Case 1:15-cv-00293-LTS-RWL Document 394 Filed 05/10/19 Page 1 of 19

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

-------------------------------------- x
MORTGAGE RESOLUTION SERVICES, LLC, 1ST :
FIDELITY LOAN SERVICING, LLC, and S & A :
CAPITAL PARTNERS, INC., :
:
Plaintiffs, :
: No. 15 CV 293-LTS-RWL
-against- :
:
JPMORGAN CHASE BANK, N.A., CHASE HOME : ORAL ARGUMENT REQUESTED
FINANCE LLC, and JPMORGAN CHASE & CO., :
:
Defendants. :
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PLAINTIFFS’ REPLY IN SUPPORT OF THEIR MOTION FOR PARTIAL SUMMARY

JUDGMENT ON PLAINTIFFS’ BREACH OF CONTRACT CLAIMS

Roberto L. Di Marco
Jennifer Martin Foster
Michael V. Longo
Foster, Walker & Di Marco, P.C.
350 Main Street, Third Floor
Malden, MA 02148
(781) 322-3700

Counsel for Plaintiffs

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TABLE OF CONTENTS

PRELIMINARY STATEMENT.....................................................................................................1

BACKGROUND ………................................................................................................................2

ARGUMENT .................................................................................................................................4

A. STANDARD OF REVIEW……………………………….................................................4

B. MRS IS ENTITLED TO SUMMARY JUDGMENT..........................................................5

1. Lien Status...............................................................................................................5

2. Loan Information.....................................................................................................8

3. Loan Assignments....................................................................................................9

4. Loan Balances........................................................................................................10

5. Lien Releases.........................................................................................................10

6. Retention of Payments...........................................................................................11

7. Ownership of Loans...............................................................................................12

C. S&A and 1st FIDELITY ARE ENTITLED TO SUMMARY JUDGMENT.....................12

1. Debt Forgiveness Letters.......................................................................................13

2. Lien Releases.........................................................................................................14

3. Retention of Payments...........................................................................................14

D. PLAINTIFFS HAVE BEEN DAMAGED………………………………........................15

CONCLUSION..............................................................................................................................15

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TABLE OF AUTHORITY

Cases Page(s)

Computer Assoc. Intl., Inc. v. U.S. Balloon Mfg. Co., Inc.,

782 N.Y.S.2d 117 (2004).....................................................................................................6

Dalton v. Educ. Testing Serv.,

87 N.Y.2d 384 (1995)........................................................................................................11

Gaia House Mezz LLC v State St. Bank & Trust Co.,
720 F.3d 84 (2d Cir. 2013).................................................................................................11

M/A-COM Sec. Corp. v. Galesi.,

904 F.2d 134 (2d Cir. 1990)...............................................................................................11

Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,

475 U.S. 574 (1986).............................................................................................................5

Profex, Inc. v. Town of Fishkill.,

883 N.Y.S.2d 912 (2009)...................................................................................................13

Royal Bank of Canada v. Mahrle.,

818 F. Supp. 60 (S.D.N.Y. 1993)....................................................................................5, 7

Uribe v. Merchants Bank of N.Y.,

91 N.Y.2d 336 (1998)..........................................................................................................6

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Plaintiffs S&A Capital Partners, Inc. (“S&A”) and 1st Fidelity Loan Servicing, LLC (“1st

Fidelity”) (together “SA&F”) and Mortgage Resolution Servicing, LLC (“MRS”) (together with

SA&F “Plaintiffs”), respectfully submit this Memorandum in reply to the opposition submitted

by Defendants JPMorgan Chase Bank, N.A., JP Morgan Chase & Company and Chase Home

Finance, LLC (together “Chase” or “Defendants”) to Plaintiffs’ motion for partial summary

judgment on Plaintiffs’ breach of contract causes of action (Counts I-III of Plaintiffs’ Fourth

Amended Complaint) and in further support thereof.

