Franklin Am. Mortg. Co. v. Univ. Nat'l Bank of Lawrence
910 F.3d 270
6th Cir.2018Background
- FAMC purchased two mortgage loans from UNB (2006 Salvino; 2007 Turner), which UNB underwrote pursuant to a Correspondent Loan Purchase Agreement and a later Delegated Underwriting Modification. FAMC resold both loans to Wells Fargo.
- Wells Fargo later identified underwriting defects (missing docs, income miscalculations) and demanded repurchase (Salvino) and indemnity (Turner). FAMC paid Wells Fargo $231,225.33 total and resold Salvino at a loss.
- FAMC sued UNB in 2013 for breach of contract asserting UNB breached repurchase and express indemnification obligations; district court granted summary judgment for FAMC and awarded $188,858.71. UNB appealed, chiefly arguing the claims were time-barred.
- Central legal dispute: when breach claims accrue for limitations purposes — at loan purchase (when alleged misrepresentations were made) or later (when FAMC paid Wells Fargo and sought indemnity/repurchase).
- The Sixth Circuit affirmed, holding UNB’s statute-of-limitations defense failed because FAMC properly pleaded and proved distinct indemnification claims that accrued when FAMC actually suffered loss (when it paid Wells Fargo), and the Modification did not eliminate the indemnity remedy.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Accrual/statute of limitations | Claims accrued when FAMC paid Wells Fargo (2010–2011); suit timely | Claims accrued at purchase (2006–2007) when representations were made; suit time-barred | Accrual for indemnity claims is at time indemnitee sustains loss; claims timely (2010–2011 accrual) |
| Nature of repurchase vs indemnity obligations | Indemnification is an independent contractual obligation that survives and accrues on payment | Repurchase and indemnity are merely alternative remedies for an earlier breach; accrual at purchase | Repurchase provision is remedial (accrues at purchase) but indemnity is distinct and accrues upon payment/loss |
| Sufficiency of evidence on breach and causation | FAMC showed defective underwriting, Wells Fargo demand, payments, and damages | UNB contested materiality and causation, argued defects immaterial or demands voluntary | Summary judgment proper: FAMC presented adequate evidence; UNB failed to identify record facts creating genuine dispute |
| Mitigation / affirmative defenses | FAMC mitigated by reselling Salvino; damages established | UNB asserted failure to mitigate and raised 24 affirmative defenses but offered no concrete contrary evidence | UNB bore burden on affirmative defenses and failed to present evidence; no genuine issue on mitigation or damages |
Key Cases Cited
- ACE Sec. Corp. v. DB Structured Prods., Inc., 25 N.Y.3d 581 (N.Y. 2015) (repurchase clauses treated as remedial; accrual at misrepresentation date unless contract creates distinct future obligation)
- Long v. McAllister-Long, 221 S.W.3d 1 (Tenn. Ct. App. 2006) (indemnitor liability accrues when indemnitee actually pays an obligation)
- Lehman Bros. Holdings, Inc. v. Universal Am. Mortg. Co., LLC, [citation="660 F. App'x 554"] (10th Cir. 2016) (distinguishing contract damages from indemnity where plaintiffs never alleged payment to third parties)
- TMW Enters., Inc. v. Fed. Ins. Co., 619 F.3d 574 (6th Cir. 2010) (contract interpretation principles; avoid creating ambiguity from redundant language)