To be Argued by:
MolTY SHULMAN
New York County Clerk's Index No. 654464/12
New fnrk ~preme (!tnurt
Appellate iliuisittn-1J1irst ilepartment
THE BANK OF NEW YORK MELLON, solely as Secmi.ties Administrator
for J.P. Morgan Mortgage Acquisition Tmst 2006-WMC4,
Plaintiff-Respondent,
-against-
WMC MORTGAGE, LLC,
Defendant,
-and-
J.P. MORGAN MORTGAGE ACQUISITION CORPORATION
and JPMORGAN CHASE BANK, N.A.,
Defendants-Appellants.
BRIEF FOR PLAINTIFF-RESPONDENT
On the Brief
MolTY SHULMAN
RICHARD E. WEILL
IAN M. DUMAIN
MARC AYALA
PRINTED ON RECYCLED PAPER f!tJ
BOIES, SCHILLER & fLEXNER LLP
Attorneys for Plaintiff-Respondent
333 Main Street
Annonk, New York 10504
(914) 749-8200
mshulman@bsfllp.com
rweill@bsfllp.com
idumain@bsfllp.com
mayala@bsfllp.com
TABLE OF CONTENTS
TABLE OF AUTHORITIES................................................................................... iii
PRELIMINARY STATEMENT ...............................................................................1
STATEMENT OF FACTS ........................................................................................4
A. RMBS Securitizations and the Trust................................................................4
B. Defendants’ Representations and Warranties ..................................................5
C. JPMMAC’s MLS Representation and Warranty .............................................9
D. Defendants Breach Their Representations and Warranties
and Repurchase Obligation. ...........................................................................12
E. The Securities Administrator’s Complaint.....................................................13
F. JPMMAC’s Motion to Dismiss ......................................................................14
G. JPMMAC’s Motion to Reargue .....................................................................15
ARGUMENT...........................................................................................................17
I. THE MOTION COURT CORRECTLY INTERPRETED JPMMAC’S
MLS REPRESENTATION ........................................................................17
A. The motion court’s interpretation is consistent with and based on
the PSA’s plain language .........................................................................17
B. The motion court’s interpretation does not render any portion of
the MLS Representation meaningless......................................................20
C. JPMMAC’s interpretation contradicts the PSA’s plain language and
renders its MLS Representation meaningless as to the majority
of the MLS................................................................................................22
II. THE MOTION COURT’S INTERPRETATION DID NOT RELY ON
AN ERRONEOUS FACTUAL SUPPOSITION........................................23
III. THE MOTION COURT’S INTERPRETATION IS CONSISTENT
WITH THE TRUST’S STRUCTURE........................................................26
IV. THE MOTION COURT’S REFERENCE TO A SEPARATE
CONTRACT IS IMMATERIAL................................................................28
ii
V. JPMMAC’S AMBIGUITY ARGUMENT BOTH LACKS MERIT
AND HAS NO PLACE IN A FACIAL CHALLENGE TO THE
PLEADINGS ..............................................................................................31
CONCLUSION........................................................................................................35
PRINTING SPECIFICATIONS STATEMENT .....................................................36
iii
TABLE OF AUTHORITIES
Cases
Ashwood Capital, Inc. v. OTG Mgmt., Inc.,
99 A.D.3d 1 (1st Dep’t 2012) ...............................................................................33
Banco Espirito Santo, S.A. v. Concessionaria Do Rodoanel Oeste S.A.,
100 A.D.3d 100 (1st Dep’t 2012) .........................................................................29
BDC Finance, L.L.C. v. Barclays Bank PLC,
110 A.D.3d 582 (1st Dep’t 2013) .........................................................................22
Cappelli v. Cappelli,
286 A.D.2d 359 (2d Dep’t 2001)..........................................................................22
Crenulated Co., Ltd. v. City of New York,
244 A.D.2d 191 (1st Dep’t 1997) .........................................................................33
D.B. Zwirn Special Opportunities Fund, L.P. v. SCC Acquisitions, Inc.,
74 A.D.3d 530 (1st Dep’t 2010) .....................................................................17, 28