PRELIMINARY STATEMENT

In its opposition, Chase brazenly admits to drafting a document, the Mortgage Loan

Purchase Agreement (“MLPA”), which it knew to be false as Chase was drafting it. Chase

argues that failing to deliver what the clear language of the MLPA required it to deliver is

excusable. Chase claims that Plaintiffs’ allegedly knew “at the time the MLPA was executed”

that Chase could never comply, therefore Chase is excused. Chase then has the audacity to

suggest that Plaintiffs did not sustain any damages as a result of its admitted breaches, or as a

result of other acts. These collective actions eviscerated Plaintiffs’ ability to collect any

substantial monies on the 3,529 loans MRS purchased from Chase. The actions also continue,

even to the date of this filing, to expose MRS to enormous liability for Chase’s bad deeds.

Chase’s argument that all of Plaintiffs’ “principal breach of contract claims” are time

barred ignores the fact that Chase’s brazen argument on that point, if somehow believed, would

only eliminate alleged breaches that occurred prior to December 24, 2009, as Chase originally

argued. (Docket 303). Moreover, as articulated in Plaintiffs’ opposition to Chase’s Statute of

Limitations argument, various strong arguments support denial of Chase’s limitations motion.

Among these arguments is the fact that the parties worked together until May 2013. Plaintiffs

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finally received enough information to determine Chase breached the MLPA. (Docket 308).

Coupled with this is Chase’s unsupported argument that Plaintiffs suffered only unrecoverable

consequential damages. Such an argument also defies established case law and common sense.

This defense is as clearly erroneous as the argument that Plaintiffs can only establish damages

through an expert vis a vis a lay witness. (Docket 388).

While Chase’s position attempts to conflate and confuse the facts, it does nothing that

denies Plaintiffs’ entitlement to summary judgment on their contract claims.

BACKGROUND

The facts of this case have been amply set forth within the numerous memos filed, and in

motions now pending before this Court. But there are two new examples of Chase’s nefarious

conduct was hidden until years after the MLPA was executed. These examples have only been

discovered since the filing of Chase’s opposition to Plaintiffs’ motion for partial summary

judgment on April 19, 2019.

First, just last week, MRS received a telephone call from David Chapman of Near North

Title Group (“NNTG”), who was directed by Chase to contact MRS to obtain information on a

loan regarding a borrower by the name of Clarence Swinehart. (RSOF 164, 168).1

Plaintiffs and counsel have learned that Mr. Swinehart is presently attempting to sell his

home, but a Chase mortgage remains on the public record, despite Chase acknowledging in an

August 7, 2007 letter (two years before the MRS transaction) that the lien had been “settled in

full for $16,000 on November 30, 2006.”2 (RSOF 164, 168). This letter also thanks the

borrower for “bringing this matter to [Chase’s] attention,” as prior thereto, Chase apparently had

1
References herein to “RSOF” is a reference to Plaintiffs’ Reply to Chase’s Counterstatement of Facts, and
references to “SOF” is a reference to Plaintiff’s originally filed Statement of Facts (Docket 351).
2
Chase’s August 7, 2007 letter is copied to the Office of the Comptroller of Currency (“OCC”) as Mr. Swinehart
made a complaint to the OCC regarding Chase’s refusal to acknowledge that his loan was satisfied.

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had made collections attempts through a collection agency, despite the loan being satisfied.

Clearly, and despite its promise to “update [its] records” Chase inconceivably included the loan

in the MLPA. In addition to selling a loan that no longer existed, a clear breach of the MLPA,

on December 9, 2013, Chase released the Swinehart mortgage as part of the lien release

incentive program though the Government. (RSOF 164, 168). On May 28, 2014, Chase issued a

“vacation and rescission of release/discharge” on the Swinehart loan in a futile attempt to “fix”

the error, obviously still believing a valid lien had been sold to MRS. Chase completely failed at

any point in time to realize, despite allegedly “updating” its records in 2007, that the loan had

been satisfied in 2006. (RSOF 164, 168). When NNTG contacted Chase, Chase had the

audacity to inform NNTG that NNTG had to call MRS to fix the issue. (RSOF 164, 168). Chase

had no authority to issue any of the above documents, after either satisfying the loan or allegedly

selling the already satisfied loan to MRS. Chase also never provided an assignment to MRS. But

despite this, when the loan became a known problem, Chase pointed the finger at the innocent

and unknowing MRS, ten years after the MLPA was executed in 2009. MRS and its counsel

learned of this particularly egregious breach for the very first time in May 2019.

