Jackson Jambalaya

Collection of all posts on the Evans case.

A federal court sentenced the Evans brothers to jail yesterday in the largest mortgage cause ever in Mississippi. U.S. District Judge Dan Jordan, III sentenced Chris Evans to 168 months and Charles Evans, Jr. to 240 months in prison for bank fraud and money laundering. The two brothers created over thirty companies to defraud over fifty banks to obtain approximately $80 million in mortgage loans. Assistant U.S. Attorney Mike Hurst said "It was a fair sentence for the Bernie Madoffs". Judge Jordan also imposed a three-year term of supervised release after imprisonment and forbade either man from obtaining a line of credit without approval.

The two brothers sat passively through the hearing- sullen and resigned to their fates. Chris Evans looked older, more gaunt, than he did when first seen a year ago. He had been free on bond. Charles Evans looked the same as he did then- shackled in orange, looking ahead into space while the proceedings whirled around him.

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. Chris used over 30 LLC's to obtain fraudulent loans from over 30 banks in Mississippi. Chris Evans would 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 did not exist as the larger tract was never subdivided. Charles provided a title certificate however showing the borrowing company owned the land even though it didn't. The brothers used other LLC's to borrow $27 million from Texas banks to purchase properties in the Dallas area. Note to Clarion-Ledger: Mr. Evans did not work for Mississippi Valley Title (I imagine Scott had a conniption when he saw that one. ;-) ).

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. Both Charles and Chris Evans filed Chapter 7 bankruptcy petitions. Mississippi Valley Title testified 65 title insurance claims for approximately $41 million have been filed by banks affected by the Evans case.


The court said the amount stolen was $27 million. This amount is not the same as the amount obtained through fraud by the Evans brothers. The Fifth Circuit ruled in U.S. v. Goss the damages for mortgage fraud cases had to be calculated after the property was returned to the lender and the value of the property was deducted from the amount gained through fraud (Example: Banks loans $100,000 to purchase a property. Borrower uses fraud to get loan. Bank gets land back but it is worth $80,000. Banks loss is only $20,000). The Evans brothers obtained $27 million in loans from Texas banks for properties in Texas. However, the Texas banks were able to foreclose on their collateral, thus mitigating the losses in Texas. Jackson Jambalaya reviewed the loans in an earlier post and exposed the fact the brothers had obtained over $80 million in mortgages.

Evans attorney John Collette made several objections to the loss amount, enhancement for using sophisticated means to commit fraud, and enhanced penalties for fraud. Judge Jordan overruled the objections as he said the brothers used over 30 companies to hide assets and agreed with the prosecution the fraud was a Ponzi scheme using banks and as an investment fraud it qualified for enhanced penalties.

An emotional Chris Evans told the court:

"When I first stepped across the line, I had good intentions. I never intended to hurt anyone, I got deeper and deeper. I was wrong, there is no excuse for it. I've disappointed society, my family and friends. What I did was wrong. Whatever is left of my life, if I can do anything constructive I will."

Charles Evans was more sullen and tight-lipped as he said "I accept full responsibility for what I have done. I was wrong."

That was his whole statement. No victims spoke but in a move that surprised everyone in the courtroom, bankruptcy trustee Derek Henderson addressed the court before sentencing. Mr. Henderson very forcefully told the court

"What offends me is these two are attorneys. They used their licenses as a member of the bar to do what they did. They want you to believe they did not line their pockets (Collette's argument)." Mr. Henderson said they abused the escrow account and lived off of it. He said although Chris Evans was compliant "they knew what they were doing, they were members of the bar, and that should offend this court" (Made me wish the bar would replace Kilgore and Waddell with this guy.).

