Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_03-cv-03721/USCOURTS-cand-3_03-cv-03721-6/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

FEDERAL AGRICULTURAL MORTGAGE

CORP,

Plaintiff,

v

IT'S A JUNGLE OUT THERE, INC dba

VINTAGE CAPITAL, et al,

Defendants.

 

IT'S A JUNGLE OUT THERE, INC dba

VINTAGE CAPITAL, et al,

Counterclaimants,

v

FEDERAL AGRICULTURAL MORTGAGE

CORPORATION, et al,

Counterdefendants.

 

IT'S A JUNGLE OUT THERE, INC dba

VINTAGE CAPITAL, et al,

No C 03-3721 VRW

ORDER

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Third-party plaintiffs,

v

STEWART TITLE GUARANTY CO, et al,

Third-party defendants.

 /

This case involves the fallout from an agricultural loan

transaction gone awry. Defendant It’s a Jungle Out There, Inc, dba

Vintage Capital (“Vintage”) originated the loan in 1999 and

immediately sold it to plaintiff Federal Agricultural Mortgage

Corporation (“Farmer Mac”), a federally chartered corporation that

makes a secondary market in agricultural loans. Zions First

National Bank (“Zions”) was Farmer Mac’s central servicer for the

loan. Stewart Title Guaranty Company (“Stewart”) issued a title

insurance policy for the real property securing the loan. New

Century Title Company (“New Century”) provided escrow services in

connection with the loan transaction. After the borrower, RAM

Investments, LLC, defaulted, Farmer Mac asserted its contractual

rights against Vintage and ultimately filed a complaint in this

court against Vintage and its principals Robert and Ami Hower

(collectively, “the Howers”), who in turn asserted numerous

counterclaims and third-party claims against Farmer Mac, Zions,

Stewart and New Century (as well as other individuals and entities

no longer parties to this action).

Vintage and the Howers separately move to dismiss the

amended complaint filed by Farmer Mac. Doc ##113, 114. Farmer Mac

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moves for summary adjudication on the issue of breach in connection

with its claim for breach of contract against Vintage. Doc #135. 

Farmer Mac and Zions jointly move for summary judgment against

Vintage and the Howers on all counterclaims. Stewart, New Century

and Zions separately move for summary judgment against Vintage and

the Howers on all third-party claims. Doc ##119, 123, 133.

For reasons discussed below, the motions to dismiss the

amended complaint are DENIED. Summary judgment in favor of Vintage

and the Howers on Farmer Mac’s Lanham Act claims is GRANTED IN PART

and DENIED IN PART. Farmer Mac’s motion for summary adjudication

on its claim for breach of contract is GRANTED IN PART and DENIED

IN PART. Farmer Mac and Zions’ motion for summary judgment in

their favor on all counterclaims is GRANTED. Stewart and New

Century’s respective motions for summary judgment in their favor on

all third-party claims are GRANTED; consequently, Stewart’s motion

to bifurcate the third-party claims is DENIED AS MOOT. Zions’

motion for summary judgment in its favor on all third-party claims

is GRANTED IN PART and DENIED IN PART.

I

A

Farmer Mac is a federally chartered corporation regulated

by the Farm Credit Administration. Farmer Mac makes a secondary

market for agricultural mortgages by purchasing “qualified” loans

from “approved” loan sellers. In order to become an approved

seller, loan originators must enter into a master seller/servicer

agreement with Farmer Mac (“S/S agreement”), which incorporates by

reference an accompanying seller/servicer guide (“S/S guide”). 

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Farmer Mac and Vintage entered into an S/S agreement in 1998, which

defendant Robert Hower signed in his capacity as chairman of

Vintage. 

 In order to ensure that loans meet Farmer Mac standards,

approved sellers must submit a loan application package consisting

of several components. First, sellers must prepare a loan

“narrative.” The S/S guide provides that “the loan narrative

should present the total potential exposure to Farmer Mac” and

specifies information about the proposed borrowers that must be

included in the narrative. Doc #131 (Appendix), Ex 3, Chapter 202

at Ex A. Second, sellers must provide Farmer Mac with credit

reports for all borrowers and guarantors. The credit report for

each borrower and guarantor must disclose “all available public

records information,” including “any judgments, foreclosures, tax

liens, or bankruptcies [that] were discovered in the public

records.” Id § 202.1. Further, the seller is “expected” to verify

all information contained in the credit reports and “should”

explain in writing any undisclosed debts because “omission of this

information is often considered grounds for denying the loan.” Id. 

Third, sellers must obtain an independent appraisal of

the property. The appraisal is to assess the value of the

collateral according to guidelines prescribed by Farmer Mac. 

Sellers must verify the appraisal by completing an “administrative

appraisal review report” (“AARR”). The purpose of the AARR is to

verify “that the understandings conveyed through the [appraisal] as

well as certain factual data set forth in the [appraisal]

accurately reflect the conditions of the property being appraised.” 

Id § 204.5. An environmental survey report must also be submitted. 

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The purpose of this report is to identify any liabilities “that may

be associated with any hazardous waste or other environmental

concerns.” Id § 203.7(10). The appraiser is required to verify

the environmental survey report.

The S/S guide obligates sellers to make extensive

representations and warranties in connection with each loan offered

for sale to Farmer Mac. First and foremost, sellers must represent

that “loan information submitted to Farmer Mac is true and

correct.” Id § 304.3(1). (Other representations and warranties

will be referenced as needed below.) Sellers who make untrue

representations or warranties “will be required either to cure,

replace (with a Qualified Loan satisfactory to Farmer Mac) or

repurchase a Qualified Loan sold or transferred to Farmer mac if

any breach of a representation or warranty is discovered.” Id §

305.2. 

 Farmer Mac may terminate the S/S agreement “for cause

based upon the existence of” an event of default. Id § 503.2. The

S/S guide specifies several events of default, including failure

“to comply with any one or requirement, term, or condition of” the

S/S agreement or guide, the making of “false or misleading

representations or warranties” and failure to service loans in

accordance with the requirements of the S/S agreement or guide. 

Id § 503.1(3). Termination of the S/S agreement terminates a

seller’s status as an approved seller. Id.

B

In 1999, the Singh/Sidhu family approached Vintage for

the purpose of refinancing two apple orchards (separately, the

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“Chelan orchard” and the “Mattawa orchard”). Jarnail Singh was the

title holder of record for both properties. Because Mr Singh was

not a resident alien of the United States, he was ineligible to

borrow from Farmer Mac. In order to overcome this hurdle, the

Singh/Sidhu family formed RAM Investments, LLC (“RAM”). Mr Singh’s

son Kulwinder (Calvin) Sidhu, a permanent legal resident of the

United States, was named managing member and was given a 51%

interest in RAM. RAM thus qualified as a Farmer Mac borrower

because a majority of its interest was owned by a permanent legal

resident of the United States. Mr Singh and his other son Devinder

Sidhu were also members of RAM. Mr Singh transferred the orchard

properties to RAM, thereby paving the way for a Farmer Mac loan. 

In June 1999, Vintage submitted an application to Farmer Mac

requesting a loan on behalf of RAM. The apple orchards were

offered as security for the loan. 

As required by the S/S guide, Vintage presented to Farmer

Mac a loan “narrative” describing and assessing RAM and the

Singh/Sidhu family (the “RAM narrative”). Appendix, Ex 7. In the

RAM narrative, Vintage stated that Mr Singh had “an exemplary

credit history.” Id at 8. With respect to the collateral, Vintage

stated that “[t]he value is not dependent upon perfection of any

lien instrument in addition to the mortgage(s) * * *.” Id at 13. 

Robert and Ami Hower both signed the RAM narrative. Vintage also

obtained an independent appraisal of the orchards, which was

verified in an AARR signed by Robert Hower. Id, Exs 9, 14.

In anticipation of closing, Vintage engaged Stewart to

provide title services and New Century to provide escrow services. 

As the closing date approached, Vintage and New Century

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communicated with Zions, Farmer Mac’s central servicer, regarding

various arrangements and details attending the transaction. On

September 23, 1999, Vintage loaned RAM $1,932,000 and assigned the

note and mortgage to Farmer Mac. Farmer Mac issued a commitment to

purchase the RAM loan on September 30, 1999, and escrow closed on

October 8, 1999. 

In January 2001, RAM defaulted on the loan. Farmer Mac

foreclosed on the two orchards in April 2002. In the course of

attempting to liquidate the loan security, Farmer Mac discovered

several facts surrounding the orchards and Jarnail Singh that,

according to Farmer Mac, should have been disclosed or otherwise

addressed by Vintage prior to the close of escrow. Invoking its

remedies for breaches of the S/S agreement and guide, Farmer Mac

demanded that Vintage repurchase the RAM loan. Vintage’s failure

to do so prompted Farmer Mac to “suspend” Vintage as an loan

originator and seller for Farmer Mac December 10, 2002. Farmer Mac

formally terminated Vintage as an approved seller on March 23,

2003, and as a field servicer on August 18, 2003. 

Farmer Mac filed its original complaint against Vintage

and the Howers on August 11, 2003. Doc #1. The original complaint

asserted claims for breach of contract, fraud, negligent

misrepresentation, false advertising and trademark infringement. 

Doc #1. Vintage and the Howers responded to the original complaint

with counterclaims against Farmer Mac for breach of contract and

breach of the implied covenant of good faith and fair dealing. 

Against both Farmer Mac and Zions, Vintage and the Howers allege

trade libel, restraint of trade and intentional interference with

prospective economic advantage. Doc #6. (The court notes that

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Zions was not an original party to the action, and thus was not an

“opposing party” for purposes of FRCP 13(a) or (b). This potential

procedural defect has not been raised by any party thus far in the

litigation. Given the ultimate disposition of the claims asserted

against Zions in the second amended counterclaim, the court will

simply treat Zions as a properly joined counterdefendant pursuant

to FRCP 13(h).) Vintage and the Howers also filed a third-party

complaint, alleging various claims for indemnity and contribution

against Stewart, New Century and Zions. Doc #15.

Almost two years later, Farmer Mac amended its complaint

to add a claim for express indemnity. Doc #110 (FAC). Vintage and

the Howers responded with separate motions to dismiss the amended

complaint pursuant to FRCP 12(b)(6). The court will address these

motions first.

II

Rule 12(b)(6) motions to dismiss essentially “test

whether a cognizable claim has been pleaded in the complaint.” 

Scheid v Fanny Farmer Candy Shops, Inc, 859 F2d 434, 436 (6th Cir

1988). Although a plaintiff is not held to a “heightened pleading

standard,” the plaintiff must provide more than mere “conclusory

allegations.” Swierkiewicz v Sorema NA, 534 US 506, 515 (2002)

(rejecting heightened pleading standards); Schmier v United States

Court of Appeals for the Ninth Circuit, 279 F3d 817, 820 (9th Cir

2002) (rejecting conclusory allegations).

Under Rule 12(b)(6), a complaint “should not be dismissed

for failure to state a claim unless it appears beyond doubt that

the plaintiff can prove no set of facts in support of his claim

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which would entitle him to relief.” Hughes v Rowe, 449 US 5, 9

(1980) (citing Haines v Kerner, 404 US 519, 520 (1972)); see also

Parks School of Business, Inc v Symington, 51 F3d 1480, 1484 (9th

Cir 1985). All material allegations in the complaint must be taken

as true and construed in the light most favorable to plaintiff. 

See Gompper v VISX, Inc, 298 F3d 893, 895 (9th Cir 2002). But “the

court [is not] required to accept as true allegations that are

merely conclusory, unwarranted deductions of fact, or unreasonable

inferences.” Sprewell v Golden State Warriors, 266 F3d 979, 988

(9th Cir 2001) (citing Clegg v Cult Awareness Network, 18 F3d 752,

754-55 (9th Cir 1994)).

A

The court first addresses the timeliness of the motions

to dismiss the claims asserted against Vintage and the Howers in

the original complaint (i e, all claims except for the claim for

express indemnity). Vintage and the Howers filed an answer to the

original complaint without filing a Rule 12(b) motion. Vintage and

the Howers’ answer stated -- without elaboration and in boilerplate

fashion -- that the “complaint fail[ed] to state a claim upon which

relief could be granted.” Doc #6 at 7. Vintage and the Howers did

not otherwise challenge the original complaint under Rule 12(b)(6). 

More than two years after the filing of the original complaint and

extensive discovery, Farmer Mac sought and obtained (without

opposition) leave to amend its complaint to add a claim for express

indemnity. The amended complaint did not modify the claims

asserted in the original complaint. In lieu of a responsive

pleading, Vintage and the Howers filed the present motions to

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dismiss all claims pursuant to Rule 12(b)(6).

Generally, a motion to dismiss for failure to state a

claim must be made before any responsive pleading; otherwise, the

motion is untimely. Aetna Life Ins Co v Alla Medical Servs, Inc,

855 F2d 1470, 1474 (9th Cir 1988). Vintage and the Howers posit

that the amended complaint revived their ability to attack all

claims, including the original claims reasserted without

modification, pursuant to Rule 12(b)(6) -- explaining, perhaps,

Vintage and the Howers’ uncharacteristic decision not to oppose

Farmer Mac’s motion for leave to amend. 

According to one leading commentator, “[t]he filing of an

amended complaint will not revive the right to present by motion

defenses that were available but were not asserted in timely

fashion prior to the amendment of the pleading; conversely, a Rule

12 defense that becomes available because of new matter in the

amended complaint may be asserted by motion.” Wright & Miller, 5D

Federal Practice & Procedure § 1388, at 491-92 (3d ed 2004). 

