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WARRANTIES AND REPRESENTATIONS CLAUSE IN RESIDENTIAL MORTGAGE-BACKED SECURITIES PURCHASE AGREEMENT DID NOT POSTPONE THE ACCRUAL OF A BREACH OF CONTRACT ACTION, THE ACTION WAS THEREFORE TIME-BARRED (CT APP). ​

The Court of Appeals, in a full-fledged opinion by Judge Fahey, over a two-judge dissent, determined that the language of a mortgage loan purchase and warranties agreement (MLPWA) did not postpone the accrual of a breach of contract cause of action and, therefore, the statute of limitations had expired. This is another case arising out of the sale of residential mortgage-backed securities which were supported by allegedly defective mortgage loans that did not comply with the representations and warranties in the agreement:

… [P]laintiff did not dispute that the representations and warranties made by defendant in the MLPWA were effective as of the closing date. Instead, plaintiff argued that the statute of limitations had yet to lapse, relying upon a provision in the MLPWA that it refers to as the “accrual clause,” which states as follows: “Any cause of action against the Seller relating to or arising out of the breach of any representations and warranties made in Subsections 9.01 and 9.02 shall accrue as to any Mortgage Loan upon (i) discovery of such breach by the Purchaser or notice thereof by the Seller to the Purchaser, (ii) failure by the Seller to cure such breach, substitute a Qualified Substitute Mortgage Loan or repurchase such Mortgage Loan as specified above and (iii) demand upon the Seller by the Purchaser for compliance with this Agreement.” …

In New York, the default accrual rule for breach of contract causes of action is that the cause of action accrues when the contract is breached … . “[E]xcept in cases of fraud where the statute expressly provides otherwise, the statutory period of limitations begins to run from the time when liability for wrong has arisen even though the injured party may be ignorant of the existence of the wrong or injury”… . This Court has “repeatedly rejected accrual dates which cannot be ascertained with any degree of certainty, in favor of a bright line approach,” and for that reason, we do not “apply the discovery rule to statutes of limitations in contract actions” … . “To extend the highly exceptional discovery notion to general breach of contract actions would effectively eviscerate the Statute of Limitations in this commercial dispute arena” … . * * *

… [General Obligations Law 17-103] requires an agreement to extend the statute of limitations to be made “after accrual of the cause of action,” and it allows extension of the limitations period only for, at most, the time period that would apply if the cause of action had accrued on the date of the agreement, i.e., six years from the date that the agreement was made if the limitations period is six years … . An agreement to extend the statute of limitations that does not comply with these requirements “has no effect” … . In addition, CPLR 201 provides that an action “must be commenced within the time specified in this article unless a different time is prescribed by law or a shorter time is prescribed by written agreement,” and “[n]o court shall extend the time limited by law for the commencement of an action.” Deutsche Bank Natl. Trust Co. v Flagstar Capital Mkts., 2018 NY Slip Op 06851, CtApp 10-16-18

CONTRACT LAW (WARRANTIES AND REPRESENTATIONS CLAUSE IN RESIDENTIAL MORTGAGE-BACKED SECURITIES PURCHASE AGREEMENT DID NOT POSTPONE THE ACCRUAL OF A BREACH OF CONTRACT ACTION, THE ACTION WAS THEREFORE TIME-BARRED (CT APP))/CIVIL PROCEDURE (CONTRACT LAW, WARRANTIES AND REPRESENTATIONS CLAUSE IN RESIDENTIAL MORTGAGE-BACKED SECURITIES PURCHASE AGREEMENT DID NOT POSTPONE THE ACCRUAL OF A BREACH OF CONTRACT ACTION, THE ACTION WAS THEREFORE TIME-BARRED (CT APP))/SECURITIES  (WARRANTIES AND REPRESENTATIONS CLAUSE IN RESIDENTIAL MORTGAGE-BACKED SECURITIES PURCHASE AGREEMENT DID NOT POSTPONE THE ACCRUAL OF A BREACH OF CONTRACT ACTION, THE ACTION WAS THEREFORE TIME-BARRED (CT APP))/RESIDENTIAL MORTGAGE BACKED SECURITIES (CONTRACT LAW, CIVIL PROCEDURE, WARRANTIES AND REPRESENTATIONS CLAUSE IN RESIDENTIAL MORTGAGE-BACKED SECURITIES PURCHASE AGREEMENT DID NOT POSTPONE THE ACCRUAL OF A BREACH OF CONTRACT ACTION, THE ACTION WAS THEREFORE TIME-BARRED (CT APP))/STATUTE OF LIMITATIONS (WARRANTIES AND REPRESENTATIONS CLAUSE IN RESIDENTIAL MORTGAGE-BACKED SECURITIES PURCHASE AGREEMENT DID NOT POSTPONE THE ACCRUAL OF A BREACH OF CONTRACT ACTION, THE ACTION WAS THEREFORE TIME-BARRED (CT APP))

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