Chris Evans will report to prison on February 21, 2012 at 12:00 PM. Charles Evans will remain in custody. Mr. Evans was arrested Memorial Day weekend in 2010 after he tried to reach for a gun in a gun bag when two marshals tried to apprehend him for for a bench warrant issued by the bankruptcy Court. Mr. Collette argued with a straight face if anything Mr. Evans "would have never pulled a gun on anyone" and if anything, "Mr. Evans was at risk." Several people in the audience fought to keep from laughing when hearing this statement. Judge Jordan said Mr. Evans actions during the arrest could be used to enhance the penalty. Judge Jordan also imposed an $18.5 million judgment against each brother

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From PACER:

Set/Reset Hearings as to Charles H. Evans, Jr, Jon Christopher Evans: Sentencing reset for October 5, 2011 at 9:00 AM in Courtroom 5A (Jackson) Jordan before District Judge Daniel P. Jordan III. (SP)

For a collection of all posts on Evans case, see special coverage section on right side of the page.

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


Mississippi Valley Title Insurance Company and its parent company, Old Republic, filed a motion to hold Charles Evans in contempt of court on April 6 in U.S. Bankruptcy Court. Judge Neal Olack had ordered Mr. Evans to submit to a Rule 2004 exam by Mississippi Valley Title before April 1. Apparently Mr. Evans' attorney even went so far as to claim he had tried to make his client appear for the exam but was unsuccessful in his efforts. The motion also accuses Mr. Evans of withholding documents and failing to provide an accounting of his lawyers trust account. Mississippi Valley Title asked the Court to issue civil and criminal sanctions against Mr. Evans. Indeed, MVT asked for "severe" sanctions. Copy of motion

Mississippi Valley Title Insurance also filed an answer in the suit filed by Westport Insurance Company, the malpractice insurance carrier for Charles Evans. Westport filed suit seeking to withdraw its coverage of Charles Evans in January. Copy of motion, Copy of answer Mississippi Valley Title opposes Westport's withdrawal from the case. MVT demanded a jury trial. The suit mentions MVT and Old Republic because they are plaintiff's in a lawsuit against Charles Evans and Bank of Forest because it is involved in litigation against Charles Evans as well.

Another development that is interesting is Mississippi Valley Title filing a claim on April 9 against Chris Evans in Bankruptcy Court. Despite representing to the Court in November that 65 claims for $41 million had been filed against the insurance company by banks victimized by the Evans brothers, Mississippi Valley Title stated its claim against the estate at $13,119,842, a difference of nearly $28 million. MVT's claims registration, November affidavit, Itemized list of loans

The proof of claim filed by Mississippi Valley Title states it has only paid four claims for $1,975,000 in the Evans case despite the fact it filed suit against the Evans brothers in September. Mississippi Valley Title paid Metropolitan Bank $500,000, Holmes County Bank $525,000, M&F Bank $450,000, and Commercial Bank & Trust $500,000. Eight months since the fraud was discovered by Mississippi Valley Title yet only four claims have been paid.

Meanwhile, Mississippi Valley Title released its 2009 annual statement and an accompanying actuarial opinion, and statement of investments. The claims reserves are approximately $34 million and relatively unchanged from the previous year.

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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A Madison County Circuit Court ordered Natchez bank Britton & Koontz and Mississippi Valley Title Insurance Company to enter into mediation last Monday. B&K loaned $904,000 on property allegedly owned by Chris Evans. Charles Evans, the brother of Chris Evans, was an approved attorney for Mississippi Valley Title and issued a phony title certificate showing an LLC operated by Chris Evans owned the land in question when in fact it never held ownership in the land at issue. Thus B&K loaned money to an LLC without realizing there was no collateral.

B&K filed a claim on its title insurance policy against MVT. MVT never paid the claim. B&K sued Mississippi Valley Title. MVT tried to invoke an arbitration clause in the policy and here we are. See earlier post. JJ has also learned Mississippi Valley Title has paid some claims but as one source put it, such claims were "a drop in the bucket".

Britton & Koontz should settle for nothing less than full payment of the claim and attorney's fees. It was MVT's rogue "approved attorney" that burned the bank. It obtained a title insurance policy to protect itself against what? Defects in the title. Mississippi Valley Title is engaging in nothing more than bad-faith stalling tactics as from day one in the Evans case, it has kept information hidden, refused to disclose the extent of the fraud until forced to do so, paid few claims out of 65 it um, claimed were filed, and fought every attempt to scrutinze its dealings with Charles Evans. B&K should demand full satisfaction.

