gmac residential v mortgage guarantee collateral acceptance doc 011 order 07 jan 2003

CASE 0:02-cv-02915-FLN-FLN Document 11 Filed 01/07/03 of 13

UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA

GMAC/Residential Funding Corporation, a Delaware corporation,

Plaintiff,

vs.

Mortgage Guarantee Collateral Acceptance, a California corporation,

Defendant.

File No. 02-CV -2915 ~1FLN)

STIPULATION AND ORDER TO AMEND COMPLAINT AND RECONCILE ANSWER WITH FIRST AMENDED COMPLAINT

The parties by and between their respective counsel hereby stipulate as follows:

1. Plaintiff shall be permitted to file the First Amended Complaint, copy attached as

Exhibit 1, to replace Plaintiff's original Complaint.

2. Defendant's Answer shall be deemed to contain denials of all additional allegations

contained in the First Amended Complaint. That is, for all allegation contained in the First

Amended Complaint that do not appear in the original Complaint, Defendant's Answer st.all be

construed to deny the same and Defendant need not file additional pleadings to close the pleadings.

MPLS 231645·1

': 'Ji


Dated:

Dated: /2 / ~ 7/cJ2--

IT IS SO ORDERED.

Dated:

MPLS 231645-1

FELHADER, LARSON, FENLON & VOGT, P.A.

BY:~· J . ude, #94171 Richard A. Beens, #6105 Eric J. Riensche, #309126

225 South Sixth Street, Suite 4200 Minneapolis, MN 55402-4302 (612) 339-6321

A TTORNEYS FOR PLAINTIFF

BALE, ANDERSON, POLSTEIN, RANDALL & HILL, LTD.

By: ~l'i~A#/td' P er G. Hill, #451OX

527 Marquette Avenue, Suite 1800 Minneapolis, MN 55402-1319 (612) 332-8063

FINER, KIM & STEARNS

Robert B. Parsons City National Bank Building 3424 Carson Street, Suite 500 Torrance, CA 90503 (310) 214-1477

ATTORNEYS FOR DEFENDANT

By: NKLIN L. NOEL

ited States Magistrate Judge

2


UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA

GMAC/Residential Funding Corporation, a Delaware corporation,

Plaintiff,

vs.

Mortgage Guarantee Collateral Acceptance, a California corporation,

Defendant.

File No. 02-CV -2915 (JUR/FLN)

FIRST AMENDED COMPLAINT

GMAC/Residential Funding Corporation ("RFC"), for its First Amended Corr:plaint

against Defendant Mortgage Guarantee Collateral Acceptance ("Defendant" or "Mo::tgage

Guarantee"), states and alleges as follows:

PARTIES

1. Plaintiff RFC is a corporation incorporated under the laws of the State of Delaware

and is headquartered in Bloomington, Minnesota.

2. Defendant Mortgage Guarantee is a corporation incorporated under the laws of the

State uf Califurnia with its principal place of business located at 14111 Freeway Drive, Suite~ 205,

Santa Fe Springs, California 90670. Defendant is a financial institution that, among other

activities, provides loans secured by mortgages.

MPLS 230865-1 1

EXHIBIT 1


JURISDICTION AND VENUE

3. This Court has subject matter jurisdiction over this action pursuant to 28 U. S. C.

§ 1332 because it is an action between citizens of different states and the matter in controversy

exceeds the sum or value of $75,000.00 exclusive of interest and costs.

4. This Court has personal jurisdiction over this action pursuant to Minn. Stat.

§ 543.19; because Defendant expressly agreed to submit to the jurisdiction of "any state or federal

court located in Hennepin County, Minnesota," as stated in Exhibit A of this Complaim.: and

because Defendant has contacts within the State of Minnesota such that the United States

Constitution permits personal jurisdiction.

5. Venue in this Court is appropriate pursuant to 28 U.S.C. § 1391(a) because

Defendant is a resident of the State of Minnesota for purposes of venue under 28 l.S.C.

§ 1391(c). Further, venue in this Court is appropriate because Defendant expressly submitted

itself to the jurisdiction of Minnesota courts pursuant to its contractual relationship with RFC, as

stated in Exhibit A.

FACTUAL BACKGROUND

6. One of RFC's principal lines of business is that of residential mortgag:· loan

"conduit" in the secondary mortgage market. RFC purchases residential mortgages from primary

lenders under terms and conditions described in detail in its various client contracts.

