Latest 21 Cases This Week: Congregation Rabbinical College of Tartikov, Inc. v. Village of Pomona (2d Cir.), Fodge v. Trustmark National Bank (5th ...

Taking Stock: A Review of Justice Stevens’s Last Book and an Appreciation of His Extraordinary Service on the Supreme Court

RODGER CITRON

Rodger D. Citron, the Associate Dean for Research and Scholarship and a Professor of Law at Touro College, Jacob D. Fuchsberg Law Center, comments on the late Justice John Paul Stevens’s last book, The Making of a Justice: Reflections on My First 94 Years. Citron laments that, in his view, the memoir is too long yet does not say enough, but he lauds the justice for his outstanding service on the Supreme Court.

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Congregation Rabbinical College of Tartikov, Inc. v. Village of Pomona

Court: US Court of Appeals for the Second Circuit

Docket: 18-0869

Opinion Date: December 20, 2019

Judge: Kaplan

Areas of Law: Civil Rights, Constitutional Law, Real Estate & Property Law, Zoning, Planning & Land Use

Plaintiffs filed suit challenging four amendments to the Village of Pomona's zoning law as violations of federal and New York law. The district court dismissed Tartikov's complaint in part and later resolved certain claims in defendants' favor. The remaining claims concluded with a verdict in favor of Tartikov. Defendants appealed the final judgment and Tartikov appealed the earlier orders dismissing certain claims. The Second Circuit held that Tartikov lacked Article III standing to pursue its free exercise, free speech,and free association claims under the federal and New York constitutions, Religious Land Use and Institutionalized Persons Act (RLUIPA) substantial burden and exclusion and limits claims, Fair Housing Act (FHA) claims, and common law claims related to the Berenson doctrine claims. Therefore, the court vacated the judgment with respect to those claims, remanding for instructions for dismissal. In regard to the remaining claims that went to trial, the court reversed the district court's judgment to the extent the claims invoke two of the challenged laws and affirmed insofar as the claims invoked the remaining two. Finally, the court affirmed the district court's dismissal of the as-applied challenges and challenges to the RLUIPA equal terms and total exclusion provisions.

Fodge v. Trustmark National Bank

Court: US Court of Appeals for the Fifth Circuit

Docket: 19-30279

Opinion Date: December 19, 2019

Judge: James Earl Graves, Jr.

Areas of Law: Military Law, Real Estate & Property Law

Plaintiffs brought a putative class action under the Servicemembers Civil Relief Act (SCRA), alleging that they and similarly situated individuals were on active duty with the military when defendants variously foreclosed on their properties through executory proceedings in Louisiana state courts based on mortgage, privilege, or security agreements each plaintiff and putative class member had entered with one of the defendants. The Fifth Circuit affirmed the district court's grant of defendants' motions to dismiss and Trustmark National Bank's motion for judgment on the pleadings. The court held that 50 U.S.C. 3931 does not encompass Louisiana executory proceedings where, as here, the debtors confessed judgment. The court explained that the SCRA's waiver requirements were thus inapplicable because there was nothing to waive where plaintiffs were never protected under section 3931. Therefore, the court rejected plaintiffs' argument that the state court orders authorizing seizure and sale of their respective properties constitute default judgments under the SCRA.

