Deutsche Bank Nat'l Tr. Co. v. Equifirst Corp.
| Decision Date | 21 June 2022 |
| Docket Number | Index No. 651957/2013 |
| Citation | 2022 NY Slip Op 31953 (U) |
| Parties | DEUTSCHE BANK NATIONAL TRUST COMPANY, Plaintiff, v. EQUIFIRST CORPORATION, EQUIFIRST MORTGAGE CORPORATION OF MINNESOTA, BARCLAYS BANK PLC Defendant. |
| Court | New York Supreme Court |
Unpublished Opinion
DECISION + ORDER ON MOTION
The following e-filed documents, listed by NYSCEF document number (Motion 003) 182, 183,184,185, 186, 187, 188, 189, 190, 191 192, 193, 198, 201, 203, 204, 205, 206, 207, 208, 209, 210 211, 212, 213, 214, 215, 216, 217, 218, 219, 220, 221, 222, 223, 224, 225, 226, 227, 228, 229, 230, 231, 232, 233, 234, 235, 236, 237, 238, 239, 240, 241, 242, 243, 244, 245, 246, 247, 248, 249, 250, 251, 252, 253, 254, 255, 256, 257, 258, 259, 260, 261, 262, 263, 264, 265, 266, 267, 268, 269, 270, 271, 272, 273, 274, 275, 276, 277, 278, 279, 280, 281, 282, 283, 284, 285, 286, 287, 288, 289, 290, 291, 292, 293, 294, 295, 296, 297, 298, 299, 300, 301, 302, 303, 304, 305, 306, 307, 308, 309, 310, 311, 312, 313, 314, 315, 316, 317, 318, 319, 320, 321, 322, 323, 324, 325, 326, 327, 328, 329, 330, 331, 332, 333, 334, 335, 336, 337, 338, 339, 340, 341, 342, 343, 344, 345, 346, 347, 348, 349, 350, 351, 352, 353, 354, 355, 356, 357, 358, 359, 360, 361, 362, 363, 364, 365, 366, 367, 368, 369, 370, 371, 372, 378 were read on this motion to/for JUDGMENT - SUMMARY.
This residential mortgage-backed securities (RMBS) breach of contract action is brought by plaintiff Deutsche Bank National Trust Co. (DBNT or Trustee), on behalf of the EQLS 2007-1 Trust (the Trust), against defendants EquiFirst Corp. and EquiFirst Mortgage Corp. of Minnesota, (together, EquiFirst), the originators of the mortgage loans, and Barclays Bank PLC (Barclays), the parent of the non-party depositor BCAP LLC (BCAP or Depositor).[1] Defendants move for summary judgment dismissing plaintiffs claims as time-barred under the four-year statute of limitations (SOL) of California, the state DBNT resides in. Plaintiff opposes the motion and counters that the claims are timely under New York's six-year SOL because the law of the Depositor's residence applies. Defendants' motion is granted for the reasons below.
For context, as the Court of Appeals has explained in Deutsche Bank Natl. Trust Co. v Barclays Bank PLC (34 N.Y.3d 327 [2019] [BRl/NCl]), (id. at 331-332 [internal quotation marks and citation omitted]).
At center of this motion is the assignment relationship among the deal parties, which arose from four key agreements that effectuated the securitization of the Trust. To begin with, EquiFirst originated certain mortgage loans (Mortgage Loans) and sold them to the sponsor Sutton Funding LLC (Sutton) pursuant to a Mortgage Loan Purchase Agreement (MLPA), executed on March 1, 2007 (NYSCEF # 13). In the MLPA, EquiFirst made certain representations and warranties to Sutton concerning the quality and characteristics of the Mortgage Loans and agreed to cure or repurchase any breaching loans upon notice (id., §§ 9.02, 9.03).
Subsequently, Sutton transferred the Mortgage Loans and assigned its rights to the Depositor BCAP pursuant to the Assignment, Assumption and Recognition Agreement (AARA), executed on June 27, 2007, by EquiFirst, Sutton, and BCAP (NYSCEF # 14). Although the Trustee is not a party to the AARA, the AARA explicitly addressed the Trust and DBNT, recognizing that BCAP "will transfer the Mortgage Loans and assign its rights under the [MLPA]" to DBNT, that EquiFirst "shall look solely to the Trust" for performance of any obligations under the MLPA, and that EquiFirst represented "for the benefit of [Sutton], [BCAP], the Trust, and [Barclays]" that the representations and warranties made in MLPA were true and correct (id).
Separately, Barclays made certain representations and warranties to BCAP concerning the Mortgage Loans pursuant to the Representations and Warranties Agreement (RWA), executed on June 27, 2007, between Barclays and BCAP (NYSCEF # 15). The Trustee is not a party to the RWA but was also referenced in the RWA in connection with the representations and warranties.