The Client Contract

7. On or about January 30, 1998, Defendant entered into a Client Contract (the

Contract) with RFC. A copy of said Contract, marked as Exhibit A, is attached and hereby

incorporated by reference. Pursuant to the Cuntral,;l, RFC agn::t::d to purchase loans from

MPLS 230865-1 2


Defend:mt under certain terms and conditions and Defendant, a "CFA Seller," agreed to sell loans

to RFC under certain terms and conditions.

8. Under the Contract, Defendant agreed that RFC's AlterNet Seller Guide

(Guide)-now called the Consumer Finance Acquisitions Guide-would be "incorporated into [the]

Contract by reference and for all purposes made a part hereof. "

9. Pursuant to the Contract and Guide, Defendant made specific representations and

warranties that each of the loans delivered and sold by Defendant to RFC met the terms and

criteria set forth in the Guide; all information relating to each loan delivered and sold to RFC was

true, complete and accurate with no omission of material facts; and that Defendant would take

necessary action to ensure that each loan sold to RFC was in compliance with all representations,

warranties and requirements delineated in the Guide.

10. Pursuant to the Contract and Guide, Defendant made specific representations and

warranties that the loans it sold to RFC were of "investment quality," had been prudently

originated, and had been properly underwritten within the meaning of the Guide.

11. Pursuant to the Contract and Guide, Defendant represented and warrantied tblat all

loan documents submitted by Defendant to RFC were complete and accurate and would remain

complete and accurate throughout the term of the loan.

12. Pursuant to the Contract and Guide, Defendant represented and warrantied lthat a

policy of title insurance effective as of the day the security instrument had been recorded aId was

in full force and effect.

13. Under the Contract, in Section 260 of the Guide, anyone or more or the following

t.::vt.::nls l,:Ullslitutes an Event of Default:

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(1) The CF A Seller has not complied with one (1) or more of the requirements (including any requirement outlined in the Eligibility Standards Part of this CFA Guide), terms or conditions outlined in this CFA Guide.

(2) The CFA Seller has breached any agreement outlined or incorporated by reference in the CF A Seller Contract or any other agreement between the CFA Seller and GMAC-RFC.

(3) The CFA Seller has made one (1) or more false or misleading representations or warranties to GMAC-RFC or has tailed to provide GMAC-RFC with information that is true, complete and accurate.

(4) The Borrower(s) or any other person or entity involved in the Loan transaction or in its underwriting or documentation (including any appraiser, broker, third-party originator, credit reporting agency, or other provider of underwriting information) has made any false representation and/or has failed to provide information that is true, complete and accurate in connection with such transaction, whether or not the CF A Seller was a party to or had knowledge of such misrepresentation or incorrect information.

(5) Occurrence of an Event of Servicer Default with respect to any Loans serviced by the CF A Seller.

14. The Contract and Guide provide that if RFC determines that an Event of Default

has occurred with respect to a specific loan, Defendant must repurchase the loan.

15. The Contract and Guide provide that Defendant must indemnify RFC from all

losses, damages, penalties, fines, forfeitures, court costs and reasonable attorneys' fees,

judgments, and any other costs, fees and expenses resulting from any Event of Default.

16. The Contract and Guide provide that Defendant must indemnify RFC and hold it

harmless against all court costs, attorneys' fees and any other costs, fees and expenses incurred

by RFC in enforcing the Contract and Guide.

MPLS 230865-1 4


17. Under the terms of the Contract and Guide, Defendant expressly recognized F~FC's

reliance upon these provisions as the basis for RFC' s decision to purchase loans sold by Defendant.

18. Under the Contract, Defendant and RFC agreed that the Contract and Guide would

be governed by, construed and enforced in accordance with applicable federal laws and the laws

of the State of Minnesota.

Defendant Sells Non-Compliant Loans to RFC

19. After having purchased certain loans from Defendant, RFC discovered that said

loans did not conform with the requirements of the Contract and Guide. The following

loans-represented by a loan name and number-did not comply with the terms of the Contract and

Guide: Danley #3665014; Moore #3520780; Havens #3351481; Jackson #4489751; Riffle

#2861249; and Keene #6935954 (collectively "the Subject Loans"). The facts set forth below

constitute a non-exhaustive list of the facts giving rise to Defendant's breach of contract.

