Central Bank v. HoganAnnotate this Case
Liberty Bank made five loans to the owner of real property (Property). Liberty Bank and five other banks entered into participation agreements related to the loan. Iowa Great Lakes Holding later defaulted on the loan, and the mortgage was extinguished. After the surrender and foreclosure, Liberty Bank and Central Bank entered into an agreement under which Central Bank acquired assets, including loans, from Liberty Bank. Liberty Bank conveyed the Property to a Central Bank affiliated entity via quitclaim deed. Central Bank then filed a declaratory action against Liberty Bank and the five participating banks seeking a ruling that it owned the Property free and clear of any interest of the participating banks. The district court granted summary judgment for Defendants, concluding that, under the participation agreements, Central Bank did not own the property in fee simple because Liberty Bank did not sell Central Bank a one hundred percent interest in the property. The Supreme Court affirmed, holding that the ownership interest of the participating banks in the mortgage and underlying collateral was superior to Central Bank, which claimed its interest was derivative of and limited to the interest held by Liberty Bank.