Although the Ninth Circuit has not had occasion to apply this

principle, the weight of authority outside this circuit holds that

where the complaint is amended after the defendant has filed a Rule

12(b) motion, the defendant may not thereafter file a second Rule

12(b) motion asserting objections or defenses that could have been

asserted in the first motion. See Sears Petroleum & Transport Corp

v Ice Ban America, Inc, 217 FRD 305, 307 (NDNY 2003) (“While it is

true that an amended complaint ordinarily supersedes a prior

complaint, and renders it of no legal effect[,] [i]t is also true

that if the amended complaint also contains new matter, the

defendant may bring a second motion under Rule 12 to object to the

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new allegations only.” (citations omitted)); Wafra Leasing Corp

1999-A-1 v Prime Capital Corp, 247 F Supp 2d 987, 999 (ND Ill

2002); Rowley v McMillan, 502 F2d 1326, 1333 (4th Cir 1974) (“An

unasserted defense available at the time of response to an initial

pleading may not be asserted when the initial pleading is

amended.”); Keefe v Derounian, 6 FRD 11, 13 (ND Ill 1946). 

This case differs from the above-cited cases in one

respect: Vintage and the Howers’ initial response to the original

complaint was in the form of an answer rather than a Rule 12(b)

motion. The court perceives the difference to be immaterial. The

parties, however, have not placed timeliness squarely in issue; nor

does the court find it appropriate in this case to treat Vintage

and the Howers’ motions as motions for judgment on the pleadings

pursuant to FRCP 12(c). Accordingly, the court declines to find

Vintage and the Howers’ motions untimely insofar as they challenge

claims asserted in the original complaint. But the timing of the

motions is nonetheless relevant to Vintage and the Howers’ argument

for dismissing the fraud claim, to which the court now turns.

B

Fraud

Although the substantive elements of Farmer Mac’s fraud

claim are governed by state law, those elements must be pleaded in

accordance with FRCP 9(b). Vess v Ciba-Geigy Corp USA, 317 F3d

1097, 1103 (9th Cir 2003). Rule 9(b) requires that “circumstances

constituting fraud” be stated with particularity. To satisfy this

heightened pleading standard, a plaintiff must set forth “the who,

what, when, where, and how” of the alleged misconduct. Id at 1106

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(internal quotations omitted). In other words, a “plaintiff must

include statements regarding the time, place, and nature of the

alleged fraudulent activities * * *.” In re Glenfed, Inc

Securities Litig, 42 F3d 1541, 1548 (9th Cir 1994). Further,

“plaintiff must set forth what is false or misleading about a

statement, and why it is false.” Id. Vintage argues that Farmer

Mac “has failed to identify who made any of the alleged

misrepresentations or the source of the alleged representations or

when and where the alleged misrepresentations were made.” Doc #114

at 5. Similarly, the Howers argue that Farmer Mac has failed “to

identify any alleged representations by the Howers or the source of

the Howers alleged representations [sic] or when and where the

Howers made such alleged representations.” Doc #113 at 9. 

The amended complaint alleges that “Defendants” made

several specific representations in connection with the RAM loan,

as required by the S/S agreement and guide. FAC ¶11. The

complaint further alleges that “Defendants” made additional

representations in the RAM narrative regarding the quality of the

RAM loan in general and Jarnail Singh’s exemplary credit history in

particular. Id ¶12. The complaint goes on to explain what was

false about each of the representations. Id ¶19. The court is

satisfied that these allegations describe with sufficient

particularity the alleged representations and the reasons why those

representations were false. 

Arguably, the complaint fails to attribute

representations to either Robert or Ami Hower with adequate

specificity. The complaint states that “[a]t all times herein

referenced, each of the above-referenced misrepresentations were

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made by Robert Hower and Ami Cheri Hower in their capacities as

officers of [Vintage].” Id ¶21. If, as it appears, Farmer Mac

intended to allege that both Robert and Ami Hower made each of the

alleged representations, then in order to comply with Rule 9(b),

Farmer Mac should have specifically so alleged rather than using

the blanket term “Defendants”. Without citation to legal

authority, Farmer Mac insists that “[m]ore is not necessary” where

the fraud allegations “are directed at both of the [d]efendants who

jointly and in concert committed the fraud alleged.” Doc #155 at

20. Indeed, courts in the past have stated that “once [the

complaint] has adequately identified a particular defendant with a

category of defendants allegedly responsible for some continuing

course of conduct,” Rule 9(b) does not require that the complaint

“plead more than the group conduct of the defendants.” In re

Equity Funding Corp of America Securities Litig, 416 F Supp 161,

181 (CD Cal 1976). 

The court need not at this time determine the continuing

viability of this gloss on Rule 9(b) because even if the court were

to conclude that the fraud allegations do not attribute the alleged

misrepresentations to the individual defendants with sufficient

particularity, “to grant defendant[s’] motion[s] in this case would

be to reward defendant[s] for not bringing [their] Rule 9(b) motion

in a more timely manner.” Independent Energy Corp v Trigen Energy

Corp, 944 F Supp 1184, 1199 (SDNY 1996). Ordinarily, the court

would grant leave to amend a claim that is dismissed for failure to

satisfy Rule 9(b). In this case, however, Farmer Mac might be

denied an opportunity to amend its claim due to the fastapproaching trial date. Additionally, Vintage and the Howers are

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“not confronted with the type of conclusory or speculative

allegations against which Rule 9(b) seeks to guard.” Id. Finally,

a core purpose of Rule 9(b) is “to give defendants adequate notice

to allow them to defend against the charge.” In re Stac

Electronics Securities Litig, 89 F3d 1399, 1404 (9th Cir 1996). 

Here, there can be no serious question that Vintage and the Howers

have filed a pleading responsive to the fraud claim and have had

ample opportunity through discovery to ascertain the full factual

basis of Farmer Mac’s fraud claim. Under these circumstances,

dismissal will not further the purposes of Rule 9(b). 

C

Negligent Misrepresentation

As with Farmer Mac’s fraud claim, Vintage and the Howers

argue that Farmer Mac’s failure to plead with sufficient

particularity is a basis for dismissing the claim for negligent

misrepresentation. Vintage and the Howers fail to appreciate,

however, that these two birds it hopes to kill with one stone are,

for pleading purposes, of a different feather. “‘Although [Rule]

9(b) does not expressly apply to a claim for negligent

misrepresentation, [Rule] 8 does require plaintiffs to give

defendants fair notice of the claim against them.’” In re Heritage

Bond Litig, 289 F Supp 2d 1132, 1154 (CD Cal 2003) (quoting Foster

v Allstate Insurance Co, 1995 WL 396646, at *2 (SD Cal 1995))

(brackets omitted). “The complaint should state, among other

things, the facts alleged to have been misrepresented by the

defendants and the identity of the person who made the statements.” 

Id. The court has already found that the complaint adequately

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specifies the facts alleged to have been misrepresented. And in

light of (1) the court’s refusal to dismiss the fraud claims for

failure to attribute each alleged misrepresentation to the

individual defendants and (2) the less rigorous pleading standard

applicable to claims for negligent misrepresentation, the court

will not dismiss the claims for negligent misrepresentation for

want of specificity with regard to the identity of the defendants

who made the statements. 

D

Breach of Contract

Vintage first argues that the S/S guide is

“noncontractual” and therefore cannot serve as the predicate for

breach of contract. Doc #114 at 6. The court disagrees. The

complaint alleges that Robert Hower, acting in his official

capacity on behalf of Vintage, entered into the S/S agreement with

Farmer Mac on January 2, 1998. FAC ¶8. Farmer Mac further alleges

that the S/S agreement incorporates the S/S guide by reference. 

Id, ¶11. Taking these allegations together, Farmer Mac has

sufficiently alleged that Vintage was contractually bound by the

terms of the S/S guide.

Next, Vintage argues that Farmer Mac failed to allege

“that the provisions at issue were in effect when [Vintage] entered

into the agreement or when [Vintage] offered to sell Farmer Mac the

RAM loan.” Doc #114 at 5. The thrust of this argument is that

because the S/S guide is subject to modification, it is possible

that the terms Vintage allegedly breached took effect after Vintage

sold the RAM loan to Farmer Mac. See id at 6. Yet despite

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extensive discovery up to this point, Vintage presents no evidence

that the S/S guide was in fact modified subsequent to January 2,

1998. And interestingly, Vintage and the Howers have based their

own counterclaims on the terms of the guide that they now suggest

to be “noncontractual”. See Doc #57, ¶7. 

In any event, Farmer Mac has alleged that (1) Vintage and

Farmer Mac entered into the agreement on January 2, 1998, (2)

Vintage has “since” sold loans to Farmer Mac pursuant to the

agreement and (3) Vintage did not originate the RAM loan until

September 23, 1999. FAC ¶¶8-9. In other words, the complaint

states that the acts constituting the alleged breach occurred

subsequent to formation of the contract. Vintage has offered no

authority indicating Farmer Mac must specifically allege that the

relevant terms of the agreement and guide were “in effect” at the

relevant time.

Because the breach of contract claim is asserted against

Vintage only, Doc #155 at 9, the court need not consider the

Howers’ separate arguments for 12(b)(6) dismissal. 

E

Express Indemnity

“An indemnitee seeking to recover on an agreement for

indemnification must allege the parties’ contractual relationship,

the indemnitee’s performance of that portion of the contract which

gives rise to the indemnification claim, the facts showing a loss

within the meaning of the parties’ indemnification agreement, and

the amount of damages sustained.” Four Star Electric, Inc v F & H

Construction, 7 Cal App 4th 1375, 1380 (1992). Vintage does not

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dispute that Farmer Mac’s complaint alleges each of these elements. 

Rather, the sole basis for Vintage’s motion to dismiss the claim

for express indemnity is that the claims alleged by Farmer Mac are

not in fact encompassed by the S/S guide’s indemnity provision,

which states:

The Seller shall indemnify Farmer Mac and its

directors, officers and other employees and hold

each of them harmless against any and all losses,

claims, damages, judgments, penalties, fines and

legal costs and expenses, including reasonable

attorneys’ fees, that they may sustain as a result

of or arising out of any event of default, including

but not limited to those that are in any reasonable

way related to the actual or alleged failure of the

Seller to perform its duties and service the

Qualified Loans in strict compliance with the terms

of [the S/S agreement and guide]. The obligations

of the Seller under this Subsection shall survive

delivery and payment for the Qualified Loans and

termination of the Seller’s relationship with Farmer

Mac. The Seller shall immediately notify Farmer Mac

if a claim is made by a third party with respect to

[the S/S agreement, the S/S guide] or any Qualified

Loan, and may assume, with Farmer Mac’s prior

written consent, the defense of any such claim at

the Seller’s expense.

Appendix, Ex 3, § 503.3 (emphasis added).

Farmer Mac did not recite the underscored language in its

amended complaint. Vintage maintains that this language

“establishes that the provision applies [only] to claims made by

third parties with regard to Farmer Mac’s conduct or loans.” Doc

#114 at 9. “Without the third sentence,” Vintage argues, “the

provision is incomplete and nonsensical.” Id. Vintage’s argument

fails to persuade. 

The first sentence of the indemnity provision clearly

states that sellers are required to indemnify and hold Farmer Mac

harmless against “any and all” claims arising out of “any” event of

default. The S/S agreement further evidences the broad scope of

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sellers’ obligations to indemnify Farmer Mac: “Seller will be in

default under the [S/S agreement] upon the occurrence of any Event

of Default under the [S/S guide], and will be subject to any

remedies available to Farmer Mac, including, but not limited to,

indemnification of Farmer Mac * * *.” Appendix, Ex 2, § 5

(emphasis added). In other words, Farmer Mac may seek

indemnification for losses arising from “any” event of default, not

just events of default giving rise to claims by third parties.

The third sentence does not narrow the scope of sellers’

obligation to indemnify Farmer Mac. Rather, the third sentence of

the S/S guide’s indemnity provision simply addresses a subset of

sellers’ obligations, viz, in the event a third party files a claim

implicating the S/S agreement, the S/S guide or a Farmer Mac loan,

sellers must notify and, with Farmer Mac’s consent, defend Farmer

Mac. This in no way limits sellers’ obligations to indemnify

Farmer Mac for “any and all” claims arising from “any” event of

default. There can be no doubt that the claims asserted by Farmer

Mac in this case (with the exception of the Lanham Act claims, see

infra III) fit this description.

Because the claim for express indemnity is asserted

against Vintage only, Doc #155 at 9, the court need not consider

the Howers’ separate arguments for 12(b)(6) dismissal. 

E

Vintage’s motion to dismiss is DENIED. The Howers’

motion to dismiss is likewise DENIED.

//

//

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III

“Farmer Mac” is registered as a service mark with the

United States Patent and Trademark Office. Following Farmer Mac’s

suspension of Vintage as an approved seller, Farmer Mac requested

that Vintage correct statements on Vintage’s website that

represented Vintage to be a Farmer Mac lender. Doc #201 (Oslick

Decl), Ex A. Farmer Mac repeated this request on January 29, 2003. 

Id, Ex B. As of August 5, 2003, Vintage’s website continued to

state that Vintage offered “Long Term, Fixed Rate Agricultural

Loans through Farmer Mac” and that Vintage was “an approved Farmer

Mac Lender whose focus is tailored to serve the needs of the wine

industry.” Id, Ex C. One page on Vintage’s website was dedicated

to describing the benefits of Farmer Mac loans, with the phrase “A

Farmer Mac Lender” prominently displayed at the top of the page

right below Vintage’s name. Id. The appears to be no dispute that

Vintage has removed all references to Farmer Mac from its website.

