Wells Fargo and ORIX Motion Claiming No Fiduciary Duty

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CAUSE NO. 02-2849

ORIX CAPITA L MARK ET S, L .L .C ., as Master §

Servicer and Special Servicer of the Trust for the §

Certificateholders of the Merrill Lynch §

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Mo rtg ag e In ve sto rs, L Ile .Mortg ag e P ass -

Through Certificates, Series 1999-C, Suing on

behalf of the Trust and in the Name of WELLS

FARGO BANK, NATIONAL ASSOC IATION ,

as Trustee of the Trust,

and

O RIX CAPITAL M ARK ETS, L .LC.,

and

WELLS FARGO BANK, NATIONAL

ASSOCIATION, as Trustee of the Trust/or the

Certificateholders of the Merrill Lynch

Mortgage Investors, Inc. Mortgage Pass-

Through Certificates, Series 1999-C,

Plaintiffs,

vs,

UBS W ARBURG REAL ESTATE

SECURITIES, INC. and UBS PAINEWEBBER,

INC.

Defendants.

IN THE DISTRICT COURT OF

DALLAS COUNTY, T EXAS

192 ND JUDIC IA L D IS TR ICT

PLAINTIFFS' SUPPLEMENTAL RESPONSES TO REQUESTS FOR DISCLOSURE

TO: Defendants UBS W A RBURG REAL ESTATE SECURITIES, INC. and UBS PA IN E

WEBBER, INC., by and through their attorneys of record, Scott Davis, Gardere Wynne

Sewell, LLP, 3000 Thanksgiving Tower, 1601 Elm Street, Dallas, Texas 75201 and

William B. Chaney, Conant, French & Chaney, 1717 Main Street, Suite 3880, Dallas,Texas 75201,

In accordance with Texas Rule of Civil Procedure 194.2, Plaintiffs, Wells Fargo Bank

Min ne so ta , N atio nal A ss oc ia tio n and ORIX Capital Markets, L.LC., make this supplemental

response to Defendant's Requests for Disclosure as follows:

PLAINTIFFS' SUPPLEMENTAL RESPONSES TO REQUESTS FOR DISCLOSURE - PAGE 1



194.2(c): The legal theories and, in general, the factual bases of Plaintiffs' claims and/or defenses;

RESPONSE:

As explained in more detail inPiaintiffs' Seventh Amended Petition, underthe Ml.Px, Paine

Webber Real Estate Securities, Inc. ("Paine Webber") made representations and warranties about

the characteristics of the loans it transferred to the Trust. Paine Webber agreed that these

representations and warranties were for the Certificateholders' benefit, and that ORIX, as Master

Servicer and as Special Servicer, could enforce th e representations and warranties on the

Certificateholders' behalf. Under the term s of the M LPA and PSA, Paine Webber also agreed that

it would cure any breach of any representation or warranty which materially and adversely affect[ s]

th e value of the related Mortgage Loan or th e interest o fth e C ertif ic ate ho ld ers th er ein w ith in 9 0 d ay s

of its notice of the breach. Any such cure includes payment of losses and expenses. If it could

not cure within the requisite 90-day period, it could seek a 90-day extension in accordance with the

conditions set forth in the MLP A. On or before the expiration ofthe cure period, Paine Webber was

required to substitute a Qualified Substitute Mortgage Loan, as that term is defined within the PSA,

or repurchase th e d efe ctiv e Mo rtg ag e Loan from the Trust. The formula for calculating that

repurchase price is also set forth within the MLPA.

On multiple occasions dating back to 2000, Plaintiffs have identified breaches of

representations and warranties with regard to the nine loans at issue and brought such breaches to

the attention of Defendants. To Plaintiffs' knowledge, Defendants have not made any actual attempt

to cure these breaches, much less effected an actual cure of any of the breaches at issue within the

90-day cure period. Moreover, under the terms of the MLPA, Defendants were entitled to a 90-day

extension of the time to cure if the breach could be cured but not within the original 90 days, and

PL AIN TIFFS' SU PPL EM EN TA L R ESPO NSES T O R EQUE STS FO R D ISC LO SU RE - PA GE 2



provided further that Defendants were proceeding diligently with the cure of such breach. While

some of the breaches may be of such a nature that they cannot be cured, it is·now apparent that

Defendants made no effort to even attempt a cure of their breaches, much less an attempt that

proceeded diligently after their own discovery of the breaches. Despite the fact that certain breaches

were capable of cure by the Defendants' payment of a sum of money to the Trust, Defendants wholly

failed to cure any breaches within the applicable time period. With respect to each of the nine loans

that suffers from a defect that cannot be cured, Plaintiffs are entitled to the repurchase or substitution

of the Mortgage Loans in question in accordance with the terms of the MLPA, as set forth more fully

below.

Similarly, despite the Plaintiffs' demand for substitution of Qualified Substitute Mortgage

Loan, Defendants made little or no effort to locate or acquire any Qualified Substitute Mortgage

Loans as required by the MLP A and the PSA. Because Defendants unilaterally decided with

virtually no investigation that it would be too expensive for them to comply with their obligations

to tender Qualified Substitute Mortgage Loans to replace the defective loans at issue, Defendants

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turned their backs on the interests of the.Certificateholders and their own obligations made in the

express representations and warranties. At the same time that UBS disingenuously claimed that

ORIX was not acting in the best interests of the Certificateholders, UBS refused to provide a

substitution remedy or its equivalent through a defeasance or yield maintenance payment.

The importance of the Defendants' representations and warranties traces back to discussions

that occurred between Jim Thompson of ORIX and Jack Taylor of Paine Webber prior to the closing

of the MLMI securitization. Concerned with the quality of several of the loans that-Paine Webber

was proposing to sell into the pool, including but not limited to the Arlington Apartments loan,

ORIX requested that certain loans be removed from the pool. Paine Webber defended the inclusion

PLAINTIFFS' SUPPLEMENTAL RESPONSES TO REQUESTS FOR DISCLOSURE ~PAGE 3



of the loans in the pool, including the Arlington Apartments loan; and said that ORIX's assessment-

of the loan was incorrect, that Paine Webber's underwriters were more familiar with the loans inthe

pool, and that ORIX should defer to the Paine Webber assessment. Moreover, Paine Webber needed

the Arlington Apartments and Lee Hall loans in th e tvILMI pool in order to meet the 30% threshold

of multifamily properties in the pool, which would result in a greater profit to Paine Webber by

meeting the investment criteria for-certain institutional investors such as Fannie Mae and Freddie

Mac to purchase the MLMI certificates. Most importantly, Mr. Taylor gave Mr. Thompson his

assurance that if the loans were not everything that the Paine Webber underwri ters represented them

to be, ORlX and the other Certifieateholders had strong representations and warranties from Paine

Webber, representations that Paine Webber would stand behind, at thatORIX was given the standing

to fully enforce the terms of the contract, ORlX specifically negotiated for these strong

representations and warranties; the warranties were so important to orux that it delayed its purchase

of the B-piece certificates until appropriate revisions were made to the representations and

warranties, During the negotiation process, attorneys hired by Paine Webber repeatedly hindered

ORIX's ability to timely review the securitization documents. Although Paine Webber relied in part

upon atto rn ey s to tell it whether the loans that it was selling to the MLMl Trust actually met all of

the representations and warranties, it is now evident that neither Paine Webber nor its attorneys

actually verified the accuracy of all of the representations and warranties made by Paine Webber.

