In re: Part 60 Put-Back Litigation Federal Housing Finance Agency, etc., Plaintiff, Deutsche Bank National Trust Company, in its capacity as Trustee for the MSAC 2007-NC1 Trust, Plaintiff-Appellant,
Morgan Stanley ABS Capital I Inc., Defendant-Respondent. In re: Part 60 Put-Back Litigation Federal Housing Finance Agency, etc., Plaintiff, Deutsche Bank National Trust Company, in its capacity as Trustee for the MSAC 2007-NC3 Trust, Plaintiff-Appellant,
Morgan Stanley Mortgage Capital Holdings LLC, as successor-by-Merger to Morgan Stanley Mortgage Capital Inc., Defendant-Respondent.
MoloLamken LLP, New York (Robert K. Kry of counsel), for
Polk & Wardwell LLP, New York (Brian S. Weinstein of
counsel), for respondent.
Acosta, J.P., Mazzarelli, Manzanet-Daniels, Webber, Gesmer,
Supreme Court, New York County (Marcy S. Friedman, J.),
entered April 20, 2016, which, insofar as appealed from,
granted defendant's motions to dismiss, unanimously
affirmed, with costs.
tolling agreement between nonparty National Credit Union
Administration (NCUA) - a certificateholder in the NC3 Trust
- and various Morgan Stanley entities - the sponsor of the
securitization - states, "the Potential Claims do not
include causes of action and claims by any person or entity
that is not a party to this tolling agreement as set forth in
the first paragraph, " i.e., any person or entity other
than NCUA and Morgan Stanley. Hence, plaintiff is not an
intended third-party beneficiary (see e.g. Fort Lincoln
Civic Assn., Inc. v Fort Lincoln New Town Corp., 944
A.2d 1055, 1069 [DC App 2008]). (The NCUA tolling agreement
is governed by District of [*2]Columbia law.)
contends that we should infer that NCUA and Morgan Stanley
intended to benefit plaintiff because it was the only one who
could pursue a claim. That is incorrect. First, while
certificateholders' rights to sue "upon or under or
with respect to" the Pooling and Servicing Agreement
(PSA) are limited (emphasis added), that is not the same as
saying that only plaintiff (the trustee under the PSA) can
pursue a claim. Second, the tolling agreement was not limited
to claims under the PSA. To the extent NCUA had non-contract
claims, they would not have been barred by the no-action
clause in the PSA (see Quadrant Structured Prods.
Co., Ltd. v Vertin, 23 N.Y.3d 549, 552 ).
Third, as a matter of fact, NCUA brought its own lawsuit.
plaintiff cannot take advantage of the tolling agreement, its
deadline to sue was May 31, 2013. On that date, Federal
Housing Finance Agency (FHFA), as conservator for the Federal
Home Loan Mortgage Corporation - an NC3 certificateholder -
filed a summons with notice, purportedly on behalf of the
trustee (i.e., plaintiff). On August 27, 2013, plaintiff
first asked defendant to cure or repurchase defective loans.
On November 6, 2013, plaintiff filed the complaint. Under
similar circumstances, we have held that the trustee's
claims are time-barred on standing grounds (see U.S. Bank
N.A. v DLJ Mtge. Capital, Inc., 141 A.D.3d 431, 432-433
[1st Dept 2016]; Nomura Asset Acceptance Corp.
Alternative Loan Trust v Nomura Credit & Capital,
Inc., 139 A.D.3d 519, 520 [1st Dept 2016]; ACE Sec.
Corp. v DB Structured Prods., Inc., 112 A.D.3d 522');">112 A.D.3d 522 [1st
Dept 2013], affd 25 N.Y.3d 581');">25 N.Y.3d 581 ).
Campbell v Hudson & Manhattan R.R. Co. (277 A.D.
731 [1st Dept 1951], affd 302 NY 902 ), plaintiff
contends that the above cases and the no-action clause in the
PSA do not apply because FHFA commenced this action on behalf
of the trustee. This argument is unavailing. Campbell said,
"If a trustee under ... an indenture acts in bad faith,
or, abdicating its function ..., declines to act at all,
bondholders for themselves and others similarly situated may
bring a derivative action in the right of the trustee .... In
that event they are not subject to the limitations of"
the no-action clause (277 A.D. at 734-735 [emphasis added];
see also Velez v Feinstein, 87 A.D.2d 309, 314 [1st
Dept 1982], lv dismissed in part and denied in part 57 N.Y.2d
605 ). FHFA did not allege that plaintiff (the trustee)
had acted in bad faith or declined to act. In addition, FHFA
failed to "set forth with particularity [its] efforts
... to secure the initiation of the action by the trustee,
or the reasons for not making such effort"
(Velez, 87 A.D.2d at 316 [internal quotation marks
tolling agreement between various HSH entities (at least one
of which was a certificateholder in the NC1 trust) and
various Morgan Stanley entities did not clearly establish
HSH's and Morgan Stanley's intent to confer an
immediate benefit on plaintiff (see e.g. State of Cal.
Pub. Employees' Retirement Sys. v Shearman &
Sterling, 95 N.Y.2d 427, 434-435 ; LaSalle
Natl. Bank v Ernst & Young, 285 A.D.2d 101, 108-109
[1st Dept 2001]). The word "representatives" simply
will not bear the weight that plaintiff wants to put on it
(see generally Matter of Westmoreland Coal Co. v Entech,
Inc., 100 N.Y.2d 352, 358  ["The meaning of a
writing may be distorted where undue force is given to single
words or phrases"] [internal quotation marks omitted]).
arguments that (1) it is an implied intended beneficiary of
the HSH-Morgan Stanley agreement because it is the only one
who can recover and (2) the no-action clause does not apply
to a derivative action are unavailing for the same reasons
set forth relative to "The NC3 Trust, " supra.
light of the particular wording of the backstop obligation in
this case, we find that plaintiff's demand on defendant
was not a condition to defendant's performance;
therefore, accrual of plaintiff's claim was not delayed
(see ACE Sec. Corp., Home Equity Loan Trust, Series
2006-SL2 v DB Structured Prods., Inc., 25 N.Y.3d 581');">25 N.Y.3d 581,
597 ; Deutsche Bank Natl. Trust Co. v Flagstar
Capital Mkts. Corp., 143 A.D.3d 15, 22 [1st Dept 2016]).
Unlike the situation in U.S. Bank, it was not a condition
precedent to enforcement of defendant's backstop
obligation that the ...