Because none of this is coincidence, on May 9, 2019, just over 24 hours before Plaintiffs’

Reply Memorandum was due, Chase’s counsel sent an email producing additional discovery

“mistakenly tagged as non-responsive and therefore not produced at the time of our initial

production.” (RSOF 163, 164). The document produced is an email conversation between

Chase employees in early 2010 wherein Chase admits that on September 9, 2009, Chase was

paid $135,604.00 on the Kevorkants loan. This is of great interest since Chase’s counsel argued

strenuously in its summary judgment motion, and in opposition to Plaintiffs’ motion, that “there

is no evidence demonstrating that any such [insurance] payment was ever made or received by

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Chase” (p. 21). These monies were paid to Chase seven months AFTER the loan was sold as

part of the MLPA loan pool.3 (RSOF 163, 164). More telling are the admissions by Chase

within the emails that the loan “should never have been sold…or included in the bulk sale” and

worse “I don’t think we are in the business of giving away free money and incurring a loss at the

same time.” (RSOF 163, 164). Despite internal recommendations to buy back the loan or give

the money to MRS, Chase ultimately decided to keep the money, deny it had done so and then

designate the inflammatory emails as “nonresponsive” to intentionally suppress the evidence.4

The above examples, like numerous mortgage loans before them, and likely more to

come in the absence of Court intervention, will undoubtedly result in legal fees and time

(damages) to clean up legal quagmires created by Chase. Chase’s wonton, reckless, careless and

perhaps calculated efforts to financially ruin Plaintiffs have no end in sight. For this reason

alone, without even considering all the other reasons cited within Plaintiffs’ motions on record to

date, Plaintiffs are entitled to an award of summary judgment as a matter of law.

ARGUMENT

A. STANDARD OF REVIEW

3
The email chain produced on May 9, 2019 (JPMC-MRS-00387338-349) is a continuation of the email
conversation Chase previously produced (JPMC-MRS-00005516-18). That Chase chose to withhold the more
incriminating portion of the email chain, despite it being clearly responsive and relevant, until this point calls into
question the veracity and completeness of Chase’s document production to date. (RSOF 163, 164).
4
On January 8, 2018, counsel for the parties herein appeared before the Court on competing motions to compel.
(Docket 277). During that hearing, Plaintiffs argued that Chase failed to provide all loan files and documents. In
response, Robert Wick, counsel for Chase, represented that Chase had provided everything, specifically stating
“those are the I-Vault files. And we have given him all of this. There is nothing left to give.” (Docket 277: p.17-
18, ln. 25-2). Despite Wick’s statement, Plaintiffs have now discovered that additional loan documents exist. With
the Kevorkants loan, Chase designated relevant documents as “non-responsive” and withheld them, albeit Chase
now claims such withholding was “mistaken.” (RSOF 163, 164). With Swinehart, Plaintiffs only learned of
Chase’s egregious acts because the borrower provided two letters drafted by Chase in 2007 (documents Chase
should have in its loan files and should have produced, but did not). (RSOF 164, 168). The above two examples
lead Plaintiffs to only one conclusion, that additional documents exist that would help prove Plaintiffs’ case, and that
Chase has failed to produce those documents, intentionally or otherwise. Moreover, these two examples further
amplify Chase’s attempt to conceal its breaches, which prevented Plaintiffs from discovering the breach until May
2013, and not until May 2019 with respect to the Swinehart and Kevorkants loans. Where the facts are as
established herein, a Statute of Limitations argument cannot be entertained, and summary judgment should be
awarded to Plaintiffs on all of Plaintiffs’ breach of contract claims as a matter of law.

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To defeat Plaintiffs’ entitlement to summary judgment on their breach of contract claims,

it was incumbent upon Chase to demonstrate a material issue of fact. Showing a “meta-physical

doubt as to a material fact” is not enough. See Royal Bank of Canada, Supra at 62, citing

Matsushita Electrical Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Chase’s

opposition fails to cast any doubt on Plaintiffs’ proven facts regarding breach and damages and

as such, Plaintiffs are entitled to an award of Summary Judgment.

