Justia Banking Opinion Summaries

The Ninth Circuit filed an amended opinion affirming in part and vacating in part the dismissal of plaintiff's action for failure to state a claim, holding that the trustee of a California deed of trust is a "debt collector" under the Fair Debt Collection Practices Act (FDCPA).Actions taken to facilitate a non-judicial foreclosure, such as sending the notice of default and notice of sale, are not attempts to collect "debt" as that term is defined by the FDCPA; enforcement of a security interest will often involve communications between the forecloser and the consumer; and when these communications are limited to the foreclosure process, they do not transform foreclosure into debt collection. The panel explained that, because the money collected from a trustee's sale is not money owed by a consumer, it is not "debt" as defined by the FDCPA. In this case, the notices at issue did not request payment from plaintiff, but merely informed her that the foreclosure had begun, explained the timeline, and apprised her of her rights. Therefore, the panel held that ReconTrust's activities fell into the category of enforcement of a security interest, rather than general debt collection. View "Vien-Phuong Thi Ho v. ReconTrust" on Justia Law

The parties' dispute arose out of transactions originating from the savings and loan crisis during the 1970's and 1980's. Washington Mutual appealed a judgment entered in favor of the Government after a bench trial in a tax refund action. The Ninth Circuit affirmed, holding that Washington Mutual did not meet its burden of establishing a cost basis for its intangible assets. The panel concluded that the district court held Washington Mutual to the correct burden; did not make any clearly erroneous factual findings; permissibly determined that the cumulative fundamental flaws underlying the Grabowski Model rendered it incapable of producing a reliable value for the Missouri Branching Right; and was thus not required to sua sponte assign a value to that Right. Even assuming the Missouri Branching Right could be valued, Washington Mutual nonetheless failed to show reversible error as to the denial of its abandonment deduction. View "Washington Mutual v. United States" on Justia Law

Linda Clarke filed suit against First National Bank of Omaha (FNB) alleging that she, rather than Gregg Graham, was the owner of a certificate of deposit. FNB filed a third-party action seeking recovery against Graham to the extent FNB was liable to Clarke. The parties filed competing motions for summary judgment. The district court granted summary judgment for Clark against FNB and in favor of FNB against Graham. Graham filed a motion for new trial. Before the court had ruled on the motion, Graham filed his notice of appeal. FNB filed a motion for summary dismissal, arguing that the court of appeals lacked jurisdiction because the notice of appeal was prematurely filed. The court of appeals overruled the motion for summary dismissal. The Supreme Court dismissed the appeal for lack of jurisdiction, holding that Graham’s notice of appeal was prematurely filed and, therefore, was without effect. View "Clarke v. First National Bank of Omaha" on Justia Law

Shareholders lacked standing to challenge, as an illegal exaction, U.S. government’s acquisition of AIG stock as loan collateral. In 2008, during one of the worst financial crises of the last century, American International Group (AIG) was on the brink of bankruptcy and sought emergency financing. The Federal Reserve Bank of New York granted AIG an $85 billion loan, the largest such loan to date. The U.S. Government received a majority stake in AIG’s equity under the loan, which the Government eventually converted into common stock and sold. One of AIG’s largest shareholders, Starr, filed suit alleging that the Government’s acquisition of AIG equity and subsequent actions relating to a reverse stock split were unlawful. The Claims Court held that the Government’s acquisition of AIG equity constituted an illegal exaction in violation of the Federal Reserve Act, 12 U.S.C. 343, but declined to grant relief for either that or for Starr’s reverse-stock-split claims. The Federal Circuit vacated in part, holding that Starr and the shareholders it represented lack standing to pursue the equity acquisition claims directly, as those claims belong exclusively to AIG, rendering the merits of those claims moot. The court affirmed as to Starr’s reverse-stock-split claims. View "Starr International Co. v. United States" on Justia Law

Aliant Bank, a division of USAmeribank ("Aliant"), sued various individuals and business entities involved in a failed effort to develop the Twelve Oaks subdivision in Odenville, alleging that, as a result of those defendants' conspiracy and wrongful actions, Aliant's security interest in the property upon which the Twelve Oaks subdivision was to be built had been rendered worthless. The Circuit Court ultimately entered a number of orders either dismissing Aliant's claims or entering a summary judgment in favor of the various defendants. Aliant filed three appeals. In appeal no. 1150822, the Alabama Supreme Court reversed summary judgment against Aliant: (1) on the negligence and breach-of-fiduciary duty claims asserted against the Board members in count four of Aliant's complaint; (2) on the fraudulent-misrepresentation and fraudulent-suppression claims asserted against Bobby Smith and Twelve Oaks Properties in count seven of Aliant's complaint; and (3) on the conspiracy claims asserted against Smith, Twelve Oaks Properties, Four Star Investments, Mize, and Billy Smith in count seven of Aliant's complaint. The Court affirmed summary judgment against Aliant and in favor of the various Twelve Oaks defendants in all other respects. In appeal no. 1150823, the Court reversed the summary judgments entered against Aliant on the fraudulent misrepresentation and conspiracy claims asserted against Pfil Hunt, and his management company Wrathell, Hunt & Associates, LLC, in count seven of Aliant's complaint; however, the Court affirmed those summary judgments with regard to all other claims asserted by Aliant against Hunt and WHA. Finally, in appeal no. 1150824, the Court affirmed summary judgment against Aliant and in favor of the Engineers of the South, LLC defendants on all counts. View "Aliant Bank v. Four Star Investments, Inc." on Justia Law

