| CIFG Assur. N. Am., Inc. v Goldman, Sachs & Co. |
| 2013 NY Slip Op 03271 [106 AD3d 437] |
| May 7, 2013 |
| Appellate Division, First Department |
| CIFG Assurance North America, Inc.,Appellant-Respondent, v Goldman, Sachs & Co. et al., Respondents-Appellants,and M&T Bank, Respondent. |
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Sullivan & Cromwell LLP, New York (William B. Monohan of counsel), forrespondents-appellants. Luskin Stern Eisler LLP, New York (Michael Luskin of counsel), forrespondent.
Order, Supreme Court, New York County (O. Peter Sherwood, J.), entered May 3,2012, which, granted defendant M&T Bank's motion to dismiss the complaint against it,granted defendant Goldman entities' motion to dismiss the complaint to the extent ofdismissing the fraudulent inducement and accounting causes of action against them anddenied it with respect to the breach of contract causes of action, unanimously modified,on the law, to deny all defendants' motions with respect to the cause of action forfraudulent inducement, and otherwise affirmed, without costs. Judgment, same court andJustice, entered May 31, 2012, dismissing the complaint against M&T Bank,unanimously reversed, on the law, without costs, and the judgment vacated.
In this action by plaintiff arising from its financial guaranty of a residentialmortgage-backed securities investment, the cause of action for fraudulent inducementshould not have been dismissed. Plaintiff conducted its own due diligence, utilizing anoutside consultant to analyze the characteristics of the underlying loans (cf. Barneli & Cie SA v Dutch BookFund SPC, Ltd, 95 AD3d 736 [1st Dept 2012]). The characteristics analyzed byplaintiff's consultant were the subject of written warranties that were not demonstrablyknown by plaintiff to be false when made (see DDJ Mgt., LLC v Rhone Group L.L.C., 15 NY3d 147,154 [2010]). Under the circumstances, there is a question of fact as to whether plaintiffreasonably relied on defendants' representations. It was not required, as a matter of law,to audit or sample the underlying loan files (cf. United Guar. Mtge. Indem. Co. vCountrywide Fin. Corp., 660 F Supp 2d 1163, 1189-1190 [CD Cal 2009]).
The motion court correctly determined that plaintiff lacked standing to sue for breachof [*2]the master mortgage loan purchasing and servicingagreement (sale agreement), as to which it was neither a party nor an express third-partybeneficiary. Although the assignment, assumption and recognition agreement (AAR), ofwhich plaintiff was an express third-party beneficiary, incorporated the warranties andrepresentations of the sale agreement, this does not give plaintiff the right to enforce thesale agreement, which was executed before plaintiff's involvement in the transaction andmakes no reference to the AAR (see Applehead Pictures LLC v Perelman, 80 AD3d 181,189 [1st Dept 2010]). The motion court properly dismissed the cause of action againstM&T Bank for breach of the AAR based on the unambiguous limitation of remediesprovision in section 8 (b) of the agreement, which provides that the cure and repurchaseremedy for breach must be obtained from Goldman. Plaintiff's reliance on Rubinsteinv Rubinstein (23 NY2d 293, 297-298 [1968]), holding that a liquidated damagesprovision does not bar specific performance, is misplaced in light of the specific soleremedy language of the AAR (see L.K. Sta. Group, LLC v Quantek Media, LLC, 62 AD3d487, 492-493 [1st Dept 2009]).
The breach of contract causes of action against Goldman were properly upheld.Notice of breach was sufficiently alleged. The indemnification claim, which seeksindemnity against liability and not only loss, is not premature (see Maryland Cas. Co.v Straubinger, 19 AD2d 26, 28-29 [4th Dept 1963]; Blair v County ofAlbany, 127 AD2d 950, 951 [3d Dept 1987]).
Plaintiff's accounting claim against Goldman was properly dismissed for lack of apredicate fiduciary relationship (see Bradkin v Leverton, 26 NY2d 192, 199 n 4[1970]; Sirico v F.G.G. Prods.,Inc., 71 AD3d 429, 434-435 [1st Dept 2010]).
We have considered the parties' remaining contentions and find them unavailing.Concur—Tom, J.P., Andrias, Acosta, Manzanet-Daniels and Román, JJ.