B. MRS IS ENTITLED TO SUMMARY JUDGMENT

In its opposition, Chase argues that Plaintiffs allege seven breaches, none of which in its

estimation support an award of summary judgment. For all the reasons set forth below, Chase’s

arguments utterly fail, and this Court should grant summary judgment in favor of the Plaintiffs.

1. Lien Status

The preamble of the MLPA drafted by Chase unequivocally, in plain language, states that

Chase was obligated to sell MRS “certain nonperforming and/or impaired closed end first lien

mortgage loans.” (SOF 81). As evidenced by the May 29, 2013 Exhibit A provided by Chase,

what MRS received was “104 second liens, four third liens, 725 unsecured loans and 282 loans

that did not have a lien identification.” (SOF 88). Even worse, many of the secured loans

became unsecured when Chase released and/or forgave the liens. (SOF 87). More concerning

and troublesome, and compounding the damages to MRS, Chase secretly attempted to vacate

certain lien releases, by recording numerous Vacation of Rescission of Satisfaction/Discharge of

Mortgage, effectively rendering the loans entirely uncollectible due to Chase’s intentional act of

placing a cloud on the titles. (SOF 87).5 Chase nonsensically attempts to excuse this blatant

breach by arguing that inclusion of the term “impaired” in the MLPA somehow excuses its

default because, according to Chase, impaired means “unsecured.” Such a reading defies logic
5
The Swinehart loan discussed above is a perfect example (RSOF 163, 164).

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and grammar. “Impaired” is, based on grade school grammar, used to describe the type of

secured mortgage Plaintiffs would receive – “nonperforming and/or impaired closed end first

lien mortgage loans [emphasis added].” (RSOF 169). It is unrefuted that Schneider’s business

was founded upon purchasing nonperforming or impaired “first lien mortgage loans.”

“Impaired” is also defined by the Financial Accounting Standards Board (“FASB”), the

SEC designated accounting standard setter for public companies, such as Chase. Id. The

definition is located under the Statement of Financial Accounting Standards No. 114. Id.

Hopefully Chase is aware of its existence. The FASB states that an “impaired” loan is one in

which “it is probable that a creditor will be unable to collect all amounts due according to the

contractual terms of the loan agreement.” (RSOF 169). Schneider’s business plan was to get

something from a borrower where Chase could not, but in order to be successful, the mortgage

Schneider received had to be secured. The plain and unambiguous language of the MLPA

required Chase to provide 3,529 first-lien mortgages, and as admitted by Chase’s own expert,

and confirmed by Plaintiffs’ expert Richard Payne, Chase breached the MLPA when it failed to

supply first liens. (SOF 85, 106). Any argument that impaired “could certainly indicate that the

first lien is not intact” (i.e. – unsecured) cannot be entertained. (RSOF 169).

However, assuming this Court entertains Chase’s illogical argument, then at best, the

term “impaired” is ambiguous. Under New York law, ambiguity of a term in a contract is

construed against the drafter, Chase, meaning there can be no argument that Schneider knew or

should have known that he was getting anything other than first-lien mortgages. See Uribe v.

Merchants Bank of N.Y., 91 N.Y.2d 336, 341 (1998); Computer Assoc. Intl., Inc. v. U.S.

Ballooon Mfg. Co., Inc., 10 A.D.3d 699, 700, 782 N.Y.S.2d 117 (2004).

Chase attempts to escape liability by arguing that Schneider “knew” he was getting both

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secured and unsecured loans. Such an argument is clearly advanced in bad faith when the very

emails used by Chase to support that argument clearly predate the execution of the MLPA that

contained the express “first-lien” language cited above. [RSOF 174-175] As such, the language

of the MLPA, not the parole evidence leading up to its execution, controls. See Royal Bank of

Canada v. Mahrle, 818 F. Supp. 60 (SDNY 1993).

