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Month: April, 2012
Jury Rejects Bank’s Suit Over Loan
Category: News | Monday, April 30th, 2012 | Comments Off on Jury Rejects Bank’s Suit Over Loan
The $55 million lawsuit has the real estate and banking industries watching closely.
RIVERSIDE – A jury here rejected a $55 million lawsuit against a title company that a bank accused of committing fraud and fiduciary duty breaches in connection with a multimillion-dollar loan on a failed home development in Hemet.
A case watched closely by the real estate title insurance, escrow and banking industries, it’s part of a wave of litigation from banks facing criticism of their lending activity during the mortgage meltdown. In an attempt to restore money lost in the housing bust and recession, banks are increasingly filing lawsuits attempting to collect damages from title companies that underwrote and insured their loans.
On Wednesday, the Superior Court panel turned aside Central Pacific Bank’s arguments that Fidelity National Title Company and Fidelity National Title Insurance Company misled the bank about the scope of the title policy and the collateral for the loan and that it failed to comply with escrow instructions – issues Central Pacific alleged led it to make the loan that ultimately defaulted.
“There was a lot at stake here,” said Eric P. Early, a partner at Early Sullivan Wright Gizer & McRae LLP who was lead trial attorney for Fidelity. “You had a bank bringing a lawsuit based on a large failed loan and trying essentially, from our position, to recoup its loss on the backs of a title insurance company and an underwritten title company.”
“This is a major victory for my clients,” he added. “The jury got it 100 percent right, and we’re very grateful for that.”
Craig S. Bloomgarden, an attorney for Central Pacific and a partner with Manatt, Phelps & Phillips LLP, said Friday that he wasn’t authorized to comment on the matter.
No one else with the firm responded to a request for comment.
According to Early, the jury rejected the bank’s request for $55 million in damages, an amount that included the $50 million in compensatory damages and interest, punitive damages and about $5 million in attorney fees for Manatt.
The underlying dispute centered on Central Pacific’s 2006 loan of $35 million to PCG-Peppertree LP to build a 456-unit home development for seniors in Hemet called Peppertree. Two years later, with the housing crash in full freefall, the borrower defaulted on the loan.
In trial arguments, Central Pacific contended Fidelity acted improperly in underwriting the loan, including failing to inform the bank that the borrower didn’t have title to the entire tract. In addition, the bank alleged the title company’s legal description of the project didn’t cover the whole development and that its title policy was insufficient.
According to Central Pacific, after the default, the title company’s insurance division refused to insure the project. The bank contended it was unable to recoup its losses through a foreclosure proceeding and had to incur millions in extra expenses, including paying for a receiver to maintain the property.
At trial, Fidelity said it bore no responsibility for the bank’s loss.
“The bank’s underwriting process was flawed from the start, the money never should have been loaned, and even after the loan was made, the Bank could have, but failed, to stop continuing to disburse the entirety of the loan proceeds to Peppertree,” wrote … co-counsel for Fidelity, in a trial brief. “Fidelity, of course, had nothing to do with any of these decisions or occurrences.”
The 2-month-long trial was held before Judge John W. Vineyard. The case is Central Pacific Bank v. Fidelity National Title Insurance Company, RIC525131 (Riverside County Super. Ct., filed 2009).
Source: Jason W. Armstrong, Los Angeles Daily Journal
Fidelity Wins Verdict In $55M Suit Over Development Loan
Category: News | Friday, April 27th, 2012 | Comments Off on Fidelity Wins Verdict In $55M Suit Over Development Loan
Law360, New York (April 27, 2012, 5:08 PM ET) — A California state jury on Tuesday handed a verdict in favor of Fidelity National Title Co. in a $55 million lawsuit by Hawaii-based Central Pacific Bank over an unpaid construction loan in which Fidelity was the escrow agent.
Central Pacific had claimed that Fidelity had obtained an inadequate title insurance policy from its sister firm Fidelity National Title Insurance Co. to cover a $37 million loan that Central Pacific had given a unit belonging to Southern California developer William Lo in 2006. The policy was used to finance the construction of a residential development in Hemet, Calif., according to its second amended complaint.
The bank had claimed also that Fidelity had also wrongfully failed to provide insurance coverage under that policy, but after a trial that lasted less than two months, the jury delivered a unanimous defense verdict in favor of both Fidelity defendants on all counts, according to court documents.
“We’re obviously very happy with the jury’s decision,” Eric Early of Early Sullivan Wright Gizer & McRae LLP, an attorney for Fidelity, said Friday. “It was a hard fought lawsuit and we were thrilled to prevail because my clients did not do anything wrong.”
