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First Franklin Financial Corp. v. Amerihome Mortgage Co.

June 30, 2008

FIRST FRANKLIN FINANCIAL CORPORATION, A DELAWARE CORPORATION, PLAINTIFF,
v.
AMERIHOME MORTGAGE COMPANY, L.L.C., A WISCONSIN LIMITED LIABILITY COMPANY, DEFENDANT.



The opinion of the court was delivered by: Charles P. Kocoras, District Judge

MEMORANDUM OPINION

This matter comes before the court on the motion of Defendant Amerihome Mortgage Company, L.L.C. ("Amerihome") to dismiss Count II of Plaintiff First Franklin Financial Corporation ("First Franklin")'s complaint. For the following reasons, Amerihome's motion is denied.

BACKGROUND

Because this case comes to us in the context of a motion to dismiss, we take all well-pleaded facts alleged in the complaint as true. Conley v. Gibson, 355 U.S. 41, 45-46 (1957). According to the complaint, First Franklin is a Delaware corporation with its principal place of business in California and Amerihome is a Wisconsin limited liability company with members in Illinois and Wisconsin.

I. The Agreement

First Franklin and Amerihome entered into a Mortgage Broker Agreement (the "Agreement") in May 2004. Under the terms of the Agreement, Amerihome became an independent contractor for First Franklin. Amerihome was authorized to submit loan applications that were secured by a first or junior lien on residential property to First Franklin for funding.

Under Article III § 3.01(b) of the Agreement, Amerihome made the following assurances to First Franklin:

[Amerihome] will make such investigations and inquiries to verify the truthfulness and completeness of all information relating to the Borrower's creditworthiness and collateral submitted in connection with an application for a Loan. [Amerihome] warrants and represents that as of the date the Loan is closed and funded by First Franklin all such information is true, accurate, and complete and that [Amerihome] will not omit any material information.

In Article III § 3.01(e) of the Agreement, Amerihome consented to "provide and represent[] that it has provided the Goods and Services listed on Schedule A [including "investigating the accuracy and completeness of a Borrower's information" and "analyzing the Borrower's income"] for any Loan for which it receives compensation from First Franklin."

The Agreement also contained an Indemnification Clause at Article II § 2.02(a), which provided:

[Amerihome] shall indemnify, defend, and hold harmless First Franklin...from and against any and...all damage, loss, liability, cost, actions, causes of action, claims, demands, or expense both direct and indirect...by whomsoever asserted, including but not limited to the claims of: (1) the Borrower arising directly or indirectly out of the transaction which is the subject matter of this Agreement...which may arise or be incurred as a result of any action or inaction by [Amerihome], including, but not limited to, a breach of any covenant, condition, representation or warranty arising under the Agreement, except as such damage, loss, liability, cost, action, cause of action, claim, demand, or expense is caused solely by the negligence or willful misconduct of First Franklin.

II. The Loan Applications

According to First Franklin, Amerihome submitted three loan applications (the "Loan Applications") to First Franklin for funding. The Loan Applications were submitted on behalf of two different borrowers and were secured against two different properties. The borrowers later defaulted on their loans.

First Franklin's investor subsequently learned that the Loan Applications contained false information regarding the creditworthiness and collateral of the borrowers. As a result, First Franklin's investor required First Franklin to repurchase the loans and sell the properties in foreclosure ...


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