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Exhibit 99.2
XXXXX X. XXXXXXXX
ATTORNEY AND COUNSELOR AT LAW
00000 XXXXXXXX XXXXX
XXXXX 000
XXXXXXX, XXXXX 00000
-----------------------------
TELEPHONE (000) 000-0000
FACSIMILE (000) 000-0000
June 16, 2000
Xxxxx X. Xxxxxxx, President
National Institute Companies of America, Inc.
00 Xxxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Re: Mortgage Bankers Holding Corp.
Stock Purchase Agreement
Dear Xx. Xxxxxxx:
You have requested that my firm provide National Institute Companies of
America, Inc. (the "Company"), previously known as Mortgage Bankers Holding
Corporation ("MBHC") with an opinion of counsel regarding the Mortgage Bankers
Holding Corp. Stock Purchase Agreement ("Agreement") dated December 8, 1998 and
executed effective March 14, 1999, wherein Mortgage Bankers Holding Company,
Xxxxx X. Xxxxxxxxxx ("Xxxxxxxxxx") and National Institute Companies of America,
Inc. were parties. Your request focuses particularly on (1) whether or not the
Company effectively gained control of the stock and assets of National Institute
Companies of America, the entity previously owned by Xxxxxxxxxx, under the
Agreement and (2) whether or not the Company is obligated to pay any further
consideration to Xxxxxxxxxx under the Agreement.
In March of 2000, my firm was retained by the Company to investigate
certain matters involving the conduct of Xxxxxxxxxx prior to the consummation of
the Agreement, as well as activities which occurred subsequent to the execution
of the Agreement, to determine whether or not Xxxxxxxxxx had engaged in
fraudulent activities regarding the sale of National Institute Companies of
America to the Company. The investigation resulted in the conclusion that
several acts of fraud had occurred prior to the Agreement being finalized and
that Xxxxxxxxxx continued to engage in activities which were damaging to the
Company after the Agreement was executed. The primary nature of the fraudulent
acts were material misrepresentations regarding the financial history of
National Institute Companies of America made to induce the Company to enter into
the Agreement; failure to pay commissions to the Company and converting those
commissions to his own use subsequent to the consummation of the Agreement. The
evidence also indicated that Xxxxxxxxxx had breached his fiduciary duties to the
Company through use of Company property and Company personnel to further his own
economic interests which were adverse to the interests of the Company.
Xxxxxxxxxx also tortiously interfered with the Company's business by
misrepresenting facts to Company employees, clients and customers for the
purpose of damaging
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Xxxxx X. Xxxxxxx, President
June 16, 2000
Page 2
the Company's reputation.
The Company, then known as MBHC, instituted suit against Xxxxxxxxxx in
the 134th Judicial District Court of Dallas County, Texas in Cause Number
00-2349-G, entitled Plaintiff's Original Petition, Application for Temporary
Restraining Order, and Application for Temporary Injunction and Permanent
Injunction. The suit seeks injunctive relief, damages and attorneys fees. On
March 30, 2000, the Court granted the Company's request for a Temporary
Restraining Order (TRO) and the TRO was extended by the Court on April 10, 2000.
A mediation between the parties to the suit was unproductive and the case is on
a standard course of discovery and, ultimately, trial of the issues. The TRO has
expired and the Company elected to forego its right to seek a Temporary
Injunction since it believes that any further damage which could be inflicted by
Xxxxxxxxxx would be offset by aggressive marketing and expansion of the
Company's business plan. No counterclaim has been filed as of this date,
although the Company has been advised that such a counterclaim probably will be
forthcoming.
Under the laws of the State of Texas, a party who is defrauded in a
contractual relationship has the option to stand on the bargain or seek
rescission of the contract. A defrauded party who elects to stand on the
contract is not required to pay any further consideration to the perpetrator of
the fraud, nor can the perpetrator rely upon other provisions of the contract.
Further, it is well established in Texas law that stock certificates are a mere
indicia of title and that a transfer of shares may take place even though the
actual shares are not delivered where it is clear that the transferor and
transferee had a meeting of the minds.
In the instant case, there was clearly a meeting of the minds between
the parties to the Agreement which is evidenced by their signatures on the
Agreement. Further, we believe the evidence will substantiate our claims of
fraud and fraudulent inducement. The evidence will show that Xxxxxxxxxx grossly
overstated the revenue stream generated by the National Institute Companies in
order to induce the Company into paying excessive consideration for the
acquisition. In the opinion of the undersigned, a high degree of probability
exists that the verdict will deny Xxxxxxxxxx any further payments under the
Agreement and the court will rule as a matter of law that the stock of the
National Institute Companies of America, Inc. was transferred to the Company
under the Agreement.
The law and the facts of this case further support the opinion that the
verdict will award the Company damages against Xxxxxxxxxx for the commissions
that he wrongfully converted to his own use.
A final issue to be addressed is that the Agreement states in paragraph
7.04 that disputes related to the Agreement will be governed by the laws of the
State of New York. The Company
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Xxxxx X. Xxxxxxx, President
June 16, 2000
Page 3
elected to pursue its remedies in Texas and the Xxxxxxxxxx did not challenge
that election in his responsive pleading. Therefore, the Agreement has been
effectively amended by the parties actions and conduct and the laws of the State
of Texas will govern the outcome of this litigation.
This opinion is limited to the matters set forth and does not purport to
address issues directly or by inference not specifically addressed herein.
Very truly yours,
Xxxxx X. Xxxxxxxx
