Sundquist v. Bank of America N.A.

Breach of Fiduciary Duty

Eastern District

U.S. Bankruptcy Judge Christopher M. Klein

Plaintiff’s Lawyers: Dennise S. Henderson, Law Office of Dennise S. Henderson

Defense Lawyers: Jonathan R. Doolittle, Reed Smith LLP

Dennise S. Henderson said the situation Bank of America put her clients through was like something out of a Franz Kafka story. And as the judge’s $46 million ruling in her client’s favor includes the phrase “Kafkaesque nightmare,” the imagery apparently stuck.

Henderson’s clients, Erik and Renee Sundquist, said they were “stampeded” into taking out a loan for a new home in 2009, under threat that it would otherwise be snatched up by another buyer. At the advice of their loan broker and bank employees, they defaulted on the loan to speed along the refinancing process.

Once the Sundquists had defaulted, Henderson said the bank seemed to block the process from moving along. Struggling financially from enormous mortgage payments and an economic downturn, the Sundquists entered Chapter 13 bankruptcy to stay the imminent foreclosure of their home, with a plan to cure the default.

Despite the Sundquists’ notice, the bank moved forward with the foreclosure process, purchasing it out from under them for its own account in a 2010 trustee sale. Days before their planned eviction, Bank of America apparently noticed the mistake.

But they failed to notify the Sundquists, who left the home as planned. Sundquist v. Bank of America N.A., 10-35624-B-13J (E.D. Cal., filed Sept. 23 2014).

“They didn’t tell them. They didn’t tell me. They didn’t tell the bankruptcy court. So the house just sits there empty,” Henderson said.

The Sundquists returned to find the home in disrepair, with a $20,000 Housing Authority assessment for dead landscaping for which the bank said they’d have to foot the bill. The bank also wanted them to pay mortgage payments for the six months it thought they were evicted from the home.

In a March ruling, U.S. Bankruptcy Judge Christopher M. Klein slammed Bank of America for its repeated and apparently willful violations of its own procedures. He said the foreclosure would have immediately been seen as invalid, but “nobody at Bank of America cared to look.”Henderson compared the situation to the unfinished Kafka novel, “The Castle.”

“It’s really about the bureaucracy of the castle,” Henderson said. “And when you’re dealing with that sort of bureaucracy, it feels like it’s never going to end.”

The judge awarded the Sundquists $1.07 million in actual damages and another $45 million in punitive damages, of which $40 million would be paid to consumer protection and legal public service entities.

Bank of America appealed the ruling, and the two parties settled for an undisclosed amount in February.

— Steven Crighton