The first test of Mr. Taylor's commitment that Paine Webber would stand behind its

representations and warranties came shortly after the closing of the securitization, when ORIX

asserted a breach o r a representation and warranty on the Parbhu Loan. The Parbhu Loan.was a

$1,400,000 loan secured by the Travel Lodge South in Nashville, Tennessee. On February 3,2000,

ORIX representatives sent a letter to Defendants demanding that they repurchase the Parbhu Loan~ ~ ~

PLAINTIFFS1 SUPPLEMENTAL RESPONSES TO REQUESTS FOR DISCLOSURE - PAGE 4



because Paine Webber had breached its ''No Default" warranty.' The ''No Default" warranty was

b re ac hed b ec au se , p rio r to s ec uritiz atio n, th e b orrower's fra nc his e a gre em en t w ith th e T ra ve l L od ge

com pan y w as in default due to the b orrower's fa ilu re to pay f ra nc his e f ee s. In t ha t c ir cumstance ,

u nlik e th e m an ne r in which tJBS has dishonored its obligations under the MLPA , Defendants agreed

to buy back the loan, and did so in early March of2000.2 Tellingly, Defendants did not a ss e rt in that

case that they lacked=knowledge" of the default, or that such.lackofknowledge somehow absolved

their breach, or that ORlX was not entitled to assert a breach of a representation and warranty claim

on a loan that was not in payment default, as they have done here. They simply acknowledged their

error and acted as required under th e MLP A.

Later in 2000, Paine Webber w as acquired by UBS Warburg. UBS quickly engaged ina full

housecleaning of the Paine Webber conduit loan department, terminating the employment of many

key employees of the Paine Webber conduit group, including Jack Taylor, Ron Wechsler, Frank

Pomar, and Steve Plust. Once UBS cleaned house ofthe former Paine Webber employees, it refused

to stand behind the commitments made by Taylor, and failed to honor its obligations to cure,

repurchase, or substitute defective loans as required by the MLPA.

In response to the demands made for cure or, if cure was not possible, repurchase or

Although the Parbhu Loan was part of another securitization, it was contemporaneous with the transaction at

issue and the "No Default" warranty in that securitization contained identical language to the "No Default" warranty at

issue here:

There is no material default, breach, violation or event of acceleration existing

under the related Mortgage or Mortgage Note, and to the Mortgage Loan Seller'sknowledge, there is no event (other than payments due but not yet delinquent)

which, with the passage of time or with notice and the expiration of any grace or

cure period, would constitute such a default, breach, violation or event of

acceleration. See MLPA Schedule I (vii);

1 To be more precise, because Defendants. were afraid of the adverse publicity that would be caused by their

repurchase of a loan they had so recently placed into a securitization, Defendants and Plaintiff ORIX agreed to a deal

whereby Paine WebberprovidedPJaintiffOIUX with the required funds andPlaintiffORIX, not Defendants, repurchased

the Parbhu Loan, and Paine Webber quietly purchased the loan from ORJX.

PLAINTIFFS' SUPPLEMENT AI.. RESPONSES TO REQUESTS FOR DISCLOSURE - PAGE 5



substitution' of the defective loans at issue, UBS has disavowed its responsibility fo r the

representations and warranties made by-Paine Webber. Infact, Mr. Taylor has indicated in testimony

that, had he still been at UBS/ Paine Webber, many, if not all, of the disputes at issue could have

been resolved without protracted litigation. Not only has UBS breached its obligations under the

parties' agreements, it has violated the duty of good faith and fair dealing under the :MLPA by

engaging in acts designed to thwart ORJX's ability to enforce UBS' obligations under the

agreements. These tactics include, but are not limited to, UBS' engaging in scorched-earth litigation

tactics and other improper means to pressure ORJX into relenting from its efforts to enforce the

representations and warranties. In fact,UBS has expended more in litigation costs than it would

have cost in 2002 to repurchase the Lee Hall and Arlington Apartments loans. UBS conspired with

other loan sellers to pressure trustees of the securitization tmsts by asserting frivolous claims against

the trustees, to pressure ratings agencies that rate ORIX as a servicer, and to freeze-out ORlX from

obtaining new servicing business, either by purchasing the B-piece of a securitization at issuance or

by purchasing B-piece securities on the secondary market. UBS took these actions In direct response

to and in retaliation for the claims brought by ORIX on behalf of the Certificateholders,

Under the term s of the MLP A , P aine Webber a lso conveyed all its rig ht, title , a nd in te re st

to any docum ents w ith respect to the related Mortgage Loan prepared by or which come into the

possession of Paine Webber. The right to these documents was assigned to the Trust under the

terms of the PSA. Under the MLPA, Paine Webber also undertook the duty of delivering all

docum ents and records in its possession relating to the M ortgage Loans to the M aster Serv icer on

or before the Closing Date. The obligation to deliver documents did not exclude themany electronic

documents and e-mails in the possession of Paine Webber that related to the Mortgage Loans.

Moreover, under the :MLPA, Paine Webber specifically agreed to deliver such other documents,




instruments, and agreements relating to the Mortgage Loans as the Purchaser, the Trustee, the

Custodian, the Master Servicerand.the Special Servicer may reasonable request.

Although under n o obligation to demand that Paine Webber perform it s obligation todeliver

all doculllents and records related to the Mortgage Loans, ORIX (in its capacity as Master Servicer)

has requested on at least two occasions that the Defendants immediately deliver to ORIX all

documents and records pertaining to the mortgage loans that were inthe possession or control of

Paine Webber as of the Closing Date. The documents that Defendants have refused to deliver

con ta in informat ion important to the ability of ORIX as Master and Special Servicer to perform its

obligations under the MLPA and PSA. Defendants failed and refused to furnish or deliver the

requested documents. Paine Webber/ UBS' s failure to deliver the documents and records asrequired

Even after the lawsuit was filed, Defendants still failed and refused to produce all documents

and records, including electronic documents and records, related to the Mortgage Loans. Despite

multiple orders requiring them to do so, Defendants have steadfastly refused to tender to the

Plaintiffs all documents and recordsrelated to the Mortgage Loans that Paine Webber sold to the

Trust, including electronic documents and records that exist on the Defendants' back-up tapes,

archives, and electronic document retention systems.

Defendants' failure to deliver all documents required by the MLPA is due, at least in part,

to a "purge file" policy implemented by Paine Webber, whereby senior executives in the Paine

Webber conduit department instructed junior members ofthe conduit group to systematically destroy

or "purge" their files of critical documents related to the Mortgage Loans. Defendants actively

concealed this purge policy from orux, from the Trust, from the Trustee, and from the ratings

agencies that rated the MLMI securitization.




The above paragraphs set forth the primary factual basis for the causes of action Plaintiffs have

brought against Defendants,' as follows:

Claim I: Breach ofthe l\.fl..,PA- Delivery of Documents. As set forth above, Paine Webber was

required to deliver "[ajll documents and records in the Mortgage Loan Seller's possession relating

to the Mortgage Loans (including financial statements, operating statements and any other

information provided by the respective Mortgagor from time to time) or copies thereof, that are not

required to be a part of a Mortgage File," Defendants have failed and refused to produce all

documents within their possession, custody, and control. That refusal constitutes a breach of the

MLPA.

