Jackson Jambalaya

The Evans case just won't go away for Mississippi Valley Title. The Desoto Times reports:

"The City of Southaven may be able to collect $100,000 in fine money after a title insurance company divided up and redistributed a 20-acre plot of land on Goodman Road without going through the city's planning department.

The law firms of Lifton Lancaster of Jackson and Deas and Deas of Tupelo contacted the city about the potential fine collections after working on the case for another client, offering to represent the city free of charge.

Southaven Mayor Greg Davis said the title insurance company divided the land against city ordinances in an attempt to satisfy bad loans and creditors on the 20-acre parcel.

"The attorney representing the banks is willing to represent the city free of charge to get a judge to order the land back and ask for the $500-per-day fine which could total $100,000," Davis said. "We don't have an interest in the land as a city but because they broke every subdivision law on our books we should pursue. If the title company wants to follow our procedures, they can."

The Southaven Board of Aldermen voted unanimously to have the law firms represent the city in order to have the land rezoned under a judge's order and possibly collect fines." Article

Needless to say, the title insurance company is Mississippi Valley Title (Old Republic). The Evans brothers are to be sentenced at the end of the month.

Collection of all posts on the Evans case.

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For a collection of all posts on Evans case, see sidebar on right side of page. See bottom of posts for a synopsis of the Evans case.

The Evans case continues to heat up as Britton & Koontz Bank (Natchez) filed a lawsuit on December 22, 2009 against Mississippi Valley Title Insurance Company seeking to enforce a title insurance policy it purchased from Mississippi Valley Title and recover related costs. Britton & Koontz bought the policy for a loan it issued to Chris Evans. Mississippi Valley Title responded with a Motion to Compel Arbitration, citing an arbitration clause in the insurance policy. Copy of complaint

B&K granted a mortgage for $904,000 to Brashear Heath, LLC, a company owned by Chris Eavns on May 2, 2008. Deed of Trust. The bank argues the policy covered fraud and that it filed the claim pursuant to the notice provisions in the policy. Apparently Brashear Heath never owned the property that was the subject of the loan even though (and this is a familiar story) Charles Evans certified Brashear Heath ownded the land. The Natchez bank first filed a claim with the insurance company, sent a demand letter to Mississippi Valley Title seeking payment of its claim after the thirty day payment period passed, (Copy of letter is on page 16 of complaint.), and then filed suit in December after Mississippi Valley Title did not pay the claim.

Mississippi Valley Title answered with a Motion to Compel Arbitration on Janurary 4, 2010. The defendant cited a clause in the thirteenth paragraph of the title insurance policy. The clause cited states: "Either the company or the insured may demand that the claim or controversy shall be submitted to arbitration..." (See page 10 of the complaint for a copy of the policy.). Motion to Compel Arbitration, Memo in support of Motion to Compel Arbitration.

This lawsuit is the second case where Mississippi Valley Title and a bank are fighting over a title insurance policy in the Evans case. JJ reported last month on a dispute between the insurance company and the Bank of Forest over a mortgage issued on an Evans-owned property. Mississippi Valley Title also sought (and failed) to keep its lawsuit against Charles Evans in chancery court and has already opposed the trustee and a few banks on several motions in bankruptcy court. It is reasonable to assume a substantial percentage of the title insurance policies issued by MVT contain arbitration clauses. Thus it must be asked if Mississippi Valley Title is going to force banks to sue MVT for payment of claims so it can then use such an arbitration clause to its advantage. As arbitration is costly and strings out the process even further, is Mississippi Valley Title's motion merely an attempt to delay or force Britton & Koontz to settle a case for a lower amount and thus mitigate its damages?

Stay tuned.

Synopsis of Evans case (This feature will be included with future posts on Evans case): Charles Evans, Jr. was an attorney approved by Mississippi Valley Title Insurance Company to provide title certificates to MVT and lenders showing a borrower had clear title to property. MVT filed a lawsuit in September accusing his brother of using over 30 LLC's to obtain fraudulent loans from over 30 banks in Mississippi. Chris Evans would allegedly use one company to purchase a large tract of prime commercial real estate in Madison and Desoto Counties. Another company owned by Evans would obtain a commercial real estate mortgage on a smaller section of the tract yet that borrowing company never obtained a deed showing ownership of the land from the other company. Thus the smaller tract was actually non-existed as the larger tract was never actually subdivided. Charles would allegedly provide a title certificate however showing the borrowing company owned the land even though it didn't. Over 80 loans for nearly $50 million were issued by Mississippi banks to companies owned by Chris Evans for lands those companies either did not own. MVT has testified federal authorities are currently investigating the case. Chris Evans filed Chapter 7 bankruptcy on October 26, which stopped the Mississippi Valley Title's lawsuit against him as federal bankruptcy law stays most state civil court proceedings once a bankruptcy petition is filed. Mississippi Valley Title testified 65 title insurance claims for approximately $41 million have been filed by banks affected by the Evans case.

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For a collection of all Evans posts, see sidebar on right side of page. See below for a synopsis of the case.


For an audio recording of the hearing, listen to hearing here or click on the play button above.

Nutshell: Several banks victimized by the Evans brothers want to use the powers under Rule 2004 of the bankruptcy code to look at claims filed with MVT in the Evans case and investigate the relationship between Evans and MVT. MVT strongly objected. Judge said they were entitled to the information but couldn't go on a "fishing expedition."

