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Bank tries to prove Valley committed fraud

The long-awaited trial of the Evans brothers began last week in U.S. Bankruptcy Court for the Southern District of Mississippi and was still continuing at press time.

Judge Neil Olack will rule in the non-jury trial.

Heritage Bank and the Bank of Forest are suing Mississippi Valley Title Insurance Company (MVT) on contractual claims and a bad faith claim, as well as accusations of negligent misrepresentation and fraud.

MVT says the company, which was defrauded by one of its approved attorneys Charles Evans Jr., is the biggest victim in the case.

MVT attorney Bill Brabec said about $16 million has already been paid in claims to creditors. At the time the scandal broke, the company had around $30 million in its claims reserves. All title policies were issued jointly with MVT’s parent company, Old Republic National Title Insurance Company.

Brabec said title insurance policies are contractual agreements that cover defects in title and don’t act as insurance for loans.

“What’s happening here is both Bank of Forest and Heritage Bank are trying to obtain loan insurance to cover their loan deficiencies,” he said in his opening argument.

Approved attorney vs. agent

Additionally, Brabec noted the distinction between approved attorneys and title agents. MVT will accept the work of approved attorneys, who are pre-approved to submit applications to MVT for policies. However, they are not agents licensed with the state. Agents are authorized to act on behalf of the company in issuing title commitments and policies.

MVT says that because Evans wasn’t an agent, the company cannot be held responsible for his actions.

The banks cross-examined two MVT employees, who explained they relied on Evans’ work and didn’t check the certifications he presented after doing title research.

Parrish Fortenberry, vice president for senior claims and title counsel, said MVT does not supervise approved attorneys. MVT runs a background check on them before putting them on a list of those approved.

Clear and convincing evidence

Brabec made an unspecified motion on which Judge Olack declined to render judgment until the end of the trial. Brabec said the Bank of Forest had failed to present clear and convincing evidence regarding the claims of fraud and negligent misrepresentation.

Evidence shows that “the title companies, when they issued a commitment, did not intend for it to be a representation of fact,” and conditions in the document specified it was not a representation of title, he said.

Also, evidence was not presented that MVT intended to defraud anybody, Brabec said. There was no proof of agency in regard to Charles Evans Jr., who was acting on his own behalf, contrary to the interest of MVT and its parent company.

Bank of Forest attorney William Liston III said there was proof of agency. MVT authorized Evans to do certain things “which is where the fraud came from,” he said.

The title company’s commitment, which is a document issued prior to a title policy, represented the status of title to the bank before it made its loan. The title company clearly intended for people to rely on its documents, Liston said.

Under Mississippi law, a party does not have to prove intention of fraud but ignorance of the truth, and MVT employees testified they did not know if the information used from Evans’ research was true or false, Liston said.

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