Farmer Mac’s fourth claim seeks injunctive relief for

false advertising under § 43(a) of the Lanham Act, 15 USC §

1125(a), which creates liability against any person who “uses in

commerce any word, term, name, symbol, or device, or any

combination thereof, of * * * false or misleading representation of

fact which * * * is likely to cause confusion, or to cause mistake,

or to deceive as to the affiliation, connection, or association of

such person with another person, or as to the origin, sponsorship,

or approval of his or her goods, or commercial activities by

another person * * *.” Id § 1125(a)(1). Farmer Mac’s fifth claim

seeks monetary and injunctive relief for trademark infringement

under § 32 of the Lanham Act, 15 USC § 1114, which creates

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liability against any person who without consent “use[s] in

commerce any reproduction, counterfeit, copy or colorable imitation

of a registered mark in connection with the sale, offering for

sale, distribution, or advertising of any goods or services on or

in connection with which such is likely to cause confusion, or to

cause mistake, or to deceive * * *.” 15 USC § 1114. 

When the matter came before the court, the court notified

Farmer Mac that it intended to treat Vintage and the Howers’

motions to dismiss the Lanham Act claims as motions for summary

judgment and allowed Farmer Mac an opportunity to present evidence

supporting its Lanham Act claims. See Portsmouth Square, Inc v

Shareholders Protective Committee, 770 F2d 866, 869-70 (9th Cir

1985) (holding it proper for district court sua sponte to grant

summary judgment at a pretrial conference where discovery was

complete and losing party “was adequately notified that it might

have to defend the sufficiency of its claim”).

A

In reviewing a motion for summary judgment, the court

must determine whether genuine issues of material fact exist,

resolving any doubt in favor of the party opposing the motion. 

“[S]ummary judgment will not lie if the dispute about a material

fact is ‘genuine,’ that is, if the evidence is such that a

reasonable jury could return a verdict for the nonmoving party.” 

Anderson v Liberty Lobby, 477 US 242, 248 (1986). “Only disputes

over facts that might affect the outcome of the suit under the

governing law will properly preclude the entry of summary

judgment.” Id. And the burden of establishing the absence of a

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genuine issue of material fact lies with the moving party. Celotex

Corp v Catrett, 477 US 317, 322-23 (1986). Summary judgment is

granted only if the moving party is entitled to judgment as a

matter of law. FRCP 56(c).

The nonmoving party may not simply rely on the pleadings,

however, but must produce significant probative evidence, by

affidavit or as otherwise provided in FRCP 56, supporting its claim

that a genuine issue of material fact exists. TW Elec Serv v

Pacific Elec Contractors Ass’n, 809 F2d 626, 630 (9th Cir 1987).

The evidence presented by the nonmoving party “is to be believed,

and all justifiable inferences are to be drawn in his favor.” 

Anderson, 477 US at 255. “[T]he judge’s function is not himself to

weigh the evidence and determine the truth of the matter but to

determine whether there is a genuine issue for trial.” Id at 249.

The evidence presented by both parties must be

admissible. FRCP 56(e). Conclusory, speculative testimony in

affidavits and moving papers is insufficient to raise genuine

issues of fact and defeat summary judgment. Thornhill Publishing

Co, Inc v GTE Corp, 594 F2d 730, 738 (9th Cir 1979). Hearsay

statements in affidavits are inadmissible. Japan Telecom, Inc v

Japan Telecom America Inc, 287 F3d 866, 875 n1 (9th Cir 2004).

B

Vintage and the Howers argue that the claim for

injunctive relief is moot because Vintage has removed all Farmer

Mac references from its website. Farmer Mac argues that

discontinuance of infringement or false advertising does not

necessarily moot claims for injunctive relief under the Lanham Act. 

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Farmer Mac relies upon Levi Strauss & Co v Shilon, 121 F3d 1309

(9th Cir 1997), and Polo Fashions, Inc v Dick Bruhn, Inc, 793 F2d

1132 (9th Cir 1986). 

Polo Fashions involved claims for trademark infringement. 

After finding liability, “the district court refused to grant an

injunction because the plaintiffs had not introduced any specific

evidence to demonstrate that the defendants would infringe in the 

future.” Id at 1135. A panel of the Ninth Circuit unanimously

reversed:

The defendants had willfully violated Polo’s

trademark rights. The defendants refused to stop

violating those rights until Polo brought suit in

federal district court. We should not require Polo

also to introduce concrete evidence that the

defendants are likely to infringe again. If the

defendants sincerely intend not to infringe, the

injunction harms them little; if they do, it gives

Polo substantial protection of its trademark. 

Id at 1135-36.

Levi Strauss involved claims under the Lanham Act for

marketing counterfeit goods and unfair competition. The district

court enjoined defendant from continuing to deal in infringing

products. On appeal, defendant argued that the injunction was

unnecessary because defendant had ceased violating plaintiff’s

rights under the Lanham Act. The Ninth Circuit wasted no time

rejecting this argument:

A trademark plaintiff is entitled to effective

relief; and in any doubt in respect of the extent

thereof must be resolved in the plaintiff’s favor as

the innocent producer and against the defendant,

which has shown by its conduct that it is not to be

trusted. [Plaintiff] is not required to produce

evidence that [defendant] is likely to infringe

again.

Levi Strauss, 121 F3d at 1314 (citations and quotations omitted).

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Vintage and the Howers’ mootness argument must fail under

Polo Fashions and Levi Strauss. The court declines to address the

merits of Farmer Mac’s claims for injunctive relief at this time.

Summary judgment in favor of Vintage and the Howers on Farmer Mac’s

claims for injunctive relief under the Lanham Act is DENIED. 

C

“Section 35 of the Lanham Act, 15 USC § 1117(a), governs

the award of monetary remedies in trademark infringement cases and

provides for an award of defendant’s profits, any damages sustained

by the plaintiff, and the costs of the action.” Lindy Pen Co, Inc

v Bic Pen Corp, 982 F2d 1400, 1405 (9th Cir 1993). To recover

damages, “plaintiff must prove both the fact and amount of damage.” 

Id at 1407; see also Intel Corp v Terabyte Int’l, Inc, 6 F3d 614,

620 (9th Cir 1993). 

Farmer Mac has not presented any evidence of damages or

profits, much less damages or profits reasonably attributable to

the alleged infringement. Farmer Mac appears to take the position

that it need not prove the existence of damages to obtain an

accounting of Vintage’s profits. This argument misses the mark; in

order to obtain disgorgement, Farmer Mac must prove that Vintage

and the Howers profited during the relevant time period, and

summary judgment is appropriate in the absence of such evidence. 

See Committee for Idaho’s High Desert, Inc v Yost, 92 F3d 814, 823

(9th Cir 1996) (affirming summary judgment on claims for monetary

relief under 15 USC § 1117(a) where plaintiff offered no evidence

that defendant profited). 

// 

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Claims for monetary relief under the Lanham Act may be

properly disposed of on summary judgment, see id at 823, even if a

claim for injunctive relief is allowed to stand, see Strike It

Rich, Inc v Jos Schlitz Brewing Co, 505 F Supp 89, 91 (DDC 1980). 

The court finds such a disposition to be appropriate in this case

and accordingly GRANTS partial summary judgment in favor of Vintage

and the Howers on Farmer Mac’s claims for damages and disgorgement

under the Lanham Act.

IV

Before turning to the Farmer Mac’s motion for summary

adjudication and Farmer Mac and Zions’ motion for summary judgment,

the court addresses Vintage and the Howers’ objections to evidence

submitted by Farmer Mac and Zions in support of their respective

motions, Doc #168, and Farmer Mac’s request for judicial notice,

Doc #209. 

Defects in the authenticity of deposition transcripts and

records of judicial proceedings have been cured through

supplementary declarations. See Doc #179, Exs 81-83. Moreover,

the following documents were authenticated by Robert Hower through

his (now-authenticated) deposition testimony, Appendix, Ex 65

(Hower Depo): (1) the S/S agreement, Appendix, Ex 2 (see Hower

Depo at 51:23-52:20); (2) the RAM Narrative, Appendix, Ex 7 (see

Hower Depo at 270:1-23); (3) the appraisal, Appendix, Ex 9 (see

Hower Depo at 140:25-141:9); (4) the AARR, Appendix, Ex 14 (see

Hower Depo at 175:1-25); (5) the revised preliminary loan approval

notice, Appendix, Ex 13 (see Hower Depo at 123:13-124:11); and (6)

an agricultural financial statement for Jarnail Singh dated

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September 27, 1999, Appendix, Ex 50 (see Hower Depo 400:9-22). The

e-mails contained in Exhibit 56 were authenticated by the

declaration of Gary Johnson, Doc #137, and the court finds the

copies of records relating to water rights to be authentic pursuant

to FRE 901(b)(4), see Orr v Bank of America, 285 F3d 764, 778 n24

(9th Cir 2002). Objections to the authenticity of the foregoing

exhibits are OVERRULED. 

The court SUSTAINS objections to hearsay evidence

contained in Exhibits 21 and 27. Several of the exhibits to which

defendants/counterclaimants object are not offered for the truth of

the matter asserted; objections to such exhibits are accordingly

OVERRULED. 

The remaining objections to authenticity and hearsay are

OVERRULED as the court has not relied upon the challenged evidence.

Farmer Mac’s request for judicial notice of records

relating to the ownership status of mobile homes is GRANTED. 

V

Farmer Mac moves for summary adjudication on the issue of

breach in connection with its claim for breach of contract. 

Summary judgment “may be rendered on the issue of liability alone

although there is a genuine issue as to the amount of damages.” 

FRCP 56(c); see also FRCP 56(a) (stating that parties may seek

summary judgment “upon all or any part” of a claim). Because

Farmer Mac bears the burden of proof at trial on its claim for

breach of contract, Farmer Mac must establish that no rational

trier of fact could find in favor of Vintage on the issue of

breach. See Southern California Gas Co v City of Santa Ana, 336

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F3d 885, 888 (9th Cir 2003).

Farmer Mac contends that Vintage breached its obligations 

(a) by failing to disclose the existence of a known

tax liability with respect to Jarnail Singh, one of

the borrowers/guarantors; (b) by failing to obtain

security interests on mobile homes valued as part of

the collateral for the loan;(c) by failing to obtain

good title in mobile homes, and thereby a valid

security interest on mobile homes valued as part of

the collateral; (d) by including in the appraisal,

valuation of mobile homes for which no good title

was obtained; (e) by failing to ascertain, and

misrepresenting, the nature and extent of the water

rights existing on the property; and (f) by failing

to disclose an existing judgment, as well as a

pending lawsuit which later resulted in judgment.

Doc #136 at 1. 

The court addresses each of these theories in turn.

A

The Tax Liability and Tax Lien

Several weeks before escrow closed on the loan, Stewart

prepared a “date down” endorsement showing that the IRS had

recorded a “Notice of Federal Tax Lien” in the amount of $143,405

against Jarnail Singh on August 16, 1999. Doc #187, Ex B at Ex 13. 

Because the tax lien had the potential to derail the RAM loan, Anne

Dennis, an employee of Vintage, obtained a letter from the IRS

stating that the tax liability belonged solely to Jarnail Singh as

an individual and did not affect property owned by RAM. Id, Ex B

at Ex 12. Apparently, this letter satisfied Stewart that the tax

lien did not affect the security for the RAM loan, which consisted

of property owned by RAM. Ultimately, the tax lien was not listed

as an exclusion from coverage under the title insurance policy

issued by Stewart. Robert Hower has admitted that Vintage was

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aware of the tax lien and underlying tax liability prior to the

close of escrow. Hower Depo at 422:12-25. And there is no dispute

that neither the tax lien nor the underlying tax liability were

disclosed to Farmer Mac in writing prior to the close of escrow. 

The parties dispute whether Farmer Mac or Zions were aware of the

tax lien prior to final approval of the RAM loan. 

 Jarnail Singh was, at the very least, a “guarantor” of

the RAM loan. See Appendix, Ex 13; Doc #171, Ex A at Ex 3; Doc

#175 at 12. Accurate financial statements for Mr Singh were

required to be submitted to Farmer Mac, notwithstanding that he was

a “guarantor” rather than a “borrower” or “co-borrower.” 

See Appendix, Ex 3, § 202.1 (“A complete and current credit report

is to be obtained on all applicants and guarantors.”); see also id,

Glossary (defining “Borrower” as the “obligor or co-obligor on a

Qualified Loan”); Id § 202.2(6) (including “co-makers and

guarantors” within the meaning of “Borrowers”). Thus, Vintage was

required to verify financial information for Jarnail Singh and to

explain “in writing” debts or liens not disclosed in the financial

statement. Id § 202.1. 

Vintage argues that the IRS did not file the notice of

the federal tax lien until August 16, 1999, more than two months

after the loan application package was initially submitted. Doc

#167 at 19. True as that may be, the fact remains Vintage

submitted a financial statement for Jarnail Singh dated September

27, 1999, that did not disclose the tax liability. Appendix, Ex

50. The tax liability was required to be disclosed in this

financial statement, and if it was not, Vintage was required to

explain the omission in writing given its awareness of the

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situation. Failure to do so constituted a breach of the S/S guide.

