Category: 4th Circuit Court of Appeals

4th Circuit: Powell v. Palisades Acquisition- Assignment of Judgment was an Action in Connection with the Collection of a Debt

Summary:

Ms. Powell incurred a credit card debt original with Direct Merchants. After losing her job, she fell into default and Platinum Financial, the assignee of the debt, obtained a judgment against Ms. Powell. Several years later, Platinum Financial sold the debt to Palisades Acquisition, whose attorney filed an Assignment of Judgment that erroneously stated the outstanding balance owed. Ms. Powell was able to have the judgment vacated due to such errors and then commenced suit against Palisades Acquisition and its attorney, asserting claims under the FDCPA for overstating the balance due in the Assignment of Judgment. The District Court granted summary judgment for Palisades Acquisition, finding that an Assignment of Judgment did not qualify as conduct taken “in connection with the collection of any debt” under 15 U.S.C.… Read More

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4th Cir. : Kingston at Wakefield Homeowner’s Association, Inc. V. Castell (In re Castell)- Homeowner’s dues are unsecured unless Claim of Lien is filed.

Summary:

Homeowner’s association filed a Proof of Claim in the Debtor’s Chapter 13 case asserting that it was secured by a lien against the Debtor’s residence. The Debtor objected to the secured status as the HOA had not filed a Claim of Lien with the County Clerk of Court pursuant to the Planned Community Act (“PCA”) at N.C.G.S. § 47F-3-116(a). The HOA argued that its recorded Declaration of Covenants, Conditions, and Restrictions was sufficient under common law to hold a secured claim without the filing of a Claim of Lien. The bankruptcy court and district court sustained the Debtor’s objection.

The Court of Appeal held that even if the PCA is not the exclusive vehicle by which a homeowners’ association in North Carolina can enforce a lien for unpaid assessments on a homeowner’s property, the HOA’s common law argument failed as the Declaration required recordation of a Notice of Claim of Lien with the County Clerk of Court.… Read More

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4th Circuit: National Heritage Foundation v. Highbourne Foundation- Non-Debtor Release of Liability Invalid

Summary:

A provision of the Chapter 11 plan for National Heritage Foundation (“NHF”) provided that its officers, directors, and employees, the Unsecured Creditor Committee, and their successors and assigns (the “Released Parties”) were released from liability for any acts or omissions relating to NHF.

Relying on Class Five Nevada Claimants v. Dow Corning Corp. (In re Dow Corning Corp.), 280 F.3d 648 (6th Cir. 2002), the Fourth Circuit considered (and found the plan of NHF lacking) the following factors in determining the valid of a third-party release:

1. whether there is an identity of interests between the debtor and the third party…such that a suit against the non-debtor, in essence, is a suit against the debtor or will deplete the assets of the bankruptcy estate;
2.… Read More

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4th Cir.: In re Railworks Corp- Initial Transferee for Preference Recovery Cannot Be A Mere Conduit

Summary:

The Chapter 11 Trustee sought to avoid and recover as preference, premium payments that Railworks transferred made to CPG within 90 days of filing bankruptcy, which later transferred them to TIG, which provided various insurance coverage to Railworks. While CPG had physical control over the transfers it received, it held the funds in trust for TIG.

Pursuant to 11 U.S.C. § 550(a)(1), a preferential transfer can be recovered from an “initial transferee.” The Court of Appeals applied the ‘dominion and control’ test to determine whether an entity qualifies as such holding that under this test, an initial transferee must

(1) have legal dominion and control over the property—e.g., the right to use the property for its own purpose; and
(2) exercise this legal dominion and control.”

“[A] party cannot be an initial transferee if he is a ‘mere conduit’ for the party who had a direct business relationship with the debtor.” In re Se.… Read More

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4th Circuit: Olson v. Midland Funding- FDCPA Statute of Limitations, Non-collection Notices, and Unsucessful Debt Collection Suits

Olson raised FDCPA claims in federal court against Midland, which had brought a debt collection action in state court. These claims were asserted within a year of when Olson first appeared in the state court debt collection action, but more than a year after the alleged violations. The 4th Circuit found that the one-year statute of limitation barred Olson’s FDCPA suit, as the Statute of Limitations ran from the violation date, especially as Olson had been on notice and participated in the state court action for longer than one year.