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For a collection of all posts on the Evans case, see sidebar at the right side of the page.

Amy McCullough of the Mississippi Business Journal reports the Evans brothers are still operating their Gulf States Directory company:

"Employees from a phone book company operated by a man who filed for bankruptcy in October are selling ads to small business owners in Rankin and Madison counties. And money is being collected for ads for new phone books that will likely never be distributed or printed.

Rankin County books were supposed to be distributed in June but have still not been delivered due to nonpayment to the printer. The phone books’ printer, Utah-based Liberty Press, still holds 45,000 Rankin County books in its warehouse. Gulf States paid for 1,700 Rankin County books in spring 2009, which the company has distributed sparingly to stall angry customers who have inquired about books.

Gulf States has produced Metro West Jackson and Rankin and Madison county phone books for years.

Pure Air Consultants in Ridgeland wrote a check for $1,200 to Gulf States in January for their balance on advertising in the Rankin book. Employee Jennifer Sanders contacted Gulf States ad salesman James Garner early this month about distribution of the books. Garner was “extremely rude and defensive” and told Sanders that directories had been distributed and that she was welcome to come by the office to pick one up, she said. Garner told her that ad representatives were too busy selling ads for the upcoming Madison County book to handle her request personally, Sanders said." Article

I can personally testify to the attempts by Gulf States to sell more ads. Gulf States tried to sell an ad to a friend a few weeks ago. She called me and asked about these guys as she reads this site. She was writing out a check for several hundred dollars. The rep tried to blame everything on real estate deals gone bad, disgruntled banks, and a former employee poor-mouthing them to everyone. Thankfully for Chris Evans, my friend decided not to buy the ad after she had already written the check. However, the article reports other organizations such as the Flowood Chamber of Commerce never received their copies and the publisher still has not been paid for the directories which are still sitting in the publisher's warehouse. I also spoke to the Hinds County District Attorney's office about this case and was told if any of the injured parties file a complaint, they can investigate. However, it takes someone willing to stand up for themselves.

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Natchez bank Britton & Koontz responded to Mississippi Valley's attempt to avoid honoring its title insurance policy in Madison County Circuit Court. JJ reported on January 7, 2010:

"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 Evans 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 owned 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 January 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."
Earlier post

John Corlew, attorney for B&K, filed his response on February 19. Mr. Corlew claimed the arbitration language was never approved by the bank and it is not a "valid agreement". The response states the clause can not be enforced because well, the forum cited by MVT to be used for arbitration no longer exists.

The arbitration rules cited by the policy states "disputes administered in accordance with Title Insurance Arbitration Rules are administered by the National Arbitration Forum." However, the forum is no longer accepting new disputes pursuant to a consent decree with the Attorney General of Minnesota. Legal Times reported last July in its blog:
"The National Arbitration Forum announced Sunday that it would stop doing business in consumer arbitration by the end of this week, as part of a settlement with the attorney general of Minnesota. The settlement came less than a week after the attorney general there filed suit in state court accusing the Forum of deceptive trade practices by failing to disclose its interests in debt collection while claiming to be a neutral arbiter between consumers and corporations." Article

It is a fundamental rule of contract law that ambiguities in contracts are to be construed against the draftor. Since Mississippi Valley Title is the party citing the arbitration language it drafted, one can imagine a court is not going to be too sympathetic with MVT trying to use an arbitration forum that no longer exists for their purposes. However, the judge could order the parties to select another arbitration panel to meet the purposes of the contract as well. Since the "alleged" Evans fraud was discovered last summer, Mississippi Valley Title Insurance has not paid a single claim to any of the victimized banks even though 65 claims have been filed. This case just keeps getting more interesting and interesting.


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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Audio recording of hearing last Friday. If audio doesn't work, try this link.

A hearing was held in the Evans case last week to determine the fate of several motions, responses, and other actions filed in U.S. Bankruptcy Court. The room was awash in gray and black waves of suits as bankers and lawyers once again flooded the courtroom. The main focus of the hearing was the intent of the bankruptcy trustee to sell the properties owned by Chris Evans and divide up the proceeds among the lien-holders. Chris Evans has stated in court filings he owned properties worth approximately $82 million in Madison County MS, Desoto County MS, Collin County TX, Harrison County MS, and Denton County TX.