Vintage argues that there is a triable issue of fact

regarding whether the existence of the tax lien was communicated to

Mr Avey of Zions prior to the close of escrow. Although Zions’

knowledge of the tax lien may go to other issues to be resolved at

trial (e g, breach of duty by Zions, see infra VII(B)(3)), it is

irrelevant for present purposes because there is no evidence that

Vintage provided a written explanation of the tax lien or the

underlying tax liability as required by the S/S guide. See also

Appendix, Ex 3, § 103.1 (“All notices and communications between

Farmer Mac and the Seller (unless otherwise indicated by Farmer

Mac), shall be in writing and shall be personally delivered, faxed,

or mailed * * *.”). Vintage has presented no evidence that

unwritten communications to Zions regarding the tax lien were an

adequate substitute for a written explanation of the omission of

the underlying tax liability from Jarnail Singh’s financial

statement.

Accordingly, the court finds that Vintage breached its

representation and warranty that Jarnail Singh’s financial

statement was true and correct. Further, Vintage breached its

obligation to explain the omission of the tax liability from

Jarnail Singh’s financial statement to Farmer Mac in writing prior

to the close of escrow. Farmer Mac’s motion for summary

adjudication of this issue is GRANTED. 

//

//

//

//

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C

Lawsuits and Judgment Against Jarnail Singh

The loan application package did not disclose two civil

lawsuits against Jarnail Singh dba Ram Farms. One lawsuit resulted

in a judgment against Jarnail Singh in the amount of $635.38 plus

pre-judgment interest and attorney fees in the amount of $1,266.23. 

This judgment was fully satisfied on April 20, 1998 (the “satisfied

judgment”). Doc #179, Ex 82. The other lawsuit was actively

pending throughout the RAM transaction (the “pending lawsuit”);

judgment against Jarnail Singh in the amount of $167,325.38 plus

post-judgment interest was not entered until June 13, 2000 (i e,

after close of escrow on the RAM loan). Id, Ex 81. Farmer Mac

claims Vintage breached its obligations by failing to disclose

these items.

1

The court first briefly addresses Vintage’s suggestion

that this aspect of Farmer Mac’s breach of contract claim is beyond

the scope of the amended complaint. Doc #167 at 14. As the Ninth

Circuit has stated:

Under the liberal system of notice pleading set up

by the Federal Rules, Rule 8(a)(2) does not require

a claimant to set out in detail the facts upon which

he bases his claim. To the contrary, all the Rules

require is a short and plain statement of the claim

that will give the defendant fair notice of what the

plaintiff’s claim is and the grounds upon which it

rests.

Lee v City of Los Angeles, 250 F3d 668, 679 (9th Cir 2001)

(alterations and quotations omitted); cf FRCP 54(c) (“[E]very final

judgment shall grant the relief to which the party in whose favor

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it is rendered is entitled, even if the party has not demanded such

relief in the party’s pleadings.”).

The amended complaint states “what the plaintiff’s claim

is” (breach of contract) and “the grounds upon which it rests”

(“numerous representations and warranties made by Defendants were

untrue,” FAC ¶30). Although the amended complaint states several

factual bases for Farmer Mac’s breach of contract claim without

mentioning the lawsuits and judgment, facts regarding the lawsuits

and judgment need not have been specifically alleged. Accordingly,

the court finds that Vintage’s alleged failure to disclose the

pending lawsuit and the satisfied judgment are encompassed by the

claim for breach of contract.

2

The Satisfied Judgment

As discussed, the S/S guide requires that credit reports

for applicants and guarantors “include all available public records

information,” including “whether any judgments, foreclosures, tax

liens, or bankruptcies were discovered in the public records.” 

Appendix, Ex 3, § 202.1. Sellers are “expected” to verify the

credit reports. Id. Further, “[w]ritten explanations of the

circumstances of [judgments] are required and judgments must have

been bonded or satisfied unless nominal in amount.” Id. 

The court assumes, as the parties appear to have, that

Vintage obtained, as required by the S/S guide, credit information

for Jarnail Singh “from two national repositories of credit records

for each location in which the applicant has resided for the past

seven years,” including “all legal information not considered

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obsolete under the Fair Credit Reporting Act, which includes all

credit and legal activity of the last seven years.” Id. If so,

the court wonders what more Vintage could have done to “verify”

this information. There is no evidence that a different or more

exhaustive credit report would have uncovered the satisfied

judgment. And the mere fact that the satisfied judgment existed is

not conclusive evidence that Vintage did not take steps to verify

Jarnail Singh’s credit information. Unless and until Farmer Mac

demonstrates that either (1) commercially reasonable steps to

verify the information would have revealed the satisfied judgment

or (2) the satisfied judgment was in fact disclosed in the credit

report, Vintage cannot be faulted for failing to describe the

circumstances of the judgment in writing.

This conclusion is fully consistent with the court’s

ruling in connection with the tax liability and lien. The

undisputed evidence shows that Vintage was aware of the tax lien. 

In contrast, there is no evidence that Vintage was aware of the

satisfied judgment. While the court does not intimate that Vintage

cannot be liable for failing to disclose information of which it

was unaware, sellers can only be expected to verify that which is

verifiable by commercially reasonable means. Farmer Mac has not

argued that nondisclosure of the satisfied judgment constituted a

breach of any other obligation, representation or warranty;

accordingly, the court expresses no opinion in that regard. Farmer

Mac’s motion for summary adjudication of this issue is DENIED.

//

//

//

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3

The Pending Lawsuit

Farmer Mac contends that the pending lawsuit was a

contingent liability that needed to be disclosed, notwithstanding

that it had not proceeded to judgment before the close of escrow. 

The only provision of the S/S guide that has been brought to the

court’s attention which addresses disclosure of contingent

liabilities states that “[i]f other than audited financial

statements are submitted, the Seller should obtain” a schedule

listing “any contingent liabilities including amount, purpose and

terms,” but such a schedule “may be eliminated” if the financial

statements have “sufficient detail.” Appendix, Ex 3, § 202.2

(emphasis added). Although there is no indication whether the

financial statement of Jarnail Singh was audited, his financial

statement did have a ledger entry for contingent liabilities; none

was listed. Id, Ex 50. But it would appear that Vintage obtained

a financial statement accounting for contingent liabilities as

required by § 202.2. 

Although Vintage contends that the S/S guide did “not

require any type of search * * * which would disclose pending

litigation,” Doc #167 at 11, Vintage does not appear to dispute

that the lawsuit -- which resulted in a six-figure money judgment

against Jarnail Singh -- was a contingent liability within the

meaning of either the S/S guide or the financial statement for

Jarnail Singh. The omission of the pending lawsuit as a contingent

liability rendered Jarnail Singh’s financial statement inaccurate. 

Accordingly, based on undisputed evidence, the court finds that the

omission of the pending lawsuit from Jarnail Singh’s financial

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statement constituted a breach of Vintage’s representation and

warranty that “all loan information submitted to Farmer Mac” was

“true and correct.” Appendix, Ex 3, § 304.3(1). Farmer Mac’s

motion for summary adjudication of this issue is GRANTED. 

 

D

Mobile Homes

Four mobile homes located at the Chelan orchard were

given value in the independent appraisal submitted in connection

with the RAM loan. Appendix, Ex 9 at 16-17. After RAM defaulted

on the loan, Farmer Mac discovered several defects in title for at

least two of the mobile homes. The “Silvercrest” unit was subject

to a security interest held by Seattle First National Bank. Doc

#222, Ex A. Bank of America, successor-in-interest to Seattle

First National Bank, repossessed the Silvercrest unit on November

17, 2002. Doc #217, Ex E-1 at 2. The “Concord” unit was legally

owned by one Dale Nasman, who apparently was the previous owner of

the Chelan orchard. Doc #218. For whatever reason, title to the

Concord unit had not been transferred to Jarnail Singh or RAM. 

Farmer Mac advances several reasons why these defects

create liability under the S/S guide. First, Farmer Mac focuses

upon the AARR submitted by Vintage. Robert Hower, on behalf of

Vintage, verified that the appraisal (1) “[i]dentifie[d] and

consider[d] the effect on the value of the real estate of any

personal property, fixtures or intangible items that are not real

property but are included in the appraisal,” (2) “[c]learly and

accurately set forth the appraisal in a manner that is not

misleading” and (3) “[s]tate[d] pertinent assumptions and limiting

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conditions that affect the analyses, opinions and conclusions.” 

Id, Ex 14. Robert Hower further indicated that “the value(s)

allocated to the improvements [were] reasonable and adequately

supported.” Id.

The court does not agree that Mr Hower’s responses to the

first three items were false or misleading given the assumptions

upon which the appraisal proceeded. In this respect, the appraisal

clearly stated its assumptions, including the nonexistence of “any

liens or encumbrances.” Id, Ex 9 at 5. Based on this assumption,

the appraisal considered the value of the mobile homes and other

fixtures to the Chelan property. Id at 16-17, 24. Further,

encumbrances and other defects in title to the mobile homes did not

cause the appraisal to be misleading given that the appraisal

clearly states that such considerations were ignored. With regard

to Mr Hower’s representation that the value allocated to the

improvements was reasonable and adequately supported, even assuming

this component of the AARR required Vintage independently to assess

the value added by the mobile homes, the evidence is not conclusive

that Vintage did not make such an assessment. Farmer Mac cites

Robert Hower’s deposition testimony that he did not recall doing

anything to verify the accuracy of the AARR. Hower Depo at 176:5-

177:25. This evidence will not sustain Farmer Mac’s burden of

persuasion. 

Still, the Howers independently represented that “value

is not dependent upon perfection of any lien instrument in addition

to the mortgage(s), as the appraisal value [sic] the units with

permanent fixtures and appurtenances only.” Id, Ex 7 at 14. This

statement likely reflected a mistaken perception that the mobile

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homes were true improvements or otherwise so affixed to the

property that they were adequately secured by a first deed of

trust. The S/S guide clearly shifts the risk of such a mistake to

sellers by requiring sellers to represent and warrant that

“[a]ppropriate UCC Financing Statements on fixtures and personal

property have been filed and a UCC Search has been conducted

indicating a security interest in such fixtures and personal

property.” Appendix, Ex 3, § 304.3(5)(c); see also id § 302.5(8)

(requiring sellers, when applicable, to submit “a copy of any

security documents, including UCC Financing Statements, and a UCC

search showing a First Lien position on all fixtures given value in

the appraisal”).

Vintage points to the agricultural financial statement

submitted with the loan application, which disclosed a principal

debt associated with an unspecified mobile home. Id, Ex 6. The

parties apparently agree that this debt related to the Silvercrest

unit. In any event, this disclosure is irrelevant to whether

property included in the appraisal was adequately secured.

Based on undisputed evidence, the court concludes that

Vintage’s failure to ensure that the mobile homes were adequately

secured constituted a breach of its obligations under the S/S

guide. Further, Vintage’s incorrect representation in the RAM

narrative that security interests in the mobile homes were

unnecessary was a breach of its representation and warranty that

all information submitted to Farmer Mac was “true and correct.” 

Id, Ex 3, § 304.3(1). Finally, Vintage breached its representation

and warranty that appropriate financing statements had been filed

for fixtures and personal property included in the appraisal. 

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Farmer Mac’s motion for summary adjudication of this issue is

GRANTED.

E

Water Rights

Farmer Mac advances three theories of contractual

liability in connection with the water rights at the Chelan

orchard. First, Farmer Mac argues that the appraisal was

inaccurate in that it incorrectly listed one digit of a certificate

number for one of the water permits. Second, Farmer Mac argues

that Vintage was obligated, but failed, to obtain documentation

evidencing water rights. Finally, Farmer Mac appears to argue that

the Chelan orchard had rights to less water than described in the

appraisal.

1

The independent appraisal listed three water permits

accounting for rights to a total of 620.77 acre feet/year of water

at the Chelan orchard. Id, Ex 9 at 13. One permit was listed as

bearing certificate number “1-383” and permit number “1156”, dated

February 18, 1930, and securing rights for 56 acres of land at a

rate of 0.74 cubic feet/second. Id. In the course of attempting

to liquidate the Chelan orchard, Farmer Mac discovered that

certificate number 1-383 did not correspond to a water permit for

the Chelan orchard. It thus appeared that the water rights on the

Chelan orchard were actually far less than described in the

appraisal. Farmer Mac undertook to learn the actual extent of the

water rights on the Chelan orchard, which required the assistance

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of a water resource engineer “to obtain the accurate certificate

pertaining to the missing water rights” and “to confirm the place

of use relating to each of the certificates of water rights.” Doc

#136 at 19. Ultimately, Farmer Mac’s research efforts (which

Vintage characterizes as “an ill-advised witch hunt,” Doc #167 at

17) disclosed that the “missing” water rights were in fact secured

by a permit bearing certificate number “1-388” (not “1-383” as

indicated in the appraisal). Appendix, Ex 56. Significantly, the

water permit was in all other respects identical to the permit

listed in the appraisal, including permit number, acreage and

volume. Further, the copy of the certificate for this water permit

submitted by Farmer Mac appears to bear a certificate number “383”

at the top (although the body of the certificate shows “388”). Id.

Based on what appears to be a scrivener’s error committed

in 1930, Farmer Mac would have the court conclude that the

appraisal was inaccurate, constituting a breach of Vintage’s

representation that all information submitted to Farmer Mac was

“true and correct.” Id, Ex 3, § 304.3(1). The court cannot

imagine a more technical infraction of the S/S guide. In any

event, there is no dispute that permit number 1156 did grant water

rights to the Chelan orchard. Further, the court finds that the

certificate for permit number 1156 did bear the number “383” at the

top. Based on this undisputed evidence, the court finds that the

appraisal was not inaccurate for purposes of § 304.3(1) of the S/S

guide by virtue of the fact that the appraisal listed certificate

number 1-383. 

