$1,790,000 Jury Verdict for Our Client, JPMorgan Chase, in an Impairment of Security Interest Action

Haight, Brown & Bonesteel was retained by JPMorgan Chase to file suit on behalf of Citibank against another Defendant Bank, and two other individual defendants, to recover the loss of its security interest on a residential mortgage loan. The Complaint alleged causes of action for impairment of security interest, slander of title, declaratory relief, quiet title and other equitable claims.

In 2006, the individual defendant and borrower secured a loan in order to purchase a $2.2 million home. The borrower was the president and sole shareholder of HomeLoanAdvisors.com (“HLA”) which was the loan originator. The Promissory Note and Deed of Trust were assigned to Citibank, the Trustee of a residential mortgage backed securitized trust into which thousands of residential mortgage loans were transferred and used as investment tools. Pursuant to the Pooling and Servicing Agreement which governed the operation of the Trust, Defendant Bank acted as the Custodian, Securities Administrator and Master Servicer. As Custodian, Defendant Bank held the original Promissory Note, a copy of the Deed of Trust and other documents related to the borrower’s mortgage loan.

The assignment of defendant’s mortgage loan into the Trust was not recorded in the public records, but the transfer was registered in MERS. The defendant reconveyed the Deed of Trust to himself from HLA when he realized that the assignment had not been recorded. He then conveyed the Deed of Trust to his girlfriend. The girlfriend sold the house to a third party who borrowed money from Defendant Bank in order to finance the home purchase. Proceeds from the sale were paid to defendant’s girlfriend in the amount of $1.6 million instead of being paid to our client, Citibank, which held a $1.5 million mortgage on the house. At no time did the borrower defendant disclose that Citibank still held the mortgage. After a jury trial the jury awarded Citibank the full amount requested against the borrower defendant, $1,795,000. The jury unanimously concluded that borrower defendant impaired Citibank’s security interest and slandered its title to the property.

Equitable claims were also made against the Defendant Bank alleging that it had actual knowledge outside the recorded chain of title of Citibank’s senior lien on the subject property; namely, the fact that the Defendant Bank held the defendant’s original Note and Deed of Trust which identified the borrower’s mortgage loan. Defendant Bank also had knowledge of Citibank’s lien by virtue of its multiple roles under the Pooling and Servicing Agreement which provided that the assignment of defendant’s mortgage loan into the Trust would not be recorded in the public records but was to be recorded in MERS.

February 7, 2013