The scrum continues between Mississippi Valley Title Insurance Company and several banks in the Evans case. A hearing was held Wednsday on a motion filed by Merchants & Farmers requesting a 2004 exam of Mississippi Valley Title. The motion asked that Mississippi Valley Title for any "surveys, plats, maps, diagrams, reports, title reports, or documents relating in any way to the ownership of any of the properties at issue in the lawsuit." However, M&F didnt' stop with asking for documents but also requested "Any analyses of claims made against Mississippi Valley Title Insurance Company and/or Old Republic National Title Insurance Company relating in any way to Jon Christopher Evans or his related entities." State Bank, Bank of Forest, Cadence Bank, Copiah Bank, and Bank of Yazoo joined in the motion.

Rule 2004(a) of the U.S. Bankruptcy Code states "On motion of any party in interest, the court may order the examination of any entity." Rules of Bankruptcy. MVT is the only party besides Chris or Charles Evans that has a true idea of the amount and number of claims, the properties involved, and the extent of any fraud that took place. The banks are thus attempting to use rule 2004 to learn exactly what is in MVT's hand as it adjudicates title insurance claims filed by banks victimized by the Evans brothers.

The hearing began with Judge Olack stating "every single person known to mankind has joined in (this motion)." David Clark, the attorney for MVT, repeatedly clashed with attorneys Jeff Rawlings (M&F) and Kristina Johnson (State Bank, Bank of Forest, Holmes County Bank) over how much information should be released to the banks. M&F's request for "Any manuals, guidelines, procedures, recommendations or other documents or things relating in any way the internal controls and procedures of Mississippi Valley Title Insurance Company or Old Republic National Title Insurance Company as to title policies issued by approved attorneys from January, 2003 to date" in particular drew his ire as he repeatedly accused Rawlings and Johnson of seeking information they didn't need. Copy of motion

Clark said Rawlings was "asking for the world" and Mississippi Valley was not about to give its competitors copies of its manuals. (The question thus must be asked that given the amount of alleged fraud committed by the Evans brothers, why exactly would a competitor want such information other than as an example of what not to do?) Clark claimed the request went "far beyond the scope of a 2004 exam" and objected to all requests for manuals and procedures. Clark accused Rawlings and the banks of attempting to conduct discovery under the guise of the 2004 exam.

Clark didn't state what the alleged discovery was for but it doesn't take a genius to figure out what he means: a potential action by the banks against Mississippi Valley Title for negligence or collusion and that the banks were using the 2004 exam as an excuse to conduct the discovery it would pursue in such a lawsuit and the fact they weren't interested "in things relating to their claims." At this point, it became obvious Mr. Henderson, the trustee who was participating via telephone, was in a tree stand and multitasking from a field afar as a specimen of wildlife made its presence known by quacking loudly.

Rawlings stepped up to bat and immediately started swinging at Clark's client. He said "I suspect they don't want to give us anything" and that MVT did not want to give them any documents. The M&F attorney said Mississippi Valley said only $45 million in claims were filed against it even though there were over $80 million in loans that were issued to the Evans brothers and that either the banks or the insurance company were going to have to eat the difference.

Rawlings said "they (the banks) want to know what they know and when did they know it" and accused Mississippi Valley Title of withholding important information from the banks who loaned money to Chris Evans. Rawlings demanded to know why MVT named Charles Evans "Agent of the Year" and "when did MVT audit Charles Evans". Mr. Rawlings also revealed Mississippi Valley Title has not paid any of their claims and sources have informed JJ many other banks have not received payment for their claims as well. Rawlings and Johnson repeately told the Court they wanted to know the relationship between Charles Evans and MVT. Johnson claimed MVT knew much more than the banks and wanted to protect their claims against any actions taken by MVT.

Judge Olack said he didn't want an "expensive fishing expedition" but the banks "had the right to determine what happened". Judge Olack said "they are entitled to some historical information and documentation about the relationship between Mississippi Valley Title, the debtor, and Charles Evans.... They need to fill the blanks in..." The Judge also said the banks were entitled to learn what the "supervision" of Charles Evans was. Judge Olack repeatedly used the word "entitled" in ruling that under Section 510(c) of the U.S. Bankruptcy Code, the banks could obtain this information. Code

Rawlings told the Court MVT had been in the "claims process for four months. They've got to know some things" and could not keep saying it "was not sure" about what happened. The lawyers for the banks said Mississippi Valley Title was "not talking" and refused to meet with all of the lenders." Clark appeared befuddled at times as he told the Court he didn't know what the banks wanted or why they needed the requested information. He repeatedly told the Court his client did not want to give out information on how its internal controls and auditing of "approved attorneys" such as Charles Evans to its competitors. It was a stark contrast to the sharp performance of Mississippi Valley Attorney Bill Brabec in the Yazoo City hearing in October. It also led one to wonder if the use of 2004 exams was why Mississippi Valley Title sought to keep the complaint against Charles Evans in state court.

Judge Olack ruled the 2004 exam will be limited to a reasonableness standard and that Mississippi Valley Title Insurance must provide the following to the banks:
1. List and policies from Mississippi Valley Title Insurance of the insured properties.
2. The status of each and an analysis of each lien as well.
3. An appraisal if one was made.
4. Any surveys made.
5. Any chancery court filings.

The Court ruled the banks had a right to know what was in the file for each loan and also had a right to examine the documents forming the basis for MVT's lawsuit against Charles Evans. The Court said it wasn't going to rule on the issue of MVT's manuals, internal controls and procedures at this time, but wanted to see how his order handled matters before he took that step.