Claim II: Breach of tbe MLPA and PSA - Deliyery of Documents. Under Section 2.4(a) of the

lYfLPA, in pertinent part; "the Mortgage Loan Seller hereby agrees to deliver to each afthe Trustees,

the Custodian, the Master Servicer and the Special Servicer (x) all documents, instruments and

agreements required to be delivered by the Purchaser to such parties pursuant to Section 2.01 of the

Pooling and Servicing Agreement, and meeting all the requirements of Section 2.01 of the Pooling

and Servicing Agreement, and (y) such other documents, instruments and agreements relating to the

Mortgage Loans as the Purchaser, the Trustee, the Custodian, the Master Servicerand the Special

Servicer may reasonable request."

Section 3.6 of the MLPA obligates Defendants to take any further action reasonably

requested "to effectuate the purpose and to carry out the terms of this Agreement and to effectuate

the securitization of the Mortgage Loans pursuant to the Pooling and Servicing Agreement and to

carry out its obligations under the Pooling and Servicing Agreement." Section 2.01(d) of the PSA

mandates that "[ajll documents and records in the possession of ... [Paine Webber] that relate to the

Mortgage Loans a.nd Lhat are not required to be a part of a Mortgage File in accordance with the

PLAINTIFFS' SUPPLEMENTAL RESPONSES TO REQUESTS FOR DISCLOSURE· PAGE 8



definition thereof shall be delivered t o the Master ServicerIat the expense of the Depositor or the

applicable Mortgage Loari Seller.as-applicableron or before the Closing Date and shall be held by

the Mas te r Se rv ic er on behalf of the Trustee int rus t fo r the benefit ofthe Cert if ica teho lder s. " Despite

these many obligations to deliver all documents and records relating to the Mortgage Loans,

Defendants have failed and refused to deliver those documents. That refusal constitutes a breach of

both the Mortgage Loan PurchaseAgreement and Pooling. and Servicing Agreement as set forth

above.

Claim III: Breach of Contract - Representations and Warranties. A s noted abov e, und er the

MLP A, Paine Webber Real Estate made representations an d warranties about the characteristics of

the loans transferred. See MLPA § 3.2(b) and Schedule I. Paine Webber agreed that these

Servicer and as Special Servicer, could enforce the representations and warranties on the

Certi ficateholders' behalf. MLP A § 3.3. Those representations and warranties have been breached.

As required by Section 3.3 of the :MLPA, Paine Webber Real Estate had to cure such defects within

90 days of prune Webber's discovery of such breaches or its receipt of notice of same. Ifcure could

not be effected within 90 days, then P aine W e bber R eal E state w as obligated und er the MLPA to

replace th e defective loans with Quali fied Substitute Mortgage Loans, a s th at term is defined within

the PSA, or repurchase the defective loans from the Trust under a formula set forth within the

MLPA.

To the extent Paine Webber Real Estate discovered the breached representations and

warranties in the course of its origination and underwriting of the loans, Paine Webber Real Estate

had 90 days from the s ecur iti za tion c lo s ing date, November 4, 1999, to cure the breaches or

substitute or repurchase. To the extent Paine Webber Real Estate discovered the breached

PLAINTIFFS' SUPPLEMENT ALRESPONSES TO REQUESTS FOR DISCLOSURE - PAGE 9



representations and warranties subsequent to securitization and before the notice. given on.or about

July 31, 2003, they had 90 days to cure, substitute or repurchase .: Inaddition, orux gave formal,

written notice of those breaches by letter and by f il ing t he F ede ra l Court a cti on s ty le d ORIX Capital

Markets, LLC v. UBS Warburg Real Estate Securities, Inc., UBS Warburg, Inc. and UBS Paine

Webber, Inc., 3-02-CV-2213-K, in the United States District Court for the Northern District of

Texas. ORIX's noti fi ca ti on to Defendants took.place in2000,2001,2002, and most recently, in July.

of 2003. Despite this notice, Defendants did not comply With its obligation to cure these breaches

within the requisite 90-dayperiod, not did they ask for any additional90-period to affect such a cure.\

As such, under the MLP A and PSA, Defendants were required to repurchase or substitute the

Mortgage Loans in question, asset forth above. Defendants have refused to do so. This refusal

constitutes an independent breach of the MLPA.

Plaintiffs seek relief for breached representations and warranties on nine ofthe thirty-seven

or so loans that Paine Webber Real Estate sold to the Trust. Those loans are identified as Lee Hall,

PW Loan # 8703; Arlington Apartments, PWLoan#6132, Red Lion Apartments, PW Loan # 7395;

Smithtown Bypass, PW Loan # 7790; 401 N. Broad, PW Loan # 7562; Eckerd's Building, PW Loan

# 8694; G atew ay Plaza, PW Loan #6410; Lexus Training Center, PW Loan # 7789; and

Shadowbrook Apartments, PW Loan #6376.

Claim IV: Texas Securities Act. Tex. Rev. Civ. Stat. Ann. Art. 581-33A(2). Plaintiffs plead this

claim in the alternative. The Certificates Plaintiff ORIX purchased are securities that were offered

and sold by means of untrue statements of material facts in documents provided to PlaintiffORlX

and/or omissions of material facts necessary in order to make the statements made, in light of the

circumstances in which they were made, not misleading, Alternatively, each Defendant, with the

requisite intent, either controlled and/or aided and abetted the Seller ofllie Certificates to Plaintiff

PLAINTIFFS' SUPFLEMENTALRESPONSES TO REQUESTS FOR DISCLOSURE - PAGE 10



ORIX and are each therefore jointly and severally liable. Under the Texas Securities Act, Plaintiff

ORIX is therefore entitled to rescission. Plaintiff ORIX (inaddition to the other claims herein) is

ready, willing, an d able to rescind its purchase of certain unrated Certificates th at OR IX purchased.

Claim V: Breach of the Covenant of Good Faith and Fair Dealing. Under New York Law,

implicit in the MLPA and PSA is a covenant of good faith and fair dealing in the course of contract

performance. Pursuant to this covenant, Paine Webber implicitly pledged that it would not do

anything that would have th e effect of injuring the rights under the lvILPA or PSA. Defendants, as

successors to the various obligations of Paine Webber, are liable for the breaches of the covenant of

good faith and fair dealing for, among other things: (a) withholding and refusing to deliver all

required documents regarding the Mortgage Loans; indestroying documents required to be turned

over under the tenus of the MLP A and PSA; Cb) failing to honor the obligations to cure and to

substitute or repurchase those Mortgage Loans that did not meet the representations and warranties;

(c) failing to follow prudent underwriting standards with regard to the Mortgage Loans; (d)

withholding material information regarding its underwriting and thereb y interfering with the Parties'

performance of their duties under the PSA;(e) preventing or delaying discovery of the breaches of

representations and. warr an ti es by numerous actions, including the purging or destruction of

d ocume nts an d rec ord s, in clud ing ele ctro nic d ocume nts an d re co rd s, d ue to be deli ve red to P la in tif fs

under the terms ofthe contracts at issue; and (f ) unconscionably and unreasonably delaying both cure

and substitution and/or repurchase of the loans to the detriment of the Trust.

