HSBC BANK USA v. MERRILL LYNCH MORTGAGE LENDING INC (2019)

Order, Supreme Court, New York County (Marcy S. Friedman, J.), entered June 6, 2018, which, to the extent appealed from as limited by the briefs, granted in part and denied in part defendants' motions to dismiss plaintiff's claims for failure to give notice of non-conforming loans, unanimously modified, on the law, to deny the part of the motion seeking to dismiss the claims based on untimely notices of breach, and otherwise affirmed, without costs.

This Court has discretion to consider defendants' arguments under the Pooling and Servicing Agreement (PSA) § 2.03(b), although they were first raised in reply on the motion, because they involve questions of law that can be resolved on the existing record (see Facie Libre Assoc. I, LLC v. SecondMarket Holdings, Inc., 103 A.D.3d 565, 961 N.Y.S.2d 44 [1st Dept. 2013], lv denied 21 N.Y.3d 866, 2013 WL 5180437 [2013] ).

The motion court correctly found that plaintiff had standing to assert the breach of notice claims.  Defendants' reading of PSA § 2.03(a) contradicts the definition of the Assignment and Assumption Recognition Agreement (AARA) set forth in the PSA. Any conflict must be resolved in favor of that definition, which with regard to this term is more specific (see Isaacs v. Westchester Wood Works, 278 A.D.2d 184, 185, 718 N.Y.S.2d 338 [1st Dept. 2000] ).

Defendants' reading also contradicts the AARA, which should be read together with the PSA (see Ambac Assur. Corp. v. EMC Mtge. LLC, 121 A.D.3d 514, 515, 995 N.Y.S.2d 545 [1st Dept. 2014] [various agreements governing residential mortgage-backed securitization are “interlocking”] ).

Defendants failed to establish by documentary evidence that the notice obligations were not transferred to defendant Countrywide Home Loans, Inc. and thereafter to defendant Bank of America, N.A., because the transfer agreement is not included in the record.

The court correctly found that the sole remedy provision in § 2.03(a) does not apply to the notice claims asserted here (cf. Ambac Assur. Corp., 121 A.D.3d at 516, 995 N.Y.S.2d 545).  When viewed in the context of all the governing agreements, that provision is limited to breaches of representations and warranties.  As the motion court found, defendants' interpretation would drastically limit the rights that actually were assigned to plaintiff.

Contrary to the court's conclusion, claims involving the loans referred to in the untimely breach notices relate back to the claims asserted in the summons with notice.  Plaintiff sent two timely notices;  the loans referred to in the other notices arose from the same transactions (see Nomura Home Equity Loan, Inc., Series 2006–FM2 v. Nomura Credit & Capital, Inc., 133 A.D.3d 96, 108, 19 N.Y.S.3d 1 [1st Dept. 2015], mod on other grounds 30 N.Y.3d 572, 69 N.Y.S.3d 520, 92 N.E.3d 743 [2017] ).