JPMORGAN CHASE BANK, N.A., a National Banking Association, Plaintiff,
SIERRA PACIFIC MORTGAGE COMPANY, INC., a/k/a SIERRA PACIFIC MORTGAGE CO., INC., a/k/a SIERRA PACIFIC MTG. CO., INC., Defendant.
ORDER DENYING DEFENDANT'S MOTION TO DISMISS
JOHN A. MENDEZ, District Judge.
This matter is before the Court on Defendant Sierra Pacific Mortgage Company, Inc.'s ("Defendant") Motion to Dismiss and in the alternative Motion for a More Definite Statement (Doc. #15) in relation to Plaintiff JPMorgan Chase Bank, N.A.'s ("Plaintiff") Complaint (Doc. #1). Plaintiff filed an Opposition (Doc. #16) and Defendant filed an amended Reply (Doc. #19).
I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND
The Complaint states three causes of action against Defendant: (1) breach of contract (breaches of representations and/or warranties), (2) breach of contract (obligation to repurchase loans), and (3) indemnity or in the alternative specific performance. The following factual summary is derived from Plaintiff's complaint.
Plaintiff is a national banking association organized under the laws of the United States. Comp. ¶ 1. Defendant is a California corporation doing business as a residential finance lender and mortgage banker. ¶ 2. In May 1996, the parties entered into a written Correspondent Origination and Sales Agreement - Closed Loan Purchases ("Correspondent Agreement") governing the duties and obligations of each party with respect to the origination, sale and transfer of residential mortgage loans by Defendant to Plaintiff. ¶ 5.
The Correspondent Agreement required all loans submitted by Defendant to comply with the Chase Correspondent Manual. ¶ 6. Pursuant to the agreement, Defendant represented and warranted that all loans sold to Plaintiff: (1) complied with certain regulations, requirements and standards; (2) were fully insurable; (3) did not include facts or circumstances that could reasonably result in investors regarding the loans as unacceptable investments, cause the loan to become delinquent or adversely affect the marketability of the loan; (4) contained no representations or warranties containing any untrue statements of material fact; and (5) the appraisal provided an accurate estimate of the bona fide market value of the property. ¶ 7; Exh. A (Correspondent Agreement) § 4.2.
The Correspondent Agreement provides that Defendant is obligated to repurchase a loan (or property) in the event of certain circumstances, including the following: (1) existence of an incurable breach or representation or warranty or Defendant's failure to cure any curable defect; (2) failure to provide required documentation or timely satisfy other requirements of the agreement; (3) Plaintiff's repurchase of any loan from a third party buyer due to defects existing prior to or contemporaneous with Plaintiff's purchase; or (4) the loan or credit file contained fraudulent documents. Comp. ¶ 8 & Exh. A. §§ 5.1, 5.2. Defendant also agreed to indemnify Plaintiff against "any and all losses, damages, fines, costs or expenses of any nature, including loss of marketability and attorney's fees and costs, resulting from breach of any representation or warranty, covenant or agreement, made by" Defendant. Id . Exh. A § 5.4.
The parties also executed a number of addenda that became part of the Correspondent Agreement. Comp. ¶ 5. The Correspondent Agreement further provides that the agreement and its interpretation will be governed by New Jersey law. ¶ 10; Exh. A § 7.8.
The Complaint points to eighteen specific loans out of the thousands transferred from Defendant to Plaintiff. Comp. Exh. B; Opp. at p. 4. Plaintiff alleges that Defendant breached a number of provisions in the Correspondent Agreement with regards to these identified loans.
In the first cause of action, Plaintiff alleges the loans numbered 1-6, 10, 11 and 14 (as indicated in Exh. B) failed to comply with the terms and conditions of the Correspondent Agreement and Manual in that Defendant failed to cure and/or events subsequent to their origination triggered obligations Defendant did not meet, all in breach of the Correspondent Agreement. Comp. ¶ 15. Plaintiff identifies these defects in Exhibit B to the Complaint. ¶ 16. Despite notice, Defendant has failed and refused to repurchase the loans or otherwise cure the claims regarding them, resulting in damages to Plaintiff. ¶¶ 17-20.
In the second cause of action, Plaintiff alleges that it received demands from its investors for Plaintiff to repurchase each of the loans in Exhibit B or to indemnify them from loss. ¶ 23. In turn, Plaintiff demanded that Defendant repurchase the loans or indemnify Plaintiff pursuant to the terms of the Correspondent Agreement. ¶ 24. Defendant breached the agreement by refusing or failing to so comply, resulting in damages to Plaintiff. ¶¶ 26-27.
In the third cause of action, Plaintiff alleges that Defendant failed to indemnify Plaintiff pursuant to the agreement for "loss, damages, fines, costs or expenses, including loss of marketability and attorneys' fees and costs" suffered as a result of the loans failing to conform to the representations and warranties made by Defendant in relation to the eighteen loans identified in Exhibit B. ¶¶ 29-34. Plaintiff makes an alternative request for specific performance regarding those loans identified in Exhibit B where foreclosures have not yet occurred and/or where the real property underlying the loans has not been sold to third parties. Plaintiff alleges that due to the "unique and specific nature of mortgage loans" it has no adequate remedy at law and the Court should order Defendant to perform its repurchase obligations pursuant to the Correspondent Agreement. ¶¶ 37, 43.
A. Legal ...