Justia U.S. 7th Circuit Court of Appeals Opinion Summaries

Brookfield owns a shopping center that is subject to a first mortgage of $8,900,000, held by a trust, and a second mortgage for $2,539,375 that has been transferred to ValStone, which also serves as attorney in fact for the trust. Outside of bankruptcy, state law would allow ValStone to foreclose upon default on the second mortgage; ValStone could bid on the property at auction or receive proceeds from its sale. The second mortgage is a nonrecourse loan; if the proceeds of sale were not enough to repay the first mortgage or repay the second mortgage in full, ValStone could not pursue a deficiency claim for the outstanding debt. ValStone did not initiate foreclosure. Brookfield filed a Chapter 11 bankruptcy petition. Under its reorganization plan, Brookfield elected to retain ownership of the property, requiring the bankruptcy court to establish a judicial value by means of independent appraisals. The value is expected to be less than the amount of the first mortgage, which will leave the second mortgage unsecured by any equity. ValStone argued that 11 U.S.C. 1111(b)(1)(A) treats the claim as if it had recourse, so that its unsecured deficiency claim should be allowed. Brookfield argued that the claim should be disallowed because neither state law nor 11 U.S.C. 1111(b) give ValStone a deficiency claim against Brookfield. The bankruptcy court and the district court held that the claim was valid. The Seventh Circuit affirmed. View "B.R. Brookfield Commons No. 1 v. Valstone Asset Mgmt,, LLC" on Justia Law

Anobah was an Illinois-licensed loan officer, employed by AFFC, and acted as a loan officer for at least two fraudulent schemes. Developers Brown and Adams recruited Mason to act as a nominee buyer of a property and referred Mason to Anobah for preparation of a fraudulent loan application. The application contained numerous material falsehoods concerning Mason’s employment, assets, and income, and intent to occupy the property. Anobah, Brown, and others created fraudulent supporting documents. AFFC issued two loans in the amount of $760,000 for the property and ultimately lost about $290,000 on those loans. In the course of the scheme, AFFC wired funds from an account in Alabama to a bank in Chicago, providing the basis for a wire fraud charge. Anobah played a similar role in other loan applications for other properties and ultimately pled guilty to one count of wire fraud, 18 U.S.C. 1343. The district court sentenced him to 36 months of imprisonment, five months below the low end of the calculated guidelines range. The Seventh Circuit affirmed, upholding application of guidelines enhancements for abuse of a position of trust and for use of sophisticated means in committing the fraud. View "United States v. Anobah" on Justia Law

Plaintiff challenged the constitutionality of the Indiana Unclaimed Property Act, Ind. Code 32‐34‐1‐1, as authorizing confiscation of private property without compensation. The Act states that property is presumed abandoned if the apparent owner has not communicated in writing with the holder or otherwise indicated interest in the property within a specified period. When the presumption applied, the holder (here, a bank) is required to try to notify the owner and to submit, within 60-120 days after that, a report including the owner’s last known address to the state attorney general, and to simultaneously transfer the property to the attorney general. The following year, the attorney general must attempt notice by publication. Notice is also posted on an official website. The owner can reclaim the property from the state for 25 years after its delivery before it escheats to the state. An owner who files a valid claim is entitled only to principal, and not to any interest earned on it. Plaintiff’s ward had an interest‐bearing account. The presumption of abandonment applied in 2006, three years after the last communication. Because the statute does not require individualized notice if the value of the account is less than $50, plaintiff (guardian) did not learn about the account until 2011. The district court dismissed her challenge to the “taking” of interest on the account. The Seventh Circuit reversed. View "Cerajeski v. Zoeller" on Justia Law

Woodboro has about 750 residents on 21,857 acres, within Oneida County. Woodboro’s 1998 Land Use Plan encourages low density single family residential development for waterfront properties and maintaining rural character. The 2009 Woodboro Comprehensive Plan incorporates that language. There are 177 parcels on Squash Lake, all but seven zoned for single-family uses. The seven parcels zoned for business were pre-existing uses under initial zoning in 1976. In 2001, Woodboro voluntarily subjected itself to the Oneida County Zoning and Shoreland Protection Ordinance, under which religious uses are permitted throughout the County and Woodboro. Year-round recreational and seasonal camps are permitted in 36 and 72 percent of the County; churches and religious schools are allowed on 60 percent of the land in the County. Churches and schools are permitted on 43 percent of Woodboro land; campgrounds (religious or secular) on about 57 percent. Eagle Cove sought to construct a Bible camp on 34 acres on Squash Lake in Woodboro, asserting that their religion mandates that the camp be on the subject property and operate year-round. The property is zoned Single Family Residential and Residential and Farming. Woodboro recommended denial. The County denied rezoning based on conflict with single-family usage. The district court entered summary judgment in favor of the municipalities. The Seventh Circuit affirmed, rejecting arguments under the Religious Land Use and Institutionalized Persons Act, the First and Fourteenth Amendments of the U.S. Constitution, and the Wisconsin Constitution. View "Eagle Cove Camp & Conference Ctr., Inc. v. Town of Woodboro, WI" on Justia Law