Derek Henderson, the bankruptcy trustee, filed a notice with the court stating his intent to sell the subject properties due to the dispute between various parties as to who had proper claim to each property. The true ownership of the property is extremely difficult to determine thanks to the actions of Chris and Charles Evans. Chris Evans operated a multitude of LLC's. Company A would buy a large tract of commercial real estate in a prime location. Company B, another Evans company, would obtain a loan from a bank a smaller portion of the tract. The bank provided the loan to Company B because Charles Evans, the brother of Chris Evans, was an "approved attorney" for Mississippi Valley Title Insurance Company and would issue a title certificate stating Company B owned the land.

The only problem with this little transaction was the title certificate was phony as Company A never actually transferred title of the property to Company B. Thus the bank lent money to a company that did possess title to the subject property. Company C would then obtain a loan on a smaller tract adjacent to Company B's tract with another phony title certificate, then Company D and the rest of the Evans-owned companies. Several smaller tracts overlapped each other or a company would get multiple loans on the same tract of land from different banks. The title descriptions for the smaller tracts were literally drawn up out of thin air with no thought given to the other tracts within the parent tract. Unfortunately for those banks, the combined loans were more than the fair market value of the subject property. Even more unfortunate was Mississippi Valley Title issued title policies to the affected banks due to the actions of their "approved attorney".

The end result was that multiple banks issued loans to Chris Evans for larger tracts of properties and no portions of those large tracts were transferred to the companies that obtained loans on the smaller tracts. Thus many banks (over 30 in Mississippi) issued loans to phony properties and are demanding the Court makes them whole. Some banks actually do have valid title but most are empty-handed having lost their money and collateral. Needless to say, they are demanding either the Evans estate in bankruptcy court or MVT repay them as over $41 million in claims have been filed against the title insurance company. It should be noted the Evans case is alleged to be the largest real estate fraud in Mississippi history.

MVT initially discovered the fraud and filed several emergency actions against the Evans brothers and their companies in Madison County Chancery Court. Judge Harvey-Goree granted their motions and set a hearing date for the Evans brothers to defend their interests. The day before a hearing was held, Chris Evans filed for Chapter 7 bankruptcy. His companies filed bankruptcy petitions at later dates. The Chancellor granted a preliminary injunction to MVT and froze the assets of Charles Evans and ordered a full accounting of his finances as well. What was key for MVT was Judge Harvey-Goree ruled "all defendants shall execute deeds and/or modification agreements, as directed by Mississippi Valley Title, to correct and/or cure title problems." Copy of preliminary injunction

This order was very important to Mississippi Valley Title as it allowed them to pick and choose winners and losers among the victims. The average loan in Mississippi was $620,000. Some were as small as $200,000, others were as large as $3 million. MVT gained from the ruling the right cure a title in favor of a preferred customer and thus give it the land as collateral and avoid paying that client its claim. Most, if not all, of the policies state coverage is based on what the land is worth, not the actual loan amount. One could easily see how MVT could hand over the Evans properties to a handful of big banks such as Regions and Bancorpsouth while eventually paying claims to the smaller banks that would still lose money if the payment was based on a property that was reduced in value.

Mississippi Valley Title discovered Judge Olack and Mr. Henderson apparently have other ideas on what should be done with the properties. Mr. Henderson acknowledged the ownership of all properties but argued that bankruptcy law allowed him to sell such properties and divide up the proceeds among the creditors at a later date if there was a bona fide dispute as to the ownership of the properties. However, Mr. Henderson admitted he needed to create "a long-range plan" and that he didn't want to "flood the market" with these properties and artificially depress the sales prices. He then stated he would be able to maximize the sales value if he could sell the smaller tracts as part of larger tracts. Judge Olack said in an earlier hearing he had used this method in similar cases and was inclined to apply it to this one as well.

