Last week the Missouri Court of Appeals issued its opinion in Frontenac Bank v. T.R.
I. Summary
This article is Part Five in a seven-part series on how to structure sales and what to do when your customer fails to pay. You can find previous articles in this series here: Structuring Sales to Ensure Payment; Signs of Trouble Before Payment Default; Default by a Customer; Knowledge is Power and What to Consider When Non-Payment Leads to Litigation. Please subscribe to this blog by entering your email in the box on the left, or check back weekly for additional articles in the series.
In a decision described as the first of its kind, the U.S. Bankruptcy Court of the Southern District of New York ruled that claims based on soft dollar credits issued by Lehman Brothers Inc. (LBI) to numerous investment advisers were not entitled to the special protections afforded to “customer claims” under the Securities Investor Protection Act (SIPA).
As the financial and housing markets headed toward freefall in September of 2008, an enterprising homeowner named Kyung Ha Chung applied for two loans, from two lenders, to be secured by two deeds of trust against her house. The problem was, she didn’t tell the two lenders about each other, and signed the two deeds of trust on the same day, before two different notaries.
How The Problem Arose: Document Batches Recorded Together
On September 14, the Sixth Circuit affirmed the trial court's finding that a failed bank's parent did not make a capital maintenance commitment to the bank. After the parent filed for bankruptcy, the FDIC was appointed receiver for the bank. The FDIC then sought payment from the parent under the statute requiring a party seeking reorganization to fulfill commitments to maintain the capital of an insured depository institution.
Olsen v. Heaver (In re Heaver), 473 B.R. 734 (Bankr. N.D. Ill. 2012) –
The short story is that when a deed and mortgage are executed at the same time, but the mortgage is recorded before the deed, the recorded mortgage does not provide constructive notice and can be avoided in a bankruptcy – at least under Illinois law as interpreted by the Heaver bankruptcy court.