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Mortgage Lawsuits News | Mortgage Litigation Index
Mortgage industry lawsuit news and mortgage litigation coverage. Stories about legal settlements, judgments and mortgage class actions.


Loan Titles Disputed in Court

Recent activity in litigation challenging loan titles

Sept. 25, 2012

By SAM GARCIA Mortgage Daily


portrait of Sam Garcia

Mortgage servicers are defending the title to their loans as borrowers across the country attempt to avoid foreclosure. A number of cases involve lenders battling other mortgage firms for lien priority, and some have title insurance companies hoping to avoid claims.

After Union Bank, N.A., started foreclosure proceedings on her house, Ellen Gallagher sued to stop the action. Union Bank was foreclosing on a home-equity line of credit taken out by a prior owner, and Gallagher challenged the bank's security interest. A judgment awarded to Gallagher by the trial court was overturned on July 13 by California's Court of Appeal.

"We conclude that Gallagher did not establish in her summary judgment that Union Bank lacks a valid security interest in Gallagher's home, and accordingly we reverse the judgment," the decision stated. "We also consider and reject Union Bank's argument that the trial court abused its discretion by granting Gallagher's motion to quash relating to certain business record subpoenas served by Union Bank on third parties. Moreover, based on our reversal of the judgment, we also reverse the trial court's post-judgment order awarding attorney fees to Gallagher."

Andrea Skov attempted to stop foreclosure on her California residence by U.S. Bank, N.A., which was acting as trustee for the owner of Skov's loan, Credit Suisse First Boston CSFB 2004-AR3. She appealed to the Court of Appeals of California, Sixth District, arguing that the trial court improperly took judicial notice of various recorded documents. She also contended that the second amended complaint sufficiently pleaded her causes of action for wrongful foreclosure, unlawful business practices, and declaratory relief. The appeals court agreed and reversed the judgment.

When the Court of Common Pleas denied CACH LLC's motion for a summary judgment in a lien priority filed against Eastern Savings Bank and granted a motion to dismiss by Eastern, CACH appealed to the Superior Court and the decision was reversed. Eastern filed an appeal with the Supreme Court of Delaware, but the Superior Court decision was affirmed.

CACH was trying to collect on a Dec. 7, 2006, judgment against Aaron Johnson that was recorded on Johnson's property on Dec. 21. But Johnson closed on a loan with Eastern on Dec. 19 -- though that lien wasn't recorded until Dec. 29, 2006.

A Florida circuit court ruled that Deutsche Bank National Trust Co.'s mortgage had priority over a lien that was filed earlier by Martin R. and Grace L. Sherman. Deutsche claimed equitable subrogation. But the Shermans filed an appeal, and the District Court of Appeal of Florida, Third District, reversed the decision on Aug. 22 and remanded the case for further proceedings.

"Deutsche Bank failed to demonstrate that equitable subrogation did not and would not harm the Shermans' record-priority lien," the decision stated. "Instead, Deutsche Bank sought and obtained relief that placed the Shermans in a worse, not equal, position as a result of the 2006 refinancing.

Through an inadvertent error by the county clerk's office, the property conveyance to Wright & Associates and the mortgage to First City were removed from the county records in 2006. In October 2009, Michael and Bonnie Mayfield financed the purchase of the property with Old National Bank, a company that was subsequently acquired by Branch Banking and Trust Co. First City foreclosed in 2010, and the court ruled against BB&T and the Mayfields, who were also trying to fight First City's foreclosure. BB&T appealed, and while the District Court of Appeal of Florida was sympathetic to BB&T's position, it affirmed the trial court ruling.

National City Bank filed a foreclosure lawsuit against Kristin A. Nagel then filed a motion to substitute party plaintiff indicating that the note was assigned from First Franklin Financial after the foreclosure suit was filed. But the trial court determined that National City didn't own the note at the time the suit was filed and dismissed the action.

The District Court of Appeal of Florida, Fourth District, however, reversed the decision, noting, "'A trial judge may not sua sponte dismiss an action based on affirmative defenses not raised by proper pleadings' as a dismissal under these circumstances 'denies the parties due process because the claim is being dismissed without `notice and an opportunity for the parties and counsel to be heard.'"