Judge Olack stated there were thirty objections to the trustee's motion to sell and that they fell into five categories (25-minute mark on the audio). The Court specifically called out Mississippi Valley Title's objection to the sale. The judge said they all ignored Rule 363(f)(4) of the code that gave the trustee the power to sell the properties if in dispute without the creditors' consent and that the trustee definitely had the power to make the sale.

Judge Olack stated he only wanted to hear the objections of Mississippi Valley Title. MVT's attorney Richard Carmody argued MVT had obtained orders in the Madison County Chancery Court directing the Evans-owned company to transfer title of each property to a bank of MVT's choosing and that such orders should be respected. Upon Olack's direct question, Carmody admitted the transfers had not occurred. Olack also pointed out the order was part of a preliminary injunction, not a final court order. It should be noted the banks were not parties in the original state court action and thus lack the rights they have as creditors in bankruptcy. MVT wanted to preserve the Chancellor's order's and argued there was not a "bona fide dispute". MVT argued the banks had no rights and were not in the chain of title. The chancery court lawsuit has been removed to federal court and is the subject of another action to move into the bankruptcy court.

Judge Olack ruled all parties had until April to file answers and ninety days would be given for discovery at that time. He then set a trial date on October 25 and made it quite clear he was not going to extend any deadlines. The judge said a public auction would be "problematic." Olack directed Henderson to obtain the services of a realtor with expertise on a national scale and the trustee could generate "discreet sales" and avoid the problem of flooding the market. Judge Olack then encouraged the trustee to sell the properties as part of a larger group and that once it was "reduced to cash", they could then figure out how to divide up the proceeds among the creditors and that the goal was to "convert some dirt to dollars."

Recap: Judge wants the properties sold, he's going to have a trial in October, and threw out the window Mississippi Valley Title's serious attempt to control the case by picking the ownership of each property which would have canceled out quite a few of the pending claims against MVT.

Stay tuned.

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Bank of Forest, First State Bank, Holmes County Bank, State Bank, First Security Bank, M&F, and Omnibank served James Lee III with a notice of deposition yesterday. JJ has learned Mr. Lee was the former sales manager at Gulf States Directory. Chris and Charles Evans operated the company after inheriting it from their father upon his death. The Evans brothers operated the law practice, directory business, and the LLC's that are the subject of the Evans fraud case out of the same small office on Office Park Drive in Jackson. It will be interesting to see if Mr. Lee takes the fifth amendment during deposition or if any other party moves to stop the deposition. Copy of notice

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, please see sidebar on right side of page. Synopsis of case is at the bottom of the post.

Trustee seeks to cancel all actions in state court
Bankruptcy Trustee Derek Henderson and Mississippi Valley Title traded blows over the weekend. Mr. Henderson filed a complaint in U.S. Bankruptcy Court in the Evans case against Mississippi Valley Title and all of the banks in the Evans case. The trustee asked the court to nullify any actions taken in state courts that determined who the true lien-holders of each tract of Evans-owned property were and "liquidate" the claims of each defendant that has "asserted" a claim "relating to each tract."

There have been quite a few actions filed in the Madison and Desoto county chancery courts seeking rulings on which lenders have the first lien on each property. Most of the lawsuits filed were submitted by attorneys Gene Barry and Todd Burwell (of Robbie Bell fame) that are typically associated with Mississippi Valley Title. Over twenty actions seeking declaratory relief have been filed in Madison County alone.

Mississippi Valley Title must have met with its lawyers over the weekend because a response was filed yesterday. Copy of response MVT asked the Court to "permit" Mr. Henderson to "execute" the conveyances already ordered by state courts. Copy of Complaint

Impact of Evans case on Earnings
JJ reviewed the 2009 second quarter, 2009 third quarter, and 2008 annual statement for Mississippi Valley Title as well as the 2009 third quarter earnings statement for its parent, Old Republic. It should be remembered MVT stated in the bankruptcy court that claims of $41 million were submitted to it by policyholders in the Evans case.

