Articles Posted in Banking

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This case arose from an allegedly forged home-equity loan. Plaintiff sued the lenders, bringing several claims, including statutory fraud and violations of the Texas Finance Code and Texas Deceptive Trade Practices Act. The trial court granted summary judgment for the lenders without stating its reasons. The court of appeals affirmed. The Supreme Court affirmed in part and reversed and remanded in part, holding that the court of appeals (1) properly affirmed summary judgment on Plaintiff’s constitutional forfeiture claim; and (2) erred in holding that Plaintiff’s remaining claims were barred on statute of limitations and waiver grounds. View "Kyle v. Strasburger" on Justia Law

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In 2004, the Woods obtained a $76,000 home-equity loan secured by their homestead. Nearly eight years later, the Woods notified the note holder, HSBC, and loan servicer, Ocwen that the loan did not comply with the Texas Constitution because the closing fees exceeded 3% of the loan amount. Neither of the lenders attempted to cure the alleged defects. In 2012, the Woods sued, seeking to quiet title and asserting claims for constitutional violations, breach of contract, fraud, and a declaratory judgment that the lien securing the home-equity loan is void, that all principal and interest paid must be forfeited, and that the Woods have no further obligation to pay. The trial court granted the lenders summary judgment and the court of appeals affirmed, citing the statute of limitations. The Texas Supreme Court reversed in part.“No . . . lien on the homestead shall ever be valid unless it secures a debt described by this section[.]” TEX. CONST. art. XVI, § 50(c). This language is clear, unequivocal, and binding. Liens securing constitutionally noncompliant home-equity loans are invalid until cured and thus not subject to any statute of limitations. The Woods do not, however, have a cognizable claim for forfeiture. View "Wood v. HSBC Bank USA, N.A." on Justia Law

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Garofolo took out a $159,700 home-equity loan. She made timely payments and paid off the loan in, 2014. Ocwen had become the note’s holder. A release of lien was promptly recorded in Travis County, but Garofolo did not receive a release of lien in recordable form as required by her loan’s terms. Garofolo notified Ocwen she had not received the document. Upon passage of 60 days following that notification, and still without the release, Garofolo sued, alleging violation of the home-equity lending provisions of the Texas Constitution and breach of contract. She sought forfeiture of all principal and interest paid on the loan. The federal district court dismissed. The Fifth Circuit certified questions of law to the Texas Supreme Court, which responded that the constitution lays out the terms and conditions a home equity loan must include if the lender wishes to foreclose on a homestead following borrower default, but does not create a constitutional cause of action or remedy for a lender’s breach of those conditions. A post-origination breach of terms and conditions may give rise to a breach-of-contract claim for which forfeiture can sometimes be an appropriate remedy. When forfeiture is unavailable, the borrower must show actual damages or seek some other remedy such as specific performance. View "Garofolo v. Ocwen Loan Serv., L.L.C." on Justia Law

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Lorene and Harley Walter owned a certificate of deposit account with Bank of America. The account was a survivorship account and a payable-on-death account. After Harley died and while Lorene was still alive, the Bank distributed the funds in the account to Dwight Eisenhauer and Jo Ann Day, the named beneficiaries on the account, in equal sums. The Bank violated its deposit agreement with the Walters in doing so because these payments were made before Harley’s death. Eisenhauer, using his power of attorney, deposited his check into an account in Lorene’s name, making himself beneficiary upon her death. After Lorene died, Eisenhauer, as the independent executor of Lorene’s estate, sued the Bank for breach of the deposit agreement. The jury found that the Bank had failed to comply with the agreement but that the estate suffered no damages. The trial court subsequently granted judgment for Eisenhauer notwithstanding the jury’s verdict and rendered judgment for the amount that had been distributed to Day, plus interest, costs, and attorney fees. The court of appeals affirmed. The Supreme Court reversed, holding that the trial court erred in granting judgment notwithstanding the verdict to Eisenhauer, as the evidence supported the jury’s finding that the estate suffered no damages. View "Bank of America, N.A. v. Eisenhauer" on Justia Law

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Respondents obtained a home-equity loan from Wells Fargo Bank. After Respondents stopped making loan payments, Wells Fargo filed an application in the district court for an expedited court order authorizing foreclosure. Respondents filed a separate and original declaratory judgment action that invoked the automatic stay and dismissal provisions of Tex. R. Civ. P. 736.11. Wells Fargo filed an amended answer asserting a counterclaim for declaratory judgment and requesting attorney’s fees pursuant to the Uniform Declaratory Judgments Act. The trial court granted Wells Fargo’s motion for summary judgment and awarded attorney’s fees, concluding that Respondents had defaulted on their home-equity loan. The court of appeals affirmed the trial court’s summary judgment but reversed the attorney’s fee award, concluding that neither party had pleaded a cognizable claim for declaratory relief, and the non-recourse status of the home-equity loan prohibited a personal judgment for attorney’s fees against Respondents. The Supreme Court reversed in part, holding (1) because Respondents failed to preserve any challenge to the characterization of their own claim for declaratory relief, the trial court was authorized to enter a judgment awarding Wells Fargo its attorney’s fees; and (2) neither the parties’ loan agreement nor the Texas Constitution prohibited a personal judgment against Respondents for attorney’s fees. View "Wells Fargo Bank, N.A. v. Murphy" on Justia Law

