Justia Banking Opinion Summaries

Plaintiffs purchased a residence and obtained a $1 million loan, memorialized by a note secured by a deed of trust. Years later, the property was sold through a nonjudicial foreclosure. Plaintiffs, after two prior federal suits were dismissed without prejudice, filed this state lawsuit for wrongful foreclosure, against the Buyers, and Lenders. Lenders successfully argued the action was barred by res judicata (claim preclusion), based on those dismissals; under Federal Rule 41(a)(1)(B), the “two dismissal rule,” the dismissal of the second federal suit was “an adjudication on the merits.”The court of appeal concluded the voluntary dismissal of the second federal lawsuit was not a final “adjudication on the merits” that barred the filing of this case in state court. The two-dismissal rule of Rule 41(a)(1)(B) applies when there is a voluntary dismissal in state or federal court, a second voluntary dismissal in federal court, and the subsequent filing of an action in the same federal court where the second suit was dismissed. Under California law, a plaintiff’s voluntary dismissal without prejudice of a prior action is not a final judgment on the merits that bars a subsequent suit. California does not prohibit a plaintiff from filing dismissals without prejudice in successive actions. The rule is inapplicable to this state court lawsuit alleging only state-law claims. The court nonetheless affirmed, concluding that the challenges to the foreclosure lack merit. View "Gray v. La Salle Bank" on Justia Law

Defendant appealed the district court’s judgment awarding damages to Plaintiff to recover funds Defendant received as the result of various alleged fraudulent transfers. The district court entered a default against Defendant as a sanction under Federal Rule of Civil Procedure 37(b) for her repeated failure to comply with discovery orders and ultimately entered a default judgment against Defendant for fraudulent transfers, awarding Plaintiff damages calculated based on three checks Defendant drew from bank accounts she held jointly with her debtor husband.   The Second Circuit affirmed. The court concluded that the district court did not abuse its discretion in determining that Defendant’s noncompliance during discovery warranted a default. The court explained that Defendant failed to respond to interrogatories and produce the documents Plaintiff requested, in violation of the district court’s many orders. This record supports the district court’s determination that Defendant acted willfully, that lesser sanctions would have been inadequate given Defendant’s continued noncompliance after multiple explicit warnings about the consequences of further noncompliance, that Defendant was given ample notice that her continued noncompliance would result in sanctions, including the entry of default judgment, and that her noncompliance spanned more than six months. The court also concluded that Defendant’s withdrawals from accounts she held jointly with her husband constitute fraudulent transfers under Connecticut law. View "Mirlis v. Greer" on Justia Law

The Supreme Court affirmed the judgment of the district court determining that a deed of trust on real property continued to encumber the property, holding that there was no error.LV Debt Collect, which acquired title to the subject property in 2013, filed this quiet title action in 2016 seeking a declaration that a home homeowners' association's foreclosure sale extinguished Bank of New York Mellon's (BNYM) deed of trust and that LV Debt Collect held an unencumbered ownership interest in the property. The district court granted summary judgment for BNYM, determining that the deed of trust continued to encumber the property. The Supreme Court affirmed, holding that a loan secured by real property does not become "wholly due" for purposes of Nev. Rev. Stat. 106.240 when a notice of default is recorded as to the secured loan. View "LV Debt Collect, LLC v. Bank of N.Y. Mellon" on Justia Law

The plaintiffs in this case are American service members who were wounded, and the relatives of service members who were killed or wounded, in terrorist attacks carried out in Iraq from 2004 to 2011 by proxies of the Lebanese militant group Hezbollah. In 2019, victims 20 and their family members sued several Lebanese banks, alleging that the banks aided and abetted the attacks by laundering money for Hezbollah. After Plaintiffs filed suit, the United States Department of the Treasury labelled one of those banks, Jammal Trust Bank (JTB), a Specially Designated Global Terrorist. That designation prompted the Banque du Liban, Lebanon’s central bank, to liquidate JTB and acquire its assets. JTB then moved to dismiss the case against it, on the ground that it was now entitled to sovereign immunity as an instrumentality of Lebanon. The district court denied the motion, holding that a defendant is entitled to foreign sovereign immunity only if it possesses such immunity at the time suit is filed. JTB appealed.    The Second Circuit vacated. The court held that immunity under the Foreign Sovereign Immunities Act, 28 U.S.C. Section 1604, may attach when a defendant becomes an instrumentality of a foreign sovereign after a suit is filed. Further, the court explained that it was the U.S. designation of JTB as a terrorist organization, not any attempt by Lebanon to avoid this lawsuit, that forced the bank into liquidation and public receivership. View "Bartlett v. Baasiri" on Justia Law