Ralph A. Fulchino and Katheryn Y. Fulchino had two first mortgages and one second mortgage with AmSouth Bank secured by two properties. When one property was sold in June 2005 to Albert and Adrienne Deluca with $900,000 in financing from Washington Mutual Bank, F.A., one of the loans was not detected in the title search and wasn't paid off. Ralph Fulchino died in December 2008, and the loan with AmSouth -- which had since been acquired by Regions Bank -- went into the foreclosure process on both properties. The Delucas and JPMorgan Chase Bank, N.A. -- which had since acquired WaMu -- were named as defendants and subsequently obtained a summary judgment.

Regions appealed the judgment to the District Court of Appeal of Florida, Second District, and the trial court decision was reversed and the case remanded.

A final summary judgment entered in favor of U.S. Bank, N.A., in a foreclosure against Thomas W. Cutler and Ann Cutler was reversed on appeal by the District Court of Appeal of Florida, Second District. U.S. Bank had lost the note originally executed with BNC Mortgage Inc., and the borrowers argued that the trial court erred in granting final summary judgment because U.S. Bank lacked standing to bring the foreclosure action. The decision indicated that a summary judgment was improper because there was a genuine issue of material fact.

First Tennessee Bank's diversity lawsuit against Lawyers Title Insurance was dismissed on April 17 by the U.S. District Court for the Northern District of Illinois. First Tennessee had sought a declaratory judgment and damages based on common law breach of contract, estoppel, and the Illinois Insurance Code. Subsidiary First Horizon Home Loans made an $83,200 second lien to Roosevelt Garrett on Feb. 16, 2005, with a title policy from Lawyers. But the borrower obtained another second mortgage from Countrywide Home Loans on Feb. 8, leaving First Tennessee in third position.

When James G. McDonough financed an Illinois property through United Community Bank, neither he, the bank nor the title company knew that the seller, Santarelli and Sons Inc., had encumbered the property as a result of a money judgment in favor of Prairie State Bank. United Community sued, and the trial court denied its motion for summary judgment and granted Prairie State Bank's cross-motion for summary judgment. The court noted that the title insurance company in the United Community transaction, Commonwealth Title Insurance Co., had missed the judgment lien in its title search. The judgment was affirmed by the Appellate Court of Illinois, Fourth District.

R. G. and Edna Bratton filed a lawsuit in June 2009 against CitiFinancial Inc. because it mistakenly listed three properties owned by the Brattons on the deed and mortgage of a Fayette County, Ky., property. While Citi filed a deed of correction, it didn't release the original mortgage or reconvey the other two properties back to the Brattons.

After the circuit court ruled in favor of the Brattons, Citi appealed the decision with the Court of Appeals of Kentucky. The judgment was reversed, and the appeals court noted, "We must hold that the circuit court committed reversible error."

On a $60,000 mortgage made in July 2005 to Stephen and Mary Ellen Strickland, from Ameriquest Mortgage Co., the wrong platt for the wrong property was attached to the mortgage, which correctly identified the collateral property for the loan. The owners of the property identified in the platt, Strickland's parents Frederick and Cheryl Strickland, sued Ameriquest for a release of lien. Ameriquest answered, claiming that once the younger Stricklands realized they had free and clear title they quickly transacted a sham $50,000 loan to the elder Stricklands to the detriment of Ameriquest's lien position. The trial court found in favor of the Strickland's on the parent's property but didn't address son's property.

A March 10, 2011, a dismissal of Ameriquest's reconventional demand against the Stricklands and pretermitting disposition of the motion to quash was reversed on July 18 by the Court of Appeals of Louisiana, First Circuit, and the case was remanded.

One of two seminal cases in Massachusetts included U.S. Bank Nat'l Ass'n v. Ibanez, when in 2011 the Massachusetts Supreme Court declared the foreclosure invalid because proper legal procedures weren't followed in the mortgage transfer and securitization process. Now, Antonio Ibanez "claims that as a result of defendants' acts and misrepresentations, he has been deprived of the use, possession, and value of the mortgaged property; has lost the funds that he invested in the purchase of the property; and has lost the funds, time, and labor that he invested in rehabilitating the property," according to an April 13 decision from the U.S. District Court for the District of Massachusetts. But Ibanez's case was dismissed.