Claim VI: Declaratory Jud&ment. Under Texas Civil Practice &Remedies Code § 37.001, et

seq., Plaintiffs seek a declaration from this Court that all Defendants are jointly and severally liable

for all damages suffered by Plaintiffs by virtue of the allegations made herein because: (a) in

perf OfTIling th e acts described herein, all Defendan ts ( and /o r the ir p re de ce ss ors ) a cte d or caused




others to act for the purpose of perpetuating - and did perpetuate - a fraud upon Plaintiffs herein for

their own benefit; (b) Defendants herein associated together for the purpose of carrying on a single

or common business enterprise such that this court can and should look through the forms to the

realities of the relationship between them and determine that their commingled affairs are such as

to constitute them, one integrated and single business enterprise; (c) Paine Webber Real Estate is

Paine Webber, Inc .' s agent or (d ) Paine Webber, Inc ..is estopped to deny liability.

Claim VII: Attorneys:' Fees. As a result of Defendants' conduct, Plaintiffs have retained legal

counsel to prosecute these claims. Plaintiffs may recover from Defendants all reasonable and

necessary attorneys' fees, costs, and expenses perm itted by the statutes and agreements.applicable

to this action, including, but not limited to, the T ex. Civ, Prac. & Rem. -Code and the M LPA and

PSA.

Claim VIII: Declaratory Judgmegt. PlaintiffORIX seeks a declaratory judgment under Texas

Civil Practice &Remedies Code § 37.001, e t s eq . that ORIX. by itself, has the standing and capacity

to bring claims on behalf of'the Trust without the Trustee, Wells Fargo, being a named party to the

litigation. ORlX believes that, in accordance with the tenus contained in the PSA and MLP A, it has

the full right and power to prosecute this litigation in its own name as Master Servicer and Special

Servicer for the Trust. Accordingly, ORIX filed Plaintiffs' Motion For Partial Summary Judgment

Regarding. Standing and Brief In Support Thereof seeking a ruling that it may prosecute this

litigation without the participation of Wells Fargo and not in the name of Wells Fargo.

Alter Ego. At the time of the MLMI transaction, there was no meaningful distinction between

the Paine Webber entities involved in CMBS securitizations. Paine Webber Real Estate Securities,

Inc, is, and at all times since its incorporation has been. the alter ego of Paine Webber, Inc ..

Furthermore, there exists, and at all times since Paine Webber Real Estate's Incorporation has

PLAlNTIFFS' SUPPLEMENTAL RESPONSES TO REQUESTS FORDISCLOSURE - PAGE 12



ex isted, a unity of interest and ow nership betw een these tw o d efendants such that any separateness

b etwe en th em has ceased to ex ist if it ever existed. Since the inception of P aine We bbe r R eal E state

Securities, Inc., Paine W e bber, Inc. has completely co ntro lled, d om inated , m anaged and o perated

P aine We bber R eal E state S ecurities, Inc. f or its b en ef it.

Anex ample o f P aine We bb er In c. 's to tal co ntro l o f P aine We bb er R ea l E state S ecu rities , In c,

is th e f ac t th at D efe nd an ts h av e re pe ate dly p ro cla ime d th at Paine Webber Real Estate Securi ties , Inc.

has never had a single employee. As Defendants are quick to point out, all of the ind ividuals

involved in the MLMI transaction w orked for Paine We bber, Inc. In fact, S tev en Plust, th e

indiv idual w ho signed the M LPA on behalf of Paine W ebber R eal Estate Securities, Inc, testified

that, although he w as a M anaging D irector for Paine W ebber, Inc., he is unsure of w hat position, if

any, he ev er held w ith Paine Webber Real E sta te S ec uritie s, In c. Mr. Plust further acknowledged

th at it s o d ifficult to d istin gu is h P ain e We bber R eal E state S ecurities , Inc., from P ain e We bber, Inc .,

and that he him self cannot draw such a distinction. Further, even though the M LM I transaction

involvedapoo l of M ortgage L oans w ith an initial principal balance - and co rresponding po tential

liability to Paine W ebber R eal Estate Securities, Inc.- of over $592 m illion, Paine W ebber R eal

E sta te S ec uritie s, In c.'s c orp or ate re pr es en ta tiv e, Brian Harris (als o an em plo yee of U BS Paine

Webber Inc., P ain e We bbe r, Inc . 's successor) was unable to say w hether P aine W e bber R eal E state

Securities, Inc. had ev er had $400,000 in n et a ss ets .

M r. P lus t als o tes tified th at if P aine We bber, In c. had no t app ro ved th e s ecu ritizatio n at is su e

here, P aine W e bber R eal E state S ecurities, Inc. could no t hav e been inv olv ed in it. Pain e Webb er

R eal E state S ecu rities , Inc. is , and at all time s h er ein mentione d was, a mere shell, instrumentally

a nd condu it th rough which d efe nd an t P ain e Webb er, Inc. c ar rie d o n its comme rc ia l mo rtg ag e backed

securities conduit business. In.other words, Paine Webber Real Estate S ecurities , Inc. an d P aine




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Webber, Inc. were, for all practical purposes, the same entity.

Additionally, Paine Webber Real Estate Securities, Inc. acted as agent for Paine Webber, Inc.

In performing the acts described herein, P aine We bb er R eal E state S ecu rities , Inc. ac te d w ith in th e

course and scope of their agency, and acted with the consent, permission and authorization of Paine

Webber, Inc. All of Paine Webber Real Estate Securities, Inc.'s actions alleged were ratified and

approved by the officers or managing agents of Paine Webber, Inc. And, since, as stated above,

Paine Webber Real Estate Securities, Inc. did n ot h av e a s in gle emp lo ye e, a ll a ctio ns , omissions, an d

decisions a t is su e in this case were tak en or made by Paine Webber, Inc . emp loyee s .

Lack of Sufficient Financial Resources. Paine Webber, Inc., purposely created the impression that

Paine Webber Real Estate Securities, Inc. was a division through which it conducted its conduit

business an d Paine Webber, Inc. lent its nam e to Paine Webber Real Estate Securities, Inc. for

ma rk etin g p urp os es . A dd itio na lly , P ain e Webb er, In c. had Paine W ebber R eal Estate Securities, Inc.

assume over hundreds of millions in potential liabilities for breaches of representations and

warranties. As stated above, however, Brian Harris, the corporate representative for Paine Webber

Rea l E sta te Secur itie s, In c., testified that he did not know whether Paine Webber Real Estate

Secu rit ie s , Inc . had e ver h ad more than $400,000 in total assets at anytim e. T o the extent that P aine

Webber Real Estate does not have sufficient financial resources to satisfy its cure or repurchase

ob ligations under the MLP A or PSA, Paine Webber, Inc. has been aware of that fact from Paine

Webber Real Estate Securities, Inc's inception, yet and did not inform P laintiffs - or any other

parties to the transaction +ofthat situtation, It would be fundamentally unfair to permit Paine

Webber, Inc. to escape liability on the basis that it did not assume any of Paine Webber Real Estate's

obligations under the MLPA or the PSA.

PLAINTIFFS' SUPPLEMENTAL RESPONSES TO REQUESTS FOR DISCLOSURE- PAGE 14



Standing. The MLP A, clearly contemplates that interests in the Mortgage Loans will be distributed

to third parties who will rely on and be entitled to enforce the'Defendants' obligations under the

MLP A. For example, in Section 3 .3 ( d ) , the Defendants acknowledge that the representations and

warranties under th e :r v1LPA and the ob l ig atio ns to cure or repurchase Defective Mortgage L oans are

being assigned to the Trustee. Defendants further agree that "[t]he Trustee or its designee may

enforce such obligation as provided in Section 5.3 hereof." MLPA §,3.3(d) (Exhibit 2) (emphasis

added).