William Lo’s unit PCG-Peppertree LP allegedly had not repaid the loan in 2008, and discarded the development with millions of dollars of mechanic’s liens from unpaid work that the project’s contractors had done, according to Central Pacific’s complaint.
Fidelity had argued that Central Pacific’s underwriting process was flawed and that it should not have loaned the money to Peppertree, which defaulted in January 2008 and whose principal Lo filed for bankruptcy protection, according to Fidelity’s March trial brief.
Central Pacific had projected that its loan would help Peppertree build and sell more than 400 housing units, and repay the loan, but after two years, only 29 units had been built and only 13 sales had closed, according to Fidelity, which argued that the property had lost value because of construction defects and other related issues.
“The cause of the bank’s loss has nothing at all to do with Fidelity,” the firm said in the brief. “Undaunted, however, the bank — with $37 million gone and a worthless property as security — has fashioned its creative lawsuit to seek a bailout from Fidelity for its disastrous underwriting practices.”
Central Pacific had argued meanwhile that Fidelity had closed the loan transaction without authorization, violated its escrow requirements and given misleading reports about the property, according to its trial brief.
“Fidelity repeatedly provided the bank with reports which described the subject property as ‘all lots’ with the [tract] even though it now claims that it never intended to insure the bank’s interest in the entire tract and that it knew that the borrower did not even have record title to the entire tract,” Central Pacific said in the brief.
Central Pacific had sought roughly $50 million in damages, along with several million dollars in attorneys’ fees and punitive damages, according to the firm.
An attorney for Central Pacific could not immediately be reached for comment Friday.
Fidelity was represented by Eric P. Early, William A. Wright, Christopher I. Ritter … and Sophia Lau of Early Sullivan Wright Gizer & McRae LLP.
Central Pacific Bank was represented by Manatt Phelps & Phillips LLP.
The case is Central Pacific Bank v. Fidelity National Title Insurance Co., case number RIC525131, in the Superior Court of California, County of Riverside.
Source: Sindhu Sundar, Law360
Southwestern Law School Profiles Eric Early
Category: News | Thursday, April 26th, 2012 | Comments Off on Southwestern Law School Profiles Eric Early
Meet Southwestern’s first President of the Entertainment and Intellectual Property Alumni Association
Step foot into the hip, modern, yet understated and professional office of Early Sullivan Wright Gizer & McRae and you would never guess that the firm is less than two years old. That is, if you can manage to pull your gaze away from the striking, almost 360 degree view of Los Angeles that provides a fitting backdrop for this successful young firm.
Early Sullivan opened its doors in June of 2010 with Southwestern Alum Eric Early and four of his colleagues at the helm. In its short existence, the firm has grown from just five partners to 14 attorneys and is currently developing offices in New York and Las Vegas. The success of the firm comes as no surprise when you consider the experience, passion, and dedication of Eric Early.
Bryan Sullivan Named Founding Board Member Of Non-Profit Aiming to Support Child Abuse Victims
Category: News | Wednesday, April 11th, 2012 | Comments Off on Bryan Sullivan Named Founding Board Member Of Non-Profit Aiming to Support Child Abuse Victims
April 11, 2012 – Los Angeles, CA – A diverse and far-reaching group of professionals announced the formation of “Lion Fund For Children” (LFFC), a non-profit organization aiming to thwart child abuse and raise child abuse awareness. LFFC’s mission is to support local charities and other organizations that provide counseling and treatment to child abuse victims and their families. LFFC will also promote and support initiatives in local communities that raise awareness about this epidemic problem.
Among LFFC’s Founding Board Members is Early Sullivan Wright Gizer & McRae’s founding partner, Bryan Sullivan. “It is with great honor that I join a strong, lasting voice in addressing child abuse. My number one goal as a Founding Board Member is to make sure support goes to those who need it most,” says Sullivan.
The new organization has a six-member board that includes professionals with diverse experience in the non-profit, legal, education, business, entertainment and media arenas. There is also a twenty-member Advisory Council comprised of several PSU alumni, and former and current campus leaders, including the 2011-2012 Panhellenic and IFC Presidents.
Sullivan goes on to say “We were all appalled by the incidents of sex abuse reported to have occurred at Penn State and my own alma mater, Syracuse University, and I, along with other LFFC board members, felt the need to take action because such incidents are not isolated to those two college campuses. So, we formed this charity to raise awareness, support those that fight against abuse, and help its victims.” He brings a wealth of non-profit experience to LFFC; he is also Co-Founder, Chief Financial Officer and Board Of Director Member of BASTA, Inc., a non-profit tenants’ rights group with offices in Los Angeles, Lancaster and Compton.
LFFC is currently seeking tax-exempt 501(c)(3) status with the IRS.
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