BCAP then transferred the loans and its rights under the AARA and the RWA to the Trust pursuant to the Pooling and Servicing Agreement (PSA), dated as of June 1, 2007 and executed on June 27, 2007 (NYSCEF # 16). As such, the AARA, the RWA, and the PSA were executed on the same day, which was also the closing date for the securitization. The PSA recognized that Sutton's and Depositor's rights against defendants were assigned to the Trust and provided a repurchase protocol for the Trustee to seek remedies from the defendants.
DBNT initiated this action by filing a summons with notices on May 31, 2013. It subsequently filed its complaint on November 18, 2013 (NYSCEF # 5), which pleads two causes of action: (1) for defendants' alleged breach of their representations and warranties and breach of their obligations to give notice and to repurchase the breaching loans under the agreements; and (2) for breach of the implied good faith covenant. By order dated May 26, 2016, this court (Hon. Marcy S. Friedman [ret.]) dismissed the second cause of action and certain aspects of the first cause of action (NYSCEF # 131). Justice Friedman found that the claims accrued on June 27, 2007, at the point of contract execution (id. at 6).
On November 19, 2018, DBNT moved for leave to reargue a consolidated decision in Part 60 RMBS Put-Back Litig., 2018 WL 5099045 (Sup Ct, NY County, Oct. 18, 2018), in which Justice Friedman stated that it was undisputed that the borrowing statute is applicable. Justice Friedman granted the leave to reargue and modified the October 18 Decision and Order, clarifying that DBNT did not concede that the borrowing statute is applicable based on DBNT's California residence, and that DBNT preserved its argument that the residence of the Depositor, not the Trustee, governs for SOL purposes (NYSCEF # 173 - Order on motion to reargue).
Besides this action, DBNT, as trustee to other RMBS trusts, commenced several similar actions against the originators of those trusts, among which are two actions that are subjects of the Court of Appeals' BRl/NCl decision (34 N.Y.3d 327). The sole issue in BRl/NCl was the timeliness of the claims. The Court of Appeals applied the SOL of the state where plaintiff DBNT resides, finding that DBNT's claims were time-barred under California's four-year SOL. In contrast, the dissent by Hon. Rowan Wilson takes the view that New York's six-year SOL applies because the two New York-based depositors' residence governs as the injury accrued to them, not DBNT. Notably, on appeal, neither DBNT nor any defendant in BRl/NCl hraised the depositor-residence theory underlying Judge Wilson's dissent.
In the instant motion, defendants move for summary judgment dismissing DBNT's claims as time-barred, arguing that under the doctrine of collateral estoppel, the Court of Appeals' decision in BRl/NCl bars DBNT from arguing the depositor-residence theory. Specifically, defendants contend that the issues presented in this case and in BRl/NCl are identical: the applicability of CPLR 202 to DBNT's breach of contract claims, and that DBNT had a full and fair opportunity to litigate and did litigate the issue. As to the depositor-residence theory, defendants argue that DBNT could have raised this theory in BRl/NCl but chose instead to advance other arguments (i.e., the multi-factor test argument) and that DBNT cannot escape collateral estoppel "by raising new theories for what is, essentially, the same relief (NYSCEF # 193-Defs. Br. at 12, citing Williams v Steinberg, 211 A.D.2d 597, 597 [1st Dept 1995]). Defendants further argue that the law of the Depositor's residence does not apply since the claims accrued to the Trustee and in the place of the Trustee's residence. Defendants add that even if the assignor-residence rule applies, the Depositor resides in Delaware - its place of incorporation, so DBNT's claims are still barred by Delaware's three-year SOL.
In opposition, DBNT argues that, as the Depositor, BCAP's residence governs for SOL purposes because the claims accrued to BCAP in the first place before BCAP transferred the Mortgage Loans and assigned its rights in the loans to DBNT. DBNT contends that the doctrine of collateral estoppel does not preclude its argument based on the holding in BRl/NCl because the depositor-residence issue was not litigated by the parties or adjudicated by the Court of Appeals, despite being raised in dissent. DBNT further argues that it is not bound by the positions taken in BRl/NCl since it acted in its representative capacity on behalf of a different trust (NYSCEF # 203-Pltf. Opp. at 17-18, Restatement [Second] of Judgement § 36 [1982]; Tuper v Tuper, 34 A.D.3d 1280, 1281 [4th Dept 2006]). Lastly, DBNT maintains that BCAP resides in New York, its principal place of business, so DBNT's claims are timely under New York's six-year SOL.
As a threshold matter, defendants' argument that DBNT is collaterally estopped from relitigating the timeliness of its repurchase...
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