That is the reporting of the hearing, now for some commentary as I'm attempting to keep the two separate. An interesting situation has developed in that several banks are lined up in a bankruptcy case on one side and Mississippi Valley Title on the other. Mississippi Valley Title is literally a Mississippi institution. Although Mississippi Valley Title has claims reserves of less than $40 million, the policies issued by MVT were jointly issued with its parent, Old Republic, which has substantially larger reserves. (Old Republic can easily cover the claims on this case.) However, as payment of the claims is the equivalent of MVT's claims reserves, the question then become at what point does Mississippi Valley Title become an albatross to Old Republic.

A company such as MVT is a drop in the bucket to a large multinational corporation such as Old Republic. The Citis and Chases shut down Mississipi Valley Titles all the time without even batting an eye. (I've seen it happen personally more than once.) The other dilemma for MVT is if it plays hardball and denies as many claims as possible, it then must return to those same banks for future business. It would be reasonable to expect any banks who saw their claims denied in this case or were sued by MVT to seek non-issuance of a policy (as happened to Bank of Forest) on an Evans property aren't going to be in a hurry to ask MVT to underwrite any more title insurance policies.

One rarely sees such a slugfest in Mississippi where so many companies that are literally considered historical institutions of a sort are going to battle. However, it's also not every day a title insurance company is at risk of paying tens of millions of dollar or a local bank is facing the possibility of eating five milion dollars if its title insurance claims are not paid.

Note: The Mississippi Business Journal also has a pretty good story about the hearing.


Synopsis of Evans case (This feature will be included with future posts on Evans case): Charles Evans, Jr. was an attorney approved by Mississippi Valley Title Insurance Company to provide title certificates to MVT and lenders showing a borrower had clear title to property. MVT filed a lawsuit in September accusing his brother of using over 30 LLC's to obtain fraudulent loans from over 30 banks in Mississippi. Chris Evans would allegedly use one company to purchase a large tract of prime commercial real estate in Madison and Desoto Counties. Another company owned by Evans would obtain a commercial real estate mortgage on a smaller section of the tract yet that borrowing company never obtained a deed showing ownership of the land from the other company. Thus the smaller tract was actually non-existed as the larger tract was never actually subdivided. Charles would allegedly provide a title certificate however showing the borrowing company owned the land even though it didn't. Over 80 loans for nearly $50 million were issued by Mississippi banks to companies owned by Chris Evans for lands those companies either did not own. MVT has testified federal authorities are currently investigating the case. Chris Evans filed Chapter 7 bankruptcy on October 26, which stopped the Mississippi Valley Title's lawsuit against him as federal bankruptcy law stays most state civil court proceedings once a bankruptcy petition is filed. Mississippi Valley Title testified 65 title insurance claims for approximately $41 million have been filed by banks affected by the Evans case.

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For a collection of all posts on the Evans case, see sidebar on right side of page. Synopsis of case is at the bottom of this post.

Mississippi Valley Title Insurance Company filed suit on September 25, 2009 against the Bank of Forest in Madison County Circuit Court in an attempt to cancel a title insurance police issued on a loan connected to the Evans case. Copy of complaint

Mississippi Valley Title was a victim of Charles Evans
MVT immediately began distancing itself from Evans in the complaint. The insurance company stated it received "an application and certificate of title from Charles H. Evans regarding a certain parcel of land". MVT claimed Evans "was not a title agent for MVT. Rather, Evans was an approved attorney for purposes of providing certification of title on certain property" and that "as an approved attorney, Evans owed Plaintiffs a duty of reasonable care to accurately reflect the true status of legal title to the Subject Property."

The Bank of Forest approved a $450,000 loan to White Oaks Investment Company, LLC, which was owned by Chris Evans. The subject property was owned by G&B Investments. The property was supposed to be transferred to White Oaks at closing. MVT issued a title insurance commitment to the Bank of Forest (a copy is included in the complaint.).

MVT claims it learned after issuing the policy that G&B didn't own the land and that another Evans-owned company, Town Park of Madison, LLC, owned the property and that the land was the collateral for a $3,037,264 issued by Merchants and Farmers Bank. MVT then accuses the Bank of Forest of disbursing the $450,00 before "completing the requirements of the title commitment", the requirements in the title commitment "have not been met by the Bank of Forest", and that the insurance company has not received a premium payment for the title insurance policy. MVT then states "due to the Bank of Forest's failure to comply with the conditions" required to issue a title insurance policy, Mississippi Valley Title "have not issued a title insurance policy to the Bank of Forest for the subject property."

MVT asked the Court for a declaratory judgement on whether it was required to issue a title insurance policy to the Bank of Forest. MVT also charged Charles Evans with a count of professional negligence and asked for damages (including interest) against the attorney.

Bank of Forest: Not so fast, my friend.
Bank of Forest fired back with a withering barrage of accusations against Mississippi Valley Title. Bank of Forest states it made a contract with Mississippi Valley Title for a "correct title opinion and for a title insurance commitment and policy". While Mississippi Valley Title claims Charles Evans was not an agent of the insurance company, the Bank of Forest includes his agent number: 525241. Copy of answer

Three questions should be asked of MVT:
1. Are agent numbers issued to agents only or approved attorneys as well?
2. Did Charles Evans receive any commissions from the issuance of title insurance policies based on his title certificates?
3. Who selected Charles Evans and ordered the title work? Chris Evans? Mississippi Valley Title? The Bank of Forest? Considering the fact it is Charles Evans-provided title certificates and Mississippi Valley Title Insurance policies are the common denominators in the Evans loans, it is probably safe to say the Bank of Forest did not select MVT or Charles Evans.

