The Tribune

• Told three days’ prior of theft in Florida

• Let funeral chief go ahead with purchase

• Yet judge found fault lay with borrower

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bank of The Bahamas secured a $34,000 loan on a vehicle despite being informed three days before that it had been stolen in Florida, a Supreme Court judgment has revealed.

Justice Indra Charles, in an August 20, 2021, verdict, revealed that the BISX-listed institution also failed to disclose that knowledge to its funeral home chief borrower and allowed her to go through with the purchase of the suspect vehicle.

Denalee Penn-Mackey, Evergreen Mortuary’s principal, subsequently bought a second vehicle from the same person who had sold her the stolen automobile. Another loan from Bank of The Bahamas was obtained for the second vehicle’s purchase, but the funeral home chief only had use of them for 18 months before both were seized by Bahamas Customs for non-payment of due import tariffs.

And, while initiated legal action against Bank of The Bahamas, the Supreme Court found in the latter’s favour on the basis that she should have conducted her own investigation to determine whether there was good and marketable title to both vehicles having pledged that they were “free and clear of all liens and encumbrances” as part of the loan terms.

As a result, the Evergreen Mortuary principal has been ordered to pay Bank of The Bahamas some $64,370 in principal on the outstanding auto loans. And, with Justice Charles imposing interest at 14 percent per annum (just over $9,000) for a nine-year plus period between March 2012 and August 2021, Mrs Penn-Mackey will have to pay more in interest - over $81,000 - than principal that is due (see other article on Page 1B).

Justice Charles, in her ruling, recorded how Mrs Penn-Mackey had sought damages from Bank of The Bahamas for negligence on the basis that it financed the two auto purchases despite Carfax reports revealing one vehicle was stolen while the other had an existing lien already secured on it.

Bank of The Bahamas, though, denied these assertions and claimed for the sums due under the loans. It added that it had not advised Mrs Penn-Mackey on the vehicles’ titles, and that it had no duty to investigate these itself.

The funeral home director moved to acquire the first vehicle, a 2007 Cadillac Escalade, in 2017 after witnessing it being driven by then-owner Kevin Saunders. He offered to sell it to Mrs Penn-Mackey for $40,000, and she approached Bank of The Bahamas - where she was an existing customer with a $15,000 overdraft facility - for a loan to finance the vehicle purchase.

The bill of sale and an insurance quote were provided, yet Justice Charles noted: “On April 12, 2010, the bank obtained a Carfax report on [the vehicle] which revealed that the vehicle had been reported stolen in Florida on July 9, 2009.”

Yet, despite being armed with this knowledge, Bank of The Bahamas both went ahead with the loan and never informed Mrs Penn-Mackey. “By report from an officer of the bank dated April 15, 2010, the loan was approved,” Justice Charles noted.

The BISX-listed institution advanced a $34,000 loan to finance the purchase, with Mrs Penn-Mackey paying a $6,000 deposit. She also gave Bank of The Bahamas a mortgage over the vehicle, pledging it was free from all liens and encumbrances.

Then, several months later, Mrs Penn-Mackey approached the same Mr Saunders in June 2010 to purchase a second Cadillac Escalade 2008 for $50,000. The deal was financed with another $40,000 Bank of The Bahamas loan, with the funeral home director paying $10,000 herself and signing another mortgage over the vehicle to secure the advance.

However, the subsequent Carfax report on the second Escalade revealed that it already had an existing lien secured on it. “On September 16, 2011, [both vehicles] were seized by the Customs Department for non-payment of Customs duties,” Justice Charles recorded.

“Displeased with the seizure of her vehicles, Mrs Penn-Mackey sought legal advice from V. Alfred Gray (ex-Cabinet minister and MP). He advised her to request from the bank her file. She requested her file from the Bank and reviewed them with Mr Gray. On the file were the Carfax reports with respect to each vehicle showing that Vehicle one had been reported stolen in Florida and that Vehicle two had a lien over it....

“Mrs Penn-Mackey alleged that the bank assured her that Mr Saunders had good title to the vehicles; that her loan officer, Anthony Williams, told her that they would procure the Carfax to determine whether Mr Saunders had good title; and that the loan would be refused if the report was unfavourable.

“The bank disputed her account and argued that it did not advise Mrs Penn-Mackey on title; that she was not told about the Carfax reports, and knew nothing of it until after the vehicles were seized.” Mrs Penn-Mackey’s attorney, Yvette McCartney-Meredith, argued that Bank of The Bahamas owed “a duty of care” to disclose the Carfax report findings as this would have prevented her purchasing the vehicles.

This, though, was denied by Bank of The Bahamas and its attorney,  Michela Barnett-Ellis of Graham, Thompson & Company, who argued that it had no duty to investigate and assure on the vehicles’ title - especially when the loan agreement required Mrs Penn-Mackey to vouch for this herself.

“The bank maintained, correctly, in my view, that the reports were exclusively for internal purposes similar to an opinion on title in a mortgage over land,” Justice Charles wrote. “I agree with Ms Barnett-Ellis that, as purchaser of the vehicles in her agreement with Mr Saunders, and as mortgagor of the chattel mortgages with the bank, it was incumbent on Mrs Penn-Mackey to satisfy herself that she would be receiving good title from Mr Saunders and that, consequently, the title she was purporting to transfer to the bank in exchange for the loan was good and marketable.

“By paragraph four of both chattel mortgages, Mrs Penn-Mackey warranted that the vehicles were free from liens and encumbrances. It follows that she ought to have ensured that she was making good on that warranty by embarking on a reasonably thorough investigation.”

Justice Charles did admonish Bank of The Bahamas for extending the loans, finding: “Indeed, it would have been prudent for the bank to have refused both loan applications having regard to the irregularities revealed in the Carfax reports. However, this does not negate the mortgagor’s obligation to give good title.”

Returning to the latter theme, she ruled: “Mrs Penn-Mackey did not embark on any title investigation, but simply accepted the word of the seller, Mr Saunders, that he had good title. This is an indication that she was prepared to accept the risk that he may not have had good title.

“The absence of the title documents for the vehicles ought to have put Mrs Penn- Mackey on inquiry. Had she insisted on back title documents, she would have either uncovered the prior ownership or not followed through with the purchase..... Accordingly, the fact that Mrs Penn-Mackey embarked on absolutely no title investigation of her own meant that she was willing to accept every risk.

“Even if, as Mrs Penn-Mackey contended should have happened, the bank had told her about the Carfax reports and that the loans would be refused if the reports were not satisfactory, she had not adequately guarded herself against the risks,” Justice Charles continued.

“Obtaining the Carfax reports was merely the bank’s method of determining whether it would be getting good security for its loan. Notwithstanding that the bank may have acted without due care in accepting the vehicles as security, the interests of the Bank and Mrs Penn-Mackey with respect to the title of the vehicles were different.”

Justice Charles also noted that Mrs Penn-Mackey had failed to make a negligence claim against Mr Saunders. “Mrs Penn-Mackey warranted that the vehicles were clear from liens and encumbrances and, in fact, they were not,” she added.

“I therefore find that Mrs Penn-Mackey ought to have taken reasonable steps to satisfy herself that the vehicles were free from encumbrances before obtaining the loans to purchase them. Although it would have been prudent for the bank to take steps to ensure that it had good security for the loans, it owed no duty to Mrs Penn-Mackey to do so.”

And Justice Charles ruled that the vehicles’ seizure by Customs did not absolve the funeral home principal from having to repay the outstanding loan to Bank of The Bahamas.