If the Court were to accept Chase’s argument, it would have to accept Chase’s admission

that Chase perpetrated a fraud, since Chase is essentially confessing to drafting a contract with

terms it admittedly knew to be false when drafted – which we submit Chase did. (Docket 323).

Fraud or breach, choose. Chase cannot, as it so often wants, have its cake and eat it too.6

Further to this point, Chase argues that if it breached, the doctrines of waiver and

estoppel bar recovery. This argument, like many of Chase’s arguments, ignores the fact that

Chase did not provide MRS with a complete Exhibit A until May 2013. This was the first time

Plaintiffs could actually determine what was received; and, thereafter, Plaintiffs filed two

separate lawsuits. (SOF 104). In her May 29, 2013 email, for which she was admonished by her

Chase higher-ups, Launi Solomon confirmed that Schneider did not previously know what he

received from Chase, nor did he have the information he needed to do anything with it. Solomon

stated “You bought the loans, shoot the least that can happen is you are given the information

you need to do something with them…,” (SOF 153). The May 29, 2013 Data Tape also

establishes that, before this date, Chase was actively working to conceal that it was not in

compliance with the MLPA’s terms by refusing to provide all of the information it had. This is

why, contrary to Chase’s argument, Schneider explored purchasing a second pool a year later.

At that point, Chase was still stringing him along and promising to provide him with a complete

6
In making this argument, whether it be fraud or breach of contract, Plaintiffs did not discover either until May
2013 when Chase’s concealment tactics failed and it finally produced an Exhibit A that provided enough
information for MRS to discover what it actually received from Chase.

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Exhibit A, so he still believed Chase would work with him and not hang him out to dry. (SOF

152). Once Schneider finally discovered the types of loans he received from Chase (mostly non

first-liens), he, for the first time, realized that Chase had breached the core term of the MLPA

and filed the instant lawsuit in a timely manner.

2. Loan Information

Chase has the boldness to argue that the only information Chase had to provide Schneider

was the “outstanding principal balance” of the loans being purchased. If this insane position is

believed, the Court would also have to believe Chase’s argument that it was under no obligation

to supply the name of the borrower, the address of the property or anything else – just a list of

loans and the “outstanding principal balance.” Said argument, like many of those juxtaposed by

Chase, defies all logic and reason. It also violates the general practice of purchasing and selling

loans, a process controlled by RESPA. These same laws require the purchaser of loans to send a

letter to the borrower within a certain time, impossible without a name and address. (SOF 31-32,

69-70, 77, 94 and 99). Despite its clear opinion on the matter, Chase is subject to these laws too.

Chase’s reference to Richard Payne’s testimony in support of its ridiculous argument

ignores Payne’s testimony that Plaintiffs “aren’t able to properly service the loan” with only the

unpaid principal balance because “they wouldn’t know what the payments due were, they

wouldn’t know if they have – if they have funds to pay real estate taxes or funds to pay hazard

insurance, wouldn’t know how to properly amortize the loan, just to name several divisions.”

(SOF 151). That Chase argues it was not “required” to provide basic information (name and

address) and that failing to provide same is not a material breach of the MLPA, despite its

expert’s unsupported opinion that MRS had “sufficient” information to begin, to service the

loans, should not be deliberated by this Court. In fact, Chase’s own internal documents confirm

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that Chase knew the RCV1 could not support loan pool sales because the database lacked

pertinent and instrumental information to service the loans. (SOF 20, 75).

To get around its known shortfalls, Chase argues it supplied “all the information it had,”

an obvious lie. Chase can offer no excuse for failing to provide the information needed for

Schneider to legally board and service the loans, including sending the legally required RESPA

letters. Since it was able to give “the information [Schneider] need[ed] to do something with

[the loans]…” (SOF 153) in May 2013, over 4 years after the contract was executed, it could

have done so earlier. Even that information was insufficient, but at least Schneider was first able

to determine that Chase failed to deliver only first lien mortgage loans, something he is still

discovering as recently as May 2019.

3. Loan Assignments

Section 7 of the MLPA states that “Seller will bear the cost of preparing and recording

any assignments of mortgage …. from the Seller to the Purchaser.” Nothing therein states or

contemplates that Schneider had to request same on a case by case basis as Chase suggests. In

fact, no action was required of Plaintiffs. To the contrary, the burden was on Chase to perform.

