Tag: fraud

Bankr. E.D.N.C.: Baum v. Baum- Discharge under § 523(a)(15) for Debts In Connection with Divorce Decree


During a period of financial distress and shortly before their divorce, Doreen Baum made repeated unauthorized withdrawals from the Martin Baum’s IRAs, and did not pay the mortgage on the couple’s beach house, using the funds for the support and maintenance of the family. When the Baums divorced, the parties entered into an consent orders for Alimony and Equitable Distribution. While aware of the unauthorized withdrawals, Martin Baum believed any claims he had for fraud were preserved, whereas Doreen Baum believe these consent orders resolved all issues, including for the unauthorized withdrawals.

Doreen Baum filed Chapter 7 and Martin Baum brought an Adversary Proceeding seeking to both have the bankruptcy court determine that Doreen Baum was indebted to him for compensatory and punitive damages resulting from fraud and to have such declared nondischargable.… Read More

Tagged with: , , , , , , ,

Bankr. M.D.N.C.: Rutledge v. Wells Fargo Bank, N.A.- State Law Claims for Failure Related to HAMP Modification


The Debtor, after various alleged inconsistencies and shenanigans by Wells Fargo in application of her payments and insurance proceeds, as well as failures in the review of her loan modification application, filed bankruptcy and brought suit alleging, among other causes of action, breaches of contract and duties of good faith & fair dealing and fiduciary duty, fraud and constructive fraud, and violations of the North Carolina Unfair and Deceptive Trade Practice Act. Wells Fargo sought dismissal for failing to state a claim. Following Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547 (7th Cir. 2012), the bankruptcy court examined the treatment of allegations of state law violations arising from failures under federal regulations related to the providing and servicing of mortgages, finding that the cases fell into three categories: 1.… Read More

Tagged with: , , , , , , , , , ,

Bankr. E.D.N.C.: McGinnis v. Fantone- Bankruptcy Following Settlement Agreement does not Constitute Fraud or False Written Statement


McGinnis brought suit in state court against Fantone for two notes that Fantone had guaranteed with MSC. Following court ordered mediation, the parties agreed that Fantone would execute a modification of loan agreement for $200,000.00 with interest at six percent (6%) per year, would substitute himself as the obligor debts owed by executed by MSC, and would sign a Confession of Judgment for $200,000. Less than three weeks later, Pantone filed a voluntary Chapter 13 bankruptcy. McGinnis brought an adversary proceeding seeking a determination that Fantone’s representations, actions and/or conduct in the mediation constituted false pretenses, false representations, or actual fraud and that his Agreement to the settlement terms was a materially false written statement, due to his lack of ability to pay, and should be non-dischargeable pursuant to 11 U.S.C.… Read More

Tagged with: , , , , ,

4th Circuit: Haylett v. Wells Fargo Bank, N.A.- No Private Right of Action for HAMP Denial


After falling delinquent on their mortgage payments to Wells Fargo in early 2010, the Hayletts sought a HAMP modification. After being supplied with initial documentation, Wells Fargo requested further information from the Hayletts on March 1, 2010, allowing ten days to respond. The Hayletts provided the requested documents on March 22, 2010, but Wells Fargo denied the request and proceeded to foreclosure. The Hayletts brought suit alleging breach of implied-in-fact contract, negligence, violations of the Maryland Consumer Protection Act (“MCPA”), negligent misrepresentation, and common law fraud. All causes of action were dismissed by the district court which held that absent a Trial Period Plan (“TPP”) there was no privity of contract on which such claims could be based.… Read More

Tagged with: , , ,

4th Circuit: McCauley v. Home Loan Investment Bank- Home Owner’s Loan Act Preemption of State Law; Pleading Fraud Allegation


McCauley raised state law claims against Home Loan Investment Bank (“Home Loan”) for unconscionability and fraud, due to multiple factors, including a hurried closing, the inducement by inflated appraisal, the disparity between the size of the loan and the value of the home, and an “exploding” ARM. Home Loan moved to dismiss on the basis that the Home Owner’s Loan Act (“HOLA”) and related regulations at 12 C.F.R. § 560.2 pre-empted these state law claims.

The District Court analyzed each aspect of the unconscionablity claim separately, ultimately finding that each was in the nature of the laws pre-empted by 12 C.F.R.… Read More

Tagged with: ,

4th Circuit: Sun Trust Mortgage, Inc. v. United Guaranty Residential Insurance Company of North Carolina- Sanction for Spoliation of Evidence


In a dispute between Sun Trust Mortgage and United Guaranty, which insured against payment defaults on certain loans products, one of Sun Trust’s employees was found to have deliberately altered e-mails to manufacture documentary support for Sun Trust’s position in the dispute. The district court ordered Sun Trust to pay United Guaranty’s attorneys’ fees and costs related to the sanctions motion that was brought by United Guaranty, which had additionally sought dismissal of the entire suit.

Relying on United States v. Shaffer Equip. Co., 11 F.3d 450, 462 (4th Cir. 1993), the Court of Appeals identified six factors to consider in determining whether dismissal is appropriate:

(1) the degree of the wrongdoer’s culpability;
(2) the extent of the client’s blameworthiness if the wrongful conduct is committed by claims against blameless clients;
(3) the prejudice to the judicial process and the administration of justice;
(4) the prejudice to the victim;
(5) the availability of other sanctions to rectify the wrong by punishing culpable persons, compensating harmed persons, and deterring similar conduct in the future; and
(6) the public interest.… Read More

Tagged with: ,

N.C. Court of Appeals: DOCRX, Inc. V. EMI Services- Enforcement of Foreign Judgment Obtained by Fraud


Despite the Full Faith and Credit Clause of the U.S. Constitution, the Court of Appeals held that the enforcement of foreign judgments (in this case from Alabama) can be reviewed under Rule 60(b) on the following limited grounds:

(1) the judgment is based upon extrinsic fraud;
(2) the judgment is void; or
(3) the judgment has been satisfied, released, or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application.

For a copy of the opinion, please see:

DOCRX, Inc. V. Read More

Tagged with: , ,

Bankr. M.D.N.C.: Dark v. Thomas- Iqbal/Twombley Pleading under 11 U.S.C. § 523(a)(2)(A) regarding whether money was “Obtained” through Fraud


Dark brought an adversary proceeding seeking to have the debt of Thomas declared nondischargable pursuant to 11 U.S.C. § 523(a)(2).  Thomas moved to dismiss pursuant to Rule 12(b)(6), arguing that “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim for relief that is plausible on its face.'” Ashcroft v. Iqbal,  129 S.Ct. 1937, 1949,  (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).  The Court ruled for Thomas finding that the complaint did not contain even a “threadbare recital of the elements” required under § 523(a)(2).  Pertinent in this case is that § 523(a)(2)(A) requires that money or property be “obtained” by fraud, false representation or false pretenses. … Read More

Tagged with: , , ,