LEHMAN BROTHERS HOLDINGS, INC. Plaintiff,
RESOURCE MORTGAGE BANKING, LTD. D/B/A COVINO & COMPANY AND D/B/A LUXMAC HOME MORTGAGE Defendant. Index No. 652089/2010
DECISION AND ORDER
Melvin L. Schweitzer, J.
Plaintiff Lehman Brothers Holding, Inc. (LBHI, and collectively with LBB, Lehman) moves for partial summary judgment pursuant to CPLR 3212 against Resource Mortgage Bank, Ltd. (Resource) with respect to plaintiffs claim on Loan Number ****2821 (Ippolite Loan). For reasons discussed below, Lehman's motion is granted.
This case pertains to a contract under which Resource sold mortgage loans to Lehman Brothers Bank (LBB, and collectively with LBHI, Lehman). On November 22, 2004, Resource and LBB entered into a binding written Loan Purchase Agreement which incorporates the terms and conditions of the Aurora Seller's Guide (collectively, the Agreement). LBB subsequently sold its loans to LBHI and assigned all rights under the Agreement to LBHI.
Resource sold various loans to Lehman pursuant to the Agreement, including the Ippolite Loan. The loan was made in 2007 for $200, 000 at a 13.625% annual interest rate. These loans were purchased based on representations, warranties and covenants made by Resource about the quality of the loans. Resource agreed that if the borrower was more than 30 days late in making either of the first two payments to LBB, it would repurchase the loan. This agreement to repurchase applied only in cases where the loan was delivered to LBB under Resource's Delegated Underwriting Authority (DUA), however. When the borrower on the Ippolite Loan failed to make her second payment on the loan, Lehman notified Resource. Resource did not repurchase the loan within 30 days of the written notice.
According to Lehman's calculation of total damages based on the "repurchase formula" defined in Section 800 of the Seller's Guide, Lehman requests partial summary judgment in the amount of $311, 773.50 plus attorneys' fees and costs with respect to the Ippolite Loan.
To obtain summary judgment, the moving party must establish its cause of action "sufficiently to warrant a court's directing judgment in its favor as a matter of law." Gilbert Frank Corp. v Fed. Ins. Co., 70 N.Y.2d 966, 967 (1988). In order to defeat the motion, the defending party must produce admissible evidence to establish a factual issue requiring trial. Id. The motion must be scrutinized in a light most favorable to the opposing party. Negri v Stop and Shop, Inc., 65 N.Y.2d 625, 626 (1985).
Under New York contract law, "a plaintiff is entitled to summary judgment as to liability on a breach of contract claim if it establishes (1) the existence of a valid contract, (2) its own performance under the contract, and (3) defendant's breach of its obligations under the contract." Morgan Guar. Trust Co. v Bay View Franchise Mortgage Acceptance Co., No. 00-CIV-8613 (SAS), 2002 WL 818082, at *2 (SDNY April 30, 2002).
Lehman argues that it is entitled to summary judgment because all three elements of liability on a breach of contract claim are met. First, the Loan Purchase Agreement establishes the existence of a valid contract. Second, Lehman argues it performed its obligations under the contract by paying for the Ippolite Loan, which was delivered pursuant to Resource's DUA, granted in a May 17, 2005 letter from Lehman to Resource. Finally, Lehman states that Resource breached its obligations by failing to repurchase the Ippolite loan within 30 days of notice.
Resource opposes the motion for summary judgment because it argues that it rescinded the DUA on which Lehman relies, in a letter Resource sent to Lehman dated May 25, 2005. Resource states that Lehman acknowledged both its receipt and the efficacy of this rescission. It argues that without DUA, Resource does not have a repurchase obligation. Even if the subsequent letter did not rescind Resource's DUA, Resource further argues that Lehman's May 17, 2005 letter stated that Resource's DUA was subject to representatives of Resource attending Lehman's DUA training session. No Resource representative ever attended any training session at any time. Since the granting of DUA was conditioned on attendance at the training session, Resource argues that it never had DUA and thus had no repurchase obligation.
Lehman counters that regardless of Resource's alleged rescission letter of May 25, 2005, Resource is subject to DUA because it accepted it again in December 2006. This second DUA predated the defendants' sale of the Ippolite Loan in May 2007. The Ippolite Loan was therefore eligible for DUA under the December 2006 agreement.
Resource responds with an argument that Monica Capela, the person who signed this December 2006 DUA Agreement, was never an officer of Resource and never had authority to sign any agreement on behalf of Resource. Michael Covino, President of Resource, argues that all previous agreements between Lehman and Resource were executed only by him. The court is not persuaded by Mr. Covino's argument. Ms. Capela had apparent authority, and Lehman relied ...