Farmer Mac also points to the AARR, where Robert Hower

verified that “water rights/entitlements [have] been adequately

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defined with regard to volume, timeliness, irrigated [acreage,]

priority of filing and permanence/reliability of right.” Id, Ex 14

at 2 (emphasis added). Farmer Mac argues that “the water rights on

the property were neither adequately defined nor reliable” due to

the allegedly erroneous certificate number. Doc #136 at 19. This

argument fails for two reasons. First, Farmer Mac overlooks that

the AARR does not require sellers to verify that water rights are

adequately “defined” in every conceivable sense, but rather that

they are defined “with regard to” particular aspects of the right

that have nothing to do with the substantive qualities of the water

rights, not, for example, certificate numbers. Second, the fact

that the appraisal’s list of water permits may not have been a

reliable tool for tracking down the water permit in question has

nothing to do with the reliability of the water right. The purpose

of the appraisal’s discussion of water rights is to describe “the

quality and availability of irrigation water,” Appendix, Ex 3, §

204.5, not to provide Farmer Mac with a tool for obtaining copies

of water permits.

The court concludes that the appraisal’s listing of

certificate number 1-383 did not, of itself, constitute a breach of

any obligations, representations or warranties under the S/S guide. 

Farmer Mac’s motion for summary adjudication of this issue is

DENIED. Further, in light of the ample factual record and the

parties’ full briefing of the issue, the court finds it

appropriate, sua sponte, to GRANT summary adjudication in favor of

Vintage on this discrete issue. See, e g, Gospel Missions of

America v City of Los Angeles, 328 F3d 548, 553 (9th Cir 2003)

(“Even when there has been no cross-motion for summary judgment, a

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district court may enter summary judgment sua sponte against a

moving party if the losing party has had a ‘full and fair

opportunity to ventilate the issues involved in the matter.’”

(quoting Cool Fuel, Inc v Connett, 685 F2d 309, 312 (9th Cir

1982)).

2

Farmer Mac claims Vintage breached its obligations by

failing to verify that the appraisal was based on an examination of

water permits. Farmer Mac does not appear to argue that the

appraiser did not himself obtain water permits. Indeed, the

specificity with which the appraisal describes the water permits

would belie such a contention. Rather, Farmer Mac argues that

Vintage, in order to fulfill its obligations in connection with the

AARR, was required (but failed) to obtain and examine water permits

for the Chelan orchard. 

Farmer Mac first points to § 204.5 of the S/S guide,

which requires sellers to verify that the appraisal “include[s] a

discussion of * * * availability of irrigation water (if a factor)

as evidenced by documented water rights and entitlements[.]” The

most natural reading of this language is that sellers are required

to confirm that the appraisal’s assessment of the water rights was

based on documentation. The court concludes that § 204.5 of the

S/S guide did not, of itself, obligate Vintage to obtain

documentation pertaining to water rights.

Farmer Mac finds surer footing in § 304.3(30), which

requires sellers to represent and warrant that “such documentation

has been obtained, as may be necessary, to insure the delivery of

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water to the Mortgaged Property.” But even assuming that Vintage

was obligated to obtain documentation pertaining to water rights,

Farmer Mac has not conclusively demonstrated that Vintage did not

obtain such documentation. Farmer Mac argues that had Vintage

obtained the water permits, Vintage would have discovered that the

certificate number was incorrect. A jury could certainly conclude

that Vintage, concerned with substance over form, overlooked this

technical glitch. Or a jury could conclude that the certificate

did in fact bear the number “383” at the top, thereby explaining

Vintage’s failure to question the accuracy of the appraisal. 

Farmer Mac further relies upon Robert Hower’s deposition

testimony that he did not recall doing anything to verify the

accuracy of the appraisal’s discussion of water rights and that he

did not recall having a conversation with Anne Dennis regarding

water rights. Hower Depo at 176:11-177:25. The court does not

agree that this is conclusive evidence. Furthermore, Farmer Mac

did not present its argument regarding sellers’ obligation to 

obtain documentation pertaining to water rights until its reply, to

which Vintage had no opportunity to respond. Farmer Mac’s motion

for summary adjudication of this issue is DENIED.

3

Finally, Farmer Mac claims that the Chelan orchard in

fact had the right to less water than described in the appraisal. 

The only evidence Farmer Mac submitted to support its contention

was the declaration of Gary Johnson, who helped Farmer Mac

ascertain the true extent of the water rights associated with

Chelan orchard. Mr Johnson asserts that “water rights appurtenant

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to the Chelan property were eventually determined to be 370.83”

acre feet/year, not 620.77 acre feet/year as listed in the

appraisal. Doc #137 at 9. But Mr Johnson’s declaration does not

describe the basis for this calculation. The true extent of the

water rights associated with the Chelan orchard presents a triable

issue of fact. Farmer Mac’s motion for summary adjudication of

this issue is DENIED.

VI

The second amended counterclaim asserts against Farmer

Mac three distinct claims for breach of contract, a claim for

breach of the implied covenant of good faith and fair dealing and a

claim for conversion. Against both Farmer Mac and Zions, Vintage

and the Howers allege interference with prospective economic

advantage, trade label and restraint of trade. Farmer Mac and

Zions jointly move for summary judgment on all counterclaims. 

A

1

Breach of Contract #1: Anticipatory Breach

On October 16, 2002, Farmer Mac demanded that Vintage

repurchase the RAM loan no later than November 15, 2002. Appendix,

Ex 29. After Vintage declined to repurchase the RAM loan, Farmer

Mac suspended Vintage as a seller and originator of Farmer Mac

loans on December 10, 2002. Id, Ex 33. The first counterclaim

alleges that Farmer Mac’s decision not to purchase loans from

Vintage pending resolution of the RAM loan situation constituted an

anticipatory breach of the S/S agreement. Doc #57 at 13. 

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“‘Anticipatory breach occurs when one of the parties to a

bilateral contract repudiates the contract. The repudiation may be

express or implied.’” Martinez v Scott Specialty Gases, Inc, 83

Cal App 4th 1236, 1246 (2000) (quoting Taylor v Johnston, 15 Cal 3d

130, 137 (1975)). Express repudiation requires a “clear, positive,

unequivocal refusal to perform.” Id. Implied repudiation occurs

where the promisor “puts it out of his power to perform so as to

make substantial performance of his promise impossible.” Id. 

Vintage and the Howers’ allegations do not implicate the doctrine

of implied repudiation.

The S/S agreement is clear regarding Farmer Mac’s

obligations to purchase loans from approved sellers: “The fact

that Farmer Mac signed this Agreement does not mean that Farmer Mac

must issue a Commitment to Purchase * * * any mortgage submitted to

Farmer Mac for review and approval. Any obligation to purchase

will arise only after review and approval and the issuance by

Farmer Mac of a Commitment to Purchase * * *.” Appendix, Ex 2, §

2.3. Accordingly, in order to constitute an express repudiation,

the December 10, 2002, letter must have unequivocally conveyed that

Farmer Mac would not purchase loans that it had committed to

purchase. The court concludes that Farmer Mac did not expressly

repudiate its obligations under the S/S agreement.

First, the letter makes clear that the suspension was

only to last until the RAM issue was resolved to Farmer Mac’s

satisfaction. Id, Ex 33. More important, however, the letter

provides no indication -- much less a clear and unequivocal

expression -- that Farmer Mac would not purchase loans for which a

commitment to purchase had been issued. Finally, on December 27,

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2002, Farmer Mac expressly stated that it would “continue to

process any [Vintage] loans that were in the pipeline at the time

of suspension.” Id, Ex 37. Thus, even assuming the December 10

letter constituted an express repudiation, the December 27 letter

would have assured Vintage that Farmer Mac intended to perform its

obligations. See Guerrieri v Severini, 51 Cal 2d 12, 19 (1958)

(stating that the doctrine of anticipatory breach requires “that

there [has] been no retraction of the repudiation by the repudiator

prior to the time for performance or prior to a detrimental change

in position on the part of the repudiatee in reliance thereon”).

In light of Vintage and the Howers’ failure to provide

any evidence that Farmer Mac expressly repudiated its existing

obligations, summary judgment in favor of Farmer Mac is appropriate

on the first counterclaim.

2

Breach of Contract #2: Termination of Vintage as Seller

The second counterclaim alleges that Farmer Mac breached

the S/S agreement “when it unilaterally and without good cause”

terminated Vintage as an approved seller on March 24, 2003. Doc

#57 at 14. 

Pursuant to § 503.2 of the S/S guide, “Farmer Mac may

terminate the [S/S agreement] for cause based upon the existence of

any one or more of the events of default.” Events of default

include failure “at any time to comply with any one or more

requirement, term, condition” of the S/S agreement and guide, as

well as the making of “one or more false or misleading

representations or warranties.” Appendix, Ex 3, § 503.1(1), (3).

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For reasons that are not clear, Farmer Mac did not terminate the

S/S agreement on March 24, 2003; rather, Farmer Mac simply

terminated Vintage as an approved seller. Although the S/S guide

is silent with respect to terminating a seller without terminating

the S/S agreement in its entirety, the fact remains that Farmer Mac

could have terminated the S/S agreement on March 24, 2003, which

would have had the effect of terminating Vintage as an approved

seller. See id § 503.2 (“Any termination of the [S/S agreement] by

either party shall terminate the Seller’s status as an approved

Seller and shall terminate the Seller’s ability to submit mortgage

loans to Farmer Mac * * *.”). Accordingly, the court construes the

S/S guide to provide that an event of default is cause for Farmer

Mac to terminate a seller without terminating the S/S agreement. 

And the court has already found that Vintage breached various

obligations, representations and warranties in connection with the

RAM loan, see supra V, each of which constituted events of default

that justified Farmer Mac’s termination of the S/S agreement. 

Farmer Mac has therefore shifted the burden to Vintage and the

Howers to demonstrate a triable issue of fact on the element of

breach. In their opposition, Vintage and the Howers merely

incorporated by reference the arguments advanced by Vintage in

opposition to Farmer Mac’s motion for summary adjudication of its

breach of contract claim. To the extent Vintage failed to meet its

burden in that regard, so too Vintage and the Howers fail to

demonstrate the existence of a triable issue of fact in connection

with their second claim for breach of contract.

//

//

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3

Breach of Contract #3: Termination of Vintage as a Field Servicer

The third counterclaim alleges that Farmer Mac breached

the S/S agreement “when it unilaterally and without good cause

under the agreement, terminated that agreement and refused to

permit [Vintage] to service the loans it had submitted to Farmer

Mac.” Id at 15. Farmer Mac’s termination of Vintage as a field

servicer presents a question different from its termination of

Vintage as a seller because termination of the S/S agreement does

not automatically terminate servicing rights and obligations. The

only prerequisite to termination of a field servicer is a “breach

of the Seller’s servicing obligations as determined by Farmer Mac.” 

Id. Thus, in order to prevail on the third claim for breach of

contract, Vintage and the Howers must demonstrate that, as of

August 18, 2003, Farmer Mac had not determined that Vintage had

breached its field servicing obligations. 

The evidence submitted by Farmer Mac demonstrates that

Farmer Mac had made such a determination on or before August 18,

2003. On July 17, 2003, Zions requested that Vintage its servicing

files to Zions in connection with an Farm Credit Administration

audit. Appendix, Ex 58. According to Michael Morris of Farmer

Mac, Vintage’s tardy and incomplete response to the audit request

prompted Farmer Mac to investigate whether Vintage was fulfilling

its field servicing obligations. Id, Ex 68 at 441:6-12. This

investigation disclosed that Vintage failed to obtain and forward

to central servicers annual financial statements for certain loans,

as required by § 401.7 of the S/S guide. In this regard, Farmer

Mac submitted the uncontradicted deposition testimony of Mark

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Rickels of Zions. Mr Rickels testified that Vintage did not submit

any annual financial statements to Zions in 1998 and 2000. 

Appendix, Ex 74 at 90:23-24; Doc #179, Ex 88. The evidence further

demonstrates that Zions communicated Vintage’s non-compliance with

§ 401.7 to Farmer Mac prior to August 18, 2003. See id, Ex 61

(August 4, 2003, e-mail from Mark Rickels to Paul Caywood of Farmer

Mac and August 12, 2003, e-mail from Paul Caywood to Michael

Morris). Finally, Michael Morris testified that servicing

inadequacies such as the failure to obtain annual financial

information played a role in Farmer Mac’s decision to terminate

Vintage as a field servicer. Id, Ex 68 at 564:17-565:3.

Farmer Mac has satisfied its burden of producing evidence

demonstrating Vintage and the Howers’ inability to establish the

element of breach, and the burden accordingly shifted to Vintage

and the Howers to demonstrate the existence of a triable issue of

fact on the element of breach. In their opposition to Farmer Mac

and Zions’ motion, Vintage and the Howers incorporated by reference

arguments advanced in Vintage’s opposition to Farmer Mac’s motion

for summary adjudication of its claim for breach of contract. Doc

#165 at 6. But that submission does not in any way address

Vintage’s termination as a field servicer. See generally Doc #167. 

The only cogent argument advanced by Vintage and the

Howers is that the decision to terminate Vintage as a field

servicer was not based upon any breach of servicing obligations,

but rather upon the events of default underlying Farmer Mac’s claim

against Vintage for breach of contract. See Doc #165 at 8. 

Putting aside the fact that Vintage and the Howers have not cited

supporting evidence, the court disagrees. The August 18, 2003,

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letter terminating Vintage as a field servicer stated: “One or

more events of default listed in [§ 503.1 of the S/S guide] exist,

as set forth in further detail in, but not limited to, the

allegations of that [sic] complaint recently filed in the U.S.