The Bank of Forest goes further and argues that "on or about August 20, 2009, the Title Insurance Companies knew or should have known that there was reason to suspect the validity of title work performed by Charles Evans" and that "despite this knowledge, the Title Insurance Companies failed to suspend Charles Evans' Agent number". Its response states Mississippi Valley Title "represented to the Bank" that G&B owned the subject property and that the bank would not have issued the loan if it had been aware of this fact.

The defendant doesn't play around and charges Mississippi Valley Title "had actual or constructive knowledge in advance of the loan closing that the title work of Charles Evans.. was suspect and that their representations in the Commitment for Title Insurance were false but failed to notify the Bank" before the loan was issued to Chris Evans and that MVT is "responsible" for the title certificate provided by Charles Evans and any of his "misrepresentations".

The bank also addresses the premium issue. It states it deposited the premium into the trust account of Charles Evans and that MVT failed to issue an insured closing protection letter. The bank also accuses MVT of not fully disclosing to the bank the nature of the "problem" with the property and the loan when it contacted the bank in September. The bank claims it tried to contact Brad Jones of MVT about the issuance of the title insurance policy. Instead of receiving a phone call from Mr. Jones, the bank instead was contacted by Gene Berry, an attorney for Mississippi Valley Title about a title problem on another loan issued to White Oaks and that he "did not address" their questions about the title insurance policy for this loan and that the next day, MVT filed its lawsuit against the Bank of Forest. The bank again tried to pay the premium, in effect paying it twice but MVT refused payment.

The Bank of Forest requested the Court order Mississippi Valley Title to issue a title insurance policy for the loan, pay the Bank of Forest for the amount of the balance of the loan ($452680), including interest, attorneys fees, and late charges, and punitive damages. The Bank also charges Mississippi Valley Title with committing Civil Conspiracy ("either directly or through their agent Charles Evans). The parties are currently arguing in various motions and responses over which court has jurisdiction of this matter.

Exhibits:
Exhibit 1: Title commitment, Exhibit 2: Copy of note, Exhibit 3: Copy of loan check, Exhibit 4: Letter to MVT demanding performance
Exhibit 5: Bank of Forest's defense and counterclaim
Exhibit 6: Motion for expedited referral to bankrupcty court, Exhibit 7: Response in opposition to motion
Exhibit 9

Synopsis of Evans case (This feature will be included with future posts on Evans case): Charles Evans, Jr. was an attorney approved by Mississippi Valley Title Insurance Company to provide title certificates to MVT and lenders showing a borrower had clear title to property. MVT filed a lawsuit in September accusing his brother of using over 30 LLC's to obtain fraudulent loans from over 30 banks in Mississippi. Chris Evans would allegedly use one company to purchase a large tract of prime commercial real estate in Madison and Desoto Counties. Another company owned by Evans would obtain a commercial real estate mortgage on a smaller section of the tract yet that borrowing company never obtained a deed showing ownership of the land from the other company. Thus the smaller tract was actually non-existed as the larger tract was never actually subdivided. Charles would allegedly provide a title certificate however showing the borrowing company owned the land even though it didn't. Over 80 loans for nearly $50 million were issued by Mississippi banks to companies owned by Chris Evans for lands those companies either did not own. MVT has testified federal authorities are currently investigating the case. Chris Evans filed Chapter 7 bankruptcy on October 26, which stopped the Mississippi Valley Title's lawsuit against him as federal bankruptcy law stays most state civil court proceedings once a bankruptcy petition is filed. Mississippi Valley Title testified 65 title insurance claims for approximately $41 million have been filed by banks affected by the Evans case.

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For a collection of all posts about the Evans case, see sidebar at the right. Synopsis of case is at bottom of post.

As the Evans case winds its way through the bankruptcy court, several banks and Mississippi Valley Title Insurance Company continue to disagree over MVT's conducting a 2004 examination of the estate of Chris Evans.

A 2004 Examination is an examination of a debtor's estate by a creditor under Rule 2004 of the U.S. Bankruptcy Code. A creditor sometimes prefers a 2004 Exam as the creditor can investigate the assets and liabilities more thoroughly than is normally possible under the required meeting of the creditors that occurs in bankruptcy cases. The 2004 exam is essentially a deposition. The information gained in such an examination is immensely valuable to an insurance company such as Mississippi Valley Title if it is able to keep the results of the exam to itself for a period of time as the other creditors have filed more than $41 million in claims with MVT.

Consequently, Merchants & Farmers filed a motion on November 24, 2009 requesting Mississippi Valley Title turn over to M&F all records obtained from any 2004 Exam of Chris Evans. The bank also asked for any "surveys, plats, maps, diagrams, reports, title reports, or documents relating in any way to the ownership of any of the properties at issue in the lawsuit."

