In the first bankruptcy hearing for Jackson area businessman Jon Christopher “Chris” Evans on Nov. 23, a federal judge ruled that creditors will sort out the details of Evans’ alleged commercial real estate fraud in federal bankruptcy court and not in state court, as requested by a Madison title insurance company.
Chris Evans, his brother Charles Evans Jr. and more than 30 companies owned or controlled by them are being sued by Mississippi Valley Title Insurance Company (MVT) for allegedly committing commercial real estate mortgage fraud on banks and inducing the company to issue fraudulent title insurance policies. Charles Evans Jr. was an approved attorney for MVT.
MVT alleges that the Evans brothers and their entities used land as collateral for loans, when the title to the collateral was not owned by companies obtaining loans, the lawsuit states.
Chris Evans used various companies to borrow funds from multiple lenders for single pieces of property. Evans owned prime pieces of real estate, such as a tract near Highland Colony Parkway in Madison.
According to public record, more than 30 banks have filed a total of more than $41 million in claims against MVT.
A number of banks have also filed lawsuits in Madison County Chancery Court against the Evans brothers and against other banks for first lien position on properties.
In U.S. Bankruptcy Court in Jackson, Judge Neil Olack said that issues involving title due to bank loans piled on single properties will remain under the automatic stay, or jurisdiction, of federal court.
This decision addressed a motion MVT filed Nov. 6 asking the federal court for permission to pursue its fraud lawsuit against Evans in chancery court, where the company filed its original September lawsuit. Chris Evans’ declaration of bankruptcy in October stayed all state court proceedings.
First State Bank, Bank of Forest, Holmes County Bank and Trust Company and State Bank & Trust objected to MVT’s November motion.
In bankruptcy court, creditors have a more structured means to recover debts. In state court, since MVT was the first to sue the Evans brothers, banks would have to wait on a decision on that lawsuit before their suits could proceed.
Olack recommended that lenders who have claims to the same property allow the trustee for Evans’ estate to sell the land. Lenders can argue over dividing the proceeds according to their interests after the sale, he said.
Allowing banks to foreclose on individual parcels of land could reduce the value of land for all involved. One parcel, for example, has a gas line running through it and has no road access.
Olack did release two pieces of collateral from his jurisdiction — a Northeast Jackson house owned by Evans and a certificate of deposit.
According to testimony, loans made by Community Bank and State Bank & Trust to Evans for repairs on a house at 1542 Brecon Drive totaled approximately $320,000. The home is currently appraised at $190,000.
Olack gave Bank First Financial Services relief to liquefy a certificate of deposit of more than $101,000 used by Evans for a collateral on a loan in default that currently totals more than $103,000.
The trustee for Evans’ bankruptcy case, Derek Henderson, requested loan histories and updated title opinions as well as loan distribution information from all banks involved. Henderson said he wants to know where the money went and understands that much of various loan funds went into a trust account of Charles Evans Jr.
Henderson also requested updated appraisals from all banks. Due to the expense of appraisals, Olack said he would allow expert testimony in the place of new appraisals.
All MVT title insurance policies are jointly issued with its parent company Old Republic National Title Insurance Co. MVT has $35 million in claims reserves, which are funds reserved for paying claims on policies, and Old Republic National Insurance Company has $370 million in claims reserves, according to June numbers.
According to his bankruptcy filing, Evans has less than $50,000 in assets and between $1 million and $10 million in debt. He listed 60 creditors, a number of which are Texas banks.
Through various companies, Chris Evans owned properties in Madison, DeSoto and Harrison counties as well as in the State of Texas. Alleged fraudulent activities began as early as 2003.
The FBI is investigating Evans. The state Attorney General’s Office has neither denied nor confirmed an investigation.
Notes: Another angle not yet pursued in this case is wording found in MVT closing protection letters stating that MVT cannot be held liable for matters described in the closing protection letter itself, including fraud, by lenders more than one year after a loan’s closing date.
When making commercial mortgage loans, lenders often request closing protection letters from title insurance companies to protect them against any fraud from title company agents or approved attorneys.
At least one MVT closing protection letter for a loan made to an Evans entity contained this language limiting protection for matters described in the letter, including fraud, to one year. It is unknown how many banks requested these letters from MVT and if MVT could use these letters to deny claims.