Moreover, as Plaintiffs expert Payne states, and common knowledge of the mortgage industry

dictates, a loan is not “sold” or “transferred” until an assignment is executed. Thus, until Chase

issued assignments for all 3,529 loans, it failed to sell or deliver the loans to Plaintiffs, thus

breaching its obligation to “sell” the loans to Schneider under the terms of the MLPA when it

refused to complete the act of doing so. (SOF 93, 109-111). Conversely, if Chase did not agree

to and/or issue assignments, it would still own the loans, and thus, would not have achieved the

desired result of selling them to eliminate its obligations to service them. Chase’s remaining

arguments on this point are belied by the very basic principal stated above, and need not be

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addressed any further.

Nevertheless, Chase’s actions while this litigation has been pending contradicts its stated

position. On July 2, 2018, Chase recorded an assignment of a loan alleged to be part of the

MLPA loan pool without any notice to MRS (or without a request from MRS to do so), and

erroneously assigned the loan to S&A, with whom there was, and remains, no agreement to

accept such assignment. (SOF 141). Chase filed the assignment so it could avoid liability and

legal expenses related to a dispute with El Centro, CA over a foreclosure payoff. As a result,

Plaintiffs were forced to incur such liability and expenses (i.e., damages). (SOF 142-143).

4. Loan Balances

The MLPA required Chase to provide MRS with the “unpaid principal balance” on each

MLPA loan. Exhibit A provided to MRS on February 25, 2009 contained “account balances”

totaling $156,324.80, but when compared to unpaid principal balances on the MLPA loans

produced during discovery, the numbers are different and establish, as a matter of law, that

Chase failed to deliver what was required under the terms of the MLPA. (SOF 172).

Chase’s attempt to use “exemplar MLPA loan agreements” to argue it “technically”

complied is thwarted by RESPA requirements as explained in Payne’s testimony. The unpaid

principal balance is needed to send RESPA letters and to properly service the loan. (RSOF 172).

From a practical standpoint, if a borrower wanted to pay all interest owed and resume payments

under their loan agreement, MRS was unable to determine what amounts were due given the lack

of information Chase provided, and therefore, could not service the loans or collect money,

thereby, suffering direct damages as a result of Chase’s breach.

5. Lien Releases

The MLPA required Chase to provide first lien secured mortgages. Chase cannot take the

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position that issuing a lien release does not render a secured mortgage - unsecured. Thus, no

argument exists to counter that obliterating the secured status of a lien is a direct breach of the

contract and/or a breach of the implied covenant of good faith and fair dealing. Gaia House

Mezz LLC v. State St. Bank & Trust Co., 720 F.3d 84, 93 (2d Cir. 2013) (quoting Dalton v. Educ.

Testing Serv., 87 N.Y.2d 384, 389 (1995)). “[W]here a party's acts subsequent to performance

on the contract so directly destroy the value of the contract for another party that the acts may be

presumed to be contrary to the intention of the parties, the implied covenant of good faith may be

implicated.” M/A-COM Sec. Corp. v. Galesi, 904 F.2d 134, 136 (2d Cir. 1990).

Plaintiffs can and will prove damages flowing directly from the lien releases through

documents and the testimony of Schneider, as well as Plaintiffs’ experts. (Docket 388).

6. Retention of Payments

Chase’s argument that Plaintiffs’ have failed to provide evidence of payments retained by

Chase is inexcusable in the wake of Chase finding and producing additional evidence in the final

hours before this Reply was due, more than a year after certifying that they had delivered all

relevant information. It is clear that this is likely in response to Plaintiffs finding the evidence in

Chase’s previously incomplete production. Nevertheless, the now unrefuted evidence establishes

that on September 9, 2009 Chase received a $135,604.00 payment on a loan sold to MRS.

