Justia Banking Opinion Summaries

In 2005-2007, the borrowers obtained residential home mortgages on California properties. California law would normally have entitled them to “at least 2 percent simple interest per annum” on any funds held in escrow, California Civil Code Section 2954.8. The lender, a federal savings association organized and regulated under the Home Owners’ Loan Act of 1933 (HOLA), 12 U.S.C. 1461, did not pay interest because HOLA preempts California law. In a suit against the lender’s successor, Chase, a national bank organized and regulated under the National Bank Act, 12 U.S.C. 38, the district court denied the lender’s motion to dismiss; the Ninth Circuit has held that there is no “conflict preemption” between the National Bank Act and the California law.The Ninth Circuit reversed. HOLA field preemption principles applied to the claims against Chase even though its conduct giving rise to the complaint occurred after it acquired the loans in question. Because California’s interest-on-escrow law imposed a requirement regarding escrow accounts; affected the terms of sale, purchase, investment in, and participation in loans originated by savings associations; and had more than an incidental effect on the lending operations of savings associations, it was preempted by 12 C.F.R. 560.2(b)(6) and (b)(10), and 560.2(c). View "McShannock v. JP Morgan Chase Bank NA" on Justia Law

DLJ brought a debt and foreclosure action against the Sheridans and the IRS. At the close of DLJ’s case-in-chief, the district court granted judgment in favor of DLJ under FRCP 52(c), concluding that DLJ satisfied all elements of its claim. The Third Circuit affirmed. Sheridan was “fully heard” prior to judgment. At the close of its case-in-chief, DLJ moved for judgment based on partial findings. Sheridan did not object to the consideration of the motion. The parties made their respective arguments as to whether DLJ met its burden of providing evidence sufficient to establish its debt and foreclosure claims and whether DLJ had standing. Sheridan could have only challenged the validity of the loan documents through cross-examination of DLJ’s witness, Holmes, which he was given the opportunity to do, or through his own testimony, to the extent he had any personal knowledge. Sheridan has not indicated what additional admissible evidence he intended to present to contest DLJ’s standing. The court heard and considered Sheridan’s arguments concerning the transfer of the note and the validity of the assignment. He was fully heard with regard to DLJ’s standing to foreclose. Sheridan’s original answer asserted boilerplate affirmative defenses, none of which contained any allegations of fraud or violations of the Truth in Lending Act; Sheridan’s motion to amend was untimely, and the late assertion of fraud would have prejudiced DLJ. View "DLJ Mortgage Capital, Inc. v. Sheridan" on Justia Law

Bret and Mary Bennett filed an action to quiet title to their residence in Payette, Idaho, against the Bank of Eastern Oregon (“BEO”), seeking to remove a judgment lien and a deed of trust. In 2007, the Bennetts started a motorsports business in Ontario, Oregon, which leased its premises from a different business entity owned by the Bennetts. In 2008, the Bennetts personally guaranteed one or more loans between BEO and these businesses. Among these loans was a $100,000 promissory note (“the Note”) that was secured by a deed of trust on the Bennetts’ residence situated on the other side of the Snake River in Payette, Idaho (“the Property”). The deed of trust designated 1st American Title Company of Malheur County, Oregon as trustee. The parties signed the deed of trust on April 10, 2008. One day later, on April 11, 2008, BEO recorded the deed of trust in the Payette County Recorder’s Office. By its terms, the deed of trust was set to mature on May 5, 2009. The Bennetts later defaulted on the Note and other obligations to BEO. Rather than seeking to foreclose on the Property for a breach of the Note’s terms, BEO successfully pursued a collection action against the Bennetts in Oregon state court to recover on all of the Bennetts’ debts, including the Note. This appeal addressed whether a debtor could use Idaho’s single-action rule as a sanction to quiet title against a deed of trust when the secured creditor has violated the rule by filing an action against the debtor to recover on the debt before seeking satisfaction of the debt by foreclosing on the property serving as security. The Idaho Supreme Court determined the Bennetts stated a cause of action that could allow them to quiet title against BEO for the deed of trust. Construing the pleadings in favor of the Bennetts, BEO violated the single-action rule codified in Idaho Code section 45-1503(1) by seeking to recover from the Bennetts on the Note personally before seeking to foreclose on the Property. Thus, the Supreme Court reversed the district court's decision granting BEO's motion to dismiss, vacated the judgment of dismissal, and remanded for further proceedings. View "Bennett v. Bank of Eastern Oregon" on Justia Law