Davis v. Echo Valley Condominium Association

Court: US Court of Appeals for the Sixth Circuit

Docket: 18-2405

Opinion Date: December 19, 2019

Judge: Murphy

Areas of Law: Real Estate & Property Law

Davis suffers from asthma but lives in a complex that allows residents to smoke in their condominiums. Davis asserts that the smell of smoke regularly emanating from a neighbor’s condo aggravated her asthma. Unsatisfied with her condo association’s efforts to address the situation, she sued the association, alleging discrimination under the Fair Housing Amendments Act, 42 U.S.C. 3604(f), violations of condo bylaws, and allowing a tortious nuisance to persist. The Sixth Circuit affirmed the rejection of Davis’s claims on summary judgment. The court noted that Davis was apparently able to use her condo for “several years” despite the smoking and that her request does not qualify as a “reasonable accommodation” to the policy of allowing smoking. Reasonable accommodation means a moderate adjustment to a challenged policy, not a fundamental change in the policy. There was no violation of the bylaws, which must be narrowly construed and do not specifically prohibit (or even regulate) smoking. The prohibitions on “offensive activities” and “nuisance” in the bylaws cannot be read subjectively. Davis chose to live in a condo complex whose bylaws do not restrict smoking. Even a small amount of smoke might be a nuisance in a complex that bans smoking, the same cannot be said for a complex that allows it.

Rumsey Land Company v. Resource Land Holdings

Court: US Court of Appeals for the Tenth Circuit

Docket: 18-1452

Opinion Date: December 20, 2019

Judge: Scott Milne Matheson, Jr.

Areas of Law: Bankruptcy, Civil Procedure, Real Estate & Property Law

Rumsey Land Company, LLC (“Rumsey”) owned a property subject to a first deed of trust held by Pueblo Bank & Trust Company, LLC (“PBT”). In 2010, Rumsey filed for bankruptcy. Resource Land Holdings, LLC (“RLH”) offered to purchase the property, but the bankruptcy court did not approve the sale. Shortly thereafter, PBT purchased the property at a bankruptcy auction. PBT then transferred the land to RLH. In 2015, Rumsey discovered that during the bankruptcy proceedings, RLH had entered a loan purchase agreement to purchase PBT’s interest in the property. The agreement eventually led to litigation in state court between RLH and PBT, which culminated with a settlement agreement allowing RLH to purchase Rumsey’s property from PBT for $4.75 million. Rumsey believed the loan agreement, lawsuit, and settlement influenced the price at its bankruptcy auction. It initiated this adversarial proceeding in bankruptcy court against RLH and PBT (collectively “Defendants”), alleging: (1) fraudulent concealment in violation of state law; and (2) collusive bidding activities in violation of 11 U.S.C. 363(n). The case was transferred to federal district court, which granted summary judgment to defendants on both claims. The Tenth Circuit affirmed finding: (1) Rumsey forfeited its arguments about PBT’s duty to disclose its transaction with RLH and did not argue plain error on appeal; and (2) in the section 363(n) collusive bidding claim, it was time-barred by a one-year limitations period in Federal Rule of Civil Procedure 60(c)(1), and Rumsey failed to demonstrate a genuine dispute of material face as to whether Defendants intended to control the sale price at the bankruptcy auction.

Gordon v. ARC Manufacturing, Inc.

Court: California Courts of Appeal

Docket: D075373(Fourth Appellate District)

Opinion Date: December 19, 2019

Judge: Dato

Areas of Law: Civil Procedure, Construction Law, Labor & Employment Law, Personal Injury, Real Estate & Property Law

Beau Gordon, a professional roofer, fell 35 feet through a "camouflaged hole" in a warehouse roof he was inspecting. For the resulting head injury, a jury awarded Gordon approximately $875,000 against the building's owner, ARC Manufacturing, Inc. (ARC) and Joseph Meyers. The primary issue on appeal was whether the trial court correctly refused to instruct on primary assumption of risk where, as here, defendants did not hire or engage Gordon. The Court of Appeal concluded that primary assumption of risk did not apply, rejected appellants' other contentions, and affirmed the judgment.