District Court for the Northern District of California * * *.” 

Appendix, Ex 62 (emphasis added). This does not demonstrate that

Farmer Mac’s decision to terminate Vintage as a field servicer was

not motivated by deficiencies in Vintage’s field servicing. Nor

does this tend to prove that Farmer Mac did not determine that

Vintage had breached its field servicing obligations. Vintage and

the Howers have failed to carry their burden of demonstrating a

triable issue of fact on the element of breach in connection with

their third claim for breach of contract.

4

Breach of Implied Covenant of Good Faith and Fair Dealing

Vintage and the Howers allege that Farmer Mac’s

termination of Vintage’s rights as a seller and servicer

constituted a breach of the implied covenant of good faith and fair

dealing. “Every contract imposes upon each party a duty of good

faith and fair dealing in its performance and its enforcement.” 

Carma Developers (California), Inc v Marathon Development

California, Inc, 2 Cal 4th 342, 371 (1992). “The covenant of good

faith and fair dealing finds particular application in situations

where,” as in this case, “one party is invested with a

discretionary power affecting the rights of another. Such power

must be exercised in good faith.” Id at 372. “It is universally

recognized,” however, that “the scope of conduct prohibited by the

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covenant of good faith is circumscribed by the purposes and express

terms of the contract.” Id at 373. Thus, the California Supreme

Court has stated that where a right to terminate an agreement is

expressly permitted by the contract and within the parties’

reasonable expectations, exercise of that right “can never violate

an implied covenant of good faith and fair dealing.” Id at 376. 

As one California court has stated: 

The covenant of good faith and fair dealing has been

held in certain special cases to supply a

requirement of good cause for termination where the

contract itself is silent or ambiguous on that

subject. No obligation can be implied, however,

which would result in the obliteration of a right

expressly given under a contract.

Gerdlund v Electronic Dispensers Int’l, 190 Cal App 3d 263, 277

(1987) (discussed with approval in Carma Developers, 2 Cal 4th at

375-76). 

Applying these principles to the instant case, the claim

for breach of the implied covenant of good faith and fair dealing

fails as a matter of law. As discussed in connection with the

counterclaims for breach of contract, Farmer Mac was entitled, by

virtue of the express terms of the S/S guide, to terminate Vintage

as a seller and servicer. Under these circumstances, the implied

covenant of good faith and fair dealing cannot impose liability

upon Farmer Mac for exercising rights it enjoyed under the

contract. 

B

Conversion

Vintage and the Howers allege that Farmer Mac has

wrongfully retained servicing fees on loans sold by Vintage to

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Farmer Mac. Doc #57 at 17. Under California law, the elements of

conversion are (1) plaintiff’s ownership or right to possession of

the property at the time of conversion, (2) defendant’s conversion

by a wrongful act or disposition of plaintiff’s property rights and

(3) damages. Oakdale Village Group v Fong, 43 Cal App 4th 539,

543-44 (1996). “Money can be the subject of an action for

conversion if a specific sum capable of identification is

involved.” Farmers Ins Exchange v Zerin, 53 Cal App 4th 445, 452

(1997).

As an initial matter, it is unclear whether Vintage and

the Howers seek fees for services they provided prior to Vintage’s

termination as a servicer or whether they seek fees for services

Vintage would have provided but for its termination. Compare Doc

#165 at 6 (“[Vintage] does not claim that Farmer Mac retained

servicing fees which [Vintage] would otherwise have earned under

the [S/S agreement].”), with id at 9 (calculating the amount of

retained fees on the basis of payments made to the servicer engaged

by Farmer Mac to service loans previously serviced by Vintage), and

id (“Farmer Mac had taken without court judgment $330,000 from

[Vintage] every year for the foreseeable future * * *.”). As best

the court can decipher, Vintage and the Howers posit that Vintage

earned the right to all servicing fees for loans sold by Vintage,

regardless whether Vintage actually provided the underlying

services. Id at 6-7 (“[Vintage] has not alleged a contractual

right to receive payment of money in the future, [Vintage] has

alleged that Farmer Mac retained and failed to disburse service

fees which already belonged to [Vintage].”).

//

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To the extent Vintage and the Howers’ alleged right to

servicing fees is predicated on their claim that Farmer Mac

wrongfully terminated Vintage as a servicer, the claim for

conversion must fail because the court has already ruled that

Farmer Mac’s termination of Vintage as a servicer was proper under

the terms of the S/S guide. To the extent Vintage and the Howers’

alleged right to servicing fees is predicated on their contention

that Vintage was entitled to servicing fees even after being

terminated as a loan servicer, the court agrees with Farmer Mac

that the claim for conversion must fail for the reasons set forth

by the Ninth Circuit in American Bankers Mortgage Corp v Federal

Home Loan Mortgage Corp, 75 F3d 1401 (9th Cir 1996).

American Bankers involved a terminated seller/servicer’s

claim for conversion against “Freddie Mac” (Farmer Mac’s federally

chartered counterpart in the secondary market for home mortgages). 

Plaintiff ABM argued that “it had at the least a right of

possession to the servicing rights in the portfolio of mortgages it

serviced for Freddie Mac and that Freddie Mac’s transfer of those

servicing rights constituted conversion.” Id at 1411. (ABM

apparently understood, as Vintage and the Howers apparently do not,

that it had no right to servicing fees without a right to provide

the underlying services.) The rights and obligations of Freddie

Mac and ABM were governed by a seller/servicer guide similar in all

relevant respects to the S/S guide in this case. Compare id at

1412 (“[U]nless an entity is approved by Freddie Mac as a

Seller/Servicer, it has no right to service mortgages purchased by

Freddie Mac.”), with Appendix, Ex 3, § 501.3 (“The Seller’s right

to continue selling and servicing Qualified Loans under its [S/S]

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Agreement depends upon, among other things, its continuing to meet

the eligibility requirements in Section 501.1 of the Guide and

selling acceptable Qualified Loans to Farmer Mac.”). The Ninth

Circuit reasoned that “[u]pon termination, ABM ceased to be a

‘Seller/Servicer’ and by the terms of the contract had no right to

service mortgages owned by Freddie Mac.” Id. “Therefore, ABM had

no remaining possessory interest in the servicing rights to its

mortgage portfolio” and could not establish the first element of

its conversion claim. Id.

Vintage and the Howers attempt to distinguish American

Bankers by arguing that ABM and Vintage were not similarly situated

as servicers and that the Freddie Mac guide differed from the S/S

guide in this case. Doc #165 at 9-11. For example, Vintage and

the Howers cite § 503.2 of the S/S guide for the proposition that

“there is no requirement that a servicer be a Seller/Servicer in

good standing or even be a Seller/Servicer at all” in order to be

entitled to servicing fees on loans sold to Farmer Mac. Doc #165

at 11. The court disagrees. Section 503.2 simply states that

termination of the S/S agreement automatically terminates a

seller/servicer as a seller but not a servicer; it by no means

suggests that servicing rights survive Farmer Mac’s decision to

terminate a seller/servicer as a servicer. The remainder of Farmer

Mac and Zions’ argument is neither cogent nor substantiated.

Because Vintage and the Howers cannot establish a right

to service loans, they cannot establish a right to servicing fees,

and their counterclaim for conversion fails as a matter of law.

//

// 

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C

The counterclaims for restraint of trade, trade libel and

intentional interference with prospective advantage merit only

brief discussion. “Under the federal standard [for summary

judgment] a moving defendant may shift the burden of producing

evidence to the nonmoving plaintiff merely by ‘showing’ -- that is,

pointing out through argument -- the absence of evidence to support

plaintiff’s claim.” Fairbank v Wunderman Cato Johnson, 212 F3d

528, 532 (9th Cir 2000). Farmer Mac and Zions have pointed out the

absence of evidence, thereby shifting the burden on these three

counterclaims to Vintage and the Howers, who did not even attempt

to meet their burden.

1

Restraint of Trade

“In the absence of proof of an agreement or conspiracy,

there can be no violation” of the Cartwright Act, Cal Bus & Prof

Code § 16720 et seq. Roth v Rhodes, 25 Cal App 4th 530, 545

(1994). The California Supreme Court has described with precision

the nature and quantum of evidence of a conspiracy that is

necessary to survive summary judgment:

[I]n order to carry a burden of production to make a

prima facie showing that there is a triable issue of

the material fact of the existence of an unlawful

conspiracy, a plaintiff * * * must present evidence

that would allow a reasonable trier of fact to find

in his favor on the unlawful-conspiracy issue by a

preponderance of the evidence, that is, to find an

unlawful conspiracy more likely than not. Ambiguous

evidence or inferences showing or implying conduct

that is as consistent with permissible competition

by independent actors as with unlawful conspiracy by

colluding ones do not allow such a trier of fact so

to find. * * * [I]n addition, the plaintiff must

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present evidence that tends to exclude, although it

need not actually exclude, the possibility that the

alleged conspirators acted independently rather than

collusively. Insufficient is a mere assertion that

a reasonable trier of fact might disbelieve any

denial by the defendants of an unlawful conspiracy. 

Aguilar v Atlantic Richfield Co, 25 Cal 4th 826, 852 (2001)

(citation and footnote omitted).

Vintage and the Howers vaguely allege that “Farmer Mac

instructed and conspired and agreed with other agricultural loan

sellers, including counter defendant Zions, not to do business with

counterclaimants.” Doc #57 at 20. The only evidence suggesting

the existence of a combination or conspiracy is the deposition of

Robert Hower, who testified that Farmer Mac instructed Zions and

various agricultural loan sellers not to accept loans originated. 

Specifically, Mr Hower testified that he had been told by Zions

that “they were told [by Farmer Mac] that they were no longer to do

business with [the Howers and Vintage]. And that was the last

word.” Appendix, Ex 65 at 459:17-22. Mr Hower further testified

that he had been told by Tom Griffin of Ag First that Farmer Mac

had instructed Mr Griffin “not to accept anything” from Vintage and

to “not continue to do business with [Vintage] under our previous

correspondent relationship prior to being approved with Farmer Mac

or subsequent to being approved as a direct seller to Farmer Mac.” 

Id at 461:14-23. 

Even assuming that Vintage and the Howers could present

admissible evidence to this effect (as opposed to Mr Hower’s

hearsay testimony), such evidence would not demonstrate the

existence of a combination, conspiracy or other unlawful agreement. 

With regard to Zions, Farmer Mac and Zions presented evidence that,

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at least for purposes of agricultural lending, Zions is an agent of

Farmer Mac. See Doc #132 at 18. Under these circumstances, Zions

and Farmer Mac could not have conspired in violation of the

Cartwright Act. See Roth v Rhodes, 25 Cal App 4th 530, 544 (1994);

cf Williams v I B Fischer Nevada, 999 F2d 445, 447 (9th Cir 1993)

(“To be capable of conspiring [for purposes of § 1 of the Sherman

Act], corporate entities must be sufficiently independent of each

other.” (internal quotations omitted)). 

The hearsay statement by Mr Griffin from Ag First -- even

if admissible, which the court doubts -- is not evidence of the

existence of a combination, conspiracy or other unlawful agreement. 

Given the structure of the relevant business relationships, Farmer

Mac could not have effectuated its decision not to purchase loans

originated by Vintage without instructing sellers not to offer any

Vintage-originated loans for sale to Farmer Mac. This is as (if

not more) consistent with legal behavior as illegal behavior. The

burden therefore shifted to Vintage and the Howers to present

evidence tending to exclude the possibility that the decision not

to deal with Vintage was unilaterally made by Farmer Mac. Far from

carrying this burden, Vintage offered no opposition to Farmer Mac

and Zions’ motion. Summary judgment in favor of Farmer Mac and

Zions on the restraint of trade claim is therefore appropriate. 

2

Trade Libel

Trade libel is the intentional disparagement of the

quality of property that results in pecuniary damage. Computer

Xpress, Inc v Jackson, 93 Cal App 4th 993, 1010 (2001) (citing

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Leonardini v Shell Oil Co, 216 Cal App 3d 547, 572 (1989)). “To

constitute trade libel, a statement must be false.” Id.

The only evidence suggesting the possibility of

disparaging statements is the deposition testimony of Robert Hower. 

Mr Hower testified that Farmer Mac had instructed other

agricultural loan sellers not to do business with Vintage. 

Appendix, Ex 65 at 456:4-466:6. Again, generously overlooking the

hearsay nature of Mr Hower’s testimony, Farmer Mac and Zions point

out that nothing about Mr Hower’s testimony evidences statements by

Farmer Mac regarding the quality of Vintage’s services, much less

false statements. Doc #132 at 20-21. Farmer Mac and Zions further

point to Vintage and the Howers’ responses to interrogatories

directed at the alleged false and disparaging statements, which

were obstinately devoid of any indication that Vintage and the

Howers have any evidence that would support a claim for trade

libel. Id at 20. 

Farmer Mac and Zions therefore shifted the burden to

Vintage and the Howers to come forward with admissible evidence of

a false statement regarding the quality of Vintage’s services. 

Once again, Vintage and the Howers did not even attempt to meet

that burden. 

3

Intentional Interference with Prospective Economic Advantage

In order to prevail on their counterclaim for intentional

interference with prospective economic advantage, Vintage and the

Howers must establish that alleged conduct was independently

wrongful -- that is, “wrongful apart from the interference itself.” 