However, the bank went further than asking just for documents obtained through a 2004 exam and asked for "(g) Any manuals, guidelines, procedures, recommendations or other documents or things relating in any way the monitoring or auditing of approved attorneys for Mississippi Valley Title Insurance Company or Old Republic National Title Insurance Company..... and
(h) Any manuals, guidelines, procedures, recommendations or other documents or things relating in any way the internal controls and procedures of Mississippi Valley Title Insurance Company or Old Republic National Title Insurance Company as to title policies issued by approved attorneys from January, 2003 to date." Copy of motion

Bank of Forest, First State Bank, and State Bank & Trust also filed a Limited Joinder for Merchants & Farmers' motion yesterday. Motion for Joinder

Mississippi Valley Title didn't like this motion one bit as it made clear in its response. It called M&F's motion "inappropriate, improper, and overbroad for numerous reasons..." MVT further objected to the request for documents regarding internal controls and procedures: ""Rule 2004(b) limits the scope to matters regarding property of the debtor or matters that affect the administration of the debtor's estate. The request for manuals and internal analysis of claims made by Old Republic, for example, is a request for confidential and proprietary information that is beyond the scope of the 2004 examination. The same is true for information "relating in any way to any investigation' as requested in the motion." Copy of response

Many have suspected that the Evans brothers could not have perpetuated their (allegedly) fraudulent scheme without the assistance of others. An obvious question to ask is did anyone at MVT look the other way or collude with Charles or Chris Evans to carry out the plan? Other questions must be asked (These questions are not accusatory in nature but are a hypothesis of what the banks are likely seeking):
1. Were any appraisers accomplices in the plan to obtain so many fraudulent loans?
2. Was Old Republic and MVT's quality control departments adequately staffed?
3. How come no one noticed more than a few deeds of trusts were signed by both Charles and Chris Evans? Underwriting and auditing 101 calls for red flags to be raised when loan officers, title attorneys, appraisers, sellers, and buyers have the same last name. Did anyone notice the Evans' names and if not, why not? This question should be asked of the banks as well.
4. Did MVT audit the files of Charles Evans, Jr. since it could be liable for policies based upon his title certificates? This of course leads to a question of whether MVT was guilty of gross negligence if the audit procedures were lax or not performed in a diligent manner.
5. How many times a year were files audited? Was it random? How many files were audited? Were audits unannounced or scheduled?

Given the language of the motion filed by Merchants & Farmers, its clear the banks are asking these questions and more as they want to determine exactly how the Evans brothers were able to perpetuate the alleged fraud for over five years. The amount of claims filed by banks with MVT are roughly the same amount as its claims reserves. While its parent company, Old Republic, can easily cover these claims, the question remains whether Old Republic will keep MVT afloat if most or all of these claims are paid to the banks. Such a scenario alone is enough to probably ensure MVT will fight requests such as the one filed by M&F for internal controls tooth and nail.

Stay tuned.

Synopsis of Evans case (This feature will be included with future posts on Evans case): Charles Evans, Jr. was an attorney approved by Mississippi Valley Title Insurance Company to provide title certificates to MVT and lenders showing a borrower had clear title to property. MVT filed a lawsuit in September accusing his brother of using over 30 LLC's to obtain fraudulent loans from over 30 banks in Mississippi. Chris Evans would allegedly use one company to purchase a large tract of prime commercial real estate in Madison and Desoto Counties. Another company owned by Evans would obtain a commercial real estate mortgage on a smaller section of the tract yet that borrowing company never obtained a deed showing ownership of the land from the other company. Thus the smaller tract was actually non-existed as the larger tract was never actually subdivided. Charles would allegedly provide a title certificate however showing the borrowing company owned the land even though it didn't. Over 80 loans for nearly $50 million were issued by Mississippi banks to companies owned by Chris Evans for lands those companies either did not own. MVT has testified federal authorities are currently investigating the case. Chris Evans filed Chapter 7 bankruptcy on October 26, which stopped the Mississippi Valley Title's lawsuit against him as federal bankruptcy law stays most state civil court proceedings once a bankruptcy petition is filed. Mississippi Valley Title testified 65 title insurance claims for approximately $41 million have been filed by banks affected by the Evans case.

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JJ conducted a review of the loans issued to Evans-controlled companies in Texas. JJ calculated approximately $27 million in commercial real estate loans were issued by Texas banks and two Mississippi banks after reviewing deeds of trust. 19 loans were issued, 11 are now in foreclosure. The loans now in foreclosure proceedings are calculated to be $16,488,370 as more notes go unpaid. When the original post was made about the loans in Texas, only $12 million were in foreclosure.

See sidebar for a collection of all posts on the Evans case.

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This post will be short and I'll write more later.

There was a hearing in Bankruptcy Court today as a sea of gray suits flooded the courtroom. Here are some quick notes taken during the proceedings:
*The judge stated he will probably order all of the "parent" tracts of land sold and then work out how to split the proceeds of each sale among the banks claiming liens on portions of each tract.
*MVT caved against most motions or responses filed against it by the trustee, Derek Henderson, Cadence Bank, and the Kristi Johnson Group: State Bank, First Bank, Bank of Forest County, & Holmes County Bank
*Judge Olak and Mr. Henderson stated that the entire action in Madison County Chancery Court will be removed to the Bankruptcy Court in the next few days
*Neither Evans brother appeared in the courtroom.
*Mr. Renfroe of Merchants & Planters Bank provided the comedic moment of the day when he attempted to foreclose on a property even though 1. His bank had second lien on the property, 2. the value of the property was less than the amount of either lien, 3. The property was cut in two by a gas line and had no access, and 4. He had no clue what the value of the parent tract was or who the other banks involved were. In effect, the property was almost worthless without any access.
*MVT dropped its "emergency" attempt to conduct its own examination of Mr. Evans finances and the assets and liabilities involved. Instead two examinations will be held that are open to all of the creditors.
*No title insurance claims were addressed.