20. Loan documents concerning the Danley Loan contained inaccurate photographs of

the subject property and misrepresentations of fact with regard to valuation of said property.

21. Loan documents concerning the Moore Loan contained misrepresentations by the

appraiser as to the subject property and misrepresentations as to the neighborhood.

22. Loan documents concerning the Havens Loan contained misrepresentations by the

appraiser as to the condition of the subject property.

23. Loan documents concerning the Jackson loan contained misrepresentations as to the

purchaser's employment status and social security number. The borrower procured the loan as

part of a mortgage fraud scheme.

MPLS 230865-1 5


24. Loan documents concerning the Riffle Loan incorrectly indicated that a Deed of

Trust had been recorded, when in reality such Deed of Trust had not been recorded. In addition,

no title insurance policy had been obtained with respect to the Riffle Loan.

25. Loan documents concerning the Keene Loan indicated that the Loan was sti1 due

and owing. In reality, the Keene Loan had been paid in full. RFC has not received payments for

the Keene Loan.

COUNT 1: BREACH OF CONTRACT

26. RFC realleges paragraphs 1-25 as if fully set forth herein.

27. Defendant breached its contract with RFC when it sold RFC the Subject Loans.

28. The facts surrounding Subject Loans constituted Events of Default within the

meaning of the Contract and Guide.

29. RFC has sent written notice to Defendant demanding that Defendant repurchase the

Subject Loans pursuant to the terms of the Contract and Guide. To date, Defendant has failed to

repurchase the Subject Loans.

30. Defendant's refusal to repurchase the Subject Loans constitutes a breach Df the

Contract and Guide.

31. As a consequence of Defendant's breaches, RFC has suffered losses currently

estimated at $576,125.32 and, in addition, has been forced to incur costs, disbursemell':s and

attorneys' fees in sums yet undetermined.

COUNT 2: INDEMNITY

32. RFC realleges paragraphs 1-31 as if fully set forth herein.

MPLS 230865·1 6


33. Under the indemnity provision of the Contract and Guide, Defendant is liable to

RFC for RFC's attorneys' fees, costs and disbursements incurred in this action.

MPLS 230865·1 7


WHEREFORE. Plaintiff RFC respectfully prays for judgment against Defendant as

follows:

A. Awarding damages in favor of RFC against Defendant in an amount to be

established at trial, but in any event no less than $576,125.32, for RFC's losses arising from

Defendant's breach of contract and/or its duty to indemnify under the Contract;

B. Awarding attorneys' fees, costs and disbursements payable to RFC by Defe:ldant

as provided under the Contract;

c.

D.

Dated:

MPLS 230865-1

A warding RFC interest from and through the date of the judgment; and

Awarding such other relief as the Court deems just and equitable.

FELHABER, LARSON, FENLON & VOGT, P.A.

By: James W. Rude, #94171 Richard A. Beens, #6105 Eric J. Riensche, #309126

225 South Sixth Street, Suite 4200 Minneapolis, MN 55402-4302 (612) 339-6321

ATTORNEYS FOR PLAINTIFF

8


--------------------------------------------------------------------------------Client Contract

This Client Contract (as may be amended, supplemented or otherwise modified from time to time, this "Contract,,) is made this 30th day of Japuary 19.n... by and betwcenRcsidentialFunding Corporation, its successors and assigns ("Residential Funding,,), mlliMQrtgage Guarantee Collateral (the "Customer". and, together with Residential Funding, the "parties" and each, individually, a "party"). Acceptanc e

WHEREAS, the Customer desires to sell Loans to, and/or service Loans for, Residential Funding, and Residential Puo.ding desires to purchase Loans from, apdlor have the Customer service Loans for, Residential Funding. pursuant to the terms of this Contract and the Guides (as that term is defined below).

NOW, THEREFORE, in consideration of the premises, and the terms, conditions and agreements set forth below, the parties agree as follows: I 1. lDc:orporation of Guides by Reference.

Residential Funding has approved the Customer to sell Loans to, and/or service Loans for, Residential Funding under the Guide(s) checked below. Each Guide that is checked below (as each may be amended, supplemented or otherwise modified from time to time, together, the ''Guides"), is hereby incorporated into this Contract by reference and for all pmposes made: a part hereof.

