Justia U.S. 5th Circuit Court of Appeals Opinion SummariesArticles Posted in Banking
MoneyGram International, Inc. v. Commissioner of Internal Revenue
The Fifth Circuit affirmed the judgment of the tax court and held that MoneyGram, a global payment services company, is not a "bank" under the tax code, 26 U.S.C. 581, because customers do not give MoneyGram money for safekeeping, which is the most basic feature of a bank. The court explained that purchasers of money orders are not placing funds with MoneyGram for safekeeping. Nor are the financial institutions that use MoneyGram to process official checks doing so for the purpose of safekeeping. In this case, examining the substance of MoneyGram's business confirms how the company has long described itself on its tax returns: as a nondepository institution. Therefore, without deposits, MoneyGram cannot be a bank. View "MoneyGram International, Inc. v. Commissioner of Internal Revenue" on Justia Law
Douglas v. Wells Fargo Bank, N.A.
After Wells Fargo foreclosed on plaintiffs' home, they filed suit to set aside the foreclosure sale, to cancel the trustee’s deed, to quiet title, and for trespass to try title (collectively, the foreclosure-sale claims). Plaintiffs also filed claims for alleged violations of the Texas Debt Collection Act (TDCA), Texas Financial Code sections 392.301(a)(8) and 392.304(a)(8), and of their due process rights. Alternatively, plaintiffs asserted claims for breach of contract, unjust enrichment, and money had and received.The Fifth Circuit affirmed the district court's grant of summary judgment on the foreclosure-sale claims where the undisputed evidence shows that Wells Fargo properly served notice; affirmed the district court's grant of summary judgment on the due process claim where it was not only untimely, but also inextricably tied to the non-meritorious foreclosure-sale claims; and dismissed the remaining claims. In this case, Wells Fargo was not prohibited by law from foreclosing and the district court did not err in dismissing this TDCA claim; Wells Fargo did not violate the Texas Finance Code; and the claims for breach of contract, unjust enrichment, and money had and received are unpersuasive. View "Douglas v. Wells Fargo Bank, N.A." on Justia Law
Federal Deposit Insurance Corp. v. Belcher
This action is one of many related to the collapse of First NBC Bank of New Orleans. The FDIC filed an action in the district court seeking to enforce an administrative subpoena that ordered defendant to submit to a deposition. The district court granted the motion to enforce the subpoena and defendant appealed. In the interim, the district court denied defendant's request for a stay pending the outcome of this appeal. Defendant then sat for the deposition.The Fifth Circuit vacated the district court's judgment enforcing the FDIC's subpoena and remanded for further proceedings. The court held that the district court erred by holding that the FDIC, in its capacity as the Bank's receiver, was "the appropriate Federal functional regulator" in this case, entitling it to receive otherwise confidential and privileged documents from the Public Company Accounting Oversight Board (PCAOB). Rather, the FDIC was not "the appropriate Federal functional regulator" in this case, and the PCAOB lacked the authority under 15 U.S.C. 7215(b)(5)(B) to share transcripts of defendant's deposition testimony before it with the FDIC. View "Federal Deposit Insurance Corp. v. Belcher" on Justia Law
Posted in: Banking
Zepeda v. Federal Home Loan Mortgage Corp.
In a prior dispute between plaintiff and her lender, Feddie Mac, the Fifth Circuit certified to the Supreme Court of Texas the following question: "Is a lender entitled to equitable subrogation, where it failed to correct a curable constitutional defect in the loan documents under section 50 of the Texas Constitution?" The Texas Supreme Court answered in the affirmative. In light of the Texas Supreme Court's answer, the court reversed the district court's holding to the contrary and remanded for further proceedings. View "Zepeda v. Federal Home Loan Mortgage Corp." on Justia Law
Casalicchio v. BOKF, N.A.
Plaintiff requested that the court set aside a foreclosure sale of his residence because his lender mailed him a preforeclosure notice with the wrong deadline for curing default. In this case, the letter contained a deadline thirty days from the day the notice was printed, even though the deed of trust called for a deadline thirty days from the day the letter was mailed.The Fifth Circuit held that the district court correctly applied Texas precedents and denied plaintiff relief, because the lender's "minor" non-compliance with the terms of the deed of trust did not justify unwinding the foreclosure sale. The court held that the error in the foreclosure notice did not clearly harm or prejudice plaintiff, where he does not dispute that, even if the notice had stated the correct deadline, he would not have had the funds to pay the past-due balance on his account. View "Casalicchio v. BOKF, N.A." on Justia Law
Whitney Bank v. SMI Companies Global, Inc.