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Korea Supply Co v Lockheed Martin Corp, 29 Cal 4th 1134, 1154

(2003). The independently wrongful conduct alleged by Vintage and

the Howers includes (1) the suspension and termination of Vintage

as an approved seller and servicer of Farmer Mac loans, (2)

“disparaging [Vintage]’s services to third parties,” (3) “refusing

to do business with [Vintage]” and (4) “assisting Farmer Mac in its

attempt to pressure [Vintage] to buy back the RAM loan.” Doc #57

at 18. 

The court has already determined that the first and third

allegations “are not allegations of independently wrongful

conduct.” Doc #55 at 10. The second allegation is predicated on

the counterclaim for trade libel, which the court has already

rejected. Farmer Mac and Zions contend that the fourth allegation

is predicated on the counterclaim for restraint of trade, but,

after reviewing the pleadings, the court sees no connection between

the fourth allegation and the alleged restraint of trade. In any

event, even assuming that an agent assisting its principal in

enforcing its contractual rights is independently wrongful conduct,

Farmer Mac and Zions have pointed out the absence of any evidence

supporting that allegation. Doc #132 at 18-19.

In light of (1) the court’s order granting summary

judgment in favor of Farmer Mac and Zions on the claim for trade

libel, (2) Farmer Mac and Zions’ shifting the burden to Vintage and

the Howers by pointing out the absence of any evidence of

independently wrongful conduct and (3) Vintage and the Howers’

failure even to attempt to meet their burden, summary judgment in

favor of Farmer Mac and Zions is appropriate on the counterclaim

for interference with prospective economic advantage. 

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D

In sum, Farmer Mac and Zions’ motion for summary judgment

is GRANTED.

VII

The third-party complaint asserts a claim for express

indemnity against New Century and Stewart. The third-party

complaint further asserts claims for “implied indemnity,”

“equitable indemnity,” contribution and declaratory relief against

New Century, Stewart and Zions. Vintage concedes that the legal

principles governing its claims for implied indemnity and equitable

indemnity are identical. Doc #163 at 11, 15. Accordingly, the

court treats these two claims as one for present purposes. New

Century, Stewart and Zions each move for summary judgment against

Vintage on all third-party claims. 

A

1

Express Indemnity Against New Century

The third-party complaint vaguely asserts that Vintage’s

claim for express indemnity is based on “written and/or oral

contracts” between Vintage and New Century. Doc #15 at 10. The

only indemnity agreement between Vintage and New Century was

contained in the escrow instructions, whereby New Century agreed

“to be responsible for actual losses, costs and expenses incurred

by [Vintage] in connection with [the RAM loan] transaction when

such losses arise due to [New Century’s] failure to comply with

these [escrow] instructions” (the “indemnity provision”). Doc

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#121 (Bardellini Decl), Ex D at 6 (emphasis added). Accordingly,

New Century is entitled to summary judgment on the claim for

express indemnity if there is no genuine dispute of material fact

regarding New Century’s compliance with the escrow instructions or

if the claims alleged against Vintage and the Howers do not arise

from New Century’s failure to comply with the instructions. See, e

g, Four Star Electric, 7 Cal App 4th at 1380 (stating that an

express indemnity plaintiff must establish a loss within the

meaning of the indemnity agreement). There is no evidence, nor do

Vintage and the Howers contend, that New Century breached the

written escrow instructions. To the contrary, Anne Dennis

testified that New Century complied with the written escrow

instructions. See Bardellini Decl, Ex A (Dennis Depo) at 297:8-13,

355:17-22. Rather, the claim for express indemnity against New

Century hinges on Vintage and the Howers’ assertion that “New

Century agreed to perform tasks and took on responsibilities that

went beyond the written escrow agreement.” Doc #157 at 12. 

“In interpreting an express indemnity agreement, the

courts look first to the words of the contract to determine the

intended scope of the indemnity agreement.” Smoketree-Lake Murray,

Ltd v Mills Concrete Construction Co, Inc, 234 Cal App 3d 1724,

1737 (1991). In this case, the indemnity provision, by its own

clear terms, encompasses only losses arising from failure to comply

with “these” (i e, the written) -- and, by negative implication, no

other -- instructions. Accordingly, in order for the indemnity

provision to encompass losses arising from deficient performance of

the additional undertakings adduced by Vintage and the Howers, the

court would have to modify the written escrow instructions. 

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Vintage and the Howers casually state that “[i]t is well

established that additional escrow instructions can be given orally

as long as the additional instructions do not alter the written

instructions,” citing Thoroman v David, 199 Cal 386 (1926). Doc

#157 at 8. That is beside the point. In order for the indemnity

provision to encompass any additional instructions, the written

instructions would need to be modified. And as the California

Supreme Court observed in Thoroman, escrow instructions are subject

to the rule excluding parol evidence to modify or add another term

to the agreement when the agreement appears on its face to be a

complete expression of the parties’ obligations. 199 Cal at 390

(internal quotations omitted); see also Ebenson v Userware Int’l,

Inc, 11 Cal App 4th 631, 637 (1992) (stating that “parol evidence

is inadmissible even to add terms not inconsistent with the

writing” when a contract is completely integrated). Vintage and

the Howers have offered no reason why the court should modify the

written terms of the escrow instructions to conform to parol

evidence. The fact that New Century may have performed additional

tasks at Vintage’s request in the weeks leading up to the close of

escrow is not evidence that the parties intended the indemnity

provision to encompass losses arising from deficient performance of

those tasks.

Even if the court found it proper to modify the

instructions such that the indemnity provision would encompass

losses arising from New Century’s deficient performance of

additional undertakings, most of the additional undertakings

described (but for the most part unsubstantiated) by Vintage and

the Howers do not relate to any of the claims asserted by Farmer

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Mac. See Doc #157 at 7-9. For example, Vintage and the Howers

claim that “New Century assumed the responsibility for creating and

modifying the note, which ultimately reflected Jarnail Singh as a

borrower when he was not a legal borrower and had only been

approved as a guarantor of the loan.” Id at 7. Even assuming

these facts are true (and once again ignoring Vintage and the

Howers’ failure to cite any supporting evidence), Farmer Mac’s

claims do not implicate the alleged deficiency in New Century’s

performance. Farmer Mac’s claim regarding Jarnail Singh stems from

the omission of the tax lien and liability from Mr Singh’s

financial statement and Vintage’s failure to explain this omission

in writing. As discussed, whether Mr Singh was a guarantor or

borrower for purposes of the loan application package and the S/S

guide -- much less whether he was listed as a borrower on the note

-- is simply inapposite. See supra V(A).

The only undertaking adduced by Vintage and the Howers

that bears any cognizable relationship to Farmer Mac’s claims is

that New Century “assumed responsibility for providing copies of

the preliminary title reports and date down endorsements to Zions

Bank.” Doc #157 at 3. The only evidence offered by Vintage and

the Howers in this regard is a memorandum, dated June 24, 1999,

from Anne Dennis of Vintage to Don Lewin of New Century. Ms Dennis

requested that Mr Lewin forward a preliminary title report to

Zions. Doc #159 (Dennis Decl), Ex B. But Vintage and the Howers

have not pointed to any evidence that Vintage instructed New

Century to forward to Zions the date down endorsement reflecting

the tax lien, which did not come into existence until well into

August of 1999. To the contrary, when asked whether date down

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endorsements were “documents that [New Century] would typically

send to Zions in connection with the Farmer Mac loan,” Don Lewin

responded, “I would say no. [Vintage] was the lender in the

escrow, and so the information would to [Vintage], and they would

forward it to Zions.” Doc #172 (Carey Decl), Ex A at 87:16-25. 

Although New Century does not dispute that it was

involved in addressing the tax lien after it appeared in the date

down endorsement, New Century has presented evidence that New

Century did everything requested by Vintage in connection with the

tax lien. Bardellini Decl, Ex F (Hower Depo) at 596:18-597:21. 

Vintage and the Howers responded by simply asserting that “Farmer

Mac complains that the existence of a Canadian tax lien against

Jarnail Singh was never disclosed.” Doc #157 at 9. But Vintage

and the Howers have offered no evidence that New Century’s

responsibilities, if any, in connection with the tax lien extended

beyond helping Vintage resolve the matter to Zions’ satisfaction. 

Nor have Vintage and the Howers offered evidence demonstrating that

New Century’s performance of this undertaking was inadequate.

The court concludes (1) by its terms, the indemnity

provision does not encompass deficient performance of additional

undertakings by New Century on behalf of Vintage and (2) even if

the court were to modify the loan closing instructions and

indemnity provision to conform to extrinsic evidence, there is no

evidence that New Century failed to perform as requested by

Vintage.

//

//

//

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2

Express Indemnity Against Stewart

In addition to Stewart’s obligations under the title

insurance policy, Stewart agreed in a letter dated September 29,

1999, to indemnify Vintage for certain losses caused by New Century

in its capacity as escrow agent (the “insured closing letter”). In

response to interrogatories, Vintage and the Howers identified the

insured closing letter as the source of Stewart’s duty to indemnify

Vintage in this action. Epstein Decl, Ex J at 2; Ex K at 2. And

in their opposition to Stewart’s motion, Vintage and the Howers

premised liability for express indemnity solely upon the insured

closing letter. See generally Doc #160. 

In the insured closing letter, Stewart agreed to

reimburse Vintage for losses arising from New Century’s failure to

comply with “written closing and/or escrow instructions” to the

extent such losses relate to “(a) the status of the title to said

interest in land or the validity, enforceability and priority of

the lien of said mortgage on said interest in land,” “(b) the

obtaining of any other document specifically required by” Vintage

or “(c) the collection and payment of funds due” to Vintage. 

Epstein Decl, Ex L. Further, Stewart agreed to reimburse Vintage

for losses arising from any fraud or dishonesty on the part of New

Century in handling funds or documents in connection with closing

and/or escrow. Id. The insured closing letter excluded liability

for claims not filed within ninety days of discovery of loss and

claims not filed within one year of closing. Id. 

 Stewart argues that there can be no liability under the

insured closing letter because “there is no allegation by Farmer

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Mac that [New Century] failed to follow [Vintage]’s written closing

instructions, or that any of the damages Farmer Mac is claiming

were caused by the failure of the escrow agent to follow the

instructions.” Doc #123 at 14. The court finds this to be a

cramped view of what claims may give rise to indemnity under the

insured closing letter. Farmer Mac need not have specifically

framed its claims in terms of a failure to follow closing

instructions in order to implicate indemnity under the insured

closing letter; Farmer Mac must have alleged a claim that is

encompassed within the meaning of the insured closing letter’s

indemnity language.

Stewart contends that none of Farmer Mac’s claims relate

to the three discrete categories of losses for which the insured

closing letter provided coverage. For example, none of Farmer

Mac’s claims relate to the status of title in the real property

securing the RAM loan. Stewart further argues that the insured

closing letter, by its own terms, expired one year from the date of

closing, long before the third-party complaint was filed. The

court agrees with Stewart on both points. Stewart has shifted the

burden to Vintage and the Howers to produce evidence tending to

establish a loss within the meaning of the indemnity agreement. 

In response, Vintage and the Howers posit that the

insured closing letter encompasses losses caused by New Century’s

failure to perform obligations it undertook in addition to those

set forth in the written escrow instructions. This theory fails

simply by virtue of the language of the insured closing letter. 

First, the insured closing letter clearly states that liability is

limited to failure to comply with the written escrow instructions. 

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Epstein Decl, Ex L. Further, none of the additional undertakings

that are supported by the evidence implicates the three discrete

categories of failure to follow instructions against which the

insured closing letter provides indemnification. And as discussed,

there is no evidence that New Century failed to follow any

instruction (written or unwritten) that bears a causal relationship

to Farmer Mac’s claimed injuries. Finally, Vintage and the Howers’

attempt to overcome the one-year limitation on indemnity under the

insured closing letter is unconvincing and unsupported by legal

authority.

Stewart’s motion for summary judgment on the claim for

express indemnity is GRANTED.

B

Equitable Indemnity Against New Century, Stewart and Zions

Under the doctrine of equitable indemnity, “a concurrent

tortfeasor enjoys a common law right to obtain partial

indemnification from other concurrent tortfeasors on a comparative

fault basis * * *.” American Motorcycle Ass’n v Superior Court,

146 Cal Rptr 182, 199 (1978). “Quite simply, equitable

indemnification is a matter of fairness.” Jaffe v Huxley

Architecture, 200 Cal App 3d 1188, 1191 (1988). The party from

whom equitable indemnity is sought need not have owed a duty to the

party seeking indemnity. “What is important,” however, “is the

relationship of the tortfeasors to the plaintiff and the

interrelated nature of the harm done.” Id at 1192. Accordingly,

California courts have required the party seeking equitable

indemnity to demonstrate that the proposed indemnitor would be

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liable as a tortfeasor to the underlying plaintiff. See GEM

Developers v Hallcraft Homes of San Diego, Inc, 213 Cal App 3d 419,

429 (1989). Generally, the basis for tort liability against the

proposed indemnitor is a duty owed to the underlying plaintiff. 

BFGC Architects Planners, Inc v Forcum/Mackey Construction, Inc,

119 Cal App 4th 848, 852 (2004).

With these legal principles in mind, the court turns to

the claims for equitable indemnity asserted against New Century,

Stewart and Zions. 