Diaz v. Lexington Corp.,
59 A.D.3d 341 (1st Dep’t 2009) ...........................................................................32
Equivalent Pharm. Indus., Corp. v. Sec. Pac. Bus. Credit, Inc.,
177 A.D.2d 351 (1st Dep’t 1991) .........................................................................30
Goldstein v. Plotnicki,
301 A.D.2d 483 (1st Dep’t 2003) .........................................................................30
Greenfield v. Philles Records, Inc.,
98 N.Y.2d 562 (2002) ...........................................................................................32
Hambrecht & Quist Guar. Fin., LLC v. El Coronado Holdings, LLC,
27 A.D.3d 204 (1st Dep’t 2006) ...........................................................................31
Kasowitz, Benson, Torres & Friedman, LLP v. Reade,
98 A.D.3d 403 (1st Dep’t 2012) .....................................................................17, 28
iv
Merrill Lynch Mortgage Investors Trust, Series 2006-RM4 v. Merrill Lynch
Mortgage Lending, Inc.,
118 A.D.3d 555 (1st Dep’t 2014) .........................................................................33
Merrill Lynch Mortgage Investors Trust v. Merrill Lynch
Mortgage Lending, Inc.,
No. 654403/12, 2013 WL 5085006 (N.Y. Sup. Sep. 10, 2013) ...........................34
Moore v. Kopel,
237 A.D.2d 124 (1st Dep’t 1997) ...................................................................18, 33
Mount Vernon Fire Ins. Co. v. Creative Housing Ltd.,
88 N.Y.2d 347 (1996) ...........................................................................................18
New York City Off-Track Betting Corp. v. Safe Factory Outlet, Inc.,
28 A.D.3d 175 (1st Dep’t 2006) ...........................................................................33
Riverside South Planning Corp. v. CRP/Extell Riverside, L.P.,
13 N.Y.3d 398 (2009) ...........................................................................................32
Telerep, LLC v. U.S. Int'l Media, LLC,
74 A.D.3d 401 (1st Dep’t 2010) ...........................................................................31
Trustees of Freeholders & Commonalty of Town of Southhampton v. Jessup,
173 N.Y. 84 (1903) ...............................................................................................32
Unisys Corp. v. Hercules, Inc.,
224 A.D.2d 365 (1st Dep’t 1996) .........................................................................31
Uribe v. Merchants Bank of New York,
91 N.Y.2d 336 (1998) ...........................................................................................32
Waldan Gen. Contractors, Inc. v. Michigan Mut. Ins. Co.,
227 Mich. App. 683, 577 N.W.2d 139 (Mich. Ct. App. 1998) ............................29
PRELIMINARY STATEMENT
CPLR 3211 is not a vehicle for one party to an agreement to rewrite the
agreement’s plain and unambiguous terms. But this is precisely what J.P. Morgan
Mortgage Acquisition Corporation (“JPMMAC”) has sought to do in making its
CPLR 3211 motion to dismiss to the court below and pursuing its rejected CPLR
3211 claims here.
In retrospect, JPMMAC may wish that it “represented only that nothing had
changed with regard to the loans from either October 30, 2006 or December 1,
2006 to December 20, 2006” (App. Br. at 12)—what it now tells this Court—but
that is not what its representations and warranties said. JPMMAC may also wish
that its warranties at least were ambiguous in this regard—but they are not.
To the contrary, JPMMAC’s warranties stated unambiguously that, during
these periods, the “information set forth in the Mortgage Loan Schedule and the
tape delivered by the Seller to the Purchaser is true, correct and complete in all
material respects.” (R. 225 § 2.06(a)(iii); 402, Schedule 4(a) (emphasis
added).) Accordingly, a materially false statement made prior to the period of
JPMMAC’s warranties that remained on the Mortgage Loan Schedule and false
during the warranty period is not “information set forth in the Mortgage Loan
Schedule” that is “true, correct and complete in all material respects” during the
warranty period and thus a clear breach of JPMMAC’s unambiguous warranties.
2
In other words, JPMMAC warrantied against information being false during
the warranty period—not merely against information being falsified during this
period. Nothing in the plain language of JPMMAC’s warranties could reasonably
be read to limit their scope to the latter circumstance only.