The earnings statements reveal the following:
1. MVT had claims reserves of $35,380,452 as of September 30. (P.4, Known and Statutory Claims reserves were combined.) 3rd Quarter Earnings Statement
2. MVT had claims reserves of $35,657,424 at the end of 2008. Apparently Mississippi Valley Title did nothing to shore up its claims reserves in the same quarter it became aware of its potential liability due to the Evans case. 2008 annual statement, (2nd quarter was $34,314,931, 2nd Quarter Earnings Statement
3. Old Republic has over $14 billion in assets as of September 30. 3rd Quarter Earnings
Statement
4. Old Republic's Title Insurance Division reported:

• Pretax operating income of $4 million in the third quarter.
  
• a $9.7 million loss in the third quarter last year.
  
• a profit of $600,000 for the entire year
• a $27 million loss for the first three quarters of 2008.

Thus Old Republic's Title Insurance Division finally earned a profit in the third quarter after losing some money for some time. This is important as Old Republic is hemorrhaging badly in its mortgage insurance division: $160 million loss in the third quarter, $443 million loss in the first three quarters of 2009, and a loss of $415 in the first three quarters of 2008.

Old Republic reported an overall loss of $46 million for the third quarter and $116 million for the year ending September 30. That was an improvement as on September 30, 2008, Old Republic reported a loss of $431 million for the year.

If Mississippi Valley Title/Old Republic thus paid the $41 million in claims it stated in court filings were submitted by policyholders, the insurance company would probably see its entire profits for the title insurance division effectively wiped out although it would come out of the claims reserves. The question still remains: will Old Republic pay claims out of its own reserves, pay them first out of MVT's, or will it play hardball and fight every claim as it is doing with Britton & Koontz? The question thus must also be asked what the future of Mississippi Valley Title will be at Old Republic if the insurer pays $41 million in claims. One can imagine the insurer re-examining the um, nature of that relationship.

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 Evans case, see sidebar at the right. A synopsis of the case is at the bottom of this post.

Judge Olack ordered Mississippi Valley Title Insurance Company to provide several banks with documents and information regarding claims filed by the banks in the Evans case and the "historical relationship" between Mississippi Valley Title and Charles Evans.

The Bank of Forest, Merchants & Farmers, State Bank, Bank of Yazoo, First State Bank, Cadence Bank, and Community Bank filed a motion requesting the Court grant them permission to conduct a 2004 exam of Mississippi Valley Title.

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.

Judge Olack hammered David Clark, counsel for MVT in his ruling. The Court said Clark was "given a deadline in which to submit an order that reflected the rulings in the Bench Opinion and that was approved as to form by all other counsel." Translation: Judge Olack told Clark to submit an order that everyone agreed on within a certain time frame. Instead, the Court stated Clark "submitted one version and a later amended version of an order on the Motion that no other counsel had approved as to the form." The Judge then pointed out the parties could not agree on an order and chastized them for doing so, calling it "unacceptable" and that "further failure to comply with this court's directives regarding submission of orders may result in the imposition of sanctions or other relief."

The Court rejected the proposed orders by both sides and decreed:
1. MVT shall produce a property description and street address for each property insured by MVT that was issued to any creditor in the bankruptcy as well as
a. A lists of all interests against the property.
b. All items and analysis regarding each claim and its validity.
c. All appraisals for each property.
d. Any existing surveys for each property.

2. "All items regarding the historical relationship" between MVT and Chris Evans and between MVT and Charles Evans.

3. "All items that support the allegations contained in the original complaint and the first amended complaint filed by MVT in the Chancery Court of Madison County."

Copy of order

One can imagine the banks will make full use of this order, especially the part about the "historical relationship" as they have repeatedly accused MVT of hiding information from them.

Update: Old Republic's 3rd Quarter Earnings Statement. 4th Quarter release scheduled for January 28, 2010.

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

Chris Evans filed a schedule of his assets, liabilities, and claims in U.S. Bankruptcy Court last week. Copy of schedule. It's 76 pages long but there are many important facts in the schedule. Mr. Evans claims he owns $82,790,000 in properties and there are $60,260,266 in secured claims.

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.

Click Here to Read More..

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.

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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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