Articles Posted in Banking

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This is the third appeal that comes to us in this case, which arises out of Patrick and Mary Lafferty’s purchase of a defective motor home from Geweke Auto & RV Group (Geweke) with an installment loan funded by Wells Fargo Bank, N.A. In Lafferty v. Wells Fargo Bank, 213 Cal.App.4th 545 (2013: "Lafferty I"), the Court of Appeal affirmed in part and reversed in part the action brought by the Laffertys against Wells Fargo. Lafferty I awarded costs on appeal to the Laffertys. On remand, the Laffertys moved for costs and attorney fees. The trial court granted costs in part but denied the Laffertys’ request for attorney fees as premature because some causes of action remained to be tried. The Laffertys appealed. In "Lafferty II," the Court of Appeal held the award of costs on appeal did not include an award of attorney fees. Lafferty II also held the Laffertys’ request for attorney fees was prematurely filed. After issuance of the remittitur in Lafferty II, the parties stipulated to a judgment that contained two key components: (1) their agreement the Laffertys had paid $68,000 to Wells Fargo under the loan for the motor home; and (2) Wells Fargo repaid $68,000 to the Laffertys. After entry of the stipulated judgment, the trial court awarded the Laffertys $40,596.93 in prejudgment interest and $8,384.33 in costs. The trial court denied the Laffertys’ motion for $1,980,070 in post-trial attorney fees, $464,220 in post-appeal attorney fees, and $16,816.15 in non-statutory costs. Wells Fargo appealed the award of prejudgment interest and costs, and the Laffertys cross-appealed the denial of their requests for attorney fees and nonstatutory costs. The Court of Appeal concluded resolution of this appeal and cross-appeal turned on the meaning of title 16, section 433.2 of the Code of Federal Regulations, or the "Holder Rule." The Court found the Laffertys were limited under the plain meaning of the Holder Rule to recovering no more than the $68,000 they paid under terms of the loan with Wells Fargo. Consequently, the trial court properly denied the Laffertys’ request for attorney fees and nonstatutory costs in excess of their recovery of the amount they actually paid under the loan to Wells Fargo. In holding the Laffertys were limited in their recovery against Wells Fargo, the Court of Appeal rejected the Laffertys’ claims the Holder Rule violated the First Amendment, due process, or equal protection guarantees of the federal Constitution. However, the Court concluded the trial court did not err in awarding costs of suit and prejudgment interest to the Laffertys. View "Lafferty v. Wells Fargo Bank, N.A." on Justia Law

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After defendant filed a wrongful foreclosure action against the trustee of a foreclosure sale (Placer) and the third-party buyer, Pro Value, Placer filed a complaint in interpleader and deposited the surplus proceeds from a foreclosure sale with the court. The Court of Appeal affirmed the trial court's judgment of dismissal after the trial court sustained defendant's demurrer to the interpleader complaint without leave to amend. The court held that Placer was statutorily required under Civil Code section section 2924k to disburse surplus funds to defendant, and that Placer could safely distribute the surplus funds to defendant without any risk of multiple liability. The court remanded with directions to release the interpleaded funds to defendant. View "Placer Foreclosure, Inc. v. Aflalo" on Justia Law

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In the underlying operative complaint, plaintiff Dalia Rojas pleaded two causes of action against defendants HSBC Card Services Inc. and HSBC Technology & Services (USA) Inc. (together HSBC) based on HSBC's alleged violations of Rojas's right to privacy under the California Invasion of Privacy Act (Privacy Act). Rojas alleged that HSBC intentionally recorded certain of her confidential telephone conversations in violation of: section 632(a), which prohibited one party to a telephone call from intentionally recording a confidential communication without the knowledge or consent of the other party; and section 632.7(a), which prohibited the intentional recording of a communication using a cellular or cordless telephone. Rojas appealed the grant of summary judgment in favor of HSBC. The Court of Appeal agreed with Rojas that, because HSBC did not meet its initial burden under Code of Civil Procedure section 437c (p)(2), the trial court erred in granting HSBC's motion for summary judgment. Accordingly, that judgment was reversed and the matter was remanded with directions to enter an order denying HSBC's motion. View "Rojas v. HSBC Card Services" on Justia Law