(RSOF 164, 168). Chase employees then exchanged emails wherein they deliberated about how

they would withhold that money from Plaintiffs, which they in fact did. (RSOF 177).7

In an email of December 2009, Solomon tells Schneider he will be receiving certain

7
Chase was in contact with Schneider about this insurance payment in 2009, according to emails between Schneider
and Solomon in December 2010 wherein Schneider asks about a “large check” he was waiting on. Solomon
responds “I do not see any notes about anything or anyone working on a mortgage insurance Check? Nothing?”
This email by Solomon is irrefutable evidence of Chase’s concerted and calculated efforts to conceal information
from Schneider so that he would not know they breached the MLPA, efforts which appear to include omitting or
redacting payment records from the loan files kept by Chase. (RSOF 177).

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funds which Chase received, and then retracts that statement. (SOF 112). These are prime

examples of monies erroneously retained by Chase in direct breach of the MLPA, which states

“Purchaser shall be entitled to all proceeds arising out of the Mortgage Loans received after

the Cut-off date (December 22, 2008) [emphasis added],” (SOF 81), and further evidence of the

direct damages suffered by MRS.

7. Ownership of Loans

For Chase to sell loans, it needed to own them. The evidence herein demonstrates that

some of the loans included within the MLPA were not owned by Chase and, as such, their

inclusion in the MLPA constitutes a breach. (RSOF 167). When Plaintiffs received loans that

Chase did not own, they obviously could not service or collect on those loans, and suffered direct

damages as a result of Chase’s breach. Two examples of these are loans that Chase itself

admitted had been sold to third parties prior to the MLPA. (RSOF 167).

C. S&A and 1st FIDELITY ARE ENTITLED TO SUMMARY JUDGMENT

In opposing this section of Plaintiffs’ summary judgment motion, Chase fails to reconcile

or address the fact that, in its Answer to the Fourth Amended Complaint, Chase admits that it

breached the respective Agreements (“MMLSA”) with SA&F by issuing debt forgiveness letters

and lien releases; and failing to otherwise act in good faith. (SOF 122). This admission alone is

sufficient to render a finding of liability against Chase. Despite its admissions, and no record of

attempting to amend its Answer, Chase now argues it did not breach the separate agreements

with SA&F. Such a brazen act should not go overlooked by this Court. Plaintiffs will address

the arguments raised, but again submits that this issue ought not be considered by this Court.

Under the applicable MMLSAs, Chase agreed to transfer its legal interest in (to sell)

certain mortgage loans to SA&F. (SOF 26-27, 32-34). In these cases, unlike the MRS loan

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sales, Chase performed its initial obligations, only to later, inconsistent with its transfer of title,

issue debt cancellation letters and lien releases to borrowers. (SOF 114-117). As a result of

these initially admitted breaches, SA&F, like MRS, have suffered direct damages. (SOF 160).

1. Debt Forgiveness Letters

Chase admits it sent debt forgiveness letters, but now seems to feel it is deserving of

forgiveness, because it claims the letters were sent “inadvertently.” As above, to argue that

forgiving a loan, thus rendering it uncollectible, is not a breach of an agreement to sell a secured

loan, respectfully, should not be entertained by this Court.

Chase’s claim that an “accord and satisfaction” was reached between the parties on this

issue is not supported by the cited cases, or the clear facts of this case. The parties did not enter

into a new or separate written agreement, nor did the payment of some money “settle” the

“contract dispute.” See Proflex, Inc. Town of Fishkill, 883 N.Y.S.2d 912 (2d Dept. 2009) [“party

asserting the affirmative defense of accord and satisfaction must establish that there was a

disputed or unliquidated claim between the parties which they mutually resolved through a new

contract discharging all or part of their obligations under the original contract.”]

As argued throughout, and in response to Chase’s motion for summary judgment on

Plaintiffs’ breach of contract claims, the obliteration of a loan certainly caused damages, and

Chase’s payment of 100% of the unpaid balance of some loans, is and ought to be the measure of

damages on the rest. (RSOF 182). Moreover, the payment on some loans also constitutes an

admission by Chase that it: a) breached the MMLSAs, and b) that such breach harmed Plaintiffs

financially. While Chase paid 100% on these loans, it refused to pay more than a nominal sum

on the rest. (RSOF 180-182). Therefore, Plaintiffs refused these bad faith settlements, believing

the damages were properly the 100% Chase paid on the other erroneously forgiven loans.

