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TRUST FOR MERRILL LYNCH MORTGAGE v. LOVE FUNDING

October 7, 2005.

TRUST FOR THE CERTIFICATE HOLDERS OF THE MERRILL LYNCH MORTGAGE PASS-THROUGH CERTIFICATES SERIES 1999-C1, by and through ORIX Capital Markets, LLC, as Master Servicer and Special Servicer, Plaintiff,
v.
LOVE FUNDING CORPORATION, Defendant.



The opinion of the court was delivered by: SHIRA SCHEINDLIN, District Judge

OPINION AND ORDER

I. INTRODUCTION

  The Trust for the Certificateholders of the Merrill Lynch Mortgage Investors, Inc. Mortgage Pass-Through Certificates Series 1999-C1 (the "Trust") is suing Love Funding Corporation ("Love Funding") for breach of contract.*fn1 The claim arises from Love Funding's alleged breach of one of the representations and warranties in a Mortgage Loan and Purchase Agreement (the "MLPA") between Love Funding and Paine Webber Real Estate Securities, Inc. ("PWRES"), whose successor, UBS Paine Webber ("UBS"),*fn2 subsequently assigned its rights under the MLPA to the Trust.*fn3

  Love Funding now moves for: (1) leave to amend its answer pursuant to Federal Rule of Civil Procedure 15 and (2) summary judgment concerning the categories of damages available to the Trust under the definition of the term "Repurchase Price" in the MLPA. In addition, the Trust moves — and Love Funding cross-moves — for summary judgment on Love Funding's alleged breach of the MLPA.

  II. BACKGROUND

  A. The Parties

  The Trust is a New York trust created pursuant to a Pooling and Servicing Agreement, dated November 1, 1999, between Merrill Lynch Mortgage Investors, Inc. ("MLMI"), ORIX Capital Markets LLC ("ORIX"), and Norwest Bank Minnesota, N.A.*fn4 The holders of the certificates issued by the Trust are referred to as Certificateholders.*fn5 These certificates are essentially bonds secured by a pool of commercial mortgages that the Trust has purchased from lenders.*fn6 Such certificates are referred to as a "commercial mortgage-backed securities."*fn7

  Love Funding is a Virginia corporation with an office located in New York City.*fn8 Love Funding "offers origination, consulting and servicing of multi-family and commercial loans for investors, and loan placement services for borrowers."*fn9

  B. Facts

  1. The MLPA

  In early 1999, Love Funding entered into a "correspondent arrangement" with PWRES, whereby Love Funding would find prospective loans for PWRES to underwrite.*fn10 Love Funding was the lender in these transactions, but PWRES actually funded the loans, which were assigned to PWRES.*fn11 Love Funding and PWRES memorialized the terms of this arrangement in the MLPA, which is dated April 23, 1999.*fn12 PWRES drafted the MLPA.*fn13

  In the MLPA, Love Funding made a number of representations and warranties to PWRES concerning each of the loans it was assigning to PWRES.*fn14 For example, in section 5.02(cc) of the MLPA, Love Funding represented and warranted that at the time a particular loan is assigned: "There is no default, breach, violation or event of acceleration existing under the related Mortgage or the related Mortgage Note."*fn15

  Section 5.03 of the MLPA defines PWRES's remedies in the event that Love Funding breaches one of the representations and warranties in section 5.02.*fn16 Section 5.03(a) provides, in relevant part: "[u]pon discovery by either [Love Funding] or [PWRES] of a breach of any of the foregoing representations and warranties which materially and adversely affects the value of any or all of the Mortgage Loans . . . [(] a `Breach') the party discovering such Breach shall give prompt written notice to the other.*fn17 In addition, section 5.03(b) provides, in relevant part: "[w]ithin sixty (60) days of the earlier of either discovery by or notice to [Love Funding] of any Breach of a representation or warranty, [Love Funding] shall cure such Breach in all material respects and, if such breach cannot be cured, [Love Funding] shall, at [PWRES's] option, repurchase such Mortgage Loan at the Repurchase Price."*fn18 2. The Arlington Loan

  In 1998, principals of Cyrus II Partnership ("Cyrus") approached Love Funding for a loan to finance a rehabilitation project on the Arlington Apartments (the "Property") in Harvey, Louisiana.*fn19 Love Funding subsequently collected documents and information, performed lease audits, and made site visits to the Property.*fn20 Love Funding provided this information to PWRES, which conducted its own due diligence and ultimately committed to fund a loan to Cyrus.*fn21

  On July 6, 1999, Love Funding made a $6.4 million loan (the "Arlington Loan"), to Cyrus.*fn22 The Arlington Loan was memorialized by a Mortgage Note, which in turn was secured by a Mortgage, Security Agreement and Assignment of Leases and Rents (the "Mortgage") that provided for a lien on the Property.*fn23 ...


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