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In the underlying operative complaint, plaintiff Dalia Rojas pleaded two causes of action against defendants HSBC Card Services Inc. and HSBC Technology & Services (USA) Inc. (together HSBC) based on HSBC's alleged violations of Rojas's right to privacy under the California Invasion of Privacy Act (Privacy Act). Rojas alleged that HSBC intentionally recorded certain of her confidential telephone conversations in violation of: section 632(a), which prohibited one party to a telephone call from intentionally recording a confidential communication without the knowledge or consent of the other party; and section 632.7(a), which prohibited the intentional recording of a communication using a cellular or cordless telephone. Rojas appealed the grant of summary judgment in favor of HSBC. The Court of Appeal agreed with Rojas that, because HSBC did not meet its initial burden under Code of Civil Procedure section 437c (p)(2), the trial court erred in granting HSBC's motion for summary judgment. Accordingly, that judgment was reversed and the matter was remanded with directions to enter an order denying HSBC's motion. View "Rojas v. HSBC Card Services" on Justia Law

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In 2004, U.S. Bank made a business loan to B2B, guaranteed by B2B’s principals, the Yousufs, and secured by a second deed of trust on the Yousufs's property. In 2011, U.S. Bank assigned the note and deed of trust to SMS. SMS, B2B and the Yousufs later executed a “Forbearance Agreement,” reciting that the loan was in default and agreeing that SMS would not exercise its rights as long as B2B made payments according to the agreement’s schedule. Months later, B2B failed to make the required payments. In 2014, SMS was preparing to initiate foreclosure when it learned that in 2007, without the knowledge of U.S. Bank, Cornerstone Title had, under Civil Code 2941(b)(3), recorded a release of the obligation secured by the deed of trust. SMS alleges that Cornerstone had no authority to do so, and that contrary to the release’s language, the secured obligation had not been satisfied or discharged. The court of appeal reversed dismissal of SMS’s suit against Cornerstone. Section 2941(b)(6) imposes broad liability on any title insurance company that issues and records a release under subdivision (b)(3). SMS, as the holder of an obligation, has the right to prove damages against Cornerstone, as a title company that recorded a release of that obligation. That SMS acquired the obligation from U.S. Bank is irrelevant. View "SMS Financial XXIII, LLC v. Cornerstone Tile Co." on Justia Law

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Sparrow obtained two loans from Countrywide, each secured by a deed of trust on Hercules, California property: a residential mortgage of $205,080 and a home equity line of credit (HELOC) of $15,000. Both deeds of trust were recorded on December 16, 2003, with the Contra Costa County Recorder’s Office; the HELOC deed as instrument 0603657 and the mortgage deed of trust as 0603058. The HELOC was assigned to the Bank and the mortgage was assigned to Nationstar. Following Sparrow’s default on the HELOC, the trustee conducted a nonjudicial sale of the property and received $105,000. After payment to the Bank and of the costs of the sale, a surplus of $73,085.50 remained, which was claimed by Sparrow, the Owners’ Association, and Nationstar. The trustee deposited the funds with the court. The court of appeal affirmed that Nationstar, as a senior lienholder, was not entitled to any of the proceeds of the sale under Civil Code section 2924k. Absent evidence of timing that was determinative, the trial court reasonably relied on the apparent intent of the parties to determine the priority of the two liens. Given that Countrywide was the lender on both loans, the reasonable expectation is that it would secure the larger mortgage loan in the primary position. View "MTC Financial, Inc. v. Nationstar Mortgage" on Justia Law