Section 5 .3 prov ides that Defendan ts ' r ep re sen ta tions and warranties will survive the :MLMI

transaction and may be enforced "by or on behalf-of the Trustee and the Holders of Certificates.

MLP A § 5.3 (Exhibit 2) (emphasis added). Furthermore, insection 3.3( e) ofthe MLPA, Defendants

specifically acknowledge and agree that th e Servicer has t he r igh t to enforce such obligations under

theMLPA. That section provides as follows:

The Mortgage Loan Seller hereby acknowledges and agrees that,

pursuant to Section 2. 03(b) o fth e Poolin g and Servic in g Agreement,

the Master Servicer and the Special Servicer (in the case of SpeciallyServiced Mortgage Loans) have the right, fo r the benefit of the

Certificateholders, to enforce the obligations of the Mortgage Loan

Seller under this Section 3.3. The Master Servicer and the Special

Servicer, as the case may be, shall be reimbursed for the reasonable

costs of such enforcement in accordance with the Pooling and

Servicing Agreement.

See id. (emphasis added).

Defendants' Response on this issue amounts to a curious assertion that, because a pooling

and servicing agreement from a different securitization contained a Section 2.3(e) specifically

designating the Servicer as the Trustee's representative for enforcement of Defendants , obligations,

th e fact that the PSA at issue here does not have a Section 2.3(e) is outcome determinative.

Defendants argue that the absence 0f a Section 2.3( e) somehow means that the Servicer has not been

PLAINTIFFS' SUPPLEMENTAL RESPONSES TO REQUESTS FOR DISCLOSURE -PAGE 15



designated as the Trustee's representative to enforce the Defendants' obligations under the MLPA

D efen dants' arg um ent 'conv en ien tly ·igno res the fact that the Section 6.03 of the PSA in this

securitization transaction does clearly designate th e S erv ic er a s th e Trustee's re pre se nta tiv e f or such

purposes.

[T]he Master Servicer or the Special Servicer may in its .

d i sc re tion under take any su ch ac tio n whic h it may deem necessary or

desirable with respect to the en forcem ent an d/or protection of th e

rights and duties of the parties hereto and the interests of the

Cert if icat eho lde rs her eunde r.

PSA § 6.03.

And , m oreo ver, w hen read together (as .intend ed ), the ML PA and the·P SA expressly

and unambiguously provide for the Servicer, in this case ORIX, to prosecute and enforce

Defendants' duties tothe Trust. It is only through a spurious sleight-of-hand argument that

Defendants are able to come to an y other conclusion.

Amended Answer and Verified Denial. Plaintiffs incorporate the their verified denial

already on file with the Court and v erified o n June 25, 2004. Plaintiffs gen erally d eny each and

every allegation made inPaine We bber R eal Estate's Counterclaim in accordance wi th T exas R ule

of Civil Procedure 92. In addition, Plaintiffs assert that Paine Webber Real Estate's claims are

barred, in whole or in part, because, under the tenus of the MLP A and PSA, it does not have

standing to sue.

Defenses. Plaintiffs have the following defenses toDefendants' Counterclaims, which were

filed after the discovery deadline:

Failure to Properly State Causes of ActiQn. Paine Webber Real Estate Securities Inc.'s




claims.are barred, in whole or in part, because Paine Webber Real Estate Securities, Inc. fails to

state each and every Cause of Action and therein fails to state a Cause of Action.

Prompt Notice. Defendants' claim that Plaintiffs did not give prompt notice under the

terms of the M LP A and PSA has no merit. The breaches set forth by Plaintiffs in this case were

found based on a review of documents which-were and have been within Defendants' possession,

custody and control since the November 4, 1999 securitization date. So Defendants had actual

knowledge of these breaches, regardless of whether they were notified of them by Plaintiffs.

Infact, under both Section 3.3(b) of the MLPA.and Section 2.03(a) of the PSA, a s parties

to the securitization transaction, Defendants were required to notify Plaintiffs of the existence of

breaches that they should have discovered by review of documents that had been in their possession

for years. Their failure to do so constitutes breach on their part, as does their attempt, a s set forth

within this document, to a ff irma ti ve ly concea l the existence of such breaches. At the very least,

such actions and omissions by Defendants clearly preclude any claim they may assert regarding

Plaintiffs failure to give them prompt notice.

Moreover, the rights of the Certificateholders to remedies for Defendants' breaches of

representations and warranties cannot be waived, byPlaintiffs or anyone else, except as prescribed

by the MLPA. Under MLPA Section 5.6(a), no term of the agreement (including Defendants'

representations and warranties) may be changed, waived, discharged, or terminated except by

signed writing. No such signed writing waiving the representations and warranties exists, and

Defendants have in fact never asserted the existence of such a document.

Interim Servicing, Defendants' claims that ORlX somehow breached the interim servicing

agreement are Wholly without merit. Unlike the role of the Master and Special Servicer following

securitization, ORIX did not have the same discretion or responsibilities of a Master or Special




Servicer under the PSA when servicing loans for Paine. Webber under the interim servicing

agreement. Oru:x: denies that it ever failed to take any action requested by Paine Webber as an

interim servicer. In fact, Paine Webber often failed to respond to requests from ORIX for direction

and instruction regarding loans for which ORIK was acting as interim servicer. illmost instances,

th e f ew loans a t is sue for which ORIX acted as interim s e rv ic er we re not even transferred to ORIX

until shortly before he securitization. Despite the fact thatPaine Webber had in it s possession

numerous documents related to the Mortgage Loans for which ORlX provided interim servicing,

it is now apparent that Paine Webber withheld these documents and records, including electronic

documents, fromORIX as interim servioer. The fact that UBS has not asserted any claim against

the interim servicers of the loans for Arlington Apartments, Lee Hall, 401 N. Broad, Smithtown

Bypass, or Shadowbrook Apartments demonstrates that UBS's meritless claim has been asserted

a s p art ofUBS's campaign to pressure ORlX into dropping claims for breaches of representations

and warranties made by Paine Webber.

N o Right to A Duplicative Declaratory Judgm..ent. To the extent that Defendants seek a

declaratory judgment, it is wholly duplicative of the claims already filed by Plaintiffs, and should

be dismissed.

Indemnity. Wi~h respect to Defendants' .claim fo r indemnity, the indemnity language inthe

agreements at issue cannot be interpreted under New York law to create and indemnity for

Defendants' own breaches. Indemnity for an action brought by the alleged indemnitor against the

proposed indemnitee must be unmistakably clear from the language of the indemnity clause;

because the agreements at issue do not explicitly contemplate indemnifying Defendants for their

own liability for the complaints alleged in this suit against them, Defendants are not entitled to any

in de nl.n itj from th e Plaintiffs as a m atter of law.

PLAINTIFFS' SUPPLEMENTAL RESPONSES TO·REQUESTS FOR DISCLOSURE - PAGE 18



W aiver under the SRPSA. Defendants m aintain that OR lX 's execution ofthe SRPSA -

an agreem ent betw een Paine W ebber R eal Estate-Securities, Inc., and ORIX - waived ORIX's

right to enforce Defendants' document delivery-obligations on behalf of the Trust. Contrary to

Defendants' assertions, however, the terms ofthe SRPSA do not in any manner waive Plaintiffs'

right to enforce Defendants' document-delivery obligations under the MLP A and the PSA on behalf

o f t he ,T r us t.

