Find out why the court showed no sympathy – and cut the bank's recovery by over $100,000
A Louisiana bank kept lending hundreds of thousands of dollars even after learning its mortgage was in second position. That decision just cost them dearly.
On January 21, 2026, Louisiana's Second Circuit Court of Appeal handed Gibsland Bank & Trust a harsh lesson in what happens when lenders ignore title problems and hope they go away. The verdict should make every mortgage professional pause before their next closing.
Here's what went wrong. In late 2010, Timothy Thomas walked into Gibsland Bank & Trust looking for money to fund his construction business and tree service. The bank agreed to a $150,000 secured line of credit, using his Shreveport property as collateral. They hired John Settle from ArkLaTex Title to check the property's title history.
Settle's initial review on January 5, 2011, showed one existing lien from Bankers' Insurance Company that was supposed to disappear at closing. The loan closed on January 13, and the bank bought title insurance from Security Title Guarantee Corporation for $154,009. Everything looked fine.
Except it wasn't. The bank's mortgage didn't get recorded until January 19, six days after closing. In that gap, on January 11, Thomas had quietly taken out another mortgage with Bankers' Insurance Company for $100,000. That mortgage got recorded immediately.
Nobody caught it. Settle later admitted his office dropped the ball by never updating the title search between the initial review and the actual recording. By the time the bank's mortgage hit the records, it was already in second place.
The county clerk's office sent out a mortgage certificate in May 2011 showing the bank had a problem. But that certificate sat somewhere until May 8, 2012, when someone finally scanned it into the bank's system. Nearly a year lost.
You'd think the bank would hit the brakes at that point. Instead, they doubled down. On the very day they discovered the title mess, a loan officer emailed Settle about the confusion but never contacted the title insurance company directly. Over the next year, while Settle tried unsuccessfully to negotiate with Thomas, the bank kept opening the vault.
In June 2013, more than a year after learning about the title defect, the bank handed Thomas another $197,500. By that point, the bank had advanced over $680,000 total on the loan, with nearly $200,000 of that coming after they discovered the mortgage wasn't in first position.
Thomas kept making payments for a while, so maybe the bank thought everything would work out. What they didn't know was that Thomas had stopped paying property taxes starting in 2012. Since the bank wasn't the primary lienholder, nobody told them about the mounting tax problems.
Thomas defaulted in early 2017. Only then, nearly five years after discovering the title issue, did the bank's lawyer send formal notice to Security Title Guarantee Corporation. The letter demanded $475,325 to cover the full loan balance.
Security started asking questions. Why did the bank wait five years to report this? Why keep lending if you knew there was a problem? The bank's lawyer fired back that he couldn't understand why their knowledge mattered.
Security eventually paid $11,247.58 in March 2018 to clear the superior lien, putting the bank back in first position. But by then, the bank had racked up property tax penalties, bankruptcy costs, and legal fees. They sued for everything.
The trial court agreed the title company acted badly by dragging its feet and awarded the bank over $192,000, including $140,174.78 in attorney fees.
The appeals court saw things differently. Yes, Security Title messed up and failed to settle the claim quickly enough. But the bank's own behavior was inexcusable for a sophisticated lender.
The court pointed out that reasonable banks don't wait a year to process documents showing title problems. Reasonable banks don't think emailing the title examiner counts as formal notice to the insurance company, especially when the policy specifies exactly where to send claims. And reasonable banks definitely don't keep throwing money at borrowers when they know the collateral is compromised.
The court threw out $33,256.71 in property tax penalties and $13,113.12 in bankruptcy-related legal fees, ruling these losses came from the bank's failure to protect itself, not from the insurer's delays. The court also slashed the attorney fee award from $140,174.78 to $40,000, noting that fees twelve times larger than the actual settlement amount seemed wildly excessive.
The opinion made a pointed observation. Gibsland Bank & Trust isn't some unsophisticated consumer. It's a regulated financial institution with its own lawyer. The court expected better.
The case isn't over yet. Under Louisiana law, either side can still ask for a rehearing. But the message to lenders is already clear. When you discover a title problem, stop lending immediately, notify everyone who needs to know, and follow your insurance policy to the letter. Hoping things will sort themselves out is not a strategy. It's a recipe for losing in court.
