U.S. Bank Nat'l Ass'n v. DLJ Mortg. Capital, Inc.

• Decision Date: 19 February 2019
• Docket Number: No. 6,6
• Citation: 33 N.Y.3d 84,122 N.E.3d 47,98 N.Y.S.3d 530
• Parties: U.S. BANK NATIONAL ASSOCIATION, Solely in its Capacity as Trustee of the Home Equity Asset Trust 2006-5 (HEAT 2006-5), Appellant, v. DLJ MORTGAGE CAPITAL, INC., Respondent. U.S. Bank National Association, Solely in Its Capacity as Trustee of the Home Equity Asset Trust 2006-6 (HEAT 2006-6), Appellant, v. DLJ Mortgage Capital, Inc., Respondent. U.S. Bank National Association, Solely in Its Capacity as Trustee of the Home Equity Asset Trust 2006-6 (HEAT 2006-7), Appellant, v. DLJ Mortgage Capital, Inc., Respondent.
• Court: New York Court of Appeals Court of Appeals

33 N.Y.3d 84
122 N.E.3d 47
98 N.Y.S.3d 530

U.S. BANK NATIONAL ASSOCIATION, Solely in its Capacity as Trustee of the Home Equity Asset Trust 2006-5 (HEAT 2006-5), Appellant,
v.
DLJ MORTGAGE CAPITAL, INC., Respondent.

U.S. Bank National Association, Solely in Its Capacity as Trustee of the Home Equity Asset Trust 2006-6 (HEAT 2006-6), Appellant,
v.
DLJ Mortgage Capital, Inc., Respondent.

U.S. Bank National Association, Solely in Its Capacity as Trustee of the Home Equity Asset Trust 2006-6 (HEAT 2006-7), Appellant,
v.
DLJ Mortgage Capital, Inc., Respondent.

No. 6

Court of Appeals of New York.

February 19, 2019

122 N.E.3d 48

98 N.Y.S.3d 531

Kasowitz Benson Torres LLP, New York City (Hector Torres, David J. Abrams and David J. Mark of counsel), for appellant.

Orrick, Herrington & Sutcliffe LLP, Washington, D.C. (Robert Loeb, of the District of Columbia bar, admitted pro hac vice, and Randall C. Smith of counsel) and New York City (Barry S. Levin, John Ansbro, Richard A. Jacobsen, Paul F. Rugani, Daniel W. Robertson, Daniel A. Rubens and Matthew R. Shahabian of counsel), for respondent.

Wachtell, Lipton, Rosen & Katz, New York City (Elaine P. Golin, Graham W. Meli, Jordan L. Pietzsch and David Shieh of counsel), for The Securities Industry and Financial Markets Association, amicus curiae.

OPINION OF THE COURT

RIVERA, J.

33 N.Y.3d 88

U.S. Bank National Association in its capacity as trustee of three residential mortgage-backed securities (RMBS) trusts seeks to sue DLJ Mortgage Capital, Inc. (DLJ) for alleged violations of representations and warranties regarding the quality of the loans contained in the respective securitization trust instruments. We hold that the Trustee's untimely-filed complaint cannot relate back under CPLR 203(f) to a certificate holder's previously filed action. The Trustee's remaining claim is unpreserved.

I.

DLJ served as seller and sponsor of three RMBS securitization trusts (the HEAT Trusts), each governed by a separate pooling and servicing agreement (PSA), containing various representations and warranties about the general underwriting practices and quality of the individual loans. The PSAs include mandatory remedial provisions, which require any party that discovers a breach to promptly notify the other relevant party, and upon notice, allows DLJ time to remedy the defect. Each PSA also includes a no action clause, which prevents certificate holders from pursuing an action under the PSAs, except in limited circumstances.

Within six years of the execution of the respective PSAs, a certificate holder filed a separate summons and notice claiming violations of the representations and warranties for each of the HEAT Trusts. After

122 N.E.3d 49

98 N.Y.S.3d 532

the limitations period elapsed, the Trustee notified DLJ of the alleged breaches and demanded DLJ cure or repurchase the non-compliant loans, in accordance with the sole remedy provisions. The Trustee later filed a consolidated complaint alleging claims for all three trusts.

DLJ moved to dismiss the consolidated complaint pursuant to CPLR 3211(a), asserting, as relevant here, that the complaint was time-barred because the Trustee failed to comply with the sole remedy provision within the six-year limitations period, and the Trustee could not rely on the prior action because the certificate holder lacked standing to sue under the PSAs. In opposition, the Trustee argued that its action was timely, or, in the alternative, that it related back to the certificate holder's timely-commenced action pursuant to CPLR 203(f).

Supreme Court granted the motion and dismissed the action with prejudice (

33 N.Y.3d 89

42 Misc 3d 1206[A], 2014 NY Slip Op 50001[U], 2014 WL 27961[Sup Ct, NY County 2014]). The Appellate Division affirmed, holding that dismissal with prejudice was appropriate because the Trustee was not a "plaintiff" permitted to refile for purposes of CPLR 205(a) and therefore could not file a new action within that provision's six-month savings clause, nor could the Trustee rely on CPLR 203(f) so that its pleading would relate back to the certificate holder's filing ( U.S. Bank Nat. Ass'n v. DLJ Mortg. Capital, Inc. , 141 A.D.3d 431, 433, 35 N.Y.S.3d 82 [1st Dept. 2016] ). We granted the Trustee leave to appeal ( 29 N.Y.3d 910, 2017 WL 2435364 [2017] ).

II.

As a threshold matter, the Trustee has not preserved its claim that it may refile under CPLR 205(a) due to the timely commencement of the original action by the certificate holder. To preserve an argument for review by this Court, a party must "raise the...