Click Here to Read More..

Synopsis of Evans case: Charles Evans, Jr. was an attorney approved by Mississippi Valley Title Insurance Company to provide title certificates to MVT and lenders showing a borrower had clear title to property. MVT filed a lawsuit in September accusing his brother of using over 30 LLC's to obtain fraudulent loans from over 30 banks in Mississippi. Chris Evans would allegedly use one company to purchase a large tract of prime commercial real estate in Madison and Desoto Counties. Another company owned by Evans would obtain a commercial real estate mortgage on a smaller section of the tract yet that borrowing company never obtained a deed showing ownership of the land from the other company. Charles would allegedly provide a title certificate however showing the borrowing company owned the land even though it didn't. Over 80 loans for nearly $50 million were issued by Mississippi banks to companies owned by Chris Evans for lands those companies either did not own. MVT has testified federal authorities are currently investigating the case. Chris Evans filed Chapter 7 bankruptcy on October 26, which stopped the Mississippi Valley Title's lawsuit against him as federal bankruptcy law stays most state civil court proceedings once a bankruptcy petition is filed. Mississippi Valley Title testified 65 title insurance claims for approximately $41 million have been filed by banks affected by the Evans case.


Apparently Mississippi Valley Title Insurance Company is now fighting a three-front war in the bankruptcy case of Chris Evans. Mississippi Valley Title filed an Emergency Motion for a Rule 2004 Examination of Debtor on November 16 seeking an examination on November 20, 2009. Under Rule 2004, the Court may order an examination of "the acts, conduct, or property or to the liabilities and financial condition of the debtor, or to any matter which may affect the administration of the debtor's estate, or to the debtor's right to a discharge." Federal rules of bankruptcy

Mississippi Valley Title claims in its motion that Chris Evans filed bankruptcy as a delaying tactic against the lawsuit alleging fraud Mississippi Valley Title filed against him in Madison County Chancery Court. MVT argues "Debtor is also the subject of a criminal investigation by the FBI and other investigative government bodies for Debtor's fraudulent conduct. Based upon this criminal investigation, Movant expects that Debtor will likely exercise his Fifth Amendment rights and refuse to answer any questions in the Rule 2004 Examination. It is imperative that Movant determine if that is the Debtor’s position because it will be necessary for the Debtor to be granted immunity under Section 344 of the Bankruptcy Code prior to the first meeting of creditors now scheduled for December 9, 2009. Otherwise, the Debtor will have succeeded in further delay of investigation into his fraudulent content."
Copy of motion

Derek Henderson, the trustee appointed for the case, stated he had no objection to an examination and that "such an examination will ultimately be required". Unfortunately for MVT, Henderson states he "fails to see the emergency nature of the motion" and provides several reasons to support his position. Copy of Trustee's response

The trustee also attempts to stop Mississippi Valley Title apparent attempt to use the 2004 motion to settle the title issue for the properties allegedly used by the Evans brothers to perpetuate their fraud. This is crucial because many loans were issued by 32 banks in Mississippi on properties in Madison and Desoto Counties owned by the Evans brothers. In most cases the certificate of titles issued to Mississippi Valley Title and the lenders by Charles Evans, Jr., were said to be fraudulent, thus leaving the banks with no collateral and MVT at risk of paying millions in dollars in claims to the lenders. In many cases, the same tract of land had multiple loans issued on it by several banks that had no knowledge of the other loans. Thus, the title issue is very important to everyone involved in this case. The banks thus have a strong interest in an examination or court determining who has title to these properties and aren't going to be too crazy about an sudden examination held in their absence.

Mississippi Valley also asked the Court to to meet with MVT in the Examination and fix the title problems on the properties at issue in this case. MVT stated it "has also requested Debtor, both individually and in his capacity as an officer, manager, or member of various entities, to execute curative real property deeds in an effort to merge equitable and legal title."

The Trustee said he would oppose any such action by Evans and that it would "only cause possible adversary proceedings in the bankruptcy case as to preferences and/or fraudulent transfers.' (Translation: Some banks are going to see this as a power play to screw them and we aren't going to go there.) The Trustee asserts that it is better to leave the property issues at status quo until a complete investigation can be done..." Mr. Henderson warned MVT he would take this position in a letter dated November 9, 2009. Copy of letter It should be noted Cadence Bank filed a joinder petition with the Court supporting the Trustee's action.

Several banks filed objections to some of the motions filed by Mississippi Valley Title and other banks. Mississippi Valley filed a motion on November 6 asking for permission to pursue its fraud lawsuit against Chris Evans in Madison County Chancery Court. Copy of motion. First State Bank, Bank of Forest, Holmes County Bank, and State Bank & Trust objected to this motion on November 17, Copy of objection, and argued the bankruptcy court should decide this matter, not the state court.

Its not hard to see why the banks are objecting to Mississippi Valley Title's request that it be allowed to pursue the fraud case against Chris Evans. MVT requested the Chancellor appoint a Special Master to preside over the case which would in effect replace the Trustee in all but name only. The banks as creditors have more rights in the bankruptcy court and are able to file their own claims and motions. If the Court grants permission to MVT to proceed with its case against Chris Evans, the banks are reduced to the role of cheerleaders hoping Mississippi Valley Title is looking out for their interests in state court unless they intervene. It should also be pointed out that in bankruptcy court the Trustee has powers not available to the Special Master and can also prosecute bankruptcy fraud if discovered. It is pretty clear to see why some of the banks are not to comfortable with MVT's attempt to have the case removed back to state court.