The Customer has been approved by Residential Funding to sell Loans to andlor service Loans for Residential Funding, as indicated below, under the following Guide(s):

STATJJS

[XSeller Only

a Servicer Only

a Seller and Servk:er

APPLICABI.F. GITIDES

Q Client Guide

~ Alter Net Seller Guide

I;J Servicer GUide

If a box next to a Guide shown above has Dot been checked, the Customer has Dot been approved by Residential Fund.ing to seU Loans to, or, as appropriate, service Loans for, Residential Funding, under that Guide(s) at this time; but, Residential Funding may in the exercise orits sole discretion approve the Customer to seU Loans to, or, as appropriate, service Loans for, Residential Funding under that Guide(s) at some time in the future and the Customer will be authorized to do so upon the execution and delivery by both Residential Funding and the Customer of an addendum to this Contract in a fonn provided to the Customer by RCliidentia1 Funding containing that approval and iocorporatin& that Guide(s) into this Contract by refermce.

The Customer acknowledges that it bas received and read the Guides. All provisions of111e Guides are incorporated lby reference into and made a part of this Contract, and shall be binding upon the parties; provided, however. that the Customer sball be entitled to sell Loans to andlor service Loans for Residential Funding only if and for so long as it shall have been authorized to do so by Residential Funding in writing. Specific reference in this Contract to particular provisions of the (il.lides and not to other provisions does not mean that those provisions of the Guides not specifically cited in this Contract are not applicable. All tmns used herein shall have the same meanings as such tams have in the Guides, unless the context cleal~y requires otherwise.

1. Amendments.

This Contract may not be amended or modified oraUy, and no provision of this Contract may be waived or amended except in writing signed by the party against whom enforcement is sought Such a written waiver or amendment must expressly reference this Contract. However, by their tenns, the Guides may be amended, modified or supplemented by Residential F1Dlding from time to time. Any such amendment(s) to the Guides shall be binding upon the parties hereto.

3. Representations and Warranties.

a. Reciprocal Representations and Warranties.

The Customer and Residential Funding each represents and warrants to the other that as of the date of this Contract:

(1) Each party is duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization, is qualified, ifnecossary, to do bUlilinees and in good lltanding in oo.ohjuriadiotion in whioh it ia

required to be so qualified, and has the requisite power and authority to enter into this Contract and all OthCl

ClicnlC~ RCllcIcaIiII FUIICfiDI Corpontio:D Form 1220 (07197)

P.IOf3

EXHIBIT A


agreements which are contemplated by this Contract and to carry out its obligations hereunder and under the

Guides and under such other agreements.

(2) This Contract has been duly authorized, executed and delivered by each party and constitutes a valid and legaLily binding agreement of each party enforceable in accordance with its terms.

(3) Thero is no action proceeding or investigation pending or threlltl!med. and no basis therefor is known to either party, that could affect the validity or prospective validity of this Contract.

(4) Insofar as its capacity to carry out any obligation under this Contract is concerned, neither party is in viOlati')D of any charter, articles of incorporation, bylaws, mortgage, indenture, indebtedness, agreement, instrument,

judgment, decree, order, statute, rule or regulation and none of the foregoing adversely affects its capacity to

fulfill any of its obligations under this Contract. Its execution o~ and performance pursuant to, this Contract will not result in a violation of any of the foregoing.

b. Customer'3 Representations, Warranties ONJ CovenQl2ts.

In addition to the representations, W3lTmti~ and covenants made by the Customer pursuant to subparagraph (a) of this paragraph 3, the Customer makes the representations, warranties and covenants set forth in the Guides and agrees to deliver to Residential Funding the certified Resolution of Board of Directors which authorizes the execution and delivery of this Contract.

4. Remedies ofResidentiaJ Funding.

If an Event of Client Default or Event of Servicer Default shall occur, Residential Funding may, at its option, exerc~~= one or more of the remedies set forth in the Guides.

S. Customer's Status as Independent Contractor.

At no time shall the Customer represent that it is acting as an agent of Residential Funding. 1be Customer shall, at uU times, act as an independent contractor.

6. Prior A:reements Superseded.

This Contract restates, amends and supersedes any and all prior Client Contracts or Servicer Contracts between the parties except that any subservicing agreement executed by the Customer in CODllection with any loan-security ~chaoge traJl.sa(~ion shall not be affected.