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Respondent borrowed money from Bank pursuant to a construction loan agreement and promissory note. Defendant secured his obligations by executing a deed of trust on property. After Respondent defaulted on the note, Bank foreclosed its contractual deed of trust lien on the property. Bank purchased the property for less than the secured debt. Respondent sued Bank, arguing that Tex. Prop. Code Ann. 51.003 required Bank to offset the property’s fair market value on the date of foreclosure against any judgment in favor of Bank. Bank counterclaimed for damages and attorney’s fees. The trial court rendered judgment for Bank, concluding that section 51.003 did not apply. The court of appeals reversed, determining (1) Respondent’s deficiency must be calculated pursuant to section 51.003, and the term “fair market value” as used in the statute is the historical willing-seller/willing-buyer definition of fair market value; and (2) a factual question existed requiring further proceedings. The Supreme Court reversed, holding (1) section 51.003 applies to this case, but the term “fair market value” in that section does not equate precisely to the historical definition; and (2) the trial court did not err in its finding as to the section 51.003 fair market value of the property on the date of the foreclosure sale. View "PlainsCapital Bank v. Martin" on Justia Law

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Plaintiffs, the recipients of a home equity loan, reached two loan modification agreements with Defendant, which reduced the interest rate and payments. Plaintiffs subsequently brought this class action against Defendant in the United States District Court, alleging that the loan modifications violated Tex. Const. art. XVI, 50, which sets forth requirements for a new home equity loan. The district court dismissed the case for failure to state a cause of action. On appeal, the Fifth Circuit Court of Appeals asked the Supreme Court whether the requirements of Article XVI, Section 50 apply to the type of loan restructuring in this case. The Supreme Court answered that, as long as the original note is not satisfied and replaced, and there is no additional extension of credit, the Constitution does not prohibit the restructuring of a home equity loan that already meets its requirements in order to avoid foreclosure. View "Sims v. Carrington Mortgage Servs., LLC" on Justia Law

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A corporation (Infodisc) and one of its subsidiaries (M-TX) defaulted on a loan from a bank. A California court placed the borrowers in receivership to liquidate their assets securing the loan, and an ancillary receivership was opened in Texas. Meanwhile, another Infodisc subsidiary, a California corporation (M-CA), declared bankruptcy. The receiver claimed and sold property in a Texas warehouse that the Landlord alleged was not leased to Infodisc or M-TX but to M-CA. The parties disputed who the tenant was and who owned the property and fixtures in the warehouse. After the trial court rejected almost all of the Landlord's claims, the Landlord appealed. The court vacated the trial court's judgment and dismissed the case, holding that the proceedings violated the automatic stay even though M-CA was not a party to the case. The Supreme Court granted review and reversed, holding that the court of appeals should have abated the appeal to allow the application of the automatic stay to be determined by the trial court in the first instance. Remanded. View "Evans v. Unit 82 Joint Venture" on Justia Law

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In this suit for an alleged breach of a deposit agreement, the court reviewed the court of appeals' judgment in favor of an estate administrator, as well as the estate administrator's cross-petition concerning attorney's fees. When a party failed to preserve error in the trial court or waived an argument on appeal, an appellate court could not consider the unpreserved or waived issue. Because many of the arguments raised by the parties invoked issues of error preservation or waiver, the court declined to grant either party the relief it sought. View "FDIC v. Lenk" on Justia Law

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1/2 Price Checks Cashed (Half-Price) brought a suit in a Dallas County justice court asserting breach of contract on the basis of the obligation owed by the drawer of a check under Tex. Bus. & Com. 3.414 and requested attorney's fees. At issue was whether a holder of a dishonored check could recover attorney's fees under Texas Civil Practice and Remedies Code section 38.001(8) in an action against a check's drawer under section 3.414. The court held that Half-Price's section 3.414 claim was a suit on a contract to which section 38.001(a) applied and applying section 38.001(8) to the claim did not disrupt Article 3 of the Uniform Commercial Code's statutory scheme. Therefore, the court reversed the judgment and remanded for a determination of attorney's fees. View "1/2 Price Checks Cashed v. United Automobile Ins. Co." on Justia Law