The Gulfport Mississippi apartment complex was damaged in Hurricane Katrina. Its insurer, RSUI paid actual-cash-value proceeds. The parties began negotiating for additional replacement-cost proceeds. During negotiations, the named-insured contracted to sell the property in its unrepaired state to Edgewood and notified RSUI of its intention to assign the claim for replacement-cost proceeds. RSUI responded that if the property was sold before repair, there could be no recovery of replacement-cost proceeds. The sale closed. The seller and Edgewood sought a declaration that the insurer was obligated to pay the claim with a related breach-of-contract action. Edgewood repaired the property. The litigation continued for years until it became clear that there had been no assignment. The district court dismissed the claims. The Seventh Circuit affirmed in part and reversed in part. Absent an assignment, Edgewood lacks standing; the seller still owns the claim and remains a proper plaintiff. The seller had an insurable interest when the policy issued and at the time of the loss; the sale of the property in its unrepaired state did not extinguish its right to recover. Although the policy specifies that replacement-cost proceeds will not be paid until the property is repaired, it does not require that the insured complete the repairs itself. View "Southland Mgmt. Corp. v. RSUI Indem. Co." on Justia Law

In 2000, the Schuchmans purchased homeowner’s insurance from State Auto to insure a residence in Junction City, Illinois. About 10 years later, a fire severely damaged the insured house and the Schuchmans made a claim against the homeowner’s policy. After a lengthy investigation, State Auto denied the claim on the basis that the Schuchmans were not residing on the “residence premises,” as that term is defined by the policy, and were maintaining a residence other than at the “residence premises,” in violation of the policy’s Special Provisions. The district court entered summary judgment in favor of State Auto. The Seventh Circuit reversed, agreeing that the term “residence premises” is ambiguous and should be liberally construed in favor of coverage. View "Schuchman v. State Auto Prop. & Cas.Ins. Co." on Justia Law

In 2007 Hobart, Wisconsin passed an ordinance assessing stormwater management fees on all parcels in the village, including land owned by the Oneida Nation of Wisconsin, an Indian tribe, to finance construction and operation of a stormwater management system. Title to 148 parcels in Hobart, about 1400 acres or 6.6 percent of the village’s total land, is held by the United States in trust for the Oneida tribe (25 U.S.C. 465). Tribal land is interspersed with non-tribal land in a “checkerboard” pattern. The tribe sought a declaratory judgment that the assessment could not lawfully be imposed on it. Hobart argued that if that were true, the federal government must pay the fees; it filed a third‐party complaint against the United States. The district court entered summary judgment for the tribe and dismissed the third‐party claim. The Seventh Circuit affirmed, holding that the federal Clean Water Act did not submit the land to state taxing jurisdiction and that the government’s status as trustee rather than merely donor of tribal lands is designed to preserve tribal sovereignty, not to make the federal government pay tribal debts. View "Oneida Tribe of Indians of WI v. Village of Hobart, WI" on Justia Law

Gray’s friend Johnson offered to act as co‐borrower to help Gray buy a house, if Gray promised that she would only be on the loan as a co‐borrower for two years. In return, Johnson received a finder’s fee from the daughter of the builder-seller (Hinrichs). Mortgage broker Bowling sent their application to Fremont, a federally insured lender specializing in stated‐income loans, with which the lender typically did not verify financial information supplied by applicants. Bowling testified that he told both women that they would be listed as occupants, that their incomes would be inflated, and what the monthly payment would be. The closing proceeded; Gray and Johnson received a $273,700 mortgage from Fremont and, on paper, a $48,300 second mortgage from Hinrichs. Gray and Johnson acknowledge that the application that they signed contained several false statements. Bowling became the subject of a federal investigation. Sentenced to 51 months’ imprisonment, he agreed to testify against his clients. The Seventh Circuit affirmed the convictions of Gray and Johnson under 18 U.S.C. 1014, which prohibits “knowingly” making false statements to influence the action of a federally insured institution. Rejecting an argument that the district court erred by denying an opportunity to present testimony to show Bowling’s history of duping clients, the court stated that his prior wrongdoing was not very probative of Gray’s and Johnson’s guilt. View "United States v. Gray" on Justia Law

After being rejected for a mortgage because Hall had a bankruptcy and their joint income was too low, Hall and Phillips applied with Bowling, a mortgage broker, under the “stated income loan program.” Bowling prepared an application that omitted Hall’s name, attributed double their combined income to Phillips, and falsely claimed that Phillips was a manager. Phillips signed the application and employment verification form. Fremont extended credit. They could not make the payments; the lender foreclosed. Bowling repeated this process often. He pleaded guilty to bank fraud and, to lower his sentence, assisted in prosecution of his clients. Phillips and Hall were convicted under 18 U.S.C. 1014. The district court prohibited them from eliciting testimony that Bowling assured them that the program was lawful and from arguing mistake of fact in signing the documents. The Seventh Circuit first affirmed, but granted rehearing en banc to clarify elements of the crime and their application to charges of mortgage fraud and reversed. The judge excluded evidence that, if believed, might have convinced a jury that any false statements made by the defendants were not known by them to be false and might also have rebutted an inference of intent to influence the bank. View "United States v. Phillips" on Justia Law

When a Cook County, Illinois property owner fails to timely pay property, the amount of tax past due becomes a lien on the property. The county sells tax liens at auctions, with bids stated as percentages of the taxes past due. The percentage bid, multiplied by the amount of past‐due taxes, plus any interest, is the “penalty” that the owner must pay to clear the lien. The lowest penalty wins the bid. When bids are identical, the auctioneer tries to award the lien to the bidder who raised his hand first. The rules permit only one agent of a potential buyer or related entities, to bid. Plaintiffs accused defendants of fraud for having multiple bidders representing a single potential buyer and sought damages under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1961 and for interference with a prospective business advantage under Illinois tort law. On remand, a jury found in favor of the plaintiffs and awarded damages of $7 million, to which the judge added $13 million in attorneys’ fees and expenses. The Seventh Circuit affirmed, describing the defendants as hyperaggressive adversaries who drove up the plaintiffs’ legal costs without justification. View "BCS Servs., Inc. v. BG Inv., Inc." on Justia Law