Business Law Commercial Transaction Committee

By affirming in part and reversing in part the bankruptcy court and the Ninth Circuit BAP, both of which had allowed total recoupment, the United States Court of Appeals for the Ninth Circuit demonstrated the fine line distinction between setoff, which is subject to the automatic stay, and recoupment, which is not, and the difficulty the lower courts have in applying the distinction. Read more

The California Court of Appeal has weighed in on whether Amazon is subject to strict products liability for damages arising from a defective product sold on Amazon’s website by a third-party seller. Because as a factual and legal matter, Amazon placed itself between the seller and the buyer in the chain of distribution of the product at issue, the court found Amazon was strictly liable. Read more

The Court of Appeals of Nevada recently issued a detailed opinion, drawing on nationwide authority, interpreting section 9-609 of the Uniform Commercial Code, which authorizes a secured creditor to enter private property to recover possession of collateral so long as the repossession proceeds “without breach of the peace” (a term not defined in the UCC). The case is Droge v. AAAA Two Star Towing, 2020 WL3415636 (June 18, 2020). Read more

Many, perhaps most, home loan foreclosures are commenced on behalf of parties who were not the original lenders. The homeowner will often challenge the standing of a successor mortgagee to conduct the foreclosure, alleging that a formal defect occurred at some point in what may be a chain of assignments. In JPMorgan Chase Bank, N.A. v Syed, 2020 WL 1967527 (Conn App. April 28, 2020) the mortgage note was endorsed for assignment by the original lender bank using the stamped signature of a person who had left the bank’s employ years earlier. An intermediate appellate court in Connecticut has given effect to that endorsement, carefully applying the law governing negotiable instruments, as set forth in Article 3 of Uniform Commercial Code. Read more

The California Court of Appeal determined that expanding a bank’s duties to include investigating and disclosing possible fraudulent activity was not warranted and that nonsuit in favor of the bank was properly granted. Kurtz-Ahlers, LLC v. Bank of America (Cal. Ct. App. May 8, 2020). Read more

The high-profile Chapter 11 of Sears produced another decision involving the high-profile Mall of America (“Mall”). MOAC Mall Holdings LLC v. Transform Holdco LLC (In re Sears Holdings Corp.), 2020 WL 2319194 (S.D.N.Y. May 11, 2020). Read more

Perez v. Mortgage Electronic Registration Services, 2020 WL 2312867 (9th Cir. May 11, 2020) follows a line of California appellate cases which hold that the owner of mortgaged property may not sue to stop a foreclosure based on a claim that the trust deed was not validly assigned to the foreclosing beneficiary. The case is another nail in the coffin of pre-foreclosure challenges based on the sometimes sloppy or unperfected transfers of mortgage documents. While that coffin may be closed, lenders still must peer into the very open casket of California’s Homeowner Bill of Rights, from whence such injunctions will rise again! Read more

In Richards v. PAR, Inc., 2020 WL 1451906, the Seventh Circuit ruled that under the Fair Debt Collection Practices Act courts must look to state law to determine whether a repossession company has a present right to possess the property at the time it was seized. Read more

In a case of first impression, perhaps anywhere in the country, interpreting provisions of the Uniform Commercial Code, the Court of Special Appeals of Maryland ruled that the discovery rule does not apply to toll the statute of limitations to enforce a note payable on demand as set forth in UCC § 3-118(b). Read more

The Supreme Court of Hawaii, over a strong dissent, altered the procedure and proof necessary to establish the amount of a deficiency judgment after a foreclosure sale due to default on a mortgage. Rather than establishing the amount of deficiency by subtracting the foreclosure sale price from the balance due on the mortgage, the majority adopted the approach favored by a majority of other jurisdictions and the Restatement (Third) of Property, in which the greater of the fair market value as of the date of the foreclosure sale or the sale price of the property is deducted from the amount due. Read more