The opinion of the court was delivered by: Buchwald, United States District Judge.
Plaintiff LaSalle Bank National Association ("LaSalle," or
"plaintiff"), as trustee for the certificateholders of a Real Estate
Mortgage Investment Conduit ("REMIC"), brings this action against Nomura
Asset Capital Corporation ("Nomura") and Asset Securitization Corporation
("ASC") (collectively, "defendants"), both Delaware corporations, for
breach of certain representations and warranties, and for attorney's
fees. Before the Court is defendants' motion, pursuant to Rule 12(b)(1)
of the Federal Rules of Civil Procedure, to dismiss plaintiff's complaint
for lack of subject matter jurisdiction. For the reasons that follow, the
motion is denied.
In August of 1997, Nomura originated and closed a $50 million loan to a
newly-created single-purpose entity affiliated with the Doctor's Hospital
of Hyde Park, HPCH, LLC ("HPCH") (the "hospital loan"). This loan was
secured by the real property, equipment, and intangibles of the
hospital, as well as an assignment of the operating lease of the
hospital's operator, Doctor's Hospital of Hyde Park, Inc. (the "hospital
operator"). First Am. Compl. ¶ 5. In connection with the hospital
loan, Nomura obtained an appraisal dated August 1, 1997 which appraised
the collateral of this loan to be $68,000,000, and allocated this among
the several categories of Land, Buildings/Site Improvements, Equipment,
and Intangibles. First Am. Compl. ¶ 6.
On October 24, 1997, Nomura sold and conveyed all title, rights, and
obligations related to the hospital loan and 155 other fixed-rate
mortgage loans (collectively, the "mortgage package") to ASC pursuant to
a Mortgage Loan Purchase and Sale Agreement ("MLPSA"). First Am. Compl.
¶ 7; Defs.' Mem. at 4. The MLPSA specifically acknowledged that the
sale of the mortgage package was made in connection with
the formation of a REMIC trust*fn1 which named LaSalle as trustee. First
Am. Compl. ¶ 7. In addition, Nomura made certain representations and
warranties with regard to the hospital loan in the MLPSA. These included
the representations that the fair market value of the real property was
at least equal to 80% of the principal amount of the loan, that the
hospital loan constituted a "qualified mortgage" under § 860G(a)(3)
of the Internal Revenue Code of 1986*fn2, and that the loan was
consummated in accordance with customary industry standards. First Am.
Compl. ¶ 8. Under the MLPSA, Nomura must either cure any breach of
these representations and warranties or repurchase the hospital loan.
Also on October 27, 1997, ASC, LaSalle, and others entered into the
Pooling and Servicing Agreement ("PSA"). In this agreement, ASC conveyed
to LaSalle, as trustee, all the interest in the mortgage package it had
just obtained from Nomura in the MLPSA. First Am. Compl. ¶ 9. In the
PSA, ASC confirmed, inter alia, that Nomura's representations and
warranties from the MLPSA were true as of October 24, 1997 and, in
particular, that the hospital loan constituted a "qualified mortgage"
pursuant to § 860G(a)(3). Id. Pursuant to the PSA, ASC must either
cure any breach of these representations and warranties or repurchase the
hospital loan. Id.
On April 17, 2000, the operator of the hospital filed for relief under
Chapter 11 of the United States Bankruptcy Code, and the hospital was
shut down the following day. First Am. Compl. ¶ 11. On May 31,
2000, the United States Bankruptcy Court for the Northern District of
Illinois entered an order permitting the operator to reject its lease
for the hospital with HPCH. Shortly thereafter, the hospital loan went
into default when HPCH ceased making payments. First Am. Compl. ¶
The PSA provides that, if any of the loans comprising the mortgage
package go into default, the "Special Servicer" shall "seek to maximize
the timely and complete recovery of principal and interest" on that
loan. PSA at § 3.01(a); First Am. Compl. ¶ 10. At the time the
PSA was entered into, AMRESCO Management, Inc. was named as the Special
Servicer, but, at present, AMRESCO Management, Inc.'s successor in
interest, Lend Lease Asset Management, L.P. ("Lend Lease") is the Special
Servicer. First Am. Compl. ¶ 10.
Because the hospital loan was in default, Lend Lease, as Special
Servicer, reviewed the hospital loan file. Upon examination of the file,
it determined that the hospital loan was not, in fact, a "qualified
mortgage," because the appraised value of the real property securing the
debt was less than 80% of the principal amount of the loan, and because
the loan was not used to
purchase, improve, or protect the real property. First Am. Compl. ¶
13. Lend Lease then gave notice to ASC of this alleged breach and
demanded that ASC repurchase the hospital loan, as provided in the PSA.
Id. ASC, however, refused to do so. First Am. Compl. ¶ 14. In a
letter dated August 4, 2000, both Nomura and ASC denied that any
representation or warranty of either the MLPSA or the PSA was breached,
and, therefore, refused to repurchase the hospital loan. First Am.
Compl. ¶ 16. This litigation ensued.
Defendants assert that this Court lacks subject matter jurisdiction to
hear this case, and move to dismiss on that ground. Defs.' Mem. at 10.
Plaintiff maintains, on the other hand, that both federal-question
jurisdiction and diversity jurisdiction exist. First Am. Compl. ¶
4. Because we agree with plaintiff that there is complete diversity of
the parties to this action, we deny defendants motion on that ground
alone and do not consider the additional question of whether federal
question jurisdiction lies in this case.
A. Motion to Dismiss Standard
For purposes of a motion to dismiss, we are required to accept as true
the factual assertions in the complaint, see Zinermon v. Burch,
494 U.S. 113, 118, 110 S.Ct. 975, 108 L.Ed.2d 100 (1990); Charles W. v.
Maul, 214 F.3d 350, 356 (2d Cir. 2000), and may grant the motion only
where, viewing plaintiff's allegations in the light most favorable to
him, "it appears beyond doubt that plaintiff can prove no set of facts in
support of his claim which would entitle him to relief." Harris v. City
of New York, 186 F.3d 243, 247 (2d Cir. 1999). Moreover, at this stage of
the proceedings, ...