The Supreme Court held that a trial court should consider the totality of the circumstances surrounding a residential purchase loan and identify certain factors in determining whether a loan is a construction loan entitled to anti-deficiency protection or a home improvement loan not entitled to anti-deficiency protection.Homeowners borrowed money from Desert Hills Bank to renovate and expand their property. Later, Homeowners borrowed money from Helvetica Servicing Inc. to pay off the Desert Hills loan. Homeowners' property secured the deed of trust. After Homeowners defaulted on the Helvetica loan, Helvetica sued to judicially foreclose. The trial court entered judgment for Helvetica and entered a deficiency judgment. Homeowners appealed, arguing that the Helvetica loan was entitled to anti-deficiency protection. The trial court ultimately found that the Desert Hills loan was a home improvement loan not entitled to anti-deficiency protection because Homeowners did not build a new home from scratch. The Supreme Court remanded the matter, holding (1) the "built from scratch" standard does not further the legislative objectives of Arizona's anti-deficiency statutes; (2) courts should consider the totality of the circumstances surrounding a loan when determining whether it is a home improvement or construction loan; and (3) the trial court did not make an independent factual determination as to whether the Desert Hills loan was a construction loan or a home improvement loan. View "Helvetica Servicing, Inc. v. Pasquan" on Justia Law

The Dais obtained a loan from Apex secured by a mortgage on their laundromat. The laundromat ceased operations; the Dais defaulted. Apex agreed to accept a deed in lieu of foreclosure if the property was marketable. A December 2008 inspection revealed that it was in disrepair, exposed to the elements, and open to vagrants. Apex took measures to preserve the property and returned the deed to the Dais in April 2009. In December 2010, two Chicago firefighters lost their lives battling a blaze at the abandoned laundromat. Their estates sued Apex. Apex and the estates settled. Apex's insurer, Federal, denied coverage, citing a policy exclusion for any liability or loss "arising out of property you acquire by foreclosure, repossession, deed in lieu of foreclosure or as mortgagee in possession.” The district court granted Federal summary judgment.The Seventh Circuit vacated, applying Pennsylvania law. Summary judgment was inappropriate given the open question of material fact: who possessed the property at the time of the fire. Apex instructed its realtor to post a notice informing the Dais how to obtain keys for the new locks. Apex urged the Dais to inspect and secure the property. In July 2009, Dai ordered a handyman to board up the property after being cited for building code violations. In October 2009, Dai entered into a settlement to cure the code infractions by November 2010. He failed to do so and served 180 days in jail. Apex had no contact with the property after April 2009. View "Apex Mortgage Corp. v. Great Northern Insurance Co." on Justia Law

Spring Hill owned a 240-apartment complex in a Chicago suburb. In 2007, the owner converted the apartments into condominiums and attempted to sell them. Ginsberg recruited several people to buy units in bulk, telling them they would not need to put their own money down and that he would pay them after the closings. The scheme was a fraud that consisted of multiple components and false statements to trick financial institutions into loaning nearly $5,000,000 for these transactions. The seller made payments through Ginsberg that the buyers should have made, which meant that the stated sales prices were shams, the loans were under-collateralized, and the “buyers” had nothing at stake. The seller paid Ginsberg about $1,200,000; Ginsberg used nearly $600,000 to make payments the buyers should have made, paid over $200,000 to the buyers and their relatives, and kept nearly $400,000 for himself. The loans ultimately went into default, causing the financial institutions significant losses.The Seventh Circuit affirmed Ginsberg’s bank fraud conviction, 18 U.S.C. 1344. The evidence was sufficient for the jury to conclude Ginsberg knew that the loan applications, real estate contracts, and settlement statements contained materially false information about the transactions, including the sales prices, the down payments, and Ginsberg's fees. The court rejected a challenge to the admission of testimony by a title company employee. View "United States v. Ginsberg" on Justia Law