Defendants do not contest the fact that sections 2.3 and 2.4 of the MLP A expressly obligate

th em to d eliv er all d ocuments re la tin g to the M ortgage L oan s. See MLPA §§ 2.3 , 2.4. It is also

clear that D efendants .hav e failed to comply w ith this express con tra ctu al obli ga tio n . S ee , e .g .;

December 18, 2003 Deposition of Defendants, by and through their corporate representative Brian

Harris ("Harris Deposition") Vol. 1, at 221:12 - 222:1. Ina transparent attempt to avoid the

consequences oftheir breach, however, Defendants now contend that Plaintiffs' document delivery

claim was somehow waived by ORIX' s execution of the SRPSA - an entirely separate agreement.

As a matter of law, the SRPSA cannot have such preclusive effect.

Defendants' entire argument relies upon a misreading of the SRPSA. T he S RP SA

sets forth certain "conditions to closing." W ith respect to each of these conditions, the SRPSA

states th at OR IX could waive the occurrence of any of these events as a condition to itsobligation

to close the SRPSA;

(a) Purchaser's obligation to complete its purchase of theServicing Rights pursuant to this Agreement is subject to the

satisfaction or waiver on or prior to the Transfer Date (except as set

forth in subsection (vi) hereof) of the following conditions, which

Seller hereby represents are true and accurate or completed, as

applicable, as of the Transfer date:

(i) Seller shall have performed, or shall have caused the

performance of, in all material respects of its covenants and

agreements contained herein that are required to be performed by it




on or prior to the Transfer Date, including the taking of such actions,

delivery of such documents and files and the execution and delivery

of such duly authorized instruments as Purchaser shall have

reasonably requested for the purpose of effecting the transfer of the

Servicing Rights;

****

(iv) consistent with the oral understanding. between the

parties, Seller shall have delivered, or shall have caused the delivery,

to Purchaser of the agreed upon files and records relating to the

Mortgage Loans;

SRPSA § 2.04 (emphasis added).

The SRPSA does not even mention the rvILPA - and so cannot possibly act to waive any

terms of the MLPA, a separate agreement between different parties that do not include ORIX.3

Thus, as a matter of law, ORIX's execution of the SRPSA could not waive any provision in the

MLPA.

Not surprisingly, Defendants have not offered any summary judgment evidence that MLMI

waived Defendants' document delivery obligations or that the Trustee approved such a waiver.

Furthermore, even if ORIX had the authority to waiver the MLPA's provisions, Defendants'

corporate representative, Brian Harris, admitted that ORIX has not waived any of Defendants'

document-delivery obligations. Mr. Harris testified:

13 Q. Look at S .6A. "Ne ith er th is agreement, nor

14 any term hereof, may be changed, waived, discharged

15 or terminated except by inwriting signed by the

16 party against whom enforcement of such change,

17 waiver, discharge or termination is sought."

18 Do you see that, sir?

19 A. Yes.

20 Q . Does the word "term" in the first line.of

J Moreover, neither the oral agreement nor the documents referenced in the SRPSA are defined. Therefore,

there is no way to ascertain whether the parties meant to refer the term "documents" to refer to the documents

that Defendants are obligated to deliver under the MLP A and the PSA




21 5.6A in Exhibit 100 include the representations and

22 warranties in this agreement?

23 A . It saysvany term ," so I w ould assum e so,

24 yes.

25 Q . Is UBS aware of any change, w aiver,

1 discharge, or term ination of any term by ORIX or the2 trustee subsequent to the execution of Exhibit 100?

3 MR. DAVIS: Objection to form.

4 A . I don 't believe so.

H arris D eposition at 196:13 - 197:4.

F urth ermo re , e ve n if s uc h a w aiv er d id ta ke p la ce , it wa s f ra ud ule ntly in du ce d b y De fe nd an ts .

Inexecu ting t he MLP A, D efen dants p led ged to d eliv er all d ocum ents relating to th e m ortgage loans

to P laintiffs. P laintiff O RlX entered .into the SR PSA partly in r el iance . ..on that prom ise, w hich

Defendants promptly broke.

No Fiduciary D uty . Defendants have asserted that P laintiff O RIX ow es a fiduciary d uty to

the C ertificateh old ers and to th e D efen dants them selv es . T his is sim ply not true. O RIX 's d uties are

purely contractual, as the PSA m akes clear. A s Section 3.01(c) prov ides: ~

The relationship of the M aster Serv icer to the Trustee under thisA greem ent is intended by the parties to be that of an independent

contractor and not that of ajoint ven tu re r, pa rtne r or agent.

PSA § 3.01(c)

T hu s, sin ce ORIX . is an ind epen dent con tractor to the T rus tee, its relatio nsh ip to the T rus t

and the Certificateholders is purely contractual, as is the relationship between ORIX and

Defendants . And, since nowhere in the contract does orux undertake a fiduciary duty to

D efend an ts , D efend ants' ass ertio n that O RIX somehow has a fid uciary res pon sib ility to them IS

c urio us at b es t.

P rior B reach. O ne or m ore of D efendants', claim s or defenses are barred and/or fail due to

~LA.INTIFFS· SUPPLEMENTAL RESPONSES TO REQUESTS FOR DISCLOSURE - PAGE 21



Defendants' prior breach of the very contract or contracts at issue including the SERVICING RIGHTS

PURCHASE AND SALE AGREEMENT' C'SRPSA"), MORTGAGE LOAN PURCHASE AGREEMENT

("MLPA"), and/or THE POOLfNG AND SERVICING AGREEMENT ("PSA"), and alleged Interim

Serv ic ing ...Agreement, O ne or m ore o f th e De fendants ha ve m is re pr es en te d ma te ria l fa ct s r eg ardin g

the loans associated with each of the foregoingcontracts. Furthermore, Defendants' alleged defense

of "exclusive" rem ed ies fa il based upon Defendants' f ailu re to address and/or rem ed y its breaches

in the manner s et f or th in ce rt ain con tr ac ts .

Estoppel. D efendants have taken positions and /or courses of conduct inconsis tent w ith

th eir o rig in al re pre se ntatio ns .a nd /o r a ss ertio n o f rig hts p urs ua nt to th e SRPSA and o ther contr ac ts '

as well as its claims that plaintiffs committed various torts and are therefore estopped from enforcing

such alleged duties, contracts, and/or are equitably estopped from asserting any breach on the part

of plaintiffs.

E sto pp el a nd Waiver re N otic e. D efe nd an ts are s pe cifica lly e sto pp ed from asserting they did

not receive prompt notice and/or an opportunity to cure by their inequitable actions with regard to

the subject matter at issue, their prior possession of sufficient information that put them on notice,

th eir m is re pre se ntatio ns w ith re ga rd to th e s ub jec t matter at issue, and their course and conduct in

this litigation. For these reasons, an d o thers D efen dants h av e w aiv ed any alleg ed d efen se of notice

an dJo r any righ t they may allegedly have to assert the lack of timely notice, Defendants ar e

estopped, as way of example, from claiming that any alleged lack of notice under the MLPA or PSA

can waive any rights of the Certificateholders given Defendants' express representation that there

could be no such waiver absent an express writing that waived such performance and other such

representations, Defendants are likewise estopped from claiming waiver with regard to the rights

ofCertificateholders vis-a-vis document defects and the requests for document delivery. Defendants

PLAINTIFFS' SUPPLEMENTAL RESPONSES TO REQUESTS FOR DISCLOSURE· PAGE 22



are also estopped by their participation in the MLPA from claiming that the SRPSA effected some

waiver of Certificateholders rights.