On February 24, 2013, The Bank of New York Mellon, acting solely as
Securities Administrator for the J.P. Morgan Acquisition Trust 2006-WMC4
(“Securities Administrator”), filed a 448-page complaint (inclusive of exhibits)
against JPMMAC alleging, among other things, that “information set forth in the
Mortgage Loan Schedule and the tape delivered by the Seller to the Purchaser”
contained a myriad of material misrepresentations, including misstating the loan
amount, the underlying property’s occupancy, the borrower’s income, and the
debt-to-loan ratio. Regardless of when these misstatements first arose, the
misstatements remained in the Mortgage Loan Schedule and accompanying tape
through the December 20, 2006 Closing Date (i.e., throughout JPMMAC’s
warranty period).
In its motion to dismiss, JPMMAC did not dispute that the Securities
Administrator’s complaint sufficiently alleged the existence of these misstatements
or their materiality. Nor did JPMMAC dispute the misstatements’ appearance in
the Mortgage Loan Schedule through the Closing Date. JPMMAC’s motion’s sole
argument was that the Securities Administrator failed to allege that these
3
misstatements first appeared during JPMMAC’s warranty period. But this is not
what JPMMAC unambiguously warrantied against. JPMMAC warrantied that this
information was “true, correct and complete in all material respects” “[w]ith
respect to the period from such Whole Loan Sale Date to and including the Closing
Date” (R. 225, § 2.06(a)(iii); R. 402, Schedule 4(a)).1 Thus, JPMMAC warrantied
against the existence of any material misstatements during the warranty period,
regardless of when the misstatements first may have appeared.
JPMMAC argues that the Securities Administrator’s and the lower court’s
plain reading of the pertinent language effectively “excises” the limiting “[w]ith
respect to the period” phrase from the agreement. This is untrue. Without this
temporal limitation, JPMMAC would be liable for material misstatements
appearing in the Mortgage Loan Schedule before JPMMAC’s participation in these
transactions, regardless of whether the misstatements remained during any part of
the period of JPMMAC’s warranties. The “[w]ith respect to the period” language
makes it clear that, if a falsity is removed prior to the Whole Loan Sale Date, there
is no breach of JPMMAC’s warranties. If, on the other hand, the falsity was
allowed to persist into the period from the Whole Loan Sale Date to the Closing
Date under JPMMAC’s watch, then JPMMAC bears responsibility for it.
1 Numbers in parentheses preceded by an “R” refer to pages in the Record on Appeal.
4
JPMMAC cannot change the plain language of its agreement after the fact,
or create an ambiguity where none exists. Its motion to dismiss was properly
denied.
STATEMENT OF FACTS
A. RMBS Securitizations and the Trust
The J.P. Morgan Mortgage Acquisition Trust 2006-WMC4 (the “Trust”) is
an approximately $1.9 billion residential mortgage backed securitization that
JPMMAC arranged and sponsored. (R. 33 ¶¶ 29-30.)
The securitization process begins with the pooling of a large number of
loans, usually of a similar type, into a collateral pool. The loans’ originator then
sells the pool of loans (directly or indirectly) to a special-purpose entity known as a
“depositor,” which then places the mortgage loans into a trust. Generally speaking,
the loans are directly or indirectly purchased from the originator using funds raised
by selling residential mortgage backed securities (“RMBS”) to investors in the
form of notes or certificates, depending on the transaction’s structure. (R. 32 ¶ 24.)
By purchasing RMBS, investors acquire the right to receive monies from the
cash flows of the underlying mortgage loans or their proceeds (such as loan
principal and interest or the proceeds from the liquidation of loan collateral). (R.
32 ¶ 25.) For an investor, the underlying mortgage loans’ credit quality and
enforceability, and the amount of collateral securing the loans, are critical when
5
choosing to invest in RMBS. These factors directly affect the underlying loans’
generation of cash flow and therefore the RMBS’s value. (Id. ¶ 26.)
Information about the mortgage loans’ credit quality, enforceability, and
collateral usually is contained in a file that the originator compiles while
underwriting and issuing the mortgage loan. (Id.) Because loan files are
voluminous and contain legally protected confidential material, investors generally
cannot review the loan files before deciding whether to invest in RMBS. (R. 33
¶ 28.) Instead, investors rely upon the originator’s and seller’s representations and
warranties about the loan files’ contents, the loans’ credit quality, and the collateral
or security; and can enforce these representations and warranties through the
trustees and/or securities administrators. (Id.)
