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ACE Securities Corp. v. DB Structured Products, Inc.

Supreme Court, Appellate Division, First Department, New York.
Dec 19, 2013
112 A.D.3d 522 (N.Y. App. Div. 2013)

Summary

holding that plaintiff's breach of representations and warranties claims relating to mortgage loans sold to plaintiff by defendant were untimely because "the claims accrued on the closing date of the [mortgage loan purchase agreement], . . . when any breach of the representations and warranties contained therein occurred"

Summary of this case from Residential Funding Co. v. HSBC Mortg. Corp. (In re Residential Capital, LLC)

Opinion

2013-12-19

ACE SECURITIES CORP., etc., Plaintiff–Respondent, v. DB STRUCTURED PRODUCTS, INC., Defendant–Appellant. The Securities Industry and Financial Markets Association, The Association of Mortgage Investors, Professor Robert T. Miller and Mortgage Bankers Association, Amici Curiae.

Simpson Thacher & Bartlett LLP, New York (David J. Woll of counsel), for appellant. Kasowitz, Benson, Torres & Friedman LLP, New York (Marc E. Kasowitz of counsel), for respondent.



Simpson Thacher & Bartlett LLP, New York (David J. Woll of counsel), for appellant. Kasowitz, Benson, Torres & Friedman LLP, New York (Marc E. Kasowitz of counsel), for respondent.
Wachtell, Lipton, Rosen & Katz, New York (George T. Conway III of counsel), for The Securities Industry and Financial Markets Association, amicus curiae.

McKool Smith, P.C., New York (Robert W. Scheef of counsel), for The Association of Mortgage Investors, amicus curiae.

Robert T. Miller, amicus curiae pro se.

Jenner & Block LLP, New York (Paul M. Smith of counsel), for Mortgage Bankers Association, amicus curiae.

TOM, J.P., ANDRIAS, DeGRASSE, RICHTER, JJ.

Order, Supreme Court, New York County (Shirley Werner Kornreich, J.), entered May 14, 2013, which denied defendant's motion to dismiss the complaint, unanimously reversed, on the law, with costs, and the motion granted. The Clerk is directed to enter judgment accordingly.

This action is barred by the six-year statute of limitations on contract causes of action (CPLR 213[2] ).

Plaintiff alleges that defendant breached representations and warranties in connection with the securitization of a pool of mortgage loans governed by a Mortgage Loan Purchase Agreement (MLPA) and a Pooling and Servicing Agreement (PSA). The MLPA and PSA provided that the trustee was not entitled to sue or to demand that defendant repurchase defective mortgage loans until it discovered or received notice of a breach and the cure period lapsed. The motion court erred in finding that plaintiff's claims did not accrue until defendant either failed to timely cure or repurchase a defective mortgage loan ( see Structured Mtge. Trust 1997–2 v. Daiwa Fin. Corp., 2003 WL 548868, 2003 U.S. Dist. LEXIS 2677 [S.D.N.Y.2003] ). To the contrary, the claims accrued on the closing date of the MLPA, March 28, 2006, when any breach of the representations and warranties contained therein occurred ( see Ely–Cruikshank Co. v. Bank of Montreal, 81 N.Y.2d 399, 402, 599 N.Y.S.2d 501, 615 N.E.2d 985 [1993]; Varo, Inc. v. Alvis PLC, 261 A.D.2d 262, 267–268, 691 N.Y.S.2d 51 [1st Dept. 1999], lv. denied95 N.Y.2d 767, 717 N.Y.S.2d 547, 740 N.E.2d 653 [2000] ).

The certificate holders commenced an action on behalf of the trust, after plaintiff refused to do so, on March 28, 2012, the last day of the limitations period. However, defendant had not received notice of the alleged breach until February 8, 2012. Thus, the 60– and 90–day periods for cure and repurchase had not yet elapsed. The certificate holders' failure to comply with a condition precedent to commencing suit rendered their summons with notice a nullity ( see Southern Wine & Spirits of Am., Inc. v. Impact Envtl. Eng'g, PLLC, 80 A.D.3d 505, 915 N.Y.S.2d 541 [1st Dept. 2011] ).