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Sparrow obtained two loans from Countrywide, each secured by a deed of trust on Hercules, California property: a residential mortgage of $205,080 and a home equity line of credit (HELOC) of $15,000. Both deeds of trust were recorded on December 16, 2003, with the Contra Costa County Recorder’s Office; the HELOC deed as instrument 0603657 and the mortgage deed of trust as 0603058. The HELOC was assigned to the Bank and the mortgage was assigned to Nationstar. Following Sparrow’s default on the HELOC, the trustee conducted a nonjudicial sale of the property and received $105,000. After payment to the Bank and of the costs of the sale, a surplus of $73,085.50 remained, which was claimed by Sparrow, the Owners’ Association, and Nationstar. The trustee deposited the funds with the court. The court of appeal affirmed that Nationstar, as a senior lienholder, was not entitled to any of the proceeds of the sale under Civil Code section 2924k. Absent evidence of timing that was determinative, the trial court reasonably relied on the apparent intent of the parties to determine the priority of the two liens. Given that Countrywide was the lender on both loans, the reasonable expectation is that it would secure the larger mortgage loan in the primary position. View "MTC Financial, Inc. v. Nationstar Mortgage" on Justia Law

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Fong, born in China in 1931, moved to San Francisco as a young man and became a real estate investor. Fong had a banking relationship with the Bank, where he had more than $3.5 million dollars on deposit. Loans involving the Bank, Fong, and UTGI, a California corporation formed by young investors who were family friends of Fong, whom Fong was assisting in establishing a real estate investment business, were not timely paid. The Bank liquidated assets Fong had pledged as collateral. In a suit claiming conversion and financial abuse of an elder under Welfare and Institutions Code section 15610.30, Fong alleged that he did not understand certain documents and that documents were forged. The trial court granted the Bank summary judgment and determined that as the “prevailing party” the Bank was “entitled to its reasonable attorneys’ fees and costs,” of $202,069.75 and $6,290.05. The court of appeal reversed finding a triable issue of material fact regarding the genuineness of Fong’s signature on the documents authorizing repayment of a loan with respect to one of Fong’s conversion claims. View "Fong v. East West Bank" on Justia Law

Posted in: Banking

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The Chois consulted in 2003 with defendants, who advised the Chois that an IRC 412(i) Plan retirement account would provide tax advantages, asset protection, and steady income. It required several steps including the purchase of “whole life” insurance for eventual exchange for American General Universal Life “Platinum” policies. The initial purchase was $1,275,000; a second purchase cost $439,000. The policies comprised 70-75 percent of the Plan portfolio. The IRS audited the Chois in 2006. Defendants changed their advice. Plaintiffs sued, alleging cash losses attributable to loss in value and that they were required to pay $440,000 in back taxes and interest, plus $60,000 in penalties, and faced future payments to the Franchise Tax Board of California and anticipated IRS penalties of $600,000. Defendants cross-complained for indemnity and comparative fault against American General. The trial court found the claims time-barred. The court of appeal affirmed, upholding a determination that the limitations period began to run in September 2007, when plaintiffs were “on notice” that the IRS would impose penalties, not in 2010 when penalties were assessed; the court declining to consider any tolling effect created by the ongoing fiduciary relationship; and application of the 2007 “notice” date as a bar to all claims. View "Choi v. Sagemark Consulting" on Justia Law

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Property owners who purchased through a foreclosure sale sued the bank that sold the house, alleging that they were mislead the bank’s deed of trust was the first deed of trust, when another remained on the property, and was not extinguished by the foreclosure sale. Wells Fargo assigned any claim against the title insurer it had to David and Lina Hovannisian (the property owners), and the Hovannisians sued First American Title Insurance Company, alleging breach of contract, negligent misrepresentation and breach of the implied covenant of good faith and fair dealing. First American moved for summary judgment, arguing its title insurance coverage had terminated, and no benefits were due. The motion was granted, and the Hovannisians appealed, arguing First American failed to establish that coverage did not continue under the title policy or there were no benefits due under the policy. They also contended triable issues of fact existed regarding their bad faith claim. The Court of Appeal affirmed, finding First American showed, based on the facts Wells Fargo and the Hovannisians presented before and after the underlying action was filed, that there was no potential for coverage under the policy. The Hovannisians did not learn about the first deed of trust until after they purchased the property at the foreclosure sale without warranty. Thus, the only potential claim they had against Wells Fargo was for the alleged misrepresentations for which there was no liability or loss under the policy. View "Hovannisian v. First American Title Ins. Co." on Justia Law