Nomura Home Equity Loan, Inc. v Nomura Credit & Capital, Inc.

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Nomura Home Equity Loan, Inc. v Nomura Credit & Capital, Inc. 2018 NY Slip Op 30926(U) May 14, 2018 Supreme Court, New York County Docket Number: 651124/2013 Judge: Marcy Friedman Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. [*FILED: NEW YORK COUNTY CLERK 05/14/2018 04:39 PM 1] NYSCEF DOC. NO. 317 INDEX NO. 651124/2013 RECEIVED NYSCEF: 05/14/2018 StJPREME COURT OF THE STATE OF NEW YORK COlTNTY OF NEW ''{ORK - PART 60 NOMUR.4 HOME EQUITY LOAN, INC., SERIES 2007-3, pursuant to a Pooling and Servicing Agreement, dated as of April 1, 2007, by HSBC BANK USA, NATIONAL ASSOCIATION, solely in its capacity as Trustee, DECISION/ORDER lndex No.: 651124/2013 Plaintiff, - against NOMURA CREDIT & CAPITAL, INC., Defendant, NOiv1URA CREDIT & CAPITAL, INC, Third-Party Plaintiff, - against WELLS FARGO BANK, N.A. and OCWEN LOAN SERVICING, LLC. Third-Party Defendants. ·----~-~--............................~---~---~-~...............................~..~----~---- x In this action involving residential mortgage-backed securities (RMBS), third-party defendants \Vells Fargo Bank, N.A, (\Vdls Fargo) and Ocwen Loan Servicing, LLC (Ocwen) (together with Wells Fargo, the Servicers) separately move, pursuant to CPLR 3211 (a) (l), (5), and (7), to dismiss the third-party complaint The third-party complaint pleads a breach of contract claim against the Servicers based on the Servicers' alleged .failures to notify third~party plaintiff Nomura Credit & Capital, Inc. (Nomura) upon their discoveries of breaches of representations and warranties regarding the mortgage loans (the second cause of action), and a 2 of 6 [*FILED: NEW YORK COUNTY CLERK 05/14/2018 04:39 PM 2] NYSCEF DOC. NO. 317 INDEX NO. 651124/2013 RECEIVED NYSCEF: 05/14/2018 separate breach of contract claim against the Servicers based on their alleged failures w comply w1th thdr servicing and/or supervisory servicing obligations (the third cause of action). Except as noted below, the pmiies' arguments in suppo1t of and in opposition to the Servicers' motions are substantially similar to the axgurnents considered and addressed by the court in its recent detennination of motions to dismiss the third-pmiy complaints in two other County, May 14, 2018, No. 653390/2012] ['{P.rrmntCiQQ§_:--S.1J]; Decision & Order, Nm:rrnrn County, May 14, 2018, No. 653783/2012] IT:{mrrnKf:lJ:2_QQ6:EM2J].) The claims and governing ao-reements in this action and in Nomura i2006-S4l and Nomura i2006-FM2i are also b --------------------~....................... ------···---------------------------·--············.'substantially similar. In moving to dismiss the third-party complaint in this action, \Velis Fargo argues principally that Nomura's breach of contract claims are barred by Nomura's ovvn breaches of representations and waffanties; that Nmnura fails to adequately plead that \Vells Fargo discovered defective loans or breached any of its servicing or supervisory servicing obligations; that some or all of Nomurn's claims are time baTI'ed; and that Nomura fails to state a clairn against Wells Fargo in its capacity as Custodian. Jn its separate motion to dismiss, Ocwen argues principally that impleader was improper; that Nomura fails to plead its own _perfornrnnce under the PSA because its claims are premised on breaches of representations and wananties; that Nomura fails to adequately plead that Ocwen discovered breaches or that it breached its servicing duties; that Nomum's alleged damages constitute impem1issibly speculative consequential damages; that some or all ofNomura's claims are time barred; and that Nomura 2 3 of 6 [*FILED: NEW YORK COUNTY CLERK 05/14/2018 04:39 PM 3] NYSCEF DOC. NO. 317 INDEX NO. 651124/2013 RECEIVED NYSCEF: 05/14/2018 fails to plead that Ocvven is liable as the successor to non-party Equity One, Inc. These arguments by the Servicers are resolved in accordance with NwrwrnJJ.Q.QQ::S4), for the reasons stated and based on the authorities cited in that decision, In this case, unlike in N.9J1-1.W'.<1J)QQ9::.~.:4J, Wells Fargo has not only supervisory servicing obligations, but also servicing obligations for certain loans. Under a Seller's \Varranties and Servicing Agreement, dated as of March 1, 2006 (the Servicing Agreement [Sidman Aff. ln Supp. Of Wells Fargo MTD, Exh. 7]), entered into between Nomura as Purchaser and \"/ells Fargo as SeUer and Servicer of mortgage loans, \V ells Fargo was required to service and administer mortgage loans consistent with "Accepted Servicing Practices" to the extent not inconsistent with other provisions of the Servicing Agreement (!