207 F.3d 473 (8th Cir. 2000), 98-4155, Douglas County Bank & Trust v United Fin'l

Docket Nº:98-4155
Citation:207 F.3d 473
Case Date:March 22, 2000
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit

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207 F.3d 473 (8th Cir. 2000)




No. 98-4155

United States Court of Appeals, Eighth Circuit

March 22, 2000

Submitted: December 17, 1999

Appeal from the United States District Court for the District of Nebraska

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[Copyrighted Material Omitted]

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Before Murphy and Magill, Circuit Judges, and Smith,1 District Judge.

Smith, District Judge

Douglas County Bank & Trust Co. ("DCB&T"), a Nebraska banking corporation, appeals the district court's2 denial of DCB&T's motion for judgment as a matter of law or for a new trial, filed after a jury found for DCB&T on one count of fraudulent misrepresentation. DCB&T asserts that the district court erred in not finding, as a matter of law, that the jury improperly considered evidence in making its determination of damages, and that it should have set aside the jury's damage award. DCB&T alternatively contends, that the district court abused its discretion in failing to grant a new trial on that issue. We affirm.


DCB&T operates a Mortgage Servicing Division as part of its banking business. It purchases, through a confidential bidding process, the right to collect principal and interest on individual mortgage loans that have been collected or pooled together into packages. As compensation for the administration of these loans, DCB&T keeps a portion of the income generated. These packages are sold in the secondary mortgage market to servicing entities, like DCB&T, through written offering circulars detailing the financial characteristics of these pooled mortgages.

United Financial Incorporated ("UFI"), a Colorado corporation, acts as a broker of pooled mortgage packages on behalf of different sellers. UFI creates offering circulars sent to potential customers. The information contained in the circulars is supplied by the seller.

The Government National Mortgage Association ("GNMA") is an agency of the federal government. It has primary responsibility for regulating mortgages based on federally established criteria. As part of its responsibilities, GNMA underwrites mortgage loans meeting certain standards. If loans do not meet these standards, including eligibility for and attainment of a Mortgage Insurance Certificate ("MIC"), such loans are not accepted into the GNMA program. Consequently, the entity that has purchased the right to service the loans is responsible for repayment of their full value if the borrower defaults.

On April 16, 1996, UFI sent a circular to DCB&T, offering for sale a $65,000,000 Florida GNMA mortgage portfolio. UFI was brokering the portfolio for Waters Mortgage Corporation ("WMC"), the seller. DCB&T unsuccessfully bid on this package.

The successful bidder notified UFI on May 24, 1996, that it refused to go forward with the sale due to the results of the bidder's due diligence investigation of the packaged mortgages. The bidder indicated that some of the loans lacked the MIC, an indication of the federal insurability of the loans. The bidder also indicated that some of the loans were delinquent in principal and interest payments. Following

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receipt of this notice, UFI and WMC decided to repackage the portfolio by eliminating certain loans. They created a new $49,000,000 offering. DCB&T was given the first opportunity to purchase the revised package without going through the bidding process.

On or about June 2, 1996, DCB&T called UFI to discuss the loan package's characteristics. DCB&T recognized the new package offering involved some of the same loans as the April 16, 1996 offering. UFI's representative confirmed that the package was derived from the previous offer and represented that the previous successful bidder could not obtain financing.

On or about June 3, 1996, DCB&T successfully bid on the package and agreed to pay WMC $147,000. On June 7, 1996, DCB&T wired the first payment of $73,500 to WMC. During mid-June, it began its due diligence evaluation of the mortgage package, a process that continued into July. On or about June 20, 1996, DCB&T's investigation revealed that many MICs were missing from the individual loan files. In fact, at least three hundred out of approximately one thousand loans lacked the appropriate MICs. After contacting UFI and WMC, DCB&T received assurances from WMC that the missing MICs existed and would be obtained in the near future. After having been put on notice of the missing MICs, DCB&T wired the second payment of $73,500 to WMC on June 28, 1996.

DCB&T executed an assignment agreement with the seller on or about July 29, 1996, giving it the responsibility for servicing the loans from that day forward. On August 8, 1996, GNMA approved and consented to the assignment agreement. On or about August 15, 1996, DCB&T and WMC requested that GNMA allow them...

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