Motion to Dismiss; Statute of Limitations; Timely Commencement of Actions; Breach of Contract; Conditions Precedent.
By: James Clarke | Staff Writer
Plaintiff U.S. Bank Nat’t Ass’n, Defendant DLJ Mortg. Capital, and Defendant Ameriquest Mortg. Co. were signatories to a Pooling and Servicing Agreement (hereinafter “the Agreement”). Pursuant to the Agreement, Defendant Ameriquest issued loans to Plaintiff, whereas Defendant DLJ served as a “backstop” to Defendant Ameriquest – to repurchase the loans in the event Ameriquest was unable to comply with its obligations. Plaintiff brought a breach of contract action against Defendants, alleging breaches of the Agreement. Specifically, Plaintiff alleged that (1) Defendant Ameriquest breached representations and warranties regarding the quality and characteristics of the loans, and (2) Defendant DLJ failed to act as a “backstop.”
Defendant DLJ moved to dismiss the action pursuant to CPLR 3211, claiming that the action was barred by the statute of limitations. Specifically, Defendant DLJ claimed the action was time-barred due to Plaintiff’s failure to make a repurchase demand on Defendant Ameriquest prior to the commencement of the action or expiration of the statute of limitations. The court granted DLJ’s motion to dismiss. The court held that, since Plaintiff did not make a repurchase demand on Defendant DLJ prior to suit, as required in the Agreement, Plaintiff had not satisfied a condition precedent. Therefore, the action was dismissed, but without prejudice; the court noted that a bona fide issue existed as to whether Plaintiff was entitled to commence a new action under CPLR 205 (a). Defendant DLJ was subsequently granted leave to reargue its motion to dismiss.
DLJ subsequently brought a motion to reargue contending that the dismissal should have been with prejudice. DLJ claimed that the Plaintiff was not permitted to commence a new action under CPLR 205 (a) because the Plaintiff’s failure to make a repurchase demand prior to commencement of the original action or expiration of the statute of limitations rendered the action “untimely,” whereas CPLR 205 (a) would be inapplicable.
Here, the New York County Supreme Court upheld its prior decision to dismiss the action without prejudice. The court relied on a Court of Appeals case, “Ace IV,” holding that a condition precedent dismissal was not a statute of limitations dismissal, therefore, not rendering the original action untimely commenced. The court noted that the cases discussed in Ace IV explained that conditions precedent must be fulfilled within the agreement’s express time limits for a new action under CPLR 205 (a) to be permissible. Here, there was no language included in the agreement evincing an intention that the cure and repurchase periods were to lapse before the expiration of the statute of limitations as a condition precedent to DLJ’s obligations. The Court of Appeals emphasized that CPLR 205 (a) only serves the remedial purpose of allowing plaintiffs to avoid the harsh consequences of the statute of limitations and have their claims determined on the merits where there was a prior timely action. Since the Plaintiff timely commenced the original action, CPLR 205 (a) was applicable. Accordingly, the court adhered to its prior decision; the action should be dismissed without prejudice.
U.S. Bank Nat’l Ass’n v. DLJ Mortg. Capital, Index No. 654147/2012, 3/29/2016 (Friedman, J.).