In any event, the certificate holders lacked standing to commence the action on behalf of the trust. The “no-action” clause in § 12.03 of the PSA sets forth as a condition precedent to such an action that the certificate holders provide the trustee with “a written notice of default and of the continuance thereof.” However, the “defaults” enumerated in the PSA concern failures of performance by the servicer or master servicer only. Thus, the PSA does not authorize certificate holders to provide notices of “default” in connection with the sponsor's breaches of the representations ( see Walnut Place LLC v. Countrywide Home Loans, Inc., 96 A.D.3d 684, 948 N.Y.S.2d 580 [1st Dept. 2012] ).

Nor does the substitution of the trustee as plaintiff permit us to deem timely filed the trustee's complaint, which was filed September 13, 2012 ( compare e.g. HSBC Guyerzeller Bank AG v. Chascona N.V., 42 A.D.3d 381, 382, 841 N.Y.S.2d 11 [1st Dept. 2007] [original and substituted plaintiffs were “affiliates in the HSBC family”]; American Home Assur. Co. v. Scanlon, 164 A.D.2d 751, 752, 559 N.Y.S.2d 317 [1st Dept. 1990] [original and substituted plaintiffs were “both part of the American International Group of insurance companies”]; Frankart Furniture Staten Is. v. Forest Mall Assoc., 159 A.D.2d 322, 552 N.Y.S.2d 599 [1st Dept. 1990] [original and substituted plaintiffs were a retail furniture business and the actual owner of the furniture] ).

In light of the foregoing, we need not reach defendant's alternative basis for dismissal.

Motion and cross motions for leave to file amicus curiae brief granted.


Summaries of

ACE Securities Corp. v. DB Structured Products, Inc.

Supreme Court, Appellate Division, First Department, New York.
Dec 19, 2013
112 A.D.3d 522 (N.Y. App. Div. 2013)

holding that plaintiff's breach of representations and warranties claims relating to mortgage loans sold to plaintiff by defendant were untimely because "the claims accrued on the closing date of the [mortgage loan purchase agreement], . . . when any breach of the representations and warranties contained therein occurred"

Summary of this case from Residential Funding Co. v. HSBC Mortg. Corp. (In re Residential Capital, LLC)

holding that plaintiff's breach of representations and warranties claims relating to mortgage loans sold to plaintiff by defendant were untimely because “the claims accrued on the closing date of the [mortgage loan purchase agreement], ... when any breach of the representations and warranties contained therein occurred”

Summary of this case from Residential Funding Co. v. HSBC Mortgage Corp. (USA) (In re Residential Capital, LLC)

reversing trial court's ruling that plaintiffs' claim did not accrue until defendants failed to timely cure or repurchase defective mortgage loans

Summary of this case from U.S. Bank Nat'l Ass'n v. Dexia Real Estate Capital Markets

stating that claims relating to breaches of representations and warranties accrue on the closing date of the trust

Summary of this case from National Credit Union Administration Board v. HSBC Bank USA, National Ass'n

In ACE Securities Corp v. DB Strucutured Products, Inc., 112 A.D.3d 522, 977 N.Y.S.2d 229, 231 (N.Y. App. Div. 1st Dep't 2013), the Appellate Division did refer to the trustee's notice obligation as "a condition precedent to commencing suit," but the decision related to when the certificateholders' cause of action accrued for purposes of the statute of limitations, and the quoted phrase, unaccompanied by analysis, was not necessary to that decision.

Summary of this case from Deutsche Bank Nat'l Trust Co. v. WMC Mortg., LLC

In ACE Securities Corp. v. DB Structured Products, Inc., 977 N.Y.S.2d 229, 231 (App. Div. 1st Dep't 2013) ("ACE I"), the applicable contracts provided that "the trustee was not entitled to sue or to demand that defendant repurchase defective mortgage loans until it discovered or received notice of a breach and the cure period lapsed."

Summary of this case from Deutsche Bank Nat'l Trust Co. v. Quicken Loans Inc.

In ACE Sec. Corp. v. DB Structured Prods., Inc., 112 A.D.3d 522, 977 N.Y.S.2d 229 [1st Dept. 2013], affd 25 N.Y.3d 581, 15 N.Y.S.3d 716, 36 N.E.3d 623 (2015), we were presented with a case involving a pooling and servicing agreement containing language and enumeration of provisions in a manner strikingly similar to the PSA in the instant case.

Summary of this case from Alden Global Value Recovery Master Fund, L.P. v. Keybank Nat'l Ass'n

In ACE Securities Corp. v. DB Structured Products, Inc., 112 A.D.3d 522 (1st Dept 2013), aff'd, ACE Securities Corp. v. DB Structured Products, Inc., 25 N.Y.3d 581 (2015), plaintiff sued for breach of representations and warranties relating to the securitization of mortgage loans under a mortgage loan agreement and a pooling and servicing agreement.