Olson further contended that privacy notices sent directly to him, after Midland was aware he was represented by counsel, violated § 1692c(a)(2).… Read More

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4th Circuit: Fontell v. Hassett- FDCPA and Homeowner’s Associations

Summary:

Fontell brought suit against her Homeowner’s Association (“HOA”)alleging violation of the FDCPA, the Maryland Consumer Debt Collection Act (“MCDCA”) and the Maryland Consumer Protection Act (“MCPA”). When the district court did not grant her summary judgment on these claims, she appealled.

The Court of Appeals held that her assertion that the HOA violated the MCDCA by untimely bringing suit against her was not supported by evidence sufficient as a matter of law to grant summary judgment under Rule 56(a). The property management company, as it was always responsible for collecting the homeowner’s dues and not just after there was a default, did not constitute a “debt collector” under the FDCPA, as a default “does not occur immediately upon a debt becoming due, unless the terms of the parties’ relevant agreement dictate otherwise.” See Alibrandi v.… Read More

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4th Circuit: BB&T v. Construction Supervision Services- Subcontractor Lien on Funds

Summary:

Construction Supervision Services (“CSS”) filed a Chapter 11 bankruptcy in January 2012, after which several subcontractors, which had previously provided stone, concrete, and fuel to CSS on an open account, sought to serve notice of liens on funds owed by others to CSS, thereby perfecting such liens. BB&T, which had lent CSS money, objected to the Subcontractors’ post-petition notice and perfection, arguing that such actions violated 11 U.S.C. § 362(a)(4).

The Court of Appeals, affirming the bankruptcy and district courts in the instant case, but reversing In re Mammoth Grading, Inc., No. 09-01286-8-ATS (Bankr. E.D.N.C. July 31, 2009), In re Harrelson Utilities, Inc., No.… Read More

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4th Circuit: Scheider v. Deutsche Bank- Assignment of the Note carries with it Assignment of the Mortgage; Choice of Law

Summary:

The Scheiders refinanced their South Carolina home in 2006 with a $1.178 million adjustable rate note payable to Mortgage Network, granting a mortgage securing the note, which provided that MERS would act as the nominee for Mortgage Network. Mortgage Network subsequently transferred the note, with an endorsement that read “Pay to the order of ______ Without Recourse.” , with the blank later being filled with “IndyMac Bank F.S.B.” Indy Mac later endorsed the note in blank, without recourse, and it is currently held by Deutsche Bank. Some of these transfers occurred during the securitization of the note, which was effectuated by a Pooling and Servicing Agreement (“PSA”), governed by New York law, and provided that Indy Mac would deliver to Deutsche Bank an endorsement in blank.… Read More

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4th Circuit: Santoro v. Accenture Federal Services, L.L.C- No Invalidation of Arbitration for Non-Whistle Blower Claims by Dodd-Frank

Summary:

Santoro brought suit against Accenture, alleging violations of the Age Discrimination in Employment Act (ADEA), the Family and Medical Leave Act (FMLA), the Employee Retirement Income Security Act (ERISA), and the District of Columbia Human Rights Act. Accenture moved to compel arbitration under the employment contract with Santoro, who countered that the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 invalidated all arbitration agreements by publicly-traded companies that lack a carve-out for Dodd-Frank whistle blower claims, even if the plaintiff is not a whistle blower.

The Court of Appeals rejected this as an over-extension of Dodd-Frank, which only invalidated arbitration provisions relating only to whistle blower claims “arising under” 7 U.S.C.… Read More

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4th Circuit: In re Pfister- No Resulting Trust in Transfer from Wife and Husband to Husband’s Corporation.

Summary:

Patricia Pfister and her husband, Phillip Pfister purchased real property on May 10, 2001. Originally, this property was to be purchased by Architectural Glass Construction, Inc. (“AGC”), a corporation wholly owned by Mr. Pfister, but, on the advice of accountants, instead at the closing it was instead purchased and financed by the Pfisters, with the intention of leasing the property to AGC. In practice, however, AGC never paid the Pfisters, but paid the mortgage directly. In 2002, the mortgage was refinanced, with AGC now actually liable for the mortgage note. Over the next six years, the property was repeatedly refinanced, with the obligor under the new notes changing between the Pfisters and AGC.… Read More

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