United States District Court, D. Minnesota
M. Schehr, Esq., Jared D. Kemper, Esq. and Dykema Gossett,
PLLC, Minneapolis, MN, counsel for plaintiff.
Anders Folk, Esq., Sharon R. Markowitz, Esq. and Stinson
Leonard Street LLP, Minneapolis, MN, counsel for defendant.
S. Doty, Judge.
matter is before the court upon the motion to dismiss by
defendant Lenox Financial Mortgage Corporation. Based on a
review of the file, record, and proceedings herein, and for
the following reasons, the motion is denied.
contract dispute arises out of the sale of ten mortgage loans
by Lenox to plaintiff Ally Bank. Am. Compl.
¶ 1. Lenox and Ally entered into two agreements, the
2004 contract and the 2008 contract, under which Lenox sold
Ally residential mortgage loans. Id. Nine of the
loans were sold pursuant to the 2004 contract, and one loan
was sold under the 2008 contract. See id.
¶¶ 28, 47, 65, 84, 103, 122, 141, 160, 178, 197.
Both of the agreements incorporated the terms of the GMAC
Bank Correspondent Lending Manual, which contained
representations and warranties concerning the nature and
quality of the loans. Id. ¶¶ 12-13. Under the
terms of the correspondent manual, Lenox represented, among
other things, that any loan sold to Ally would meet
Ally's, Fannie Mae's, and Freddie Mac's
underwriting requirements and would be based on proper
appraisals. Id. ¶¶ 14-16; id. Ex.
3, Correspondent Manual § XIII.b. The correspondent
manual enumerated specific unacceptable appraisal practices.
See Am. Compl. ¶ 16; id. Ex. 3 §
VIII(9-1). Under the terms of the agreement, “[Ally]
may give [Lenox] written notice as to any loan purchased ...,
which [Ally] discovers and deems, in its sole discretion, to
fail to conform with each and every requirement,
representation, and warranty of the Correspondent Agreement
and the Correspondent Manual.” Am. Compl. Ex. 3 §
XIV.a. On receipt of such notice, “[Lenox] shall have
ten (10) days ... to cure any defect. If any such defect is
not cured within ten (10) days, [Lenox] shall repurchase the
loan .... Any repurchase must occur within ... fifteen (15)
days of the notice of defect ....” Id. Lenox
also agreed to indemnify Ally for all losses resulting from a
defective loan. See id. § XIV.b.
sold the loans to Fannie Mae and Freddie Mac, which later
demanded that Ally repurchase the loans for failure to meet
their underwriting requirements. Am. Compl. ¶¶
28-214. Ally alleges that, among other defects, the loans
failed to disclose material liabilities and were based on
unacceptable appraisal practices. Id. For example,
according to Ally, the Holland loan was based on an appraisal
that “failed to disclose the property's location
near a busy street, relied upon a comparable sale that could
not be located, [and] failed to consider that property values
in the surrounding neighborhood had declined 11% in the past
year.” Id. ¶ 31.
2012-2013, Ally either repurchased the loans from Fannie Mae
or Freddie Mac or indemnified their losses. Id.
¶¶ 28-214. Ally sent written demands to Lenox to
repurchase the defective loans or for
indemnification. Id. ¶ 24. On July 11, 2016,
Ally filed suit against Lenox and, on October 11, 2016, filed
an amended complaint. Ally asserts claims for breach of
contract and indemnification. Lenox now moves to dismiss the
Motion to Dismiss
Standard of Review
survive a motion to dismiss for failure to state a claim,
“‘a complaint must contain sufficient factual
matter, accepted as true, to state a claim to relief that is
plausible on its face.'” Braden v. Wal-Mart
Stores, Inc., 588 F.3d 585, 594 (8th Cir. 2009) (quoting
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).
“A claim has facial plausibility when the plaintiff
[has pleaded] factual content that allows the court to draw
the reasonable inference that the defendant is liable for the
misconduct alleged.” Iqbal, 556 U.S. at 678
(citing Bell Atl. Corp. v. Twombly, 550 U.S. 544,
556 (2007)). Although a complaint need not contain detailed
factual allegations, it must raise a right to relief above
the speculative level. Twombly, 550 U.S. at 555.
“[L]abels and conclusions or a formulaic recitation of
the elements of a cause of action” are not sufficient
to state a claim. Iqbal, 556 U.S. at 678 (citation
and internal quotation marks omitted).
court does not consider matters outside the pleadings under
Rule 12(b)(6). Fed.R.Civ.P. 12(d). The court may, however,
consider matters of public record and materials that are
“necessarily embraced by the pleadings.”
Porous Media Corp. v. Pall Corp., 186 F.3d 1077,
1079 (8th Cir. 1999) (citation and internal quotation marks
omitted). Here, the court properly considers the 2004 and
2008 contracts and the correspondent manual.