Summary of this case from Alden Glob. Value Recovery Master Fund, L.P. v. KeyBank Nat'l Ass'n

making no express finding on this issue

Summary of this case from Fed. Hous. Fin. Agency v. UBS Real Estate Sec., Inc.

In ACE Secs. Corp. v DB Structured Prods., Inc. (112 AD3d 522 [1st Dept 2013], lv granted 23 NY3d 906 [2014] [ACE]), an RMBS breach of contract action against a sponsor under a repurchase protocol, this Department held that a claim based on breach of representations and warranties regarding the mortgage loans accrues on the date the representations and warranties are made, and not when the sponsor fails to comply with a repurchase demand.

Summary of this case from Law Debenture Trust Co. of N.Y., Solely in Its Capacity of the Asset Backed Sec. Corp. v. Dij Mortg. Capital, Inc.

In ACE Secs. Corp. v DB Structured Prods., Inc. (112 AD3d 522 [1st Dept 2013], lv granted 23 NY3d 906 [2014] [ACE]), an RMBS breach of contract action against a sponsor under a repurchase protocol, this Department held that a claim based on breach of representations and warranties regarding the mortgage loans accrues on the date the representations and warranties are made, and not when the sponsor fails to comply with a repurchase demand.

Summary of this case from U.S. Bank Nat'l Ass'n v. DLJ Mortg. Capital, Inc.

In ACE Secs. Corp. v DB Structured Prods., Inc. (112 AD3d 522 [1st Dept 2013], lv granted 23 NY3d 906 [2014] [ACE]), an RMBS breach of contract action against a sponsor under a repurchase protocol, this Department held that a claim based on breach of representations and warranties regarding the mortgage loans accrues on the date the representations and warranties are made, and not when the sponsor fails to comply with a repurchase demand.

Summary of this case from U.S. Bank Nat'l Ass'n v. DLJ Mortg. Capital, Inc.

In ACE Securities Corp. v DB Structured Products, Inc. (112 AD3d 522 [2013], lv granted 23 NY3d 906) (ACE), a case involving an RMBS securitization in which the governing agreements provided for a repurchase protocol substantially similar to that at issue here, this Department rejected the claim that a cause of action for breach of representations and warranties accrues only after a repurchase demand is made and refused.

Summary of this case from U.S. Bank Nat'l Ass'n v. Greenpoint Mortg. Funding, Inc.

In ACE Securities Corp. v DB Structured Products, Inc. (112 AD3d 522 [2013], lv granted 23 NY3d 906) (ACE), a case involving an RMBS securitization in which the governing agreements provided for a repurchase protocol substantially similar to that at issue here, this Department rejected the claim that a cause of action for breach of representations and warranties accrues only after a repurchase demand is made and refused.

Summary of this case from U.S. Bank Nat'l Ass'n v. Greenpoint Mortg. Funding, Inc.

In ACE Secs. Corp. v DB Structured Prods., Inc. (112 AD3d 522 [2013], lv granted 23 NY3d 906 [ACE]), this Department held that a cause of action for breach of a sponsor's mortgage representations accrued on the closing date of the governing agreements, when any breach of the representations and warranties occurred, and not when the sponsor failed to cure or repurchase any defective mortgage loans.

Summary of this case from Morgan Stanley Mortg. Loan Trust 2006-13arx v. Morgan Stanley Mortg. Capital Holdings LLC

In ACE Secs. Corp. v DB Structured Prods., Inc. (112 AD3d 522 [1st Dept 2013] [ACE]), this Department recently considered the date of accrual of a cause of action for breach of representations and warranties in connection with an RMBS securitization governed by an MLPA and PSA.

Summary of this case from Nomura Asset Acceptance Corp. v. Nomura Credit & Capital, Inc.
Case details for

ACE Securities Corp. v. DB Structured Products, Inc.

Case Details

Full title:ACE SECURITIES CORP., etc., Plaintiff–Respondent, v. DB STRUCTURED…

Court:Supreme Court, Appellate Division, First Department, New York.

Date published: Dec 19, 2013

Citations

112 A.D.3d 522 (N.Y. App. Div. 2013)
112 A.D.3d 522
2013 N.Y. Slip Op. 8517

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