- District Court's summary judgment in favor of Huntington National Bank ("HNB") and its wholly owned subsidiary Fourteen Corp. ("14") was reversed and remanded on the grounds that there were questions of fact regarding the piercing the corporate veil theory of plaintiffs DAGS II, LLC ("DAGS") and G2BK, LLC ("G2BK"). The Court of Appeals found that 14 was a mere instrumentality of HNB and there was a question of fact whether HNB used 14 to commit a "fraud or wrong". District Court's summary judgment on the lack of plaintiffs' standing to raise questions regarding a mortgage assignment was upheld.
- Procedural context:
- Plaintiffs sued HNB and 14 seeking a declaratory judgment that a borrower was not indebted to HNB because of a certain assignment by HNB to 14 of a portion of debt due HNB and certain secuirty interests. Plaintiffs also asked for damages against HNB and 14. On cross motions for summary judgment, the District Court held that plaintiffs could not challenge the assignment by HNB of some of its loan documents and a portion of its debt to 14. After granting the plaintiffs leave to assert a piercing the corporate veil claim against HNB and 14, the District Court found 14 was not a mere instrumentality of HNB.
- HNB made several loans to Baker Lofts ("Borrower") and Borrower granted first and second mortgages to HNB and assigned some TIF interest and a liquor license to HNB. Post-default, HNB assigned its second mortgage to 14 along with some vague portion of its debt. 14 foreclosed and bought the real estate securing the second mortgage back at sheriff's sale for a low price. After a resale of the real estate HNB released the first mortgage. HNB subsequently proceeded against the TIF rights and the liquor license. Apparently 14 used the same address as HNB, the same employees as HNB, and funds flowed freely back and forth between the two entities. It appeared that HNB and 14 may have orchestrated the relationship to profit HNB at the expense of the purchaser of the liquor license - G2BK - and DAGS which purchased the assets of Baker Lofts from its bankruptcy estate.
- Cole, Chief Judge, Moore and Clay, Circuit Judges
Analysis: Bankrupt Borrowers Won’t Forfeit Coronavirus Aid Payments to Creditors Under Stimulus Package
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