The opinion of the court was delivered by: Honorable Janis L. Sammartino United States District Judge
ORDER: DENYING DEFENDANT'S MOTION TO DISMISS IN PART
Presently before the Court are Defendant's Motion to Dismiss Plaintiff's Second Amended Complaint [Doc. No. 62], Plaintiff's Opposition [Doc. No. 68], Defendant's Reply [Doc. No. 71], and Defendant's Surreply [Doc. No. 77.] For the following reasons, the Court DENIES Defendant's motion to dismiss Plaintiff's first and second causes of action.
I. G&P-Advanta Agreements
Plaintiff Goodrich & Pennington Mortgage Fund, Inc. ("G&P") is an originator of home mortgage loans. [Plaintiff's Second Amended Complaint ("SAC") ¶ 1.] As a loan originator, G&P offered mortgage loans to the general public through third-party mortgage brokers and to a limited extent on a retail bases. Defendant Chase Home Finance, formerly known as Chase Manhattan Mortgage Corporation ("Chase"), is engaged in the business of servicing mortgage loans and related banking services concerning mortgaged-backed securities in and for the County of San Diego. [Id. ¶ 2.]
Advanta Mortgage Corporation USA ("Advanta") previously purchased mortgageloans from loan originators, such as G&P, in accordance with its Corporate Finance Program ("CFP"). Under the CFP, Advanta "securitized" these loans by placing them into large pools and selling interests in the pools to investors as mortgage-backed securities. On or about February 11, 1997, Advanta agreed to securitize some of G&P's loans and to "service" G&P's mortgage loans under its "Conduit Agreements" with G&P. "Servicing" mortgage loans involved collecting monies due from G&P's borrowers and taking appropriate action in the event of a default. [Id. ¶ 15-17.]
Advanta placed the loan pools into Advanta Trusts ("Trusts"). While in the Trusts, the loan pools produced revenue for Advanta and G&P as the borrowers made monthly mortgage payments of principal and interest. In total, G&P participated in eight Advanta Trusts and expected to receive residual cash flow payments from them pursuant to the Conduit Agreements. [Id. ¶ 17.]
Specifically, under the CFP, G&P expected to receive two forms of "premiums" as compensation for the loans: an initial premium and a deferred premium. As borrowers made their monthly mortgage payments, Advanta was required to pay G&P monthly income from the Advanta Trusts. The initial premium was an "up front" payment made upon the purchase and securitization of the loan pools. This initial premium amounted to a percentage of the expected residual value of the loans. In essence, the initial premium was an "advance" or "loan" made by Advanta to G&P that enabled G&P to fund its ongoing loan origination operations. [Id. ¶ 18.]
The deferred premium was based on performance of the loan pools over time. This premium constituted the excess residual cash flow of principal and interest that Advanta obtained from the mortgage loans after certain expenses and costs. Thus, the amount of deferred premium G&P received directly correlated with Advanta's collection efforts.*fn1 From February 1997 to February 2001, Advanta and G&P conducted business under the Conduit Agreements, although G&P argues that Advanta's performance under the agreements was not in compliance with its contractual obligations. [Id. ¶¶ 18-19.]
II. Advanta-OCC Agreements & Advanta-Chase Agreements
On May 31, 2000, Advanta consented to the issuance of a Consent Order by the Office of the Comptroller of the Currency ("OCC") (hereinafter "OCC Consent Order").*fn2 Pursuant to the OCC Consent Order, the Comptroller required Advanta and its subsidiaries to develop and implement certain policies, plans and procedures governing, among other things, its ongoing operations, capital levels, loan loss reserves, and residual asset valuations. [SAC ¶ 5.]
On or about January 8, 2001, following the entry of the OCC Consent Order, Advanta entered into a Purchase and Sale Agreement with Defendant Chase. G&P alleges that in the Purchase and Sale Agreement, Advanta agreed to sell some of its assets to Chase, including its real estate loans as well as any ownership interest it had in certain residual assets. [Id. ¶ 6.]*fn3 The Purchase & Sale Agreement states that Chase agreed to: perform all of the obligations of [Advanta] under the Corporate Finance Agreements, including without limitation the security agreements . . . Such obligations include, without limitations, the obligations with respect to the following: to make payments to the sellers under the Corporate Finance Agreements or their successors in interest (the 'Sellers'); to service the mortgage loans sold subject to such agreements; to maintain reserves for the Sellers; to provide monthly reports and other information to the Sellers (including access to servicing and accounting records and personnel); to maintain confidentiality with respect to information related to the Sellers[.] [Id. ¶ 11.]
On or about February 27, 2001, shortly after Advanta entered into the Purchase and Sale Agreement with Chase, Advanta entered into an agreement with the OCC ("OCC Agreement") in furtherance of the prior OCC Consent Order provisions. [Id. ¶¶ 8-9.] The OCC Agreement stated that the OCC had found Advanta to be in "troubled condition," and subjected Advanta to certain requirements. It stated:
Effective immediately, the Bank [Advanta] agrees that it will not enter into, nor commence any new business activities and/or product lines (including the origination of new mortgage loans after the closing on the Purchase and Sale Agreement [with ...