These representations and warranties, accordingly, are important to
investors, as are the originator’s and seller’s independent contractual obligations to
repurchase any mortgage loans that breach the representations and warranties in a
manner that materially and adversely affects the value of the mortgage loans or the
investors’ interests therein, including because they provide investors security that
is central to the economics of an RMBS. (Id. ¶ 29.)
B. Defendants’ Representations and Warranties
In connection with the Trust’s securitization, WMC Mortgage Corp.
(“WMC”) agreed to act as the “Originator,” JPMMAC agreed to act as “Seller” of
6
the loans in the Trust, and JPMorgan Chase Bank, N.A. (“JPM”) agreed to act as
the “Servicer.” (R. 27 ¶ 3; 34 ¶ 33.) Although WMC first originated or owned the
mortgage loans in the Trust, JPMMAC purchased the loans from WMC pursuant to
the Mortgage Loan Sale and Interim Servicing Agreement dated July 1, 2005 (the
“MLSA”), and resold a substantial portion of them to the Depositor, a JPMMAC
affiliate, which then transferred the loans into the Trust. (R. 33 ¶¶ 30-31; 34 ¶¶ 32-
33; 62.)
As Originator, it was WMC’s obligation to ensure that loans were made in
accordance with its own underwriting guidelines and its representations and
warranties. (R. 31 ¶ 23.) During the underwriting process, WMC compiled and
reviewed hundreds of thousands, if not millions, of pages of documentation
pertaining to the borrowers and the property. (R. 32 ¶¶ 26-27; 46 ¶ 70.)
As is typical, the underwriting process’ complexity and the size and
confidential nature of the loan files meant that it would be difficult—if not
impossible—for potential investors in the Trust to evaluate or control the
underwriting process and thereby assess the mortgage loans’ characteristics. (R.
33 ¶ 28.) Accordingly, to provide assurance that the loans had been adequately
underwritten and to relieve others from the need to evaluate the individual loan
files themselves, WMC made more than 60 specific representations and warranties
concerning the nature, characteristics, history and quality of the mortgage loans
7
and the mortgage loan files ultimately deposited in the Trust (the “Originator
Representations and Warranties”). (R. 33-36 ¶¶ 28-29, 34-35.) The Originator
Representations and Warranties covered a broad range of topics that affect each
loan’s value, such as the borrower’s income and debt level at the time of
origination, the property’s value at the time of origination, the loan file’s
documentation, the quality of the underwriting process, and whether the property
would be occupied by the borrower or purchased as an investment. (R. 34-35 ¶¶
34-35; 46-47 ¶¶ 72-73.)
WMC made similar representations and warranties to JPMMAC about the
mortgage loans it sold to JPMMAC through the MLSA, many of which JPMMAC
sold to the Trust. (R. 34 ¶ 32; 84-98 § 7.01.)
Although JPMMAC did not originate the mortgage loans, JPMMAC
selected which loans would be sold to the Trust, and thus bore responsibility for
the accuracy of the loan information related to those loans. Thus, JPMMAC also
made a series of representations and warranties concerning, among other things,
the accuracy of the Mortgage Loan Schedule (the “MLS”) and the origination
process’ compliance with applicable law (the “Seller Representations and
Warranties” and, together with the Originator Representations and Warranties,
“Defendants’ Representations and Warranties”). (R. 37 ¶¶ 44-45.) At a minimum,
these representations were made as of the transaction closing date (December 20,
8
2006, the “Closing Date”), and some representations were promised to be true
throughout a longer time period leading up to and including the Closing Date. (R.
§ 2.06.)
Because JPMMAC selected the loans for the Trust and knew that the
investors would be unable to review the voluminous and confidential mortgage
loan files before deciding whether to invest in the Trust, JPMMAC agreed to
accept the economic risks associated with the underwriting and origination of the
loans. (R. 27 ¶ 2; 33 ¶ 28; 34 ¶ 32.)
The Defendants’ Representations and Warranties were designed to relieve
each potential investor from the task of re-underwriting the mortgage loans and
shift to Defendants the financial risk that borrowers may have provided incorrect
information in their loan documentation. Accordingly, each Defendant promised
to notify the other parties if they became aware of a breaching mortgage loan and
to cure or repurchase any breaching mortgage loans within 60 or 90 days. (R. 38-
42 ¶¶ 46-