~!,_, § 4.0 l.) A Pooling and Servicing Agreernent (the PSA [Sidman Aff. ln Supp. Of Wells Fargo MTD, Exh. 3]) was subsequently entered into between and among Nomura as Sponsor, Ocwen and non-party Equity One, Inco as Servicers, Wells Fargo as Master Servicer and Securities Administrator, and HSBC Bank USA, National Association as Trustee. In the PSA, the parties agreed that Ocwen \Vould service certain of the mortgage loans, 1 but that it wou!d not "have any responsibility to service or administer the Wells Fargo Mortgage Loans [defined as the loans serviced by Wells Fargo purslmnt to the Servicing Agreement] or have any other obligation or liability with respect to the We!Is Fargo Mortgage Loans." Gd.,§ 3.01.) The PSA further provided that "Wells Fargo shall have no obligation to service and administer the Wells Fargo Mortgage Loans in accordance with this Agreement [the PSA] o, , ." CI.4J Rather, "[t]he Wells Fargo Mortgage Loans will be serviced and administered by ·wells Fargo pursuant to the terms and provisions of the Servicing Agreement .... " (Id.) Section 4.01 of the PSA imposed certain duties on ·wells Fargo to 1 Ocwen's servicing obligations under the PSA are materially indistinguishable from its obligations in No·n~-~!rn and will not be discussed further here. t.2.QQ_Q~_S.4.i, 3 4 of 6 [*FILED: NEW YORK COUNTY CLERK 05/14/2018 04:39 PM 4] NYSCEF DOC. NO. 317 INDEX NO. 651124/2013 RECEIVED NYSCEF: 05/14/2018 "supervise, monitor and oversee the obligation of each Servicer [e.g. Ocwen] to service and administer the related Mortgage Loans in accordance with the terms of this Agreement or the Servicing Agreement, as applicable." On April 1, 2007, the same date as of which the parties entered into the PSA, Nomura as Assignor and Nomura Home Equity Loan, Inc. as Assignee entered into an Assignment, Assumption and Recognition Agreement (the AARA [annexed as Exhibit T to the PSA]) by which Nomura assigned all of its right, title and interest under the Servicing Agreement as it related to mortgage loans sold by Nomura to the Assignee pursuant to a separate Mortgage Loan Purchase Agreement. (Id., opening two paragraphs, and§ L) Wells Fargo argues that Nomura has no "right" to bring a breach of contract claim against WeUs Fargo in its capacity as Servicer. In support of this argument, \Vells Fargo relies solely 011 Nomura's entry into the AARA, assigning its rights under the Servicing Agreement to a separate Nomura entity. (See VveUs Fargo Memoo In Supp., at 16.) Under the PSA of the same date as the AARA, however, \Vdls Fargo agreed to service specified mortgage loans on a goingforward basis "pursuant to the tem1s and provisions of the Servicing Agreement, , .. " (PSA, § 3,01.) \Vells Fargo does not discuss the interrelationship bd\veen the two agreernents and their effect on Nomura's right to enforce \Vells Fargo's obligations as a Servicer. \Vells Fargo accordingly fails to demonstrate Nomura's lack of standing on this claim. \Vells Fargo also argues that Nomura has no right to bring a breach of contract claim against Wells Fargo in its capacity as Master Senticer. In suppo.tt of this claim, \Vells Fargo argues that its supervisory servicing obligations are owed only to the Trustee and certificatehoiders, (Wells Fargo Memo, In Supp., at 17.) This claim is based on section 4.02 of the PSA, which provides, in pertinent part, that "[t]he Master Servicer [Wells Fargo], for the 4 5 of 6 [*FILED: NEW YORK COUNTY CLERK 05/14/2018 04:39 PM 5] NYSCEF DOC. NO. 317 INDEX NO. 651124/2013 RECEIVED NYSCEF: 05/14/2018 benefit of the Trustee and the Certificateholders, shall enforce the obligations of the Servicers [e.g" Ocwen] under this i\greement and, if applicable, the Servicing Agreement .... " For the reasons stated and based on the authorities cited in N9l.!JJ:lfg_{:Z_QQJ5.:fM:2.1, the court holds that section 4.02 does not preclude Nomura from suing WeHs Fargo to recover the damages that Nomura itself allegedly suffered as a result of \Ve Us Fargo's failure to enforce Ocvven' s servicing obligations for the benefit of the Trustee and the certificateholders. Finally, ·wells Fargo also argues that Nonn..U"a "effectively pleads itself out of' a failure to notify claim by acknowledging that Wells Fargo provided Nomura vvith notice of certain breaches of representations and warranties. (\Ve!Is Fargo Memo. In Supp., at 14.) This argument is also resolved in accordance vvith NQITlJJrn.t~_QQ§:EM~), for the reasons stated and based on the authorities cited in that decision. Nomura has agreed to withdraw the portion of its breach of contract claim against Wells Fargo in its capacity as Custodian, (Nomura Memo, In Opp. To Wells Fargo, at 3 n 5.) It is accordingly hereby ORDERED that the motion of Ocwen Loan Servicing, LLC (Ocwen) to dismiss the third-party comp.taint is granted solely to the extent of dismissing the third-party complaint to the extent that it purports to plead a claim for successor liability against Ocwen based on the acts of Equity One, Inc.; and it is tl.lrther ORDERED that the motion of defendant \VeUs Fargo Bank, N.A. (\Veils Fargo) to dismiss the third-party complaint is granted solely to the extent of dismissing the third-party complaint as against Wells Fargo as Custodian, This constitutes the decision and order of the court. Dated: Nevv York, New York May 14, 2018 5 6 of 6

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