1

Where “the parties have expressly contracted with respect

to the duty to indemnify, the extent of the duty must be determined

from the contract and not by reliance on the independent doctrine

of equitable indemnity.” Rossmoor Sanitation, Inc v Plylon, Inc,

13 Cal 3d 622, 628 (1975) (Mosk, J); see also Maryland Casualty Co

v Bailey & Sons, Inc, 35 Cal App 4th 856, 872-74 (1995) (granting

summary judgment on claim for equitable indemnity based on

existence express indemnity agreement); Regional Steel Corp v

Superior Court, 25 Cal App 4th 525, 528-29 (1994). The title

insurance policy and the indemnity clause of the insured closing

letter preclude any claim of equitable indemnity by Vintage against

Stewart. Stewart’s motion for summary judgment on the claim for

equitable indemnity is accordingly GRANTED.

2

Although the indemnity provision in the loan closing

instructions would seem to indicate a similar disposition of the

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claim for equitable indemnity against New Century, the court

hesitates to allow the indemnity provision to preclude equitable

indemnity against New Century ab initio in light of the additional

undertakings allegedly performed by New Century separate and apart

from the written loan closing instructions. Nevertheless, the

claim for equitable indemnity against New Century fails as a matter

of law.

As discussed, in order to recover on a theory of

equitable indemnity, the proposed indemnitor must be liable as a

tortfeasor to the underlying plaintiff. The California Supreme

Court carefully explained the nature and extent of escrow holders’

obligations in Summit Financial Holdings, Ltd v Continental Lawyers

Title Co, 117 Cal Rptr 2d 541 (2002). Summit Financial involved

claims against an escrow holder brought by the assignee of the note

and deed of trust underlying the escrow transaction. As an

assignee, plaintiff was not a party to the escrow transaction. The

court first explained that “[a]bsent clear evidence of fraud, an

escrow holder’s obligations are limited to compliance with the

parties’ instructions.” Id at 545. “If an escrow holder fails to

carry out an instruction it has contracted to perform, the injured

party has a cause of action for breach of contract.” Id (emphasis

added). The court then proceeded to refute plaintiff’s argument

that even though plaintiff was not a party to the escrow

transaction, defendant owed plaintiff fiduciary and tort duties.

Summit Financial leads to the conclusion that New Century owed no

non-contractual duties to Farmer Mac, which was not a party to the

escrow. 

//

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Vintage and the Howers suggest that Farmer Mac, acting

through Zions, was for all practical purposes a party to the escrow

due to Zions’ involvement in ensuring that the loan documentation

conformed to Farmer Mac’s requirements. See Doc #157 at 1 (“The

[escrow] transaction involved a simultaneous assignment of the note

and deed of trust from [Vintage] to Farmer Mac and the funds

utilized to close the escrow from Farmer Mac and the borrower

exclusively.”). But even if Vintage and the Howers could somehow

establish that Farmer Mac was a party to the escrow rather than an

assignee of the RAM loan, New Century, as an escrow holder, could

only be liable to Farmer Mac in contract under Summit Financial. 

 Vintage and the Howers points to a facsimile

communication from Rod Avey of Zions to Anne Dennis of Vintage

which contains a list of “additional requirements and documentation

needed” in connection with the RAM loan. Dennis Decl, Ex B. 

According to Ms Dennis, this document was forwarded to Don Lewin of

New Century so that New Century could attend to certain of the

unfulfilled requirements. Doc #161 (Carey Decl), Ex B at 201:23-

203:15, 205:9-206:18. This evidence fails to demonstrate that New

Century owed any duties to Farmer Mac. Rather, this evidence

simply confirms that Vintage was the party to the escrow and New

Century received instructions from Vintage. Vintage and the Howers

cite no authority for the proposition that New Century owed a duty

to Farmer Mac as assignee by virtue of the fact that Farmer Mac’s

agent was communicating certain requirements to Vintage that were

in turn communicated in the form of instructions to New Century. 

New Century’s motion for summary judgment on the claim

for equitable indemnity is GRANTED.

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3

The claim for equitable indemnity against Zions is

premised upon Zions’ alleged failure to disclose the Jarnail Singh

tax lien to Farmer Mac. Under the legal framework governing claims

for equitable indemnity discussed above, Zions must have owed a

non-contractual duty to Farmer Mac to disclose the existence of the

tax lien and Zions must have breached that duty.

Zions does not deny that it was Farmer Mac’s agent in

connection with the RAM loan. See, e g, Doc #134 at 10 (“[Zions]

as a central servicer was Farmer Mac’s agent.”). Indeed, Zions’

argument in connection with the counterclaim for restraint of trade

was based on the existence of an agency relationship between Zions

and Farmer Mac. See supra VI(C)(1). “The law imposes upon an

agent the duty to exercise ordinary care to communicate to his

principal knowledge acquired in the course of his agency with

respect to material facts which might affect the principal’s

decision concerning a pending transaction entrusted to the agent.” 

Cecka v Beckman & Co, Inc, 28 Cal App 3d 5, 11 (1972). “An agent

who violates his duty to use reasonable care, skill and diligence

is liable for any losses which his principal may sustain as the

result of his negligence or breach of duty.” Timmsen v Forest E

Olsen, Inc, 6 Cal App 3d 860, 871 (1970). As Farmer Mac’s agent,

Zions could be held liable in tort to Farmer Mac for failing to

communicate the tax lien -- the materiality of which is evidenced

by this litigation -- to Farmer Mac.

Zions points to a lack of “evidence of any contractual,

agency or fiduciary relationship between [Vintage] or its

principals and [Zions].” As discussed, the relationship between

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the proposed indemnitor and the proposed indemnitee is irrelevant

for purposes of equitable indemnity. See, e g, Jaffe v Huxley

Architecture, 200 Cal App 3d 1188, 1192 (1988) (“It would be unfair

to require one tortfeasor to bear a loss disproportionate to his

relative culpability simply because a tortfeasor who contributed to

the loss owed a duty to the plaintiff but not to the defendant.”). 

What matters is whether Zions owed any non-contractual duties to

Farmer Mac. Although duty is generally a question of law, in light

of the surprisingly scant record and argument regarding the nature

of Zions’ relationship with Farmer Mac, the court declines at this

time to find as a matter of law that Zions owed an agent’s duty of

disclosure to Farmer Mac. But the court has no trouble concluding

that Zions has failed to demonstrate the absence of such a duty.

Zions contends that merely establishing an agency

relationship is not enough. According to Zions, Vintage must

establish “that each theory of liability (breach of contract,

misrepresentation and fraud) asserted by Farmer Mac [against

Vintage] was available against Zions and that the claim would have

been successful.” Doc #177 at 6. Zions relies upon the following

language relies upon the following passage from GEM Developers v

Hallcraft Homes of San Diego, 213 Cal App 3d 419 (1989): 

We conclude any theory which would have been

available to [plaintiff] in a direct action against

[cross-defendant] in a direct action against [crossdefendant] and upon which basis loss could have been

apportioned in [plaintiff’s] action is available to

[defendant/cross-complainant] here seeking equitable

indemnification. Accordingly, * * * [defendant/

cross-complainant] bore the burden of establishing

strict liability constituted a theory available to

[plaintiff] against [cross-defendant] * * *.

Id at 429.

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“In other words,” according to Zions, “if Farmer Mac’s theories of

liability * * * against [Vintage] could have been brought by Farmer

Mac against [Zions] in a direct action upon which loss could have

been apportioned, they would be available to [Vintage].” Doc #177

at 4. 

Zions’ reading of GEM is plainly incorrect. Vintage and

the Howers are not limited to theories alleged by Farmer Mac

against Vintage and the Howers; rather, Vintage and the Howers are

limited to theories that could have been alleged by Farmer Mac

against Zions. Further, Zions’ strained interpretation of the

doctrine of equitable indemnity is inconsistent with the liberal

approach California courts have taken with respect to the concept

of joint and several liability in the context of equitable

indemnity. Specifically, although joint and several liability is a

prerequisite for equitable indemnity, “joint and several liability

in the context of equitable indemnity is fairly expansive” and “can

apply to acts that are concurrent or successive, joint or several,

as long as they create a detriment caused by several actors.” BFGC

Architects, 119 Cal App 4th at 852; see also GEM, 213 Cal App 3d at

431 (recognizing that the term “joint tortfeasor,” when used in the

equitable indemnity context, “is a broad term which includes,

joint, concurrent and successive tortfeasors”); cf Safeway Stores,

Inc v Nest-Kart, 21 Cal 3d 322, 327-32 (1978) (holding that

equitable indemnity was available to apportion liability between a

strictly liable defendant and a negligent defendant); Yamaha Motor

Corp v Paseman, 219 Cal App 3d 958, 962-63, (1990) (reversing

dismissal of claim for equitable indemnity on general negligence

theory where underlying complaint alleged, inter alia, claims for

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strict products liability and breach of warranty). 

Vintage and the Howers must demonstrate that Zions knew

of the tax lien, for if Zions did not know about the tax lien, it

could not be liable to Farmer Mac under any tort theory. Zions

contends there is no admissible evidence that Zions was aware of

the tax lien. Vintage and the Howers appears to concede that there

is no documentary evidence that the existence of the tax lien was

communicated to Zions. On this point, Vintage and the Howers rely

exclusively upon the deposition of New Century employee Debbie

Binder, who worked as the escrow agent on the RAM loan. When asked

whether she specifically recalled faxing information about the tax

lien to Rod Avey of Zions, Ms Binder stated:

A: I don’t remember specifically [faxing either

the IRS letter or the date down endorsement to

Zions], or what I had on that day, or whatever. 

I remember that [the tax lien] was a problem,

and it was a problem that came up, and that

everything that came in to me it was required

by Farmer Mac that it be given to [Zions]. 

[Zions] had to have copies of everything, and

they had to review it. * * * So just basing it

on how it works through Farmer Mac through

Zions, I would have had to have faxed all of

these things [the IRS letter and date down

endorsement] to [Rod Avey of Zions].

Doc #164 (Carey Decl), Ex A at 28:16-29:4.

When asked whether she remembered speaking on the telephone with Mr

Avey about the tax lien, Ms Binder stated:

A: I can’t remember my actual conversation with

him, but as my procedure as escrow officer, it

would have been to fax it to him and wait for

his instruction as to how to deal with that.

Q: Okay. But let me just see if I understand. 

You don’t specifically recall having a

telephone conversation with Rod Avey about the

tax lien prior to the close of escrow?

A: No, it’s been too many years. I don’t

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specifically remember.

Q: And just to be clear, I’m not asking about,

like, the specifics of what every person said

exactly, but just generally, that, you know,

any discussion about the tax lien generally. 

And my question really is, [y]ou don’t have any

specific recollection of having any

conversation with Rod Avey about the tax lien

prior to the close of escrow, correct?

A: Rod Avey was my only * * * contact there at

Zions, and I do know that this tax lien was

causing a delay. And I remember having

conversation [sic] with them with regards that

we would have to provide them with a new date

down or [the tax lien] would have to be

removed.

Id at 48:4-25 (emphasis added). 

Although much of Ms Binder’s testimony simply evidences that the

tax lien would have been communicated in the ordinary course, and

notwithstanding that Ms Binder could not recall the specifics of an

actual conversation with Mr Avey, she did testify that she

remembered having a conversation with “them” (presumably Mr Avey)

regarding the tax lien. 

The court disagrees with Zions’ characterization of Ms

Binder’s testimony as speculative or lacking in personal knowledge. 

And because a jury could reasonably infer from Ms Binder’s

testimony that the tax lien was disclosed to Zions, Zions’ motion

for summary judgment on the third-party claims for indemnity is

DENIED.

The court does agree with Zions, however, that Vintage

cannot shift its contractual liability to Zions through a claim for

equitable indemnity. If the court ultimately concludes that Zions

owed an agent’s duty of disclosure to Farmer Mac and the finder of

fact concludes that Zions breached that duty, only Vintage and the

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Howers’ liability, if any, for fraud and negligent

misrepresentation can be subject to apportionment.

C

Briefly stated, the third-party claims for contribution

against New Century, Stewart and Zions are unripe at this time

because “[a] right of contribution can come into existence only

after rendition of a judgment declaring that more than one

defendant jointly liable to the plaintiff.” Coca-Cola Bottling Co

v Lucky Stores, Inc, 11 Cal App 4th 1372, 1378 (1992) (emphasis

added). Summary judgment is accordingly GRANTED in favor of New

Century, Stewart and Zions on the third-party claims for

contribution. 

D

Vintage and the Howers’ fifth claim seeks a declaration

regarding their rights to indemnity and contribution from thirdparty defendants. Because the court has found that Stewart and New

Century are entitled to summary judgment on the claims for express

indemnity, equitable indemnity and contribution, summary judgment

is GRANTED in favor of Stewart and New Century on the claim for

declaratory relief. Further, because the court’s order disposes of

all claims against Stewart, Stewart’s motion to bifurcate the

third-party claims for trial purposes, Doc #239, is DENIED AS MOOT.

//

//

//

//

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VIII

In sum, the motions to dismiss the amended complaint are

DENIED. Summary judgment in favor of Vintage and the Howers on

Farmer Mac’s Lanham Act claims is GRANTED IN PART and DENIED IN

PART. Farmer Mac’s motion for summary adjudication on its claim

for breach of contract is GRANTED IN PART and DENIED IN PART. 

Farmer Mac and Zions’ motion for summary judgment on all

counterclaims is GRANTED. Stewart and New Century’s respective

motions for summary judgment on all third-party claims are GRANTED;

consequently, Stewart’s motion to bifurcate the third-party claims

is DENIED AS MOOT. Zions’ motion for summary judgment on all

third-party claims is GRANTED IN PART and DENIED IN PART.

SO ORDERED.

 

VAUGHN R WALKER

United States District Chief Judge

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