McDermott Ranch v. Connolly Ranch

Court: California Courts of Appeal

Docket: C085433(Third Appellate District)

Opinion Date: December 17, 2019

Judge: Krause

Areas of Law: Real Estate & Property Law

This case stemmed from a 1958 real estate transaction between the predecessors in interest to plaintiff McDermott Ranch, LLC (McDermott) and the predecessors in interest to defendant Connolly Ranch, Inc. (Connolly). The parties owned adjoining ranches in an area called Section 10 in rural San Joaquin County, California. A dispute arose between the parties concerning the location of the southern and western borders of the Connolly parcel. According to Connolly, its parcel was approximately 165 acres with a border that ended at the Section 10 western and southern boundaries. McDermott argued the Connolly parcel was approximately 107 acres and only extended to a fence that ran along the western and southern portion of Section 10, plus a portion (the 24-acre Connolly defect) that connected the southeastern portion of the Connolly parcel to other land owned by Connolly in the adjacent Section 15. In September 2013, McDermott sued to quiet title to the disputed portions of Section 10 and to eject Connolly; Connolly cross-complained for the same relief. After a bench trial in 2016, the trial court awarded Connolly the disputed 58 acres under the agreed boundary doctrine, in part based on testimony from Mark Connolly regarding statements made by his father Robert Connolly about the background and intent of the parties in doing the 1958 transaction. Robert had negotiated the deal on behalf of his mother Ann Connolly, who was a predecessor in interest to Connolly. On appeal, McDermott contended the trial court erred in admitting the testimony regarding Robert’s hearsay statements under Evidence Code section 1323. McDermott also argued the remaining evidence was insufficient to support the trial court’s judgment because the deed and related documents reflect the parties’ intent to grant Connolly the smaller parcel. Furthermore, McDermott argued the trial court abused its discretion in awarding attorney’s fees after finding that McDermott had unjustifiably failed to admit certain requests for admission. Finding no reversible error, the Court of Appeal affirmed.

Rincon EV Realty LLC v. CP III Rincon Towers, Inc.

Court: California Courts of Appeal

Docket: A152935(First Appellate District)

Opinion Date: December 26, 2019

Judge: Streeter

Areas of Law: Civil Procedure, Real Estate & Property Law

In 2007, Plaintiffs borrowed $110 million from Bear Stearns to finance the purchase of a San Francisco apartment complex. In 2010, after plaintiffs defaulted, CP purchased the property at a nonjudicial foreclosure sale. Plaintiffs sued CP and others, alleging legal claims (breach of contract, fraud, slander of title, trade secret misappropriation), and equitable claims (unfair competition, to set aside the foreclosure sale, and for an accounting). Judge Miller struck plaintiffs’ jury demand based on provisions in the contracts, held a bench trial, and entered judgment for defendants. The court of appeal concluded Judge Miller erred by striking plaintiffs’ jury demand as to the legal claims, finding no error as to the equitable claims, and remanded the legal claims. On remand, Judge Kahn held that Judge Miller’s findings in connection with plaintiffs’ equitable claim for unfair competition necessarily resolved plaintiffs’ legal claims because the substantive law allegations of the legal claims are also alleged as grounds that defendants violated the UCL. The court of appeal affirmed, rejecting arguments that after the partial reversal, plaintiffs were entitled to relitigate all factual issues relevant to the legal claims; that Judge Kahn violated the remittitur and the law of the case; that under the statutes governing judicial notice and summary judgment, Judge Kahn, could not consider the “truth” of the facts found by Judge Miller and even if Judge Miller’s findings had binding effect, those findings did not dispose of the legal claims.

Taniguchi v. Restoration Homes LLC

Court: California Courts of Appeal

Docket: A152827B(First Appellate District)

Opinion Date: December 16, 2019

Judge: Miller

Areas of Law: Banking, Consumer Law, Real Estate & Property Law

If the principal secured by a mortgage or deed of trust becomes due because of the borrower’s default in making payments Civil Code 2924c allows the borrower to reinstate the loan and avoid foreclosure by paying the amount in default, plus specified fees and expenses. Under section 2953, the right of reinstatement cannot be waived in any agreement “at the time of or in connection with the making of or renewing of any loan secured by a deed of trust, mortgage or other instrument creating a lien on real property.” The borrowers missed four monthly payments on a mortgage loan that had been modified after an earlier default. The modification deferred amounts due on the original loan and provided that any default would allow the lender to void the modification and enforce the original loan. The borrowers sought to reinstate the modified loan by paying the four missed payments, plus fees and expenses. The lender argued that section 2953 does not apply to the modified loan and that the borrowers may reinstate the original loan by paying the amount of the earlier default on the original loan plus the missed modified payments. The court of appeal ruled in favor of the borrowers. Modification is appropriately viewed as the making or renewal of a loan secured by a deed of trust and is subject to the anti-waiver provisions. Section 2924c gives the borrows the opportunity to cure their precipitating default (the missed modified monthly payments) by making up those missed payments and paying the associated late charges and fees, to avoid the consequences of default on the modified loan.

