of Midwest amounted to an approval of RAM. Although neither the Commissioner nor RAM frame the issue exactly right, the language of the Indenture itself and Continental's conduct toward RAM lead the Court to conclude that neither the Commissioner nor Continental have any obligations associated with RAM's contract.
As a starting point for this analysis, I repeat my finding from above that Midwest's December 23rd appointment of RAM as subservicer is invalid. Because Midwest had no powers or rights as the mortgage servicer at that time, it could not appoint RAM to be the subservicer. Midwest, however, did acquire the rights and powers of mortgage servicer on January 13th as a result of Continental's appointment. At that point, whether Midwest's original contract with RAM was revived or whether Midwest's actions impliedly ratified RAM as the subservicer need not be determined by the Court for purposes of this motion. The important fact to note is that RAM did act as the subservicer beginning no earlier than January 13th, and Midwest approved payment of fees to RAM for those services. RAM's Objections to Magistrate Pallmeyer's Report and Recommendation, Exh. C.
RAM and Midwest's relationship, however, is of no concern to the Commissioner or Continental. Pursuant to Section 6.01(b) of the Indenture, any agreement that a servicer makes with another entity to perform some of the servicer's obligations under the Indenture "shall be deemed to be between such Person and the Servicer alone, and neither the Company nor any Debenture holder shall be deemed to be parties thereto or have any claims, rights, obligations, duties or liabilities with respect to any such Person." Indeed, RAM previously has taken the position that this provision "explicitly prohibits the Commissioner and Continental from involvement with any contract between Midwest and RAM . . . ." RAM's Objections to Magistrate Pallmeyer's Report and Recommendation, at 34-35. I agree.
Midwest, as the servicing agent, does act as an agent for the Commissioner and Continental, yet it does so only for a limited purpose. Although the Indenture expressly creates this agency relationship, it also expressly limits that relationship. Section 6.01 clearly indicates that the subservicing agreement that Midwest entered with RAM is the exclusive domain and concern of Midwest and RAM. Neither the Commissioner nor Continental has any role in approving or disapproving of this contract. Thus, Midwest made the agreement with RAM solely on its own behalf, and any issues, obligations or problems associated with that contract must be resolved between RAM and Midwest. See Flintridge Station Assocs. v. American Fletcher Mortgage Co., 761 F.2d 434, 438-39 (7th Cir. 1985). RAM has come forward with no evidence to demonstrate that this provision of the Indenture is invalid or that Midwest, in its negotiations with RAM, somehow held itself out to be an agent of the Commissioner or Continental. RAM's claim that the Commissioner and Continental approved of its subservicing contract must fail because, as discussed above, the contract was between RAM and Midwest alone. RAM's conclusory statements to the contrary which are unsupported by specific facts are not enough to overcome the Commissioner's motion and create a genuine issue of material fact. See First Commodity Traders v. Heinold Commodities, 766 F.2d 1007, 1011 (7th Cir. 1985). On this basis alone, summary judgment on Count II may be entered for the plaintiffs.
Yet even assuming arguendo that Midwest was somehow acting as an agent for the Commissioner and Continental when it entered the agreement with RAM, summary judgment still would be appropriate. The evidence demonstrates that the Commissioner and Continental did not approve or ratify that agreement. A principal may ratify an agent's actions "by not repudiating the agent's actions once it has knowledge of the actions, or by accepting the benefits of the actions." Athanas v. City of Lake Forest, 276 Ill. App. 3d 48, 56, 657 N.E.2d 1031, 1038, 212 Ill. Dec. 686, 693 (1995).
The Commissioner and Continental took several actions in an effort to repudiate Midwest's agreement with RAM.
First, Continental, responding to a letter from RAM which informed Continental for the first time about RAM's new role, told RAM that any transfer of APX's role as mortgage servicer was ineffective because APX's rights had been terminated previously. Letter from Michael Nelson, President of Continental, to Frederick Bragiel, General Counsel for RAM (January 10, 1995). Second, on January 18th, the Commissioner directed Midwest to place twenty-four hour security guards outside of RAM's offices. Commissioner's Reply in Support, Exh. A at 769.
Third, Continental sent a letter to Midwest on February 23rd which formally appointed Midwest as the mortgage servicer as of January 13th. In that letter, Continental expressly disclaimed any ratification or approval of the purported appointment of Midwest by NHE on December 19th, and therefore Continental implicitly disclaimed any ratification or approval of RAM as subservicer. See Letter from Steven Nelson, Chairman of Continental, to Camden Fine, President Of Midwest, 2 (February 23, 1995). The date of this letter is critical, for it reveals that Continental continued to express its repudiation of RAM's role as subservicer even after it had approved of Midwest as the servicer. Finally, the Commissioner and Continental filed suit in New York in March, 1995, seeking a declaration that RAM had no right to act as a subservicer for the mortgages.
Overall, in a three month time period, the Commissioner and Continental took four affirmative and explicit actions which revealed a clear intent to repudiate RAM's appointment as subservicer.
In contrast, RAM has directed this Court to no specific acts or evidence which would indicate ratification. Rather, it states that the Commissioner and Continental have reaped benefits from its services, but it fails to specify those benefits. Again, conclusory statements which are unsupported by specific facts are not enough to overcome a motion for summary judgment. See First Commodity Traders, 766 F.2d at 1011. Even if I scour the record in this case for the benefits which the Commissioner or Continental may have received, the only benefit I find is RAM's remittance of some payments from the mortgages. Not only did the Commissioner and Continental have a right and indeed an obligation to accept such payments, but "ratification does not occur where a principal must affirm a transaction to protect his own interests." Bingham v. Zolt, 823 F. Supp. 1126, 1132 (S.D.N.Y. 1993). Thus, the Commissioner and Continental did not ratify Midwest's appointment of RAM as a subservicer.
For the foregoing reasons, the plaintiffs' motion for summary judgment on Count II is granted. If RAM does have a right to act as subservicer for the mortgages, that right must be derived from the agreement it entered with Midwest. It does not depend on any action or inaction taken by the Commissioner or Continental, both of whom have no role or responsibilities associated with that contract.
Elaine E. Bucklo
United States District Judge
Dated: December 13, 1996