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U.S. Bank N.A. v. Bank of America N.A.

United States Court of Appeals, Second Circuit

February 15, 2019

U.S. Bank National Association, as successor (Wells Fargo Bank, NA), as Trustee (Registered Holders of Citigroup Commercial Mortgage Trust 2007-C6, Commercial Mortgage Pass-Through Certificates, Series 2007-C6), acting by and through Special Servicer CW Capital Asset Management LLC, Plaintiff-Appellant,
v.
Bank of America N.A., Defendant-Appellee.

          Argued: November 8, 2017

          ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK

         Appeal by Plaintiff U.S. Bank National Association from orders of the United States District Court for the Southern District of New York (Paul G. Gardephe, J.) denying Plaintiff's motion to retransfer the suit to the United States District Court for the Southern District of Indiana, where it was instituted, and granting judgment on the pleadings in favor of Defendant Bank of America N.A., by reason of untimeliness under the laws of New York. The district court in Indiana had transferred the case to New York under 28 U.S.C. § 1631 based on its conclusion that the defendant was not subject to personal jurisdiction in Indiana. Although we disagree with that conclusion (and therefore with the propriety of the transfer under § 1631), we affirm the New York district court's denial of the motion to retransfer to Indiana, treat the original transfer as one made under 28 U.S.C. § 1404(a) (rather than § 1631), and vacate the judgment that the suit was untimely under the laws of New York. The judgment is VACATED and the case is REMANDED for further proceedings.

          Colleen M. Mallon (Gregory A. Cross, on the brief), Venable LLP, Baltimore, Maryland, for Plaintiff- Appellant.

          Elizabeth P. Papez (Luke A. Connelly, Stephanie A. Maloney, on the brief), Winston & Strawn LLP, Washington, D.C. and New York, New York, for Defendant-Appellee.

          Before: LEVAL, LIVINGSTON, and CHIN, Circuit Judges.

          LEVAL, CIRCUIT JUDGE.

         In this suit for breach of contract, Plaintiff U.S. Bank National Association appeals from orders of the United States District Court for the Southern District of New York (Paul G. Gardephe, J.) denying its motion to retransfer the suit to the United States District Court for the Southern District of Indiana, where it was instituted, and granting judgment on the pleadings in favor of Defendant Bank of America N.A., by reason of the untimeliness of the suit under New York's statute of limitations. The district court in Indiana had transferred the case to New York under 28 U.S.C. § 1631, based on its conclusion that the suit could not be brought in Indiana because the Defendant (a nationally chartered bank and citizen of North Carolina) was not subject to personal jurisdiction in Indiana.

         We disagree with the Indiana district court's conclusion that the Defendant was not subject to the jurisdiction of the Indiana court, and therefore we necessarily conclude that the Indiana court's transfer to New York was not authorized by § 1631. We nonetheless affirm the New York district court's denial of Plaintiff's motion to retransfer to Indiana, treat the original transfer as one made under 28 U.S.C. § 1404(a) (rather than § 1631), and vacate the judgment of dismissal rendered on the ground that the suit was untimely under the laws of New York.

         BACKGROUND

         I. The Mortgage Loan Purchase Agreement

         In 2007, Defendant Bank of America's predecessor, LaSalle Bank N.A., [1]entered into a Mortgage Loan Purchase Agreement (the "MLPA"), for the sale of a portfolio (of approximately 100 commercial mortgage loans) to an entity[2] acting for the benefit of an investment trust (the "Trust"), for which Plaintiff U.S. Bank (a nationally chartered bank and citizen of Ohio) serves as Trustee. The MLPA was supplemented by a Pooling and Servicing Agreement (the "PSA"), which provided that the purchaser would deposit the loans into the Trust and assign all of its rights under the MLPA to the Trust.

         In the MLPA, the seller made representations and warranties regarding the loans. These included Representation No. 8 (set forth in the margin), [3] which effectively represented the absence of any restrictions that would interfere with the mortgagor's ability to pay its obligations under the mortgage loan or would materially and adversely affect the value of the mortgaged property.

         The MLPA prescribes specific remedies available to the mortgagee in the event of a "Document Defect or a Breach" of a representation. App. 79. Pursuant to Section 3(c), the seller of the loan portfolio (Defendant's predecessor) undertook a commitment that, upon receipt of notice of a Document Defect or Breach, it would:

cure such Document Defect or Breach . . . in all material respects, or, if such Document Defect or Breach . . . cannot be cured . . ., (i) repurchase the affected Mortgage Loan at the applicable Purchase Price . . ., or (ii) substitute a Qualified Substitute Mortgage Loan for such affected Mortgage Loan . . . .

App. 79.

         The PSA, in Section 2.03, similarly provides that, after receiving timely notice of a Document Defect or Breach, the seller shall:

(i) cure such Document Defect or Breach, as the case may be, in accordance with Section 3 of the applicable [MLPA], (ii) repurchase the affected Trust Mortgage Loan in accordance with Section 3 of the related [MLPA], or (iii) within two (2) years of the Closing Date, substitute a Qualified Substitute Mortgage Loan for such affected Trust Mortgage Loan . . . .

App. 247.

         II. The Indiana Loan

         One of the items in the portfolio sold pursuant to the MLPA, was a $9 million loan (the "Loan"), which is the subject of this litigation, made in 2007 to Women's Physicians Group, LLC. Repayment of the Loan was secured in part by a mortgage on a two-story commercial building (the "Property") (then owned by the borrower/mortgagor Women's Physicians Group), which was located on a hospital campus in Indiana. Women's Physicians Group had purchased the Property from Galen Hospital Corporation (the "Hospital") pursuant to a special warranty deed. The deed includes two title exceptions that run with the property: (1) a use restriction, which, absent the consent of the Hospital, prohibits use of the Property otherwise than as an ambulatory surgery center and medical offices, and (2) a right of first refusal in favor of the Hospital for any sale, transfer, or assignment.

         In 2012, Women's Physicians Group lost the major tenant for the Property, was unable to secure a new tenant that would use the Property in a manner that conformed to the use restriction, and consequently defaulted on the Loan. On December 13, 2012, the Trust, which had acquired the Loan pursuant to the MLPA, commenced a foreclosure action in Indiana state court against Women's Physicians Group. The foreclosure court appointed a receiver, who similarly failed to secure either a tenant or a waiver or modification of the deed restrictions.

         On October 18, 2013, Plaintiff-Trustee notified Bank of America that it had violated MLPA Representation No. 8 and demanded that Bank of America cure the violation or repurchase the Loan, as provided in the MLPA. Bank of America did not do so.

         III. The ...


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