Unclean Hands. Each and every of Defendants , requests for equitable relief, remedy,

or defense fail as they have unclean hands with regard to the subject matter at issue. For example,

Defendants' have acted inequitably with.regard to theirknowing breaches of representation and/or

cover-ups of the same vis-a-vis the::MLPA, PSA, the alleged Interim Servicing Agreement, and the

SRPSA . Any request for disgorgement by De fe nd an ts fa ils due to their inequitable conduct and

unclean hands.

Fraudulent Inducement. To the extent that Defendants' claims for breach of any

contractual or common law d uty arising from the SRPSA is th e source of any damages or avoidances

by Defendants, such claims or alleged damages are unavailable as Defendants conunitted fraud in

the inducement and/or misrepresentations regarding the SRPSA.

Ambiguity. One or more provisions of the SRPSA or associated agreements are

ambiguous and therefore one or more of Defendants' claims or defenses are barred and/or fail.

Failure to State a Claim or Defense. One or more of Defendants , claims fail as they do not

set forth e ach .e lemen t necessary to assert a recognized cause of action and/or are otherwise

unavailable as a matter of applicable law. One or more of Defendants' defenses are likewise

defective and fail. For example, lack of knowledge is not a defense to violation of an express

warranty.

One or more claims of Defendants and/or any alleged associated damages are

reduced or eliminated by Plaintiffs' right of offset. This right includes their ability to reduce an y of

Defendants' claim byan amount of Plaintiffs' damage and remedy claims and/or awards arising from

the PSA , the 1v.IL P... . , ~ .~ \'vell as an . a . . . ' 1 1 0 u . . . ' 1 t equal to the value of the services Plaintiffs' provided




pursuant to any and all servicing agreements. Defendants' request for a remedy of disgorgement,

althoughunrecognized by the causes of action pled. is subject to set off from the value ofORlX's

services provided as interim servicer of certain loans at issue. Inaddition, any damages awarded to

Plaintiffs in this litigation will act as an offset to any alleged damages of Defendants.

SetOff One or more claims of Defendants' and!or any alleged associated damages are

reduced oreliminated by Plaintiffs' rights to set off their damage and remedy claims and/or awards

arising from the PSA, the M LPA, and the value of P la in tif fs ' s er vic es pursuant to any and all

se rv i cing ag reemen ts . Defendants' request for a remedy of disgorgement, although unrecognized

by the causes of action pled, is subject to set off from the. value ofORJX's services provided as

interim services of certain loans a t is su e.

W::.iver. Defendants have waived one or more of their claims andior defenses or an

essential element of one or more of the same.

Statute of Frauds. One or more of the Defendants' claims are barred or fail as a matter

of law based upon the statute of frauds including, but not limited to, any alleged oral agreement

associated with the SRPSA and any interim servicing agreement.-

Accord an d Satisfaction. One ormore of Defe nd an ts , c la im s (in clu ding Count II a nd any

claim or defense th at r ela te s to the alleged Interim Servicing Agreem ent) fail due to accord and

satisfaction.

Limitations and Laches. One or more of Defendants' claims (including those based

upon an y alleged duties of an interim servicerandior pursuant to the SRPSA) are barred by or tail

due to the law of laches and/or the applicable limitations period.

Self Impos ed Damages . Defendants caused their own a lle ged damage s, if any, through

their own acts or omissions and therefore such damages are not recoverable from plaintiffs.




Failure to Mitigate. To the extent Defendants' have suffered any damages, those

damages are reduced or eliminated by Defendants' failure. to mitigate.

PLA.1}\fTIFFS'SUPPLEMENTAL RESPONSES TO REQUESTS FOR DISCLOSURE - PAGE 25



(d) 194.2( d) the amount and any meth od of calcu lating econ om ic d am ages;

P la in tiffs ' d am ag es a re ca lcu la ted a s fo llows :

CLAIMS I AND II:

P laintiffs are entitled to the costs to d ate of P laintiffs ' efforts to recov er docum ents related to

the M ortgage loans from other sources, in am ount not less than the follow ing:"

Sm ith town Bypa ss $ 13,346

Lee Ha ll Po rtf ol io 38,397

Ar ling ton Apartment s 106,495

Ga tew ay P la za 50,245

TOTAL $ 208,483

In'ad dition to the d am ages set forth abov e, P laintiffs are entitled to their reasonable and

necessary attorney fees and costsin a to tal am ount not less than $5,747,330, as set forth below in

conn ectio n w ith C laim s V I, V IT , and Vill

4These damages are primarily inthe form of attorney fees. Thus, to the extent that Plaintiffs receive

their full measure of attorney fees and costs, the amounts set forth herein should not represent an

additional recovery for Piaintiffs.




CLAIMS III AND V:

Plaintiffs' damages for the breach of representations and warranties under the MLPA and PSA are

largely set forth within the contracts in question. They are as follows:

Specific Performance. As set forth in more detail above, because Defendants failed to cure within

the requisite 90-day period set forth in the :MLPA and PSA, they were required to substitute the

mortgage loans inquestion with Qualified Substitute Mortgage Loans, as that term is defined

with in th e PSA. This rem edy is by far the m ost equitable, because it causes no harm to any of the

Certificateholders, Plaintiffs are therefore entitled to,specific performance of Defendants', duty to, ,

substitute on eight of the nine loans at issue.

The ninth loan, Smithtown By-Pass - 1V.1L:MILoan790, has already been foreclosed, sold

and removed from the pool, As such, due to the servicing efforts ofPlaintiffORIX, much of the

damage caused by Defendants' representations and warranties with regard to that loan have been

mitigated. Thus, specific performance is inapplicable to that loan. and Plaintiffs instead are

entitled to payment of the remaining loss on that loan in the amount of $794, I71.

Inaddition to specific performance, Plaintiffs are entitled to their reasonable and necessary

attorney fees and costs in an amount not less than $5,747,330, as set forth below in connection

with C laim s V I, V II, and vrn.




Rep la cem en t V alu e. A lternativ ely , in the unlik ely ev ent that the C ourt accepts an argum ent by

De fe nd an ts th at they a re unable to a ffe ct s pe cific performance and substitute Qualified Substitute

Mortgage loans for the nin e loans at issu e, P laintiffs are en titled to an am ount su fficient to replace

the cash flow s lost due to D efendants' breaches. This "replacem ent value" cure is not less than

as fo llows : '

401 N. Broad Street

Lee Ha ll Po rt fo li o

Arlington Apartments

Shadow brook Apar tment s

G a tew ay P la za

Sm ith town By -P as s

Eckerd's Building

Lexus Training Center

Red Lion Apartments

$ 7,496,928

22,678,568

10,714,517

7,000,536

6,633,050

794,171

4,042,920

3,308,095

2,949,175

TOTAL $ 65,617,960

In addition to the replacement value damages set forth above, Plaintiffs are entitled to their

reasonable and necessary attorney fees and costs ina total amount not less than $5,747,330, as set

forth below in c onne ctio n w ith Claims V I, V ll, and V ffi.