MB Financial Bank, N.A., was unsuccessful at the trial court level in its equitable subrogation action against John W. and Linda Thorn Hoffman. The Court of Appeals of Michigan affirmed the decision on Sept. 18.

In J.P. Morgan Chase Bank, N.A., v. Cortes, the lender neglected to obtain Floris R. Cortes' signature on a loan to her husband Michael Joseph Cortes. When the loan defaulted and the lender attempted to foreclose, it couldn't foreclose on the wife's joint interest in the property since she didn't sign the loan. An appeal filed with the Appellate Division of the Supreme Court of New York, was unsuccessful.

Rodney and Karen Biddle closed on a $342,000 mortgage with F & M Bank and Trust Co. in June 2008 and the mortgage was recorded two days later. Gardner Construction Co., however, filed a $53,759 mechanic's lien in November 2009 that covered work done since starting improvements on the Oklahoma property in March 2008. F & M filed a petition for foreclosure in December 2009, and Gardner was made a party to the matter. Both Gardner and F & M filed competing motions for summary judgment, and F & M won. The Court of Civil Appeals of Oklahoma affirmed the decision.

On June 12, the Supreme Court of Oklahoma reversed a foreclosure because standing was not established, according to an unpublished opinion. Option One Mortgage Corp. made the loan in August 2005 to Robert and Shelly Heath, who defaulted around September 2008. Wells Fargo Bank, N.A., as trustee for the Option One Mortgage Loan Trust 2005-4 Asset Backed Certificates, Series 2005-4, filed a petition to foreclose in December 2008.

A summary judgment was issued in a quiet title action by the U.S. District Court for the Middle District of Pennsylvania in favor of plaintiff Freddie Mac. A cross motion for summary judgment by the defendant, All State Asset Management LLC, was denied. All State acquired the property at a tax sale for $12,000. Freddie successfully argued that by virtue of the supremacy and property clauses of the U.S. Constitution and the Federal Home Loan Mortgage Corporation Act, its interest in real property cannot be impaired or extinguished without its consent.


ELLEN GALLAGHER, Plaintiff and Respondent, v. UNION BANK, N.A., Defendant and Appellant.
Superior Court No. No. 37-2010-00087129-CU-OR-CTL, D058896, D059838, Decided July 13, 2012 (Court of Appeal, Fourth Appellate District, Division One, State of California).

ANDREA SKOV, Plaintiff and Appellant, v. U.S. BANK NATIONAL ASSOCIATION, Defendant and Respondent.
Case No. H036483, filed June 8, 2012 (Court of Appeals of California, Sixth District).

EASTERN SAVINGS BANK, FSB, Defendant Below, Appellants, v. CACH, LLC, Plaintiffs Below, Appellees.
Case No. 88, 2012, decided Aug. 24, 2012 (Supreme Court of Delaware).

Martin R. Sherman and Grace L. Sherman, Appellants, v. Deutsche Bank National Trust Company, as Trustee for Long Beach Mortgage Loan Trust 2006-10, Appellee.
Case No. 3D11-2707, opinion filed Aug. 22, 2012 (District Court of Appeal of Florida, Third District).

NATIONAL CITY BANK, Appellant, v. KRISTIN A. NAGEL, et al., Appellee.
Case No. 4D11-3172, decision Aug. 22, 2012 (District Court of Appeal of Florida, Fourth District.

REGIONS BANK, Successor by Merger with AmSouth Bank, Appellant, v. ALBERT and ADRIENNE DELUCA; and JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, as Purchaser of the Loans and Other Assets of Washington Mutual Bank, formerly known as Washington Mutual Bank, F.A., Appellees.
Case No. 2D11-3828, opinion filed Aug. 22, 2012 (District Court of Appeal of Florida, Second District).

THOMAS W. CUTLER and ANN CUTLER, Appellants, v. U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE FOR THE STRUCTURED ASSET INVESTMENT LOAN TRUST, 2006 BNC3, Appellee.
Case No. 2D10-5709, opinion filed Sept. 21, 2012 (District Court of Appeal of Florida, Second District).

FIRST TENNESSEE BANK, NATIONAL ASSOCIATION, a National Banking Association, Plaintiff, v. LAWYERS TITLE INSURANCE, CORPORATION, Defendant.
Case No. 11 CV 01539, decided April 17, 2012 (U.S. District Court, N.D. Illinois, Eastern Division).