Whitney Bank filed suit against SMI and its president and loan guarantor in order to collect under two loan agreements upon which SMI allegedly defaulted. SMI filed several counterclaims.The Fifth Circuit held that SMI's breach of contract claim against Whitney Bank failed for two reasons: first, under basic contract interpretation principles, the mere recital of the purpose of the loan, when read in conjunction with the rest of the document, did not require Whitney Bank to continue to provide funding to SMI until that purpose was fulfilled, regardless of SMI's default and failure to make payment as required under the loans; and second, the remainder of SMI's breach claims are based on unwritten purported oral agreements between Whitney Bank employees and SMI.Therefore, the court affirmed the magistrate judge's ruling in favor of Whitney Bank on its main demand for recovery under Loan 1; reversed the magistrate judge's ruling against Whitney Bank on its main demand for recovery on Loan 2; and remanded and rendered judgment in favor of Whitney Bank on the Loan 2 claim. The court reversed and remanded for the magistrate judge to render judgment in favor of Whitney Bank on SMI's counterclaims for breach of contract, negligent misrepresentation, tortious interference with business relations, and breach of duty to deal in good faith. However, the court affirmed the magistrate judge's ruling that Whitney Bank was not entitled to recover from SMI for attorneys' fees and costs. View "Whitney Bank v. SMI Companies Global, Inc." on Justia Law
Collilns v. Mnuchin
Shareholders filed suit against the Agencies after the FHFA placed Fannie Mae and Freddie Mac in conservatorship. In 2012, FHFA and Treasury adopted a Third Amendment to their financing agreements wherein Fannie and Freddie give Treasury nearly all their net worth each quarter as a dividend. Shareholders contend that the arrangement exceeded FHFA's statutory powers and that FHFA lacked authority to adopt the Third Amendment.The court held that shareholders plausibly alleged that the Third Amendment exceeded FHFA’s conservator powers by transferring Fannie and Freddie’s future value to a single shareholder, Treasury. Therefore, a majority of the en banc court held that this claim survived dismissal under Federal Rule of Civil Procedure 12(b)(6). A majority of the en banc court held that the Director's "for cause" removal protection was unconstitutional and therefore FHFA lacked authority to adopt the Third Amendment. The court explained that FHFA's design, an independent agency with a single Director removable only "for cause," violates the separation of powers. Finally, a different majority of the en banc court held that prospective relief was the proper remedy. Accordingly, the court reversed in part, affirmed in part, and remanded for further proceedings. View "Collilns v. Mnuchin" on Justia Law
JP Morgan Chase Bank, N.A. v. Datatreasury Corp.
The Fifth Circuit affirmed the district court's denial of JMPC's motion to compel certain post-judgment discovery. The court held that, although the district court's reliance on the June 2011 date as relevant to DTC's knowledge of any potential claims by JPMC was clearly erroneous, the error was harmless. The court also held that the district court did not abuse its discretion by tying discovery to a time period associated with the Cathay agreement; the district court did not abuse its discretion by limiting discovery to the 2012 breach and the amount of the judgment specifically tied to that one breach; and the district court's proportionality determination was reasonable. View "JP Morgan Chase Bank, N.A. v. Datatreasury Corp." on Justia Law
Zepeda v. Federal Home Loan Mortgage Corp.
The Fifth Circuit certified the following question of law to the Supreme Court of Texas: Is a lender entitled to equitable subrogation, where it failed to correct a curable constitutional defect in the loan documents under section 50 of the Texas Constitution?The court also held that a secondary lender is not entitled to contractual subrogation without a valid contract. In this case, without a signature, Freddie Mac has no ability to enforce the contract itself or its subrogation provision. Therefore, the court affirmed the district court's denial of Freddie Mac's contractual subrogation claim. View "Zepeda v. Federal Home Loan Mortgage Corp." on Justia Law
SEC v. Stanford International Bank, Ltd.
Appellants challenged the approval of a global settlement between the receiver for Stanford International Bank and related entities, and various insurance company underwriters, who issued policies providing coverage for fidelity breaches, professional indemnity, directors and officers protection, and excess losses.The Fifth Circuit vacated the district court's order approving the settlement and bar orders, holding that the district court lacked authority to approve the receiver's settlement to the extent it nullified the coinsureds' claims to the policy proceeds without an alternative compensation scheme; released claims the estate did not possess; and barred suits that could not result in judgments against proceeds of the underwriters' policies or other receivership assets. Accordingly, the court remanded for further proceedings. View "SEC v. Stanford International Bank, Ltd." on Justia Law