T his amo un t is d iffe re nt from th e reme dy o f "fu ll d efe as an ce ," which w ould result in a

substantially h ig her re co very fo r th e Trust. The d am ag es fo r Smithtown By-Pass - M LM I Loan

779 0, are, for th e reason s stated abo ve, o nly the rem aining lo ss to the T ru st cau sed b y D efendan ts '

b re ac h, n ot full replacem en t v alue. M oreov er, three o f th e loans set forth h erein (L ee H aIl

P ortfolio - M LM I L oan 8703; Ar li ng ton Apartment s, MLMI Loan 6132; and Red Lion

A pa rtm en ts , MLM I L oa n # 7 39 5) a re in full default, thus the only m ethod of m aking the T rust

w hole (o th er than su bstitutio n o f a Q ualified S ubstitu te M ortgage L oan u nd er th e P SA ) is ten der o f

th e fu ll re pu rc ha se p rice a s s et fo rth inth e MLP A. T hu s fo r th os e th ree lo an s, th e fig ure in clu ded

in this ta ble is th at fo r f u l l repurchase.

PLAINTIFFS' SUFPLEMENTAL RESPONSES TO REQUESTS FOR DISCLOSURE - PAGE 28



Overpayment. Alternatively, Plaintiffs are entitled to damages related to the overpayment by the

Trust for the loans in question, which are not less than those calculated in the March 1O~2004 report

of James DUlUl, as revised, as follows:"

401 N. Broad Street

Lee Hall Portfolio

Arlington Apartments

Shadowbrook Apartments

Gateway Plaza

Smithtown By-PassEckerd's Building

Lexus Training Center

Red Lion Apartments

$ 5,285,000

22,678,568

10,714,517

1,015,000

540,000

587,000

101,500

71,000

2,949,175

TOTAL $ 43,941,760

In addition to the overpayment damages set forth above, Plaintiffs are entitled to their

reasonable and necessary attorney fees and costs in a total amount not less than $5,747,330, as set

forth below in connection with Claims VI, VII, and VIII.

6F or s im ila r re as on s a s th os e s ta te d inthe p rev io us fo otn ote, fo r th ree o f th e lo an s set fo rt h he re in

(Lee Hall Portfolio - MLMI Loan 8703; Arlington Apartments, MLMI Loan 6132; and Red Lion

Apartments, MLMI Loan if 7395), the "overpayment" calculation is inapposite because the loans

are already in full default Thus the figure included herein is that for full repurchase - the only

remaining option (other than substitution of a Qualified Substitute Mo rtg ag e L oa .'1 un de r th e P SA )

f or s uc h lo an s.




Repurchase. Alternatively, Plaintiffs are entitled to not.less than the full repurchase price of each

loan as calculated under the formula set forth. within the PSAJ

401 N- Broad Street $ 8,207,792

Lee Hall Por tfo li o 22,678,568

Arlington Apartments 10,714,517,.

Shadowbrook Apartments 7,620,687

Gateway Plaza 7,266,047

Smithtown By-Pass 794,171 . .Eckerd's Bu ild in g 4,431,161.

Lexu s T ra in in g Center 3,625,832

Red Lion Apartments 2,949,175

TOTAL $ 68,287,950

In addition to the repurchase damages set forth above, Plaintiffs are entitled to their

re as on ab le a nd necessary attom ey fees and costs in a total amount not less th an $ 5,74 7,3 30, as set

forth below in connection with Claims VI, VII, and VIll.

CLAlMIV:

Alternatively, and additionally, Plaintiff ORIX is entitled to the full value of their

r6cessionary damages for the Class K certificates that ORIX bought at securitization and still holds.II

+ 3 measured under the statutory formula set forth within the Texas Securities Act, that amount is

J833, 795.46, including interest on the investment amount at 6% as sp ecified inthe Texas Securi tiest • .

I

lct.

With the exception of the three loans already infull default (Lee Hall Portfolio - MLMI Loan

8703; Arlington Apartments, MLMI Loan 6132; and Red Lion Apartments, MLMI Loan # 7395),

P la in tiff s b elie ve th at, w h ile re pu rc ha se re su lts in th e h ig he st d olla r re co ve ry for the Trust, it is

nonetheless the least equitable of the options set forth herem because it does not replace the future

cash flows the Certificateholders would receive. Despite this fact, and despite clear contractual

language to the contrary, it must be noted that Defendants have repeatedly asserted that full

repurchase is the only measure of damages to which Plaintiffs are entitled (see. e.g., Defendants'

Special Exceptions to Plaintiffs' Seventh Amended Petition),




In addition to the rescissionary damages set forth above, Under-the terms of the Texas

Securities Act, Plaintiffs are entitled to their reasonable and.necessary attorney fees and costs ina

total amount not less than $5,747,330, as set forth below in connection with Claims VI, VII, and

VITI.

CLA IM S V I. YII A ND V III:

In addition to the claims set forth under the Texas Securities Act (Claim IV, above),

Plaintiffs are also entitled to their reasonable attorney fees and costs under other claims set forth

herein, including Claims VI and vrn, which are brought under the Texas Declaratory Judgments

Act, Texas Civil Practice & Remedies Code §37.001, e t s eq . Plaintiffs" reasonable and necessary

attorney fees and costs are in an amount not less than $5,747,330.




(e) 194.2( e): the name; address, and telephone number of persons having know ledge ofrelevant

facts, and a brief statement of each identified person's connection with the case;

RESPONSE:

See Exhibits "A-I" and "A-2," attached.




ragalone

tate B ar N o. 0 28 55 77 5

Paul illiams

Texas State B ar N o. 00798586

McKOOL SMITH, P.C.

300 Crescent Court, Suite 1500

Dallas. Texas 75201

Telephone: (214) 978-4000

Fax: (214) 978-4044

Terrell W. Oxford

Texas State Bar No. 15390500SUSMAN GODFREY L.L.P.

901 Main Street, Suite 4100

Dallas. Texas 75202Telenhone: f"J 1iI\71;:A 1('I(VI" ' " . . . . . .. . 1 " " . . .. t J &_ L~ . \ . .I.""T) I ...J...,." .lJVU

Fax: (214) 754-1933

Ta lcott J . F ra nk lin

Texas Bar No. 24010629

PATTON BOGG S. LLP

2001 R oss A venue, Suite 3 000

Dallas, Texas 75201

ATTORNEYS FOR ORlX eAPIT AL M ARKETS,

L.L.C., AsMaster Servicer and Special Servicer of

the Trust for the Certificateholders of Merrill

Lynch Mortgage Investors, Inc. Mortgage

Pass-Through Certificates Series 1999-Cl, Suing

In The Name Of WELLS FARGO )lANK,

NATIONAL ASSOCIATION, Trustee, and ORIX

eAPIT ALMARKETS, L.LC., individually.




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Susan SheltonTexas State Bar No. 08996750

SULLN AN PARKER & COOK, L.L.C.

2911 Turtle Creek

1200 Park Place Building

Dallas , Texas 75219Telephone: (214) 520-7494

Fax: (214) 528-6925

ATTORNEYS FOR \VELLSFARGO BANK,

NATIONAL ASSOCIATION, in its individual

capacity and in its capacity as trustee of the Trust

for the Certificateholders of the Merrill Lynch

Mortgage Investors, Inc. Mortgage Pass-Through

Certificates Series J999-Cl.