7. Assignment.

1bis Contract may not be assigned or traosfaTed, in whole or in part, by the Customer without the prior written CODIlmt of Residential Funding. Residential Funding may sell, assign, convey. hypotbccatc, pledge or in any other way transfer, in whole or in part. without restriction, its rights under this Contract and the Guides with respect to any Commitment or Loan.

8. Notices.

All notices, requests, demands or other communications that are to be given under this Contract shall be in writing, addressed to the appropriate parties and sent by telefacsimile. by overnight courier or by first class United States mail, PJstage prepaid, to the addresses and telefacsimlle numberS Specifie<1 below. However. ~ rusm.c:;, ~ andlortelc£a.gllimile number may be substituted by the Customer pursuant to the requirements of this paragraph 8, or by Residential Funding pursuant to an amendment to the Guides.

If to Residential Funding. notices must be sent to the appropriate address or telefdcsimile number specified in the OULidcs.

If to the Customer, notices must be sent to:

Mortgage Guarantee Collateral Acceptance

14241 East Firestone Blvd, Fourth Floor

La Mirada, Ca 90638

Attention: Maher. ~. Soliman. President

TelefacsimiI. Number: ( 5 6 2 ) 4 Q 7 - 1 49 5

9. Jurisdiction and Venue.

aic~ ResIdentia1 Fundinc Corporation Form H2O (07ttm

1'ap20(3

" .'

'II'


Each of the parties irrevocably submits to the jurisdiction of any state or federal court located in Hennepin County, Minnesota, over any action, suit or proceeding to enforce or defend any right under this Contract or othCIWise arising :from any

.'" loan sale or servicing relationship existing in ~ection with this Contract, and each of the parties irrevocably agrees that all claims in respect of any such action or proceeding may be heard or detcnnined in such. state or federal court. Each of the parties irrevocably waives the defense of an inconvenient forum to the maintenance of any such action or proceeding and any other substantive or procedural rights or remedies it may have with respect to the maintenance of any such action or prote eding in any such forum. &ell ofthc: parties agrees tbJst a final judgment in my such lLCtion or proccc:ding shall be wnclusivc Iud may be enforced in any other jurisdiction by suit on the judgment or in any other manner provided by law. Each of the parties further agrees not to institute any legal actions or proceedings against the other party or any director, officer, employee, attomey, agent or property of the other party, arising out of or relating to this COntract in any court other than as hereinabove specified in this paragraph 9. -

10. Miscellaneous.

Thi3 ContnlQt, including lUI documents incolporated by reference herein, con:m.tutes the entire under3tanding bctwcc:u the parties hereto and supersedes aU other agreements, covenants, representations, warranties,. understandings and communications between the parties. whether written or oral. with respect to the tnmsactions contemplated by this Contract All paragrap~. headings contained herein are for convenience only and shall not be construed as part of this Contract. Any provision of ibis Contract that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of liuch prohibition or unenforceabiUty without invalidating the remaining portions hereof or affecting the validity or enforceabil~y of such provision in any other jurisdiction, and, to this end, the provisions hereof are severable. This Contract shal1 be govelllcd by, and construed and enforced in accordance with, applicable fcderallaws and the laws of the State of Minnesota.

This Contract shall be of no force and effect unless and until it has been executed by both parties.

IN WI'INESS WHEREOF, the duly authorized officers of the Customer and Residential Funding have executed this Contract as of the date first above written.

[Corporate Seal] (ifnG ........ _>

::=T(fQ~ (Signature)

Name: Paul G" Davis (Typcd or PrioICd)

Title: Vice President

~~7-(Signature)

Name: LeAnn Bruley

(Typed or Priolcd)

Associate Title: _________________ _

CUSTOMER.

Mortgage Guarantee Collatercll (NIIUIC otClltlOmer) Acceptance

By: ~~- -. __ (SignalurO)

Name: Maher E. Soliman (Typed or 1'riI*d)

Title: _--,P=-=.r.=e:!:s:..:i~d:..:e~n:.:.t~ ______ _

Name: __ K_ev_i_n_D_"_B_u_e_c_h_l_e_r ___ _ (Typed or Prinlcd)

Director TItlc: ________________________ _

gmac residential v mortgage guarantee collateral acceptance doc 011 order 07 jan 2003

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