Ally Bank v. Lenox Financial Mortgage Corporation
ORDER granting 59 Motion for Summary Judgment (Written Opinion). Signed by Senior Judge David S. Doty on 1/10/2018. (DLO)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 16-2387(DSD/DTS)
Lenox Financial Mortgage Corporation,
Thomas M. Schehr, Esq., Kristina Kaluza, Esq. and Dykema
Gossett, PLLC, 4000 Wells Fargo Center, 90 South Seventh
Street, Minneapolis, MN, counsel for plaintiff.
Sharon R. Markowitz, Esq. and Stinson Leonard Street LLP, 150
South 5th Street, Suite 2300, Minneapolis, MN, counsel for
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.
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
Agreement, dated February 4, 2004, and one loan - the Raetchi loan
Ally Bank was previously known as GMAC Bank.
The loans are identified by the last name of the borrower.
- pursuant to a Client Contract, dated July 21, 2008.
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
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,
XIII.b(2)-(3); id. Ex. 17, Client Guide, Ch. 1C, § C102.
Ally could, in its “sole discretion” declare a breach on any loan
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
indemnification demands of Ally because the loans did not meet
their underwriting requirements.
Ellis Decl. Exs. 6, 9, 12, 16,
indemnification demands and requested information to rebut Fannie
Mae’s and Freddie Mac’s conclusions.
Lenox provided no new information to Ally.
It is undisputed that
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.
Decl. Exs. 7, 10, 14, 17, 28, 31.
On October 11, 2016, Ally filed
an amended complaint, asserting claims of breach of contract and
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
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
A dispute is genuine if the evidence is such that it could
cause a reasonable jury to return a verdict for either party.
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.
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).
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
Celotex, 477 U.S. at 322-23.
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) (“[F]ailure to oppose a basis for summary
judgment constitutes waiver of that argument.”).
III. The Five Sumner Loans
Lenox opposes summary judgment on the five Sumner loans
because Ally is unable to produce the September 2007 version of the
Correspondent Manual that applied to those loans. Ally is only able
to produce the October 2007 version, which was in effect after the
five Sumner loans were sold. Lenox argues that because Ally cannot
show what the actual terms of the contract were at the time of
sale, it cannot prove that Lenox breached the agreement. The court
is not persuaded.
First, Lenox points to no evidence in the record indicating
that the fundamental terms of the contractual relationship between
Ally and Lenox changed at any time.
Indeed, Lenox’s corporate
representative testified that she had no reason to believe that the
versions of the Correspondent Manual and Client Guide produced in
discovery did not apply to all ten loans at issue.
Harker Dep. at
Correspondent Manual contains identical language to the September
A review of the October 2007 Correspondent Manual
shows the revision date of each chapter.
Hughes Dep. at 51:3-53:9.
See Ellis Decl. II Ex. 1,
The key provisions at issue, namely the
Warranties and Covenants, the Repurchase and Indemnity, and the
Eligible Mortgage Loans Requirements provisions, all indicate that
they were revised in August 2007, July 2007, and March 2007
respectively, that is, before September 2007.
See Hughes Decl.
Exs. 10, 11, 12. This uncontradicted evidence establishes that the
key terms of the September 2007 Correspondent Manual are identical
to the October 2007 version.
Additionally, the underwriting
requirements chapter shows no revision date, which according to
uncontradicted testimony, means that the chapter had not been
See Hughes Dep. at 51:14-19, 53:5-15.
Because the court
can ascertain from the uncontradicted record the terms of the
September 2007 Correspondent Manual, Lenox’s argument fails.
Lenox also argues that the missing September 2007 version of
the Correspondent Manual renders the contract ambiguous, thereby
But in order for a contract to be ambiguous
there must be more than one reasonable interpretation for a jury to
See Windows v. Erie Ins. Exch., 161 A.3d 953, 957
(Pa. Super. Ct. 2017) (internal quotation marks and citation
omitted) (“A contract is ambiguous if it is reasonably susceptible
of different constructions and capable of being understood in more
than one sense.”).
Here, Lenox has failed to point to anything in
the record that would suggest that the September 2007 version of
Even assuming that the absence of a contract renders its
terms ambiguous, the court may rely on parol evidence “to explain
conflicting parol evidence relevant to what the parties intended by
the ambiguous provision is for the trier of fact.”
quotation marks and citation omitted).
Here, the court relies on
the October 2007 Correspondent Manual in resolving any ambiguity
created by the absence of the September 2007 version, and Lenox has
failed to offer any conflicting parol evidence.
is no genuine issue of material fact for a jury to resolve.
result, the court must grant summary judgment as to the five Sumner
Lenox’s argument that proof of a knowing and intentional
misrepresentation is essential to Ally’s breach of contract claim
presumes that the Correspondent Manual, which allows Ally to
declare a breach in its sole discretion, does not apply to these
loans. Because the Correspondent Manual does apply, however, the
Lenox does not oppose Ally’s calculation of damages or that
Ally is entitled to recover reasonable attorney’s fees pursuant to
the terms of the contract.
The record establishes that Ally’s
damages amount to $1,361,891.74 plus, as of December 7, 2017,
prejudgment interest in the amount of $410,810.38.4
Decl. ¶¶ 26-27; id. Exs. 19-34. Pursuant to both the Correspondent
Manual and Client Guide, Ally is also entitled to reasonable
attorney’s fees. See Hughes Decl. Exs. 3, 7, 11, 15, Correspondent
Manual, § XIV.b; id. Ex. 17, Client Guide Ch. 1D, § D103.
argument fails. In any case, the court already rejected this line
of argument in denying Lenox’s motion to dismiss. See Ally Bank v.
Lenox Fin. Mortg. Corp., No. 16-2387, 2017 WL 830391, at *3 (D.
Minn. Mar. 2, 2017) (“[L]enox fails to cite any legal authority
establishing that intent is ever a requirement for a breach of
contract or indemnification claim.
Unless the parties have
contracted otherwise, the law does not impose an intent requirement
for a breach of contract claim.”).
The Holland, Scott, Welch, Williams, and five Sumner loans
were sold pursuant to the Correspondent Agreement and are governed
by the laws of Pennsylvania.
Ellis Decl. Ex. 3, Correspondent
Agreement § 20. Pennsylvania establishes a prejudgment interest
rate of six-percent per annum. 41 Pa. Stat. and Cons. Stat. § 202.
The Raetchi loan is governed by the Client Contract and Minnesota
law. Ellis Decl. Ex. 4, Client Contract ¶ 12. Minnesota law also
establishes a prejudgment interest rate of six-percent per annum.
Minn. Stat. § 334.01.
Accordingly, based on the above, IT IS HEREBY ORDERED that:
Plaintiff’s motion for summary judgment [ECF No. 59] is
Judgment shall be entered in favor of Ally Bank following
a determination of the amount of interest, costs, and attorney’s
Ally shall submit to the court a calculation of interest,
costs, and attorney’s fees within thirty days of this order; and
Lenox shall file a reply or a notice of no reply within
fourteen days of Ally’s submission.
Dated: January 10, 2018
s/David S. Doty
David S. Doty, Judge
United States District Court
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