{b)(2) 

SETTLEMENT AGREEMENT AND MUTUAL GENERAL RELEASE 

T'bi$ Settlement Agreemeij.t and Mutual General Release ("Agreement") is entered 

into as of September 1, 2009 by and between THE FEDERAL DEPOSIT INSURANCE 

CORPORATION, as receiver for DOWNEY SAVINGS AND LOAN ASSOCIATION, F .A. (the 

"FDIC''), HERBERT CUESTA ("Cuesta"), ~d Defendant JEFFREY R. VAGG ("Vagg',, an 

individual. All aforementioned people/entities are refened to individually as a nparty" or 

collectively as the "Parties" in this Agreement· 

1. Recitals: 

1.1 . In or about July 2006, the FDIC's predecessor in interest, Downey Savings 

and Loan Associatjon, F.A. C'Downey''); approved and made a home mortgage loan (the "Loan") 

to James and Maureen Hagar. The loan was secured by the Hagars' primary residence located at 

6829 Hazel Avenue, Orangevale, California 95662 (the "Property''· 

1.2 Vagg is, and at all times relevant hereto was, a professional real estate 

appraiser licensed by the State of California. In or about June 2006, Vagg performed an 

appraisal of the Property and prepared an appraisal report. The appraisal report was used m the 

underwritbig analysis utilized by Downey in approving the Loan. 

1.3 In or about May 2007, the Loan went into default. Downey the.reafter 

foreclosed. On or about May 7, 2008, Downey filed an action against the Hagars. Vagg, and U.S. 

Financial Services, Inc. in the Orange County Superior Court (the "Court") entitled Downey 

Savings and Loan Association, F .A. v. Jeffrey R. Vagg. eta/. and identified as Orange County 

Superior Court Olse No. 30-2008-00106390 (the 11Action"), asserting causes of action for·breach 

of contract, fraud, negligence, and breach of:fiducimy duty. 

1.4 On or about Aprill4, 2009, Vagg filed an Answer to Downey's complaint 

and a cross-complaint (the "Cross-ACtion'') against the Hagars, Downey, U.S. Financial Services, 

. Inc., and former Downey employee Herbert Cuesta C'Cuesta") for indemnity, negligence, fraud, 

and unfair business practices, among other clahris. · 

1.5 In or about November 2008, the FDIC was appointed to act as receiver for 

Downey and succeeded to Downey's rights in connection with the Loan, the Property, the 

Action, and the Cross-Action. 

1.6 The purpose of this Agreement is to resolve all current disputes between 

the Parties hereto arising out of or related to the Loan, the Property, the Action, and the Cr~sAction. 

2. AfmWPent: The Parties hereby agree as follows: 

2.1 . No Admission of Liability. It is understood and agreed that by entering 

into this Agreement, no Party is admitting any liability to any other Party, and neither the fact of 

nor execution of this Agreement shall be used or commented upon by any Party as evidence of 
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any admission of liability. 

2.2 Payment to the FDIC. Upon execution of this Agreement by the FDIC and 

Cuesta, Vagg agrees to pay to the FDIC the sum of twelve-thousand-five--hundred dollars 

($12,500.00). Such payment will be tendered to the FDIC's undersigned cotlllSel of record 

within thirty (30) days after Vagg's counsel receives a copy of this Agreement signed by the 

FDIC and Cuesta. 

· 2.3 Dismissal as to V a.gg. The FDIC will dismiss its complaint in the Action 

with prejudice as against Vagg. The FDIC's counsel shall deliver to Vagg, in care of his counse~ 

an executed Request for Dismissal of the complaint in the Action with prejudice as against Vagg. 

Vagg shall hold the Request for Dismissal unfiled and shall not file it with the Court until after 

remitting the payment to the FDIC as provided in paragraph 2.2 above. 

2.4 Dismissal as to Cuesta. Immediately following the execution of this 

Agreement by the FDIC and Cuesta, Vagg shall dismiss the Cross-Action with prejudice. In 

consideration of this dismissal, Cuesta shall waive any claim against Vagg for defense costs and 

·expenses. 

2.5 Continuing Jurisdiction for &forcement. The Parties agree that the Court 

may and shall retain jurisdiction to enforce this Agreement in accordance With California Code of 

Civil Procedure Section 664.6. 

2.6 · Fees and Costs. Each Party agrees to bear his, her or its own attorneys' 

fees and costs in connection with the Action, the Cross-Action, and the preparation of this 

Agreement. 

3. Releases: 

3.1 Mutual Genemt Release. Except with respect to the obligations, 

representations and warranties set forth in this Agreement, the FDIC and Cuesta, on the one 

hand, and Vagg. on the other hand. hereby generally release, remise and forever discharge each 

other, including each others' heirs, successors and assigns, attorneys, insurers, agents and · 

.~ representatives of each other, from any and all manner of action or actions, cause or causes of 

action, in law or in equity, suits, deb~ liens, c:ontracts, agreements, promises, liabilities, claims, 

demands, damages, losses, costs or expenses (including but not litnited to attorneys' fees), of any 

nature whatsoever, whether known or unknown, fixed or contingent, based upon or arising out of 

any of the facts, cb:cumstances and/or transactions underlying the claims set forth in the Action 

or the Cross-Action. This release includes all claims, or potential claims, arising out of or 

relating to the Loan and the Property, only, and does not release any claims or potential claims 

arising out of or relating to other loans, other properties or other appraisal reports. 