When defendant HSBC Bank USA, N.A. (HSBC) notified plaintiff Stanley P. Berman in writing that HSBC was denying his application for a loan modification, HSBC told him he had 15 days to appeal the denial. Under the law, however, Berman actually had 30 days to appeal. Berman brought this action for injunctive relief under Civil Code section 2924.12 on the theory that “the denial letter . . . [wa]s a material violation of sub[division] (d) [of section 2923.6] in that [the letter] only provide[d] fifteen days for appeal.” The trial court sustained HSBC’s demurrer to Berman’s complaint without leave to amend based on the conclusion that Berman had not alleged a violation of section 2923.6. On Berman’s appeal, the Court of Appeal concluded the trial court erred: the denial letter constituted a material violation of section 2923.6 because it substantially misstated the time Berman was allowed by the law to appeal HSBC’s denial of his application for a loan modification. Moreover, the Court found no merit in any of HSBC’s alternate arguments for affirming the trial court. View "Berman v. HSBC Bank" on Justia Law

Debtor-landlord did not retain sufficient rights in rents assigned to lender for those rents to be included in landlord's bankruptcy estate. Town Center owns a 53-unit Shelby Township residential complex; its construction was financed by a $5.3 million loan owned by ECP. The mortgage included an assignment of rents to the creditor in the event of default. Rents from the complex are Town Center’s only income. Town Center defaulted. ECP sent notice to tenants in compliance with the agreement and with Mich. Comp. Laws 554.231, which allows creditors to collect rents directly from tenants of certain mortgaged properties. ECP recorded the notice documents as required by the statute. ECP filed a foreclosure complaint. A week later, Town Center filed for Chapter 11 bankruptcy relief, then owing ECP $5,329,329 plus fees and costs. The parties reached an agreement to allow Town Center to collect rents, with $15,000 per month to pay down the debt to ECP and the remainder for authorized expenses. Town Center’s bankruptcy petition resulted in an automatic stay on the state-court case, 11 U.S.C. 362(a). ECP unsuccessfully moved to prohibit Town Center from using rents collected after the petition was filed. The district vacated. The Sixth Circuit reversed; Town Center did not retain sufficient rights in the assigned rents under Michigan law for those rents to be included in the bankruptcy estate. View "In re: Town Center Flats, LLC" on Justia Law

Canadian Imperial Bank of Commerce loaned Dobson Bay Club II DD, LLC and related entities (Dobson Bay) $28.6 million for Dobson Bay’s purchase of commercial properties. The loan was secured by a deed of trust encumbering the properties. Under the terms of a promissory note, as a consequence for any delay in payment, Dobson Bay was required to pay, in addition to regular interest, default interest and collection costs and a five percent late fee assessed on the payment amount. When Dobson Bay failed to make the required payments, La Sonrisa de Siena, LLC, which bought the note and deed of trust, noticed a trustee’s sale of the secured properties, arguing that Dobson Bay owed more than $30 million, including a nearly $1.4 million late fee. At issue during the ensuing trial was whether the note was an enforceable liquidated damages provision. The superior court concluded that the late fee was enforceable as liquidated damages. The court of appeals reversed. The Supreme Court vacated the court of appeals’ opinion and reversed the trial court’s partial summary judgment in favor of La Sonrisa on the liquidated damages claim, holding that an approximately $1.4 million late fee is unreasonable and an unenforceable penalty. View "Dobson Bay Club II DD, LLC v. La Sonrisa De Siena, LLC" on Justia Law

This case arose from a mortgage foreclosure petition filed by FV-I, Inc. The dispute in this case was between FV-I and Bank of the Prairie (BOP), a bank with junior mortgages on the same property. The parties agreed to sell the property and place the proceeds in escrow pending resolution of this case. Summary judgment was initially granted in favor of BOP. The Court of Appeals reversed and remanded for a trial to determine whether FV-I had possession of the promissory note underlying the mortgage at the time it filed the mortgage foreclosure. After a trial, the district court concluded that FV-I lacked standing to file the petition because it did not have possession of the original note prior to filing its petition and that BOP’s mortgages were superior to FV-I’s mortgage. The Court of Appeals affirmed. The Supreme Court reversed, holding that evidentiary rulings excluding endorsements on the promissory note require a remand for a rehearing regarding standing and the panel’s priority determination. Remanded. View "FV-I, Inc. v. Kallevig" on Justia Law

The Community Bank loaned money to several entities (“the Borrowers”) over the course of several years. The Borrowers executed five promissory notes, granting the bank a security interest in real estate located in three different counties. To further secure the loans, the Guarantors signed commercial guaranties (“the Guaranties”) in which they guaranteed full payment of the notes. In 2011, RES-GA foreclosed on and bought the properties that were serving as collateral. It then filed confirmation actions in the three counties in which the secured properties were located. In each instance, the court entered an order refusing to confirm the sale, finding that RES-GA had failed to prove that it obtained the fair market value of the property in question, and refusing to allow a resale. RES-GA appealed two of those orders, and the Georgia Court of Appeals affirmed in each case. Last year, the Supreme Court held that compliance with OCGA 44-14-161, Georgia’s confirmation statute, “is a condition precedent to the lender’s ability to pursue a guarantor for a deficiency after foreclosure has been conducted, but a guarantor retains the contractual ability to waive the condition precedent requirement.” The Court granted certiorari in this case to consider additional questions regarding creditors’ ability to pursue deficiency actions against guarantors. The Court concluded that Jim York and John Drillot (“the Guarantors”) waived any defense based on the failure of creditor RES-GA LJY, LLC (“RES-GA”) to confirm the relevant foreclosure sales, and thus affirmed the Court of Appeals’ decision that upheld deficiency judgments against them. View "York v. RES-GA LJY, LLC" on Justia Law