Topline Q1 2015

General information

Preparing an amicus brief in a case, LSREF2 Clover Property 4 LLC v. Wells Fargo Bank, in which a commercial real estate lender was barred from enforcing a guaranty following non-judicial foreclosure. The guarantor successfully argued at trial that because the lender looked primarily to the guarantor for repayment rather than the borrower, the guarantor should be treated as the borrower and benefit from the state’s anti-deficiency protections. As in many commercial real estate loans, the guarantor was closely affiliated with the borrower.

Developing an amicus brief in a case, Cloud v. Farmers & Merchants Bank, where the court refused to enforce an arbitration agreement because the signature card did not refer to the account agreement by its exact title. The decision, if upheld on appeal, would add confusion about the status of account agreements generally.

Supporting U.S. Supreme Court review of Gutierrez v. Wells Fargo Bank on what is the applicable standard in federal court that must be met for members of a class to pursue a claim of misrepresentation. The bank’s argument is that California’s lax rules that do not require class members to prove a claim should not apply in federal court.

Preparing an amicus brief with the California Supreme Court in Yvanova v. New Century Mortgage Corp, which addresses whether a residential mortgage borrower in default has standing to sue a trustee to invalidate a foreclosure on the basis of alleged defects in the assignment of the note that ultimately became part of a mortgage-backed security.

CBA published Regulatory Compliance Bulletins on the following issues:

  • A federal appeals court ruling that a mistakenly terminated UCC-1 financing statement was effective notwithstanding (in the state of Delaware) that neither the creditor nor debtor intended to terminate it, resulting in the bank being unsecured on a $1.5 billion credit. The UCC provision that was applied is identical to California’s version.
  • U.S. Supreme Court decision that a consumer may exercise the rescission right under TILA by delivering to the creditor a written notice within the three year period without having to file a law suit. The case is Jesinoski v. Countrywide Home Loan.
  • Revisions to the OCC Handbook on deposit credit products that impose new requirements relating to affirmative requests, eligibility standards, limitations on costs and usage, risk monitoring and assessments, and management oversight.
  • A court decision that rebuffed an attempt to invalidate the non-judicial foreclosure process based on the lender’s late substitution of a trustee. In its decision the court laid out a set of rational principles for evaluating claims to invalidate foreclosures that should help restore balance and sensibility to such challenges.
  • A court decision affirming that a check cashing company that accepts a check for cash and then deposits it at a bank is not the bank of first deposit for purposes of a depository bank’s duties regarding endorsements.
  • A court decision holding that a bank could be held liable for violating debt collection practices laws by trying to collect a deficiency from a borrower after a non-judicial foreclosure if in doing so the lender implies that the debt is legally enforceable.
  • A new standard applicable to encoding checks that makes it easier for a bank to identify a check as a remotely created check or “demand draft.”