Title Guaranty Escrow Services, Inc. v. Wailea Resort Co., Ltd.

Court: Supreme Court of Hawaii

Docket: SCWC-14-0001138

Opinion Date: December 24, 2019

Judge: Sabrina S. McKenna

Areas of Law: Contracts, Real Estate & Property Law

The Supreme Court affirmed in part and vacated in part the judgment of the intermediate court of appeals (ICA) in this litigation concerning a dispute arising from a 1999 contract regarding the sale of approximately twenty-three acres of land in Honualua Maui, holding the the ICA erred by holding that Wailea Resort Company was clearly entitled to certain funds but otherwise did not err. The parties in this consolidated appeal were Michael Szymanski, Wailea, and ADOA-Shinwa Development and Shinwa Golf Hawai'i Company (collectively, Shinwa). Szymanski filed this application seeking a writ of certiorari raising seven questions. The Supreme Court held (1) the questions relating to the disqualification of the Honorable Rhonda I.L. Loo were without merit; (2) the ICA did not err in its application of the law of the case doctrine to the issue of whether the ICA gravely erred when it declined to review whether the Honorable Peter T. Cahill's 2015 order entering final judgment improperly dismissed with prejudice Szymanski's third-party complaint against Shinwa; and (3) the ICA erred by holding that Wailea was clearly entitled to certain funds and by affirming the circuit court's disbursal of funds.

Gordon v. U.S. Bank

Court: Idaho Supreme Court - Civil

Docket: 45202

Opinion Date: December 18, 2019

Judge: Stegner

Areas of Law: Real Estate & Property Law

After Ellen Gittel Gordon defaulted on her mortgage, the loan servicer initiated nonjudicial foreclosure proceedings to sell her home at auction. Gordon submitted multiple loss mitigation applications and appeals in an attempt to keep her home but all were ultimately rejected. As a result, Gordon initiated the underlying action in district court to enjoin the foreclosure sale. Upon the filing of a motion to dismiss that was later converted to a motion for summary judgment, the district court dismissed Gordon’s action and allowed the foreclosure sale to take place. Gordon appealed. Finding no reversible error in the district court judgment, the Idaho Supreme Court affirmed dismissal of Gordon's action.

Lawrence v. Bingham Greenebaum Doll, LLP

Court: Kentucky Supreme Court

Docket: 2018-SC-000344-TG

Opinion Date: December 19, 2019

Judge: John D. Minton, Jr.

Areas of Law: Real Estate & Property Law

The Supreme Court vacated the trial court's grant of summary judgment in favor of the Bingham Greenebaum Doll law firm that enforced the mortgage on Meredith Lawrence's Gallatin County property, holding that there were genuine issues of material fact that must be resolved by the trial court before summary judgment could be granted. The trial court proceedings in this case resulted in the foreclosure and judicial sale of some of Lawrence's property. On appeal, Lawrence challenged the grant of summary judgment and attacked the validity of the judicial sale of the property. The Supreme Court vacated the judgment below and remanded the case, holding that the trial court erred in granting Bingham summary judgment because numerous genuine issues of material facts remained unresolved.