In a suit filed in 2014 under the Fair Housing Act, 42 U.S.C. 3601–19, Cook County claimed that the banks made credit too readily available to some borrowers, who defaulted, and then foreclosed on the loans in a way that injured the County. The County alleged the banks targeted potential minority borrowers for unchecked or improper credit approval decisions, which allowed them to receive loans they could not afford; discretionary application of surcharge of additional points, fees, and other credit and servicing costs above otherwise objective risk-based financing rates; higher cost loan products; and undisclosed inflation of appraisal values to support inflated loan amounts. When many of the borrowers could not repay, the County asserts, it had to deal with vacant properties and lost tax revenue and transfer fees.The Seventh Circuit affirmed summary judgment for the defendants. Entertaining suits to recover damages for any foreseeable result of an FHA violation would risk “massive and complex damages litigation.” Proximate cause under the FHA requires “some direct relation between the injury asserted and the injurious conduct alleged.” Cook County seeks a remedy for effects far beyond “the first step.” The directly injured parties are the borrowers, who lost both housing and money. The banks are secondary losers. The County is at best a tertiary loser; its injury derives from the injuries to the borrowers and banks. View "County of Cook v. Bank of America Corp." on Justia Law

Consolidated suits claimed that many firms in the broiler-chicken business formed a cartel. Third-party discovery in that ongoing suit turned up evidence that Rabobank, a lender to several broiler-chicken producers, urged at least two of them to cut production. Some plaintiffs added Rabobank as an additional defendant.The Seventh Circuit affirmed the dismissal of those claims. The Sherman Act, 15 U.S.C. 1, bans combinations and conspiracies in restraint of trade and does not reach unilateral action. Here, all the plaintiffs allege is that Rabobank tried to protect its interests through unilateral action. The complaint does not allege that Rabobank served as a conduit for the producers’ agreement, helped them coordinate their production and catch cheaters, or even knew that the producers were coordinating among themselves. A flurry of emails among managers and other employees at Rabobank observing that lower output and higher prices in the broiler-chicken market would improve the bank’s chance of collecting its loans and a pair of emails from the head of Rabobank’s poultry-lending section, to executives at two producers indicated nothing but unilateral action. The intra-Rabobank emails could not have promoted or facilitated cooperation among producers and the two messages only reminded the producers that as long as demand curves slope downward, lower output implies higher prices. Advice differs from agreement. View "Amory Investments LLC v. Utrecht-America Holdings, Inc." on Justia Law

Gary and Jeanette Merritt own four residential properties in Marysville, Washington. Between 2005 and 2007, the Merritts opened five home equity lines of credit (HELOCs), executing five five promissory notes (notes or HELOC agreements) in favor of USAA Federal Savings Bank. The Merritts secured these loans by executing deeds of trust on the properties with USAA as the beneficiary. In November 2012, the Merritts filed for Chapter 7 bankruptcy. The Merritts stopped making their monthly payments on the USAA loans prior to the November 2012 bankruptcy filing. USAA never accelerated any of the loans or acted to foreclose on the properties. In 2020, the Merritts filed four quiet title complaints seeking to remove USAA’s liens on each of the properties. Relying on Edmundson v. Bank of America, NA, 378 P.3d 272 (2016), the Merritts argued that the six-year statute of limitations to enforce the deeds of trust expired six years after February 12, 2013, the day before their bankruptcy discharge. In October 2020, the Merritts moved for summary judgment in each case. In November 2020, the trial court denied each of these motions. In February 2021, USAA moved for summary judgment in each case. USAA argued that the plaintiffs were not entitled to quiet title because the statute of limitations to foreclose on the deeds of trust would not begin to run until the maturity date of each loan, the earliest of which will occur in 2025. The Court of Appeals affirmed the trial court, holding that the the six-year statute of limitations had not begun to run on enforcement of the deeds of trust since none of the loans had yet matured. The issue this case presented for the Washington Supreme Court's review was whether a bankruptcy discharge triggered the statute of limitations to enforce a deed of trust. The Court affirmed the Court of Appeals and the trial court and hold that bankruptcy discharge did not trigger the statute of limitations to enforce a deed of trust. View "Merritt v. USAA Federal Savings Bank" on Justia Law