These banks also objected to Mississippi Valley Title's emergency request for a Rule 2004 examination. They argue an examination should be held but it should be at a time and place where all of the banks have an opportunity to participate if they so desire. Copy of objection to 2004 motion

Cadence Bank also jumped into the fray, filing its own motion opposing Mississippi Valley Title. Cadence claimed it had $4.6 million at stake and that it couldn't understand exactly why Mississippi Valley Title was trying to force an examination so quickly and without the other banks present. Cadence agreed with State, First State, Holmes, and Forest and asked the Court to order an examination "far enough in the future" so all interested parties could participate. Copy of Cadence's objection to 2004 motion

There is one further issue that should be considered. Has Mississippi Valley Title actually paid any claims? The insurance company stated 65 claims worth over $41 million were filed against it by policyholders affected by the Evans case. In his motion to dismiss, the lawyer for Charles Evans, Jr., argues Mississippi Valley Title has suffered no harm and can't sue for suspected "future" injury. A fundamental rule is that before a party can recover for damages, it must first show injury to the court. MVT has not stated how much money it has paid in claims, if any. So the question must be asked if Mississippi Valley Title has actually paid any claims so far in the Evans case.

The Evans-izer Bunny, it just keeps going....and going.... and going....

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See sidebar on right side of page for a collection of all posts on Evans case

Copy of affidavit
Exhibit A: Itemized list of loans issued to Evans brothers filed by MVT
Exhibit D: copy of title certificate issued to MVT
Exhibit E: Copy of title certificate issued to MVT

Mississippi Valley Title Insurance Company filed the affidavit of Brad Jones in the bankruptcy case of Chris Evans on November 17. The affidavit provides the testimony of Brad Jones, an employee of MVT who provides specific details on how Charles Evans, Jr. and Chris Evans allegedly perpetuated a fraud upon Mississippi Valley Title and many banks. Mississippi Valley also reveals that claims in excess of $41 million have been filed against it by affected lenders.

Mr. Jones is a lawyer, CPA, and certified fraud examiner. Mr. Jones states Charles Evans, Jr. was "an approved attorney for Mississippi Valley Title, although not retained, hired, or employed by Mississippi Valley Title." MVT and its lawyers have consistently pointed out this fact at every step of this case. Evans was authorized to "provide title certificates to MVT".

A title certificate is important when obtaining a loan on a property. The certificate allows the borrower to show the bank he is indeed the true owner of the property and also tells the bank there are no other liens on the property. If liens are missed, either the title insurance company has to pay them (the lienholders had a valid claim on the property when it was sold, and thus the proceeds of the sale) or the bank finds out it doesn't have the first lien on the property (thus it may be unable to recover the loan if the borrower defaults). This is important as banks will not provide a loan on property unless there are no other liens, or the other lienholders have agreed in writing to subordinate their claim to that of the bank.

The most crucial part of the affidavit states Chris Evans, Charles Evans, Jr., "and others entered in concert in a fraudulent and/or criminal scheme to defraud MVT and Lenders by borrowing funds from Lenders using certain land as collateral when title to the collateral was not of record in the landowner."

"As a part of the fraudulent scheme.. (the Evans brothers) would misrepresent to the Lenders and MVT that the land was owned by an entity controlled by Jon Christopher Evans and/or Charles H. Evans, Jr."

Crucial because without the issuing of phony title certificates, such a scheme would not work as banks would not lend money and MVT would not issue insurance policies. Jones testifies "based upon the false title certificates... and title insurance commitments issued by Mississippi Valley Title, Lenders would advance funds to Jon Christopher Evans, Charles H. Evans, Jr., and/or others."

The other crucial point about this case is that "contrary to representations made by Charles H. Evans, Jr., in title certificates, record title to the subject property was never transferred into the entity that actually borrowed the funds and whose title was insured."

In plain English, Mr. Jones is stating that one Evans company would buy a tract of land, another Evans company would borrow money on it, but the company that bought the land never transferred the land to the company that borrowed the money. However, the title certificate issued to the bank and MVT said it did own the land even though in reality the other company did.

A simple analogy would be suppose I took your car and got a loan on it from a pawn shop. The pawn shop asks me for a copy of the title so I give them one I forged. Unfortunately for them, the title is still in your name but they don't know that little fact. I get money on the car, don't pay back the loan, then the pawn shop finds out its not my car and can't repossess it.

Mississippi Valley stated in Exhibit A (listed above, compare it to this earlier post) that as of November 17, 2009, lenders have filed 65 title insurance claims with Mississippi Valley on loans granted because Charles Evans, Jr. issued (allegedly) phony title certificates. Mississippi Valley states the total amount of the claims is $41,415,242 (JJ estimated the banks exposure in Mississippi at $47 million. Not bad.) Paying these claims will wipe out much of Mississippi Valley's claims reserves. However, Old Republic, its parent company, has reserves of several hundred million dollars and is able to cover any claims Mississippi Valley must pay. Old Republic Q3 earnings statement

The affidavit also lists several large tracts purchased by an Evans company in Madison County: 38 acres on Highland Colony Parkway and 84 acres on Park Place Boulevard. It is also important to note that not all loans were gained through fraudulent title certificates and that the banks losses are probably larger than the amount stated by Mississippi Valley, as the assets of Charles H. Evans, Jr. are frozen and Chris Evans is in bankruptcy, thus the remaining loans will probably enter into default. It is also worth remembering Texas banks issued approximately $27 million in loans as well and that nearly half of these loans are now in foreclosure. The Evans case is like the Energizer Bunny.... it just keeps going...and going.... and going.