Blanchard v. Town of Bar Harbor

Court: Maine Supreme Judicial Court

Citation: 2019 ME 168

Opinion Date: December 19, 2019

Judge: Andrew M. Mead

Areas of Law: Real Estate & Property Law, Zoning, Planning & Land Use

The Supreme Judicial Court vacated the judgment of the Business and Consumer Docket (BCD) in favor of the Town of Bar Harbor on Landowners' complaint seeking a declaratory judgment that the Town's Zoning Ordinance Amendment was invalid, holding that Landowners failed to demonstrate a particularized injury and commenced this action prematurely. The Department of Environmental Protection (DEP) issued an order approving the Amendment, which changed the Town's Land Use Ordinance by, among other things, creating a new Shoreland Maritime Activities District that would apply to the Town's Ferry Terminal Property. Landowners, individuals whose properties had views overlooking the waters adjacent to the Town's Ferry Terminal Property, sought a declaratory judgment that the Amendment was invalid. The BCD entered judgment for the Town. Landowners appealed, arguing that the Amendment was inconsistent with state law and that the court erred in deferring to the order of the DEP in approving the Amendment. The Supreme Judicial Court vacated the court's judgment on standing and ripeness grounds and remanded the case for dismissal without prejudice, holding that Landowners lacked standing to challenge the Amendment and that their claim was not ripe.

Bolton v. Town of Scarborough

Court: Maine Supreme Judicial Court

Citation: 2019 ME 172

Opinion Date: December 23, 2019

Judge: Donald G. Alexander

Areas of Law: Constitutional Law, Government & Administrative Law, Real Estate & Property Law

The Supreme Judicial Court vacated the judgment of the superior court affirming the second decision of the Scarborough Board of Assessment Review granting Taxpayers 14.74 percent abatements to their land values, holding that the Board's original abatements reviewed by the superior court after this Court's remand satisfied constitutional requirements. In previous opinions, the Supreme Judicial Court concluded that the Board had erred in denying Taxpayers' abatement requests to their land values. On remand, the Board granted Taxpayers eight percent abatements to their land values. The superior court vacated the Board's decision, concluding that the Board's abatement formulate was unreasonable. On remand, the Board determined that Taxpayers were entitled to 14.74 percent abatements. The superior court affirmed. The Supreme Judicial Court vacated the superior court's judgment affirming the Board's second decision granting 14.74 percent abatements and remanded with directions to affirm the Board's first decision, holding that the Board's original decision was not outside the reasonable range of discretion allowed the Board under this Court's precedents.

Benko v. Quality Loan Service Corp.

Court: Supreme Court of Nevada

Citation: 135 Nev. Adv. Op. No. 64

Opinion Date: December 26, 2019

Judge: James W. Hardesty

Areas of Law: Real Estate & Property Law

The Supreme Court affirmed the judgment of the district court dismissing Appellants' putative class action alleging that Respondents, current or former Nev. Rev. Stat. Chapter 107 trustees, engaged in unlicensed debt collection agency activities by pursuing nonjudicial foreclosures on their homes, holding that Appellants did not plead a cognizable cause of action. In dismissing the complaint the district court found that the plain language of Chapter 107 authorized the actions allegedly performed by Respondents. The Supreme Court affirmed, holding (1) the legislature did not intend that deed of trust trustees be subjected to Nev. Rev. Stat. Chapter 649 licensing requirements when they are engaged in nonjudicial foreclosures; and (2) because Appellants' allegations fell within the bounds of Chapter 107, Appellants did not plead a cognizable cause of action.

Chandra v. Schulte

Court: Supreme Court of Nevada

Citation: 135 Nev. Adv. Op. No. 66

Opinion Date: December 26, 2019

Judge: Stiglich

Areas of Law: Real Estate & Property Law

The Supreme Court reversed nine district court orders directing payment from the Nevada Real Estate Education, Research and Recovery Fund (the Fund), one to Melani Schulte individually and eight to various LLCs in her control, stemming from William Schulte's fraudulent management of properties, holding that the spousal exception to Fund recovery in Nev. Rev. Stat. 645.844(4)(a) applied at the time of the misconduct and that transactions involving one's own properties do not qualify for Chapter 645's protections. The Fund compensates victims of real estate fraud whose judgment against a fraudulent real estate licensee is uncollectible. The district court issued the nine orders stemming from the fraudulent management of properties by William, Melani's then husband. All but one of the properties were jointly owned by the Schultes. The Supreme Court reversed the orders, holding (1) because Melani and William were married at the time of the fraud, the spousal exception prohibits Melani's individual recovery; and (2) because transactions involving one's own properties do not require a real estate license, the district court erred in granting awards to the eight LLCs.