Six Delaware statutory Trusts acquired student loans, issued notes for the acquisitions, and pledged the student loans as collateral for the notes. This “securitization” works well when the students do not default. The Trusts initially did not provide for servicing delinquent loans; under a subsequent “Special Servicing Agreement,” U.S. Bank became the Indenture Trustee and the “Special Servicer” but allegedly failed to collect hundreds of millions of dollars in delinquent loans. The holders of the Trusts’ equity ownership interests hired an additional loan servicer, Odyssey, and submitted invoices from Odyssey for payment from the trust estate.The district court held that the Trust documents were not violated by hiring Odyssey and Odyssey’s invoices were payable. The Third Circuit reversed in part. Several provisions of the Odyssey Agreement violate the Trust documents by impermissibly transferring to the Owners of the Trusts rights reserved for the Indenture Trustee. The Odyssey Agreement supplements and modifies several provisions of the Trust documents, requiring consent not obtained from the Indenture Trustee. The court remanded for a determination of whether the Odyssey invoices are nonetheless payable, which may include reconsideration os a self-dealing issue. View "In re: National Collegiate Student Loan Trusts" on Justia Law

In 2002, Edella and Eric Johnson executed a $74,000 mortgage and associated promissory note, secured by property in Pittsburgh. The instrument was recorded and later assigned to the Bank of New York Mellon Trust Company (“Mellon”). Six years later, the Johnsons defaulted on their mortgage. In March 2009, Mellon, through its debt-collection counsel Phelan Hallinan & Schmieg, LLP (“Phelan”), filed a complaint in mortgage foreclosure. In that complaint, Phelan included a claim for attorneys’ fees of $1,300. Following a non-jury trial, the court entered judgment for Mellon. In March 2012, while the underlying mortgage foreclosure case was still ongoing, the Johnsons filed the instant class action against Phelan. When the Pennsylvania Loan Interest and Protection Law ("Act 6") was enacted in 1974, a “residential mortgage” was defined as “an obligation to pay a sum of money in an original bona fide principal amount of fifty thousand dollars ($50,000) or less.” In 2008, however, the General Assembly amended Act 6’s definition of a “residential mortgage” to increase the principal-amount ceiling to $217,873 - a base figure that automatically was adjusted for inflation annually. This appeal centered on whether that increased principal-amount ceiling should apply to mortgages that were executed before the 2008 amendment to Act 6. Specifically, the question presented was whether the $74,000 mortgage the Johnsons executed should have been considered a "residential mortgage" under Act 6, given that when Appellants' lender initiated foreclosure proceedings in 2009, the increased principal-amount ceiling had gone into effect. Because the Pennsylvania Supreme Court concluded that nothing in the 2008 legislation amending Act 6 demonstrated that the revised figure should have applied retroactively, the Supreme Court affirmed the Superior Court's order. View "Johnson v. Phelan Hallinan & Schmieg" on Justia Law

The Supreme Judicial Court affirmed the judgment entered by the superior court denying U.S. Bank Trust, N.A.'s motion to extend the time to file a notice of appeal as to its foreclosure complaint against James D. Keefe, holding that the trial court did not err in denying the motion as untimely.In denying U.S. Bank's motion seeking an extension of time to file its notice of appeal the trial court determined determined that U.S. Bank had shown good cause for the trial court to grant its motion to extend but that its authority to grant an extension of time had expired, and therefore, the motion was untimely. The Supreme Judicial Court affirmed, holding that the trial court did not err in its interpretation of the pertinent Rules of Appellate Procedure or in denying U.S. Bank's untimely motion for an extension of time. View "U.S. Bank Trust, N.A. v. Keefe" on Justia Law

The Second Circuit affirmed the district court's judgment affirming the bankruptcy court's grant of defendants' motion to dismiss in an action arising out of the Chapter 11 bankruptcy of Lehman Brothers Holdings Inc. The bankruptcy court held that, in the context of synthetic collateralized debt obligations, certain "Priority Provisions" that subordinated LBSF's payment priority to claims of the Noteholder defendants are enforceable by virtue of section 560 of the Bankruptcy Code, which exempts "swap agreements" from the Code's prohibition of "ipso facto clauses."Like the district court, the court held that, even if the Priority Provisions were ipso facto clauses, their enforcement was nevertheless permissible under the section 560 safe harbor. The court explained that the Priority Provisions are incorporated by reference into the swap agreements and thus, for the purposes of section 560, are considered to be part of a swap agreement; the contractual right to liquidate included distributions made pursuant to Noteholder priority; the Trustees exercised a contractual right to effect liquidation when they distributed the proceeds of the sold Collateral; and, in doing so, the Trustees exercised the rights of a swap participant. Because the Priority of Payments clauses are enforceable under the Code, the court held that LBSF's state-law claims also fail. Finally, the district court and bankruptcy court correctly concluded that LBSF is not entitled to declaratory relief. View "Lehman Brothers Special Financing Inc. v. Bank of America N.A." on Justia Law