3.2 TIIE PARTIES ACKNOWLEDGE TIIAT TilEY HA VB BEEN 

ADVISED BY 11IFlR RESPECTIVE LEGAL COUNSEL AND ARE FAMILIAR WI1H THE 

PROVISIONS OF CAI.JFORNIA CIVIL CODE SECTION 1542, WinCH PROVIDES AS 

FOLLOWS: 
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"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS 

WinCH THE CREDITOR DOES NOT KNOW OR SUSPECT 

TO EXIST IN HIS OR lffiR FAVOR AT THE TIME OF 

EXECUTING Tim RELEASE# WHICH IF KNOWN BY ffiM OR 

HER MUST HAVE MATERIALLY AFFECTED HIS OR HER 

SEITLEMBNT WITH TilE DEBTOR." 

BEING AWARE OF SAID CODE SECTION, TilE PARTIES HEREBY EXPRESSLY WAIVE 

ANY AND ALL RIGHI'S THEY MAY HAVE THEREUNDER, ANY AND ALL RIGHI'S 

TIIEYMA Y HAVE TIIEREUNDER WI1H REGARD TO THE LOAN OR TilE PROPERTY, 

AS WELL AS ANY AND ALL RIGHTS TilEY MAY HAVE BY REASON OF OTiffiR 

STATIJTES OR COMMON LAW PRINCIPLES OF SIMILAR EFFECT. 

4. Miscellaneous: 

4.1 Investigation. Each Party has made such investigation of the facts 

pertaming to this Agreement and of all the matters pertaining thereto as such Party deems 

necessazy. 

4.2 Inde.peruient Lesru Advice. In executing th~ Agreement, the Parties have 

relied solely upon their own judgment, belief and knowledge and, to the extent they believe it is 

necessacy, have sought the advice and recommendations of their own independently selected 

counsel concerning the nature, extent and duration of their rights and claims relating thereto, the 

rights affected by this Agreement, the form and content of this Agreement, and the advisability of 

entering into and execu1ing this Agreement 

4.3 No Reliance. Except for statements, representations and promises · 

expressly set forth in this Agreement, none of the Parties haS relied upon any statement, 

representatimi or promise of any other PartY (or of any employee, attomey or other representative 

of any other Party) in executing this Agreement, and no other Party has made any statements. 

representations or promises ~garding a fact relied upon by it in entering into ~s Agreement. 

4.4 Voluntmy Execution. Each Party acknowledges and warrants that his, her 

or its execution of this Agreement is free and voluntaty. 

4.5 Read/Understands. Each Party and/or its responsible agent has read this 

Agreement and understands the contents thereof. 

4.6 Full Autborizy/No Prior Assignment The Parties represent and warrant 

that they each have the full right and authority to enter into this Agreement, and, to the extent 

applicable, the individual'executing this Agreement on behalf of each of them has the full right 

and authority to do so, and to commit and bind them to this Agreement The Parties represent 

and warrant that they have made no prior assignment of the claims released herein. Each Party 

(the "Indemnitor'') further agrees to indemnify the other Parties (the "Indemnitees''), and shall 

hold the Indemnitees harmless from and against: (a) any and all liabilities, claims, demands, 

. actions, causes of action or rights which have been assigned or transferred by the Indemnitor 
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contrat:y to the foregoing representations and warranties; and (b) any and all loss, expense, claim, 

demand or liability arising out of any breach of the foregoing warranties by the Indemnitor. 

4.7 Later Discoyezy ofFacts. The Parties understand that they may hereafter 

discover facts different from or in addition to those they now know or believe to be true with 

respect to the matters that are the subject of this Agreement, and they hereby agree that the 

releases and agreements contained in this Agreement shall be ~d will remain effective in all 

respects notwithstanding such different or additional facts. 

4.8 Prior Amements. This Agreement is the entire agreement between the 

Parties with respect to the subject matter hereof and supersedes all prior and contemporaneous 

oral and written agreements al1d discussions. There are no agreements, representations, 

warranties, or statements, whether orai or in writing, with respect to the subject matter of this 

Agreement, except as expressly set forth herein. 

4.9 Drafting. All Parties have cooperated in the drafting and preparation of 

this Agreement. In any construction to be made of this Agreement, it sball not be construed 

against any Party. 

4.10 Attorneys' Fees. The prevQiling party in any dispute related to this 

Agreement shall be entitled to recover all actua1/reason.able attorneys' fees and costs, in addition 

to any other relief to which that party may be entitled. 

4.11 Amendments. This Agreement may be amended or modified only by a 

writing, signed by the Party against whom enforcement is sought. No modification, amendment 

or waiver of any of the tenns and conditions of this Agreement, and no future representation, 

warranty, promise, or condition in connection 'With the subject matter of this Agreement, shall be 

binding or effective for any purpose tmless expressed in wri~ and signed by the Party to be 

bound by the modification or vraiver, and any such modification, amendment or waiver shall be 

effective only in the specific instance and for the specific purpose given. 