Vegas United Investment Series 105, Inc. v. Celtic Bank Corp.

Court: Supreme Court of Nevada

Citation: 135 Nev. Adv. Op. No. 61

Opinion Date: December 19, 2019

Judge: Stiglich

Areas of Law: Real Estate & Property Law

The Supreme Court affirmed the judgment of the district court determining that Appellant took certain nonresidential property subject to Respondent's existing mortgage on the subject property, holding that Appellant took its interest subject to Respondent's deed of trust. The conditions, covenants, and restrictions (CC&Rs) of the subject property stated that the property owners' association (POA) may enforce delinquent assessment liens pursuant to Nev. Rev. Stat. 116.3116-.31168 but not the entirety of Nev. Rev. Stat. chapter 116. Specifically, the CC&Rs did not incorporate the provisions of chapter 116 that might invalidate a mortgage savings clause or provide for assessments supporting a lien that would have superpriority status. Appellant purchased the property at a foreclosure sale conducted pursuant to the procedures set forth in section 116.3116. Thereafter, Respondent recorded a notice of default for nonpayment of mortgage payments and filed a complaint for judicial foreclosure of the property. Appellant counterclaimed to quiet title, alleging that the nonjudicial foreclosure extinguished Respondent's deed of trust. The district court entered judgment for Respondent, concluding that the foreclosure sale did not extinguish Respondent's deed of trust. The Supreme Court affirmed, holding that no portion of the delinquent POA assessment lien had superpriority status as against Respondent's first security interest.

White v. State, Division of Forestry

Court: Supreme Court of Nevada

Citation: 135 Nev. Adv. Op. No. 67

Opinion Date: December 26, 2019

Judge: James W. Hardesty

Areas of Law: Criminal Law, Real Estate & Property Law

The Supreme Court affirmed the order of the district court denying a prisoner's petition for judicial review challenging the amount of compensation he received, upon his release, in connection with the industrial injury he suffered while incarcerated, holding that the administrative appeals officer properly affirmed the calculation of the prisoner's average monthly wage. Appellant was injured while working for Nevada Division of Forestry while he was incarcerated. Respondent accepted Appellant's workers' compensation claim. After Appellant was released he sought to have the benefits calculated at the minimum wage guaranteed under the Nevada Constitution. Under the modified workers' compensation program for prisoners, however, the amount of compensation a prisoner may receive upon release is based on the average monthly wage the prisoner actually received as of the date of the injury. The Supreme Court affirmed the district court's order denying Appellant's petition for judicial review, holding that an administrative appeals officer is not permitted to recalculate the average monthly wage at an amount the prisoner did not actually receive while incarcerated.

Pollak v. 217 Indian Avenue, LLC

Court: Rhode Island Supreme Court

Docket: 17-368

Opinion Date: December 17, 2019

Judge: Gilbert V. Indeglia

Areas of Law: Real Estate & Property Law, Zoning, Planning & Land Use

The Supreme Court affirmed the judgment of the superior court granting summary judgment in favor of Defendants and dismissing Plaintiff's action claiming violation of restrictive covenants and breach of the duty of quiet enjoyment arising out of Defendants' alleged wrongful construction of a multi-story structure on their property, holding that summary judgment was properly granted. Defendants failed to get approval prior to building, as required under the plain language of the restrictive covenant at issue. However, Defendants ultimately received the required approval. The requirements were not building requirements but, rather, the requirement to submit plans for approval prior to building. The Supreme Court held that because the requested relief for Defendants' breach of the restrictive covenants would lead to a futile result, the hearing justice did not err in granting Defendants' motion for summary judgment.