The property at issue in this case was a residential home that was purchased in 2007 by Shawn and Stephanie Kurtz. The house was located in a subdivision, which required property owners to pay homeowners association (HOA) assessments to petitioner Copper Creek (Marysville) Homeowners Association. If the assessments were not paid, then Copper Creek was entitled to foreclose on its lien. However, Copper Creek’s lien was “subordinate to any security interest perfected by a first deed of trust or mortgage granted in good faith and for fair value upon such Lot.” The Kurtzes stopped paying their HOA assessments and the home loan in varying times in 2010. The Kurtzes (in the process of divorcing) individually filed for bankruptcy. Neither returned to the house, nor did they make any further payments toward their home loan or their HOA assessments. However, there was no attempt to foreclose on the deed of trust. As a result, the house sat vacant for years and fell into disrepair. The Kurtzes remained the property owners of record and HOA assessments continued to accrue in their names. In 2018, Copper Creek recorded a notice of claim of lien for unpaid HOA assessments, fees, costs, and interest. In January 2019, Copper Creek filed a complaint against the Kurtzes seeking foreclosure on the lien and a custodial receiver for the property. The issue this case presented concerned the statute of limitations to foreclose on a deed of trust securing an installment loan after the borrower receives an order of discharge in bankruptcy. As detailed in Merritt v. USAA Federal Savings Bank, No. 100728-1 (Wash. July 20, 2023), the Washington Supreme Court held that a new foreclosure action on the deed of trust accrues with each missed installment payment, even after the borrower’s personal liability is discharged. Actions on written contracts are subject to a six-year statute of limitations. Therefore, the nonjudicial foreclosure action on the deed of trust in this case was timely commenced as to all unpaid installments within the preceding six years, regardless of the borrowers’ bankruptcy discharge orders. In addition, the Court held the trial court properly exercised its discretion to award fees as an equitable sanction for respondents’ litigation misconduct. View "Copper Creek (Marysville) Homeowners Ass'n v. Kurtz" on Justia Law

On O’Sucha’s death, the property, in a land trust, was to be divided equally among her four children, including Lesko. In 2009, Lesko caused her mother to make her the sole beneficiary upon O’Sucha’s 2010 death and to grant her sole power of direction over the trust. Her siblings sued Lesko in state court for undue influence. While an appeal was pending, Lesko sought a loan from Howard Bank, using the property as collateral. Because of Lesko’s poor credit and the state court decision, Howard approved a loan only when Lesko transferred ownership of the property to her daughter, Amorous. Amorous later conveyed a mortgage to Howard, securing a $130,000 loan, which Howard recorded.On remand, the Illinois court entered a money judgment against Lesko and declared a constructive trust; it later conveyed all interests of Amorous and Lesko to the plaintiffs, who unsuccessfully demanded that Howard release the mortgage.Plaintiffs sued Howard in federal court, then sold the property for $700,000, and paid the mortgage balance. Howard unsuccessfully sought to dismiss the case. In an amended complaint, the plaintiffs asserted slander of title and unjust enrichment. The Seventh Circuit affirmed the dismissal of the case. Howard held a valid mortgage and did not publish a falsity by recording it. Howard was not required to release the mortgage and did not continue to publish a falsity, nor did it unjustly retain a benefit by not releasing the mortgage. View "Guerrero v. Bank" on Justia Law

The Supreme Judicial Court vacated the judgment of the district court dismissing Key Bank National Association's complaint for foreclosure because the debtor or the debtor's estate was a necessary party and was not participating in the action, holding that neither the debtor nor the debtor's estate was a necessary party to the action.The debtor borrowed money from KeyBank and executed a promissory note for the loan. After the debtor died intestate the property at issue passed by operation of law to the debtor's wife as a surviving joint tenant. After the note went into default the wife conveyed the property to a third party. Thereafter, embank filed a complaint for foreclosure of the property against the debtor's wife and estate, as well as third party. The trial court dismissed the action without prejudice, holding that either the debtor or his estate must be named as a necessary party to the foreclosure action. The Supreme Judicial Court vacated the dismissal, holding that because a foreclosure does not include a claim for a deficiency judgment and is therefore solely in rem in nature any mortgagor or successor in interest is a necessary party but a deceased debtor is not. View "KeyBank National Ass'n v. Keniston" on Justia Law