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Ally Bank v. Lenox Financial Mortgage Corp.

United States District Court, D. Minnesota

January 10, 2018

Ally Bank, Plaintiff,
v.
Lenox Financial Mortgage Corporation, Defendant.

          Thomas M. Schehr, Esq., Kristina Kaluza, Esq. and Dykema Gossett, PLLC, counsel for plaintiff.

          Sharon R. Markowitz, Esq. and Stinson Leonard Street LLP, counsel for defendant.

          ORDER

          David S. Doty, Judge United States District Court

         This matter is before the court upon the motion for summary judgment by plaintiff Ally Bank. Based on a review of the file, record, and proceedings herein, and for the following reasons, the court grants the motion.

         BACKGROUND

         This contract dispute arises out of the sale of ten mortgage loans by defendant Lenox Financial Mortgage Corporation to Ally.[1]Lenox sold nine loans - the Holland, Scott, Welch, Williams, and five Sumner loans[2] - to Ally pursuant to the Correspondent Agreement, dated February 4, 2004, and one loan - the Raetchi loan - pursuant to a Client Contract, dated July 21, 2008. See Ellis Decl. Ex. 3, Correspondent Agreement; id. Ex. 4, Client Contract. Under the Correspondent Agreement, Lenox obtained the right to sell mortgage loans to Ally subject to the terms of the GMAC Bank Correspondent Lending Manual (Correspondent Manual). Correspondent Agreement, Recital D. The Correspondent Manual was revised from time to time, but the substantive provisions remained the same. See, e.g., Hughes Decl. Exs. 1, 5, 9, 13 (Section VIII of the Correspondent Manual for the Holland, Scott, Welch, and Williams loans). As discussed below, Lenox disputes that Ally can prove that the provisions remained the same for the five Sumner loans because Ally is not able to produce the version of the manual that applied to those loans. Under the Client Contract, Lenox sold loans to Ally subject to the terms of the Client Guide, which is substantively similar to the terms in the Correspondent Manual. See Ellis Decl. Ex. 4, Client Contract, ¶¶ 1, 3.

         Under the terms of the Correspondent Manual and Client Guide, Lenox agreed, among other things, that the mortgages sold to Ally would meet Fannie Mae's and Freddie Mac's underwriting requirements and would not be based on improper appraisal practices as defined in the agreement. Hughes Decl. Exs. 1-2, 5-6, 9-10, 13-14, Correspondent Manual, §§ VIII(9-1), XIII.a(9), XIII.b(38), XIII.b(2)-(3); id. Ex. 17, Client Guide, Ch. 1C, § C102. Further, Ally could, in its “sole discretion” declare a breach on any loan that Ally deemed “to fail to conform with each an every requirement, representation and warranty of the Correspondent Agreement and the Correspondent Manual.” Id. Exs. 3, 7, 11, 15, Correspondent Manual, § XIV(a); id. Ex. 17, Client Guide, Ch. 1A, §§ A100D, A100E. Lenox was required to repurchase the loan, or indemnify Ally for any losses, if it failed to cure any loan defects within ten days of receiving written notice from Ally. Id. Exs. 3, 7, 11, 15, Correspondent Manual, §§ XVI(a)-(b); id. Ex. 17, Client Guide, Ch. 1D, §§ D102A, D103.

         Ally sold the Holland, Scott, Welch, Williams, and Raetchi loans to Fannie Mae and the five Sumner loans to Freddie Mac, but both Fannie Mae and Freddie Mac later made repurchase and indemnification demands of Ally because the loans did not meet their underwriting requirements. Ellis Decl. Exs. 6, 9, 12, 16, 23-27, 30. Ally notified Lenox of the repurchase and indemnification demands and requested information to rebut Fannie Mae's and Freddie Mac's conclusions. Id. It is undisputed that Lenox provided no new information to Ally. From 2012-2013, Ally either repurchased the loans or indemnified Fannie Mae's and Freddie Mac's losses. Hughes Decl. ¶¶ 26-27. Ally then made repurchase and indemnification demands of Lenox pursuant to the Correspondent Manual and Client Guide, but Lenox refused. Ellis Decl. Exs. 7, 10, 14, 17, 28, 31. On October 11, 2016, Ally filed an amended complaint, asserting claims of breach of contract and indemnification against Lenox. Ally now moves for summary judgment.

         DISCUSSION

         I. Standard of Review

         “The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A fact is material only when its resolution affects the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute is genuine if the evidence is such that it could cause a reasonable jury to return a verdict for either party. See id. at 252 (“The mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient ....”).

         On a motion for summary judgment, the court views all evidence and inferences in a light most favorable to the nonmoving party. Id. at 255. The nonmoving party, however, may not rest upon mere denials or allegations in the pleadings but must set forth specific facts sufficient to raise a genuine issue for trial. Celotex, 477 U.S. at 324. A party asserting that a genuine dispute exists - or cannot exist - about a material fact must cite “particular parts of materials in the record.” Fed.R.Civ.P. 56(c)(1)(A). If a plaintiff cannot support each essential element of a claim, the court must grant summary judgment because a complete failure of proof regarding an essential element necessarily renders all other facts immaterial. Celotex, 477 U.S. at 322-23.

         II. The Holland, Scott, Welch, Williams, and Raetchi Loans

         Lenox does not oppose summary judgment on the Holland, Scott, Welch, Williams, and Raetchi loans, nor does it challenge Ally's calculation of damages on these loans. As a result, the court grants Ally's motion for summary judgment as to these loans. Satcher v. Univ. of Ark. at Pine Bluff Bd. of Trs., 558 F.3d 731, 734 (8th Cir. 2009) ...


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