Winrose Homeowners' Association v. Hale

Court: South Carolina Supreme Court

Docket: 27934

Opinion Date: December 18, 2019

Judge: John W. Kittredge

Areas of Law: Real Estate & Property Law

Homeowners Devery and Tina Hale purchased their home (the Property) twenty-one years ago and made timely mortgage payments ever since, accruing over $60,000 in equity in the Property, which had a fair market value of $128,000. However, after failing to pay $250 in homeowners' association dues to Winrose Homeowners' Association, Inc. (the HOA), the HOA foreclosed on the Property, and a third-party purchaser, Regime Solutions, LLC (Regime), bought it for a pittance. The Hales challenged the judicial sale, arguing the winning bid price of approximately $3,000 was grossly inadequate compared to the value of the Property. The South Carolina Supreme Court found there were two methods used to determine whether a winning bid at a foreclosure is grossly inadequate. While it did not draw a bright-line rule requiring the use of one method over the other, here, Regime took no affirmative steps to assume the Hales' mortgage. As a result, in determining whether the purchase price was grossly inadequate, the Supreme Court found it would be wholly inappropriate to add the value of the mortgage to Regime's winning bid. "When the value of the mortgage is not added to Regime's winning bid, the bid shocks the conscience of the court." The Supreme Court therefore reversed the judicial sale and remanded to the master-in-equity.

Janvey v. GMAG, LLC

Court: Supreme Court of Texas

Docket: 19-0452

Opinion Date: December 20, 2019

Judge: Busby

Areas of Law: Real Estate & Property Law

The Supreme Court answered a question certified to it by the United States Court of Appeals for the Fifth Circuit regarding what constitutes good faith under the Texas Uniform Fraudulent Transfer Act (TUFTA) by holding that when a transferee on inquiry notice attempts to use TUFTA's affirmative defense that it acted in good faith to shield a transfer from the statute's clawback provision it must show, at a minimum, that it investigated its suspicions diligently. Creditors may invoke TUFTA to claw back fraudulent transfers from their debtors to third-party transferees, but if the transferee proves that it acted in good faith and the transfer was for a reasonably equivalent value, it may keep the transferred asset. The Fifth Circuit asked the Supreme Court whether a transferee on inquiry notice of fraudulent intent can achieve good faith without investigating its suspicions. The Supreme Court answered the question in the negative, holding that a transferee on inquiry notice of fraud cannot shield itself from TUFTA's clawback provision without diligently investigating its initial suspicions, regardless of whether a hypothetical investigation would reveal fraudulent conduct.

Commercial Construction Endeavors, Inc. v. Ohio Security Insurance Company

Court: Vermont Supreme Court

Citation: 2019 VT 88

Opinion Date: December 13, 2019

Judge: Eaton

Areas of Law: Business Law, Civil Procedure, Construction Law, Insurance Law, Real Estate & Property Law

On a winter night in 2014, strong winds blew through the town of Georgia, Vermont, causing a partially constructed livestock barn to collapse. Commercial Construction Endeavors, Inc. (CCE), the contractor building the barn, sought recompense for the resulting losses from its insurer, Ohio Security Insurance Company. However, insurer and insured disagreed as to policy coverage for costs incurred by CCE in removing the remains of the collapsed barn and rebuilding it to its pre-collapse state. Ultimately, CCE sued Ohio Security for breach of contract. In successive summary-judgment rulings, the trial court held that the contractor’s rebuilding expenses were covered under the policy, but the cost of debris removal was not. Ohio Security cross-appealed the first ruling and CCE appealed the second; the Vermont Supreme Court reversed the first ruling and affirmed the second. The Court determined the additional collapse coverage applied only to “Covered Property,” which was business personal property; CCE did not dispute that the barn was not business personal property and thus was not “Covered Property.” Therefore, the court’s first summary-judgment ruling was reversed. The debris removal was not a loss involving business personal property. As a result, it was not a loss to “Covered Property” at that term was defined by the policy at issue.