4.12 Jlinding Effect This Agreement shal1 be binding upon and inure to the 

benefit of the Parties and their respective heirs, representatives, successors and assigns. 

4.13 California Law. This Agreement is subject to and shall be interpreted 

pursuant to the substantive laws of the State of California. 

4.14 Provisions Severable. If any tenn or provision of this Agreement is held 

to be invalid or unenforceable for any reason, the remaining terms and provisions of this 

Agreement shall remain in full force and effect. 

4.15 Cm.mtemarfs. This Agreement may be executed in counterparts, all of 

which taken together shall constitute one agreement binding upon all of the Parties hereto. 

Signatures to this Agreement may be communicated and delivered by :fucsimile transmission. 
•. 

(b)(6) 

(b)(4) 

Page 245 

IN WITNESS WHEREOF, the Parties have executed this Agreement on the dates set 

forth below, effective ~ of the date first set forth above. 

Dated: November /7, 2009 

Dated: November__, 2009 

. Dated: November__, 2009 

11IE FEDERAL DEPOSIT INSURANCE 

CORPORATION, as receiver for DOWNEY 

S OAN ASSOCIATION, F.A. 

ijERBERT CUESTA, as an individual 

JEFFREY R. V AGG, as an individuaf 

APPROVED AS TO FORM ANP CONTENT: 

·Dated: November __,2009 

Dated: Noyember __, 2009 

LAW OFFICES OF JAMES M. FRASER 

By:.-::-:-::::----:--:--:::--------- Mark Buehler, Esq. 

By: 

Attorneys for Defendant and Cross-complainant 

JEFFREY R. VAGG. 

ROBERTSON+ TIIOMMA.RSON, LLP 

=-~~~--~--~--~----- Ronald J. Thorntn8:rso~ Esq. 

Attorneys for Plaintiff and Cross-defendant 

THE FEDERAL DEPOSIT INSURANCE 

CORPORATION 

6 
(b)(4) • 

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Page 246 

IN WITNESS WHEREOF, the Parties have executed this A.greemeot on the dates set 

forth below. effective as of the date first Set for1h abcve. 

Dated: November__, 2009 

Dated: November \8, 2009 

Dated: November__, 2009 

Dated: November__, 2009 

Dated: November__, 2009 

THB FEDERAL DEPOSIT INSURANCE 

CORPORATION, as receiver for DOWNEY 

SA VJNGS AND LOAN ASSOCIATION, F...A. 

By:~------~---------

~--------------------

. .. 

----------------~rHBRBBRT CUESTA. as an individual 

.JBFfltEY ll VAGG, as an individual 

LAW dFFICBS OF JAMES M. PRASBR. 

By: ~~~~=-~~-.~B~~-.--------~--

~b Defcndentand Cross-complainant 

.mPFR:EYll VAGG 

ROBERTSON+ 'IliOMMARSON.LI.;P 

~=-~~----~~~~~ . Rould 1.1'hommaalon, Esq. 

Attomey~~ for Plaintiff 8nd Cross-defendant 

1HE FBDBRAL DEPOSIT INSURANCE 

CORPORATION 

s 
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(b)(4) 

(b )(4) 

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11-1 B·tol!l 11 : D3 F roa-l.AI OFFICE ~~ J~S FRASER T-885 P.C02IODZ F-m 

·-· I II 11/WUII 111:11:1 i'IX TH•~ ·211! llDBEBr&OH .. iHDt~~RtOII.lLt li'JOOIJCD1 

'•. 

' . ' •• 1' 

.· . · .. ·:.. ~.,........., __ 2009 

. . .. .. . ~ 

. . : 

--· . 

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\··· 

•.:- .. 

TriAl OFFICE flo J1.u£S Pus 005 

(b)(4} 
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Dated: November__, 2009 

HERBERT CUESTA, as an individual 

Dated: November__, 2009. 

. JEF~RBY R. VAGG, as an individual 

APPROVED AS TO FORM AND CONTENI; 

Dated: November____;, 2009 

Dated; November /f. 2009 

Dated: November___, 2009 

LAW OFFICES OF JAMES M. FRASER 

By:~:-::----:-::--:--------­ Mark Buehler, Esq. 

By 

Attorneys for Defendant and Cross-complainant 

JEFFREY R. VAGG 

. .t:sON + mOMMARSON, LLP 

(b)(6) 

~~~MM~J~.TIID~mmmro-----~~E~s-q.~-----

Attomeys for Plaintiff and Cross-defendant 

1HE FEDERAL DEPOSIT INSURANCE 

CORPORATION 

MARSHACK HA YS;LLP 

8~----~:------------- Sean A. Kading, Esq. 

Attorneys for Cross-defendant 

HERBERT CUESTA 
Dated: November .:ts8oo9 

(b)(6) 

(b)(4) 

Page 249 

MARSHACK HAYS, LLP 

J L 

Sean A. Kading, EV 

Attorneys for Cross-defendant 

HERBERT CUESTA 

6