UNITED COMMUNITY BANK, a Banking Corporation; and JAMES G. McDONOUGH, Plaintiffs-Appellants, v. PRAIRIE STATE BANK & TRUST, an Illinois Banking Corporation, Defendant-Appellee, and SANTARELLI AND SONS, INC., Defendant.
Case No. 4-11-0973, decided July 11, 2012 (Appellate Court of Illinois, Fourth District).

CITIFINANCIAL, INC., Appellant, v. EDNA BRATTON INDIVIDUALLY AND AS EXECUTRIX OF THE ESTATE OF R. G. BRATTON, Appellee.
Case No. 2011-CA-001152-MR rendered Aug. 31, 2012 (Court of Appeals of Kentucky).

FREDERICK W. STRICKLAND AND CHERYL D. STRICKLAND, v. AMERIQUEST MORTGAGE COMPANY.
Case No. 2011 CA 1677, decision dated July 18, 2012 (Court of Appeals of Louisiana, First Circuit).

ANTONIO IBANEZ, v. U.S. BANK NATIONAL ASSOCIATION, as Trustee for THE STRUCTURED ASSET SECURITIES CORP. PASS-THROUGH CERTIFICATE SERIES 2006-Z; AMERICAN HOME MORTGAGE SERVICING, INC.; SAND CANYON CORP. also known as OPTION ONE MORTGAGE CORP.
Civil Action No. 11-11808-RGS, decision April 13, 2012 (U.S. District Court, D. Massachusetts).

MB FINANCIAL BANK, N.A., Plaintiff-Appellant, v. JOHN W. THORN and LINDA THORN HOFFMAN, Defendants-Appellees, and LML OF FOUNTAIN SQUARE, L.L.C., Defendant.
Case No. 306672, decision on Sept. 18, 2012 (Court of Appeals of Michigan).

J.P. MORGAN CHASE BANK, N.A., appellant, v. MICHAEL JOSEPH CORTES, ET AL., respondents.
Case No. 2011-08972, decided June 13, 2012 (Appellate Division of the Supreme Court of New York, Second Department).

FIFTH THIRD MORTGAGE COMPANY, Plaintiff-Appellee, v. CHICAGO TITLE INSURANCE COMPANY, Defendant-Appellant.
Case No. 11-3795, decided Aug. 30, 2012 (U.S. Court of Appeals, Sixth Circuit).

THE F&M BANK & TRUST CO., an Oklahoma Banking Corporation, Plaintiff/Appellee, v. GARDNER CONSTRUCTION COMPANY, Defendant/Appellant, KAREN J. BIDDLE; SPOUSE IF ANY, OF KAREN J. BIDDLE; HEIRS, PERSONAL REPRESENTATIVES, DEVISEES, SUC-CESSORS, ASSIGNS, and THE UNKNOWN SUCCESSORS of RODNEY B. BIDDLE, DECEASED; OCCUPANTS OF PREMISES; and STATE OF OKLAHOMA EX REL OKLAHOMA STATE TAX COMMISSION, Defendants.
Case No. 108443, mandate issued April 13, 2012 (Court of Civil Appeals of Oklahoma, Division 1).

WELLS FARGO BANK, N.A., AS TRUSTEE FOR OPTION ONE MORTGAGE LOAN TRUST 2005-4 ASSET-BACKED CERTIFICATES, SERIES 2005-4; Plaintiff/Appellee, v. ROBERT HEATH AND SHELLY HEATH; Defendants/Appellants.
Case No. 108383, decided June 12, 2012 (Supreme Court of Oklahoma).

FEDERAL HOME LOAN MORTGAGE CORPORATION, Plaintiff v. MONROE COUNTY TAX CLAIM BUREAU, AND ALL STATE ASSET MANAGEMENT, LLC, Defendants.
In re ESTATE BY MONROE COUNTY TAX CLAIM BUREAU
.
Case No. 1:11-cv-01678-JEJ, decided July 30, 2012 (U.S. District Court for the Middle District of Pennsylvania).


Sam Garcia founded Mortgage Daily in 1998 and became its full-time publisher in 2000. Prior to his news career he worked in mortgage lending for two decades.

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