Northeast Bank v. Wells Fargo Bank, N.A., No. 14-2240 (8th Cir. 2015)
Annotate this CaseGrand Rios purchased a Brooklyn Park, Minnesota hotel and waterpark, assuming $4.61 million of the debt owed to Northeast Bank by the original owner, and purchased insurance from Hanover Insurance. The roof was damaged by a snowstorm. Sill was hired to handle the claim. Hanover issued checks totaling $350,000 made jointly payable to Grand Rios, Northeast, and Sill. Without Northeast’s endorsement, knowledge, or consent, Wells Fargo Bank paid the full amount of the checks to Grand Rios. Months later, Northeast and Grand Rios entered into a Settlement Agreement under which Grand Rios agreed to a voluntary foreclosure, assigned all insurance proceeds to Northeast, paid $50,000 to Northeast, and allowed a state court to appoint a receiver for the hotel and waterpark. Hanover made additional insurance payments of approximately $1.2 million. Ultimately Northeast received approximately $200,000 more than the debt Grand Rios owed and sold the property to CarMax. Northeast sued Hanover and Wells Fargo. The district court dismissed Hanover and granted summary judgment in favor of Northeast against Wells Fargo.. The Eighth Circuit reversed. While the payment constituted conversion under the UCC, Minn. Stat. 336.3-420, Northeast has not suffered any damages because it was subsequently paid the full amount of the debt for which the checks were security.
Court Description: Shepherd, Author, with Gruender and Kelly, Circuit Judges] Civil case - Banking law. By showing that Northeast did not suffer any actual loss, Wells Fargo successfully rebutted the presumption contained in Minn. Stats. Sec. 336.3-420 as to the measure of liability in this conversion, and to allow the district court's summary judgment for Northeast to stand would result in an impermissible double recovery.
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