| ACE Sec. Corp. v DB Structured Prods., Inc. |
| 2013 NY Slip Op 08517 [112 AD3d 522] |
| December 19, 2013 |
| Appellate Division, First Department |
| ACE Securities Corp., Respondent, v DBStructured Products, Inc., Appellant. |
—[*1] Kasowitz, Benson, Torres & Friedman LLP, New York (Marc E. Kasowitz ofcounsel), for respondent. Wachtell, Lipton, Rosen & Katz, New York (George T. Conway III of counsel), forThe Securities Industry and Financial Markets Association, amicus curiae. McKool Smith, P.C., New York (Robert W. Scheef of counsel), for The Associationof Mortgage Investors, amicus curiae. Robert T. Miller, amicus curiae pro se. Jenner & Block LLP, New York (Paul M. Smith of counsel), for Mortgage BankersAssociation, amicus curiae.
Order, Supreme Court, New York County (Shirley Werner Kornreich, J.), enteredMay 14, 2013, which denied defendant's motion to dismiss the complaint, unanimouslyreversed, on the law, with costs, and the motion granted. The Clerk is directed to enterjudgment 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[*2]with the securitization of a pool of mortgage loansgoverned by a Mortgage Loan Purchase Agreement (MLPA) and a Pooling andServicing Agreement (PSA). The MLPA and PSA provided that the trustee was notentitled to sue or to demand that defendant repurchase defective mortgage loans until itdiscovered or received notice of a breach and the cure period lapsed. The motioncourt erred in finding that plaintiff's claims did not accrue until defendant either failed totimely cure or repurchase a defective mortgage loan (see Structured Mtge. Trust1997-2 v Daiwa Fin. Corp., 2003 WL 548868, 2003 US Dist LEXIS 2677 [SD NY,Feb. 25, 2003, No. 02 Civ 3232(SHS)]). To the contrary, the claims accrued on theclosing date of the MLPA, March 28, 2006, when any breach of the representations andwarranties contained therein occurred (see Ely-Cruikshank Co. v Bank ofMontreal, 81 NY2d 399, 402 [1993]; Varo, Inc. v Alvis PLC, 261 AD2d262, 267-268 [1st Dept 1999], lv denied 95 NY2d 767 [2000]).
The certificate holders commenced an action on behalf of the trust, after plaintiffrefused 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, the60- and 90-day periods for cure and repurchase had not yet elapsed. The certificateholders' failure to comply with a condition precedent to commencing suit rendered theirsummons with notice a nullity (see Southern Wine & Spirits of Am., Inc. v Impact Envtl. Eng'g,PLLC, 80 AD3d 505 [1st Dept 2011]).
In any event, the certificate holders lacked standing to commence the action onbehalf of the trust. The "no-action" clause in section 12.03 of the PSA sets forth as acondition 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 serviceronly. 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 vCountrywide Home Loans, Inc., 96 AD3d 684 [1st Dept 2012]).
Nor does the substitution of the trustee as plaintiff permit us to deem timely filed thetrustee's complaint, which was filed September 13, 2012 (compare e.g. HSBC GuyerzellerBank AG v Chascona N.V., 42 AD3d 381, 382 [1st Dept 2007] [original andsubstituted plaintiffs were "affiliates in the HSBC family"]; American Home Assur.Co. v Scanlon, 164 AD2d 751, 752 [1st Dept 1990] [original and substitutedplaintiffs were "both part of the American International Group of insurance companies"];Frankart Furniture Staten Is. v Forest Mall Assoc., 159 AD2d 322 [1st Dept1990] [original and substituted plaintiffs were a retail furniture business and the actualowner of the furniture]).
In light of the foregoing, we need not reach defendant's alternative basis fordismissal. Concur—Tom, J.P., Andrias, DeGrasse and Richter, JJ.
Motion and cross motions for leave to file amicus curiae brief granted. [PriorCase History: 40 Misc 3d 562.]