidence was not, therefore, “relevant data” for purposes of the FDIC’s final insurance determination: "[t]he absence of any discussion pertaining to this evidence in the FDIC’s final determination is therefore unsurprising, and in no way arbitrary or capricious." The Court affirmed the FDIC's determination.

After refinancing her mortgage in 2006, plaintiff filed suit under the Truth In Lending Act, 15 U.S.C 1601, claiming failure to properly notify her of her right to cancel the mortgage. The court instructed the jury that, because her signature was on the notice of right to cancel, something more than her testimony was needed to rebut the presumption that she received it. The jury returned a verdict for defendants. The Third Circuit vacated and remanding, stating that there is no basis in TILA or the Federal Rules of Evidence for the instruction and the error was not harmless. The signature does no more than create a rebuttable presumption of delivery.

Plaintiffs sued Chambers Bank of North Arkansas for fraudulent concealment, claiming that the Bank failed to disclose to plaintiffs certain information regarding a real estate development. At issue was whether the district court erred in granting summary judgment in favor of the bank on their fraudulent concealment claim. The court held that the district court properly found there to be insufficient evidence of special circumstances that obligated the bank to make disclosures to plaintiffs regarding their investment in the development. Therefore, the court affirmed the district court's grant of summary judgment in favor of the bank.

Count One of the multi-count indictment in this case charged Robert and Patrick Singletary, and others, with conspiring between 1997 and September 16, 2004, in violation of 18 U.S.C. 371, to commit three offenses: (1) to defraud a federally insured bank, in violation of 18 U.S.C. 1344; (2) to make false representations with respect to material facts to the United States Department of Housing and Urban Development (HUD), in violation of 18 U.S.C. 1001; and (3) to defraud purchasers of residential property and mortgage lenders, in violation of 18 U.S.C. 1343. The Singletarys eventually pled guilty to Count One to the extent that it alleged a conspiracy to commit the section 1343 offense in addition to the section 1001 offense. At issue was whether the district court abused its discretion in ordering restitution in the sum of $1 million. The court held that the district court failed to determine by a preponderance of the evidence which of the 56 mortgages the loan officers handled was obtained through a false "gift" letter, a false "credit explanation" letter, or a false employment verification form; and where fraud was found, to determine the extent of the actual loss HUD could have incurred due to the mortgage's foreclosure. Accordingly, the court vacated the restitution provisions and remanded for further proceedings.

Plaintiff filed suit against, inter alia, U.S. Bank, N.A. (U.S. Bank) seeking to invalidate the foreclosure and sale of his home. Plaintiff alleged that the mortgage that the lender relied upon in foreclosing on his home was defective and therefore could not provide a valid basis for foreclosure under Minnesota law and that the lender violated the Truth in Lending Act (TILA), 15 U.S.C. 1601, et seq., by failing to provide required notice to plaintiff of his ability to cancel the transaction and by refusing to cancel the mortgage when plaintiff exercised his right to rescind the mortgage on those grounds. The court declined to reach plaintiff's Minnesota Statute 523.23 argument where plaintiff conceded he never cited to this provision to the district court at trial nor in his motion for new trial or amended verdict. The court also held that plaintiff's wife was authorized to receive the Notice of Right to Cancel on plaintiff's behalf; plaintiff cited to no evidence or legal authority that the second Notice of Right to Cancel was required under TILA; plaintiff had no standing to challenge the lender's failure to send the second notice to his former wife; and plaintiff had not overcome the rebuttable presumption of delivery of the required notice to him. Accordingly, the judgment of the district court was affirmed.

The debtor's property was subject to first and second mortgages with complex histories of assignment involving the defendants. The district court dismissed the chapter 7 trustee's action for declaratory judgment to determine the validity, extent, and priority of defendants' liens and vacated a default judgment entered against one defendant, Wilmington. The Sixth Circuit vacated and remanded in part and affirmed in part. Under 11 U.S.C. 544 and Ky. Rev. Stat. 355.9-102(1)(az)(3), operating together, the trustee's interest as a hypothetical judicial lien creditor is superior to those security interests which are unperfected as of the filing of the petition, so the trustee stated a claim against GMAC. The bankruptcy court must make further factual findings regarding Litton and Bank of New York as to the first mortgage, to determine which was the secured party on the date of the filing of the petition. The record established that Wilmington was not a proper party, having assigned its interest years earlier, and the bankruptcy court acted within its discretion in setting aside the default judgment.

Hastings State Bank sought to enforce a commercial guaranty against Miriam Misle in her capacity as trustee of the Julius Misle Revocable Trust. The bank claimed that Julius had signed a guaranty in favor of the Bank, which guaranteed debt owed by a limited liability company. The district court determined that Julius' trust was liable for up to $500,000 in principal on the commercial guaranty and granted partial summary judgment in favor of the bank. After a trial, the district court found in favor of the bank and entered judgment in the amount of $500,000. On appeal, the Supreme Court affirmed, holding (1) the district court did not err when it granted partial summary judgment in the bank's favor and denied Miriam's motion for summary judgment; and (2) the district court's factual determination that the trust was liable for the full amount of the guaranty, $500,000, was supported by the evidence and was not clearly wrong.