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Update: Copy of Preliminary Injunction

The courtroom heated up today in Yazoo City as a hearing on several motions filed in the Evans case was held this morning. Several revelations were made during testimony provided under oath by employees of Mississippi Valley Title Insurance Company.

Bankruptcy
The first bombshell to drop was a revelation by Charles Evans, Jr.'s, lawyer, Terry Levy, that Jon Chris Evans filed a Chapter 7 bankruptcy petition in U.S. Bankruptcy Court yesterday at 5:30 PM. Bankruptcy petition. Bill Brabec, MVT's attorney confirmed the entry of the petition. Thus the Chancellor did not consider any legal action taken against Chris Evans as the entry of the bankruptcy petition halted all civil proceedings at the state court level against him. Jon Chris Evans Amended Creditor List (Notice all of the banks in Texas. There are rumors and allegations the same scheme was perpetuated in Dallas.).

The Chancellor then denied a Motion to Quash a Subpoena filed by the defense. However, she approved several motions for protective orders submitted by MVT and several banks as they were concerned about providing confidential and personal financial information in a public record. The judge agreed with their concerns and granted their requests.

How Mississippi Valley Title suspected fraud
The main event at today's hearing ,however, was the consideration of a Motion for a Preliminary Injunction filed by Mississippi Valley Title and Old Republic, its parent. Copy of Motion . Brad Jones, a lawyer, CPA, and Certified Fraud Examiner for MVT, testified the fraud was discovered when MVT received a phone call from a policyholder at Holmes County Bank. Bank examiners were apparently at the bank and asked for copies of deeds related to two mortgages (deeds showing ownership by borrower, NOT deeds of trust issued to lien holders). Holmes County Bank issued two mortgages worth $1,580,479 in 2008 and 2009. The bank didn't have the deeds and called MVT to obtain a copy of them. MVT did not have any copies of the deeds. Holmes County Bank and MVT became very suspicious when the Courthouse did not have any deeds on file either. Thus the scheme (alleged, I do have to write that) began to unravel as MVT began to investigate.

Mississippi Valley Title then called Charles Evans, Jr. since he was the attorney who provided the title work for the two loans. Mr. Evans was an "approved attorney" for MVT. "Approved attorneys" are a list of lawyers from whom MVT will accept title work it then uses to issue title insurance policies to lenders and borrowers. Mr. Jones stated these attorneys are not employees nor agents of MVT. No testimony was provided on whether MVT audited these lawyers or had procedures in place to protect against fraud.

The Damage and the FBI appear
Charles Evans, Jr. disappeared and did not return any phone calls. Mr. Jones stated his office seemed to be deserted and had no employees. MVT finally sent a fax to Evans' office asking him to call the insurance company. The next day an Matt Balderidge of John Colette's law firm (Mr. Colette is one of the top criminal defense lawyers in Mississippi) called Mississippi Valley Title and said he was representing Charles Evans, Jr. Mr. Jones said this the first red flag about Mr. Evans. Mr. Jones testified he discovered the following facts:

• Over 100 policies were issued to Charles Evans, Jr.
  
• All borrowers were companies controlled or owned by Charles or Chris Evans
• Over $70 million in policies were issued by MVT
• There were 43 mortgages ($29 million) where the mortgage-holder was not vested with title
• 40 mortgage (more than $26 million) where the bank had a junior lien when it was supposed to have first lien.
  

It was at this point that Mr. Jones dropped his last bombshell upon a direct question from Mr. Brabec: he had been contacted by the FBI.

Mr. Brabec angrily said in his closing argument the Evans case was the "biggest fraud to hit Mississippi since Worldcomm" and that (the Evans brothers) "have stolen tens of millions of dollars, $50 to $100 million through a fraudulent scheme. It was also clear from courtroom testimony and statements no one has been able to locate Charles or Chris Evans.

If the allegations are true, and there is a strong probability they are, the Evans case is the largest real estate and mortgage fraud case in Mississippi history. 32 banks issued loans to companies owned or controlled by Charles or Chris Evans. Estimates on the amount of damage range from $50 to $100 million.

One abstractor familiar with the case (but has no involvement) told JJ "All the overlapping layers created by their various deeds of trust are like a cross between 3-dimensional chess and a jigsaw puzzle. And it really made swiss cheese of the bank's lien positions. Part of a tract might have first position while other parts of the same tract might be preceded by other liens. Then again, from a certain standpoint all the lenders are in the same position -- zero. It's going to be interesting to see how the courts sort out the title mess."

One must also wonder what Mississippi Valley Title's liability is in this case if it is has to cover the most of the losses the banks suffered. It should also be pointed out that while the amount of money involved in fraudulent loans is smaller than the $52 million JJ reported yesterday as the estimate for the banks exposure, those loans can be considered no good as the assets of the Evans brothers have been frozen or placed into bankruptcy. The potential losses facing either Mississippi banks or Mississippi Valley Title Insurance very well might be close to $100 million as claimed in court today.

Nearly $42 million in loans issued to Evans' brothers in Madison County
Tempest in a teapot or record-breaking fraud?
Banks issued nearly $10 million to Evans brothers in Desoto County
Evans case update on court filings

Note: Here are the results of an examination in 2006 ordered by the Missississippi Insurance Commissioner. It includes financial statement. Examination Results

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