Case Number: BC510002    Hearing Date: November 07, 2014    Dept: 32
CASE NAME: Sun West Mortgage Company, Inc. v. Mortgage World Bankers, Inc.
CASE NO.: BC510002
HEARING DATE: 11/07/14
DEPARTMENT: 32
SUBJECT: Request for Entry of Default Judgment
MOVING PARTY: Plaintiff Sun West Mortgage Company, Inc.
RESP. PARTY: None

TENTATIVE RULING

Request for entry of default judgment CONTINUED to a date to be selected at the hearing:

Deficiencies in the application:

• Plaintiff to submit additional evidence as to the “Purchase Price” of the loan pursuant to Section 306.01 of the Guides. Plaintiff does not explain why the $576,000 principal of the loan would be considered the Purchase Price pursuant to the Guides.
• Plaintiff to provide additional information on the proper method of valuing the loan

STATEMENT OF THE CASE

According to the complaint, on or about December 24, 2012, Sun West and Mortgage World entered into a written agreement entitled Mortgage Broker & Correspondence Agreement (the “Agreement”) pursuant to which Mortgage World would sell mortgage loans to Sun West. Paragraph 5 of the Agreement sets forth certain occurrences and situations that constitute an “Event of Default” under the Agreement. Among other events, in the reasonable judgment of Sun West, a mortgage loan that is ineligible for purchase by an investor, such as
Ginnie Mae, Fannie Mae, Freddie Mac, or a private investor constitutes an Event of Default under the Agreement.

On or about May 2, 2013, Sun West made a written demand to Mortgage World to repurchase the mortgage loan of borrower Jodie Meyer-Hetzler (the “Meyer-Hetzler Loan”). Mortgage World did not repurchase the Meyer-Hetzler Loan or respond to Sun West’s May 2, 2013 letter. On or about May 15, 2013, Sun West’s counsel sent a follow up letter reiterating its demand of the Meyer-Hetzler Loan, and explaining that, under the terms of the Agreement and
California law, Sun West is entitled to recover from Mortgage World “any and all losses” it suffered in connection with the Meyer-Hetzler Loan, including its lost profits as a result of not being able to sell the loan. Sun West demanded for Mortgage World to pay the entire amount owed in the amount of $607,796.91. To date, Mortgage World still has not paid the amount owed or responded to Sun West’s most recent correspondence.

Plaintiff’s Supplemental Declarations in Response to August 20, 2014 Hearing

On August 20, 2014, the Court continued the hearing and ordered supplemental briefing on the following issues:

• Plaintiff must show by competent evidence how the “Repurchase Price” of $576,000 was calculated pursuant to the “Guides” referred to in paragraph 6(a)(ii) of the Mortgage Broker & Correspondence Agreement (the “Agreement”).
• Plaintiff must show by competent evidence the current value of the Meyer-Hetzler Loan, including based on the stream of ongoing mortgage payments to Plaintiff, the value of the underlying security or any other recognized way to value this asset. (See Pahwa Decl.
4-5.)

Plaintiff has not adequately addressed the first deficiency in the Declaration of Stephen Ma filed October 27, 2014. The relevant Guides have been submitted. (Ma Decl. ¶ 2; Pahwa Decl. Exh. R.) The definition states that the Repurchase Price equals the “Purchase Price” plus certain administrative expenses and lost profits. Ma states that Plaintiff has calculated the Repurchase Price using the $576,000 principal of the Meyer-Hetzler Loan. However, Ma fails to show that this principal balance was the initial “Purchase Price” by Plaintiff from Defendant. It seems likely that Plaintiff might have purchased the loan at a discount to the principal of the loan.

Plaintiff has also not adequately addressed the second deficiency. Plaintiff submits evidence that it has received two bids to purchase the loan for approximately $222,106.89 and $444,213.79 (40% and 80% of unpaid balance.) (See Pahwa Decl. ¶¶ 4-5.) Plaintiff previously submitted evidence that three companies had stated that they would not purchase the loan. Thus, Plaintiff calculates the value of the loan as the average of the two bids and the three rejections (at $0 each.) Plaintiff has not presented competent evidence, or legal argument, to support its methodology for valuing the loan. Plaintiff should present to the court an appraisal performed by a qualified appraiser, or otherwise lay a foundation that its methodology reflects fair market value.