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2. Lien Releases

A lien release, like a debt forgiveness letter, renders a loan unsecured, and

unquestionably diminishes and/or eliminates a borrowers’ incentive to pay back the monies

owed. It turns a home mortgage into a simple low interest bank note, like a credit card. This fact

cannot be disputed. As such, the measure of damages for a lien release, like a debt forgiveness

letter, is the unpaid principal balance of the loan, and any failure by Chase to pay that amount is

a direct damage suffered by the Plaintiffs. (RSOF 180-182). With SA&F, over 100 lien releases

were sent to borrowers that Plaintiffs have been able to identify. Plaintiffs would only be able to

identify same if: 1) Chase provided proof of the lien releases through discovery; 2) a borrower

notified the Plaintiffs, or 3) the Plaintiffs did a costly title exam on every loan in its ownership,

an unrealistic and undeserved reassignment of the financial burden of curing Chase’s actions.

This reality was expressed in Plaintiffs’ response to interrogatories, wherein Plaintiffs’

responded that Chase has better access to such information because Chase, not Plaintiffs, sent the

letters; and borrowers, not Plaintiffs, received them. (SOF 163). Thus, for Chase to argue

Plaintiffs cannot prove the quantity of these releases is not the Plaintiffs’ fault, but rather it is a

result of Chase’s clear concealment of evidence where such evidence demonstrated Chase’s

malfeasance, a now established practice by Chase.

3. Retention of Payments

Like above, Plaintiffs cannot prove that Chase retained a payment received on an SA&F

loan unless Chase admits it did and/or a borrower claims they paid Chase. For Chase to argue

that retaining a payment on a loan it sold to someone else is not proof of damages, especially in

light of recent proof that they suppressed evidence that they withheld payments they knew

belonged to Plaintiffs is itself reprehensible, thus does not warrant an argument in reply.

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D. PLAINTIFFS HAVE BEEN DAMAGED

Plaintiffs’ opposition to Chase’s motion for summary judgment on Plaintiffs’ breach of

contract claims outlines the damages to which Plaintiffs’ are entitled, which includes direct

damages in the form of lost profits, expenses incurred, monies retained, liens released and liens

forgiven on loans sold to Plaintiffs. (Docket 388).

While not specifically addressed within Chase’s Opposition to Plaintiffs’ motion for

partial summary judgment on their breach of contract claims, Chase does raise the argument that

Plaintiffs have not submitted evidence that Chase received credit from the Government on loans

released and/or forgiven, which Chase sold to Plaintiffs. (RSOF 192). Chase’s argument

ignores its own failure to provide said evidence during discovery. Chase’s disclosures to date

include lists of liens and loans Chase forgave to comply with Government incentives and,

included on that list, are loans sold to the Plaintiffs. (RSOF 167). Nevertheless, Chase argues

that Plaintiffs cannot prove that Chase received any monies from the Government for the specific

loans sold to Plaintiffs. To the extent that the Court will entertain this argument, it should be

noted that only Chase has the ability to provide proof that it did not receive Government

incentives and, to date, Chase has failed to produce any such evidence. Moreover, the limited

information Chase has provided, shows that Chase did receive incentives for certain loans sold to

Plaintiffs. (RSOF 192).

CONCLUSION

Based upon the foregoing, Plaintiffs ask the Court to grant summary judgment in their

favor on liability for Count I (Breach of Contract on behalf of MRS), Count II (Breach of

Contract on behalf of S&A) and Count III (Breach of Contract on behalf of 1st Fidelity) of

Plaintiffs’ Fourth Amended Complaint.

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Dated: Malden, Massachusetts. Respectfully submitted,

May 10, 2019 By: /s/ Roberto L. Di Marco
Roberto L. Di Marco
Jennifer Martin Foster
Michael V. Longo
Foster, Walker & Di Marco, P.C.
350 Main Street, Third Floor
Malden, MA 02148
(781) 322-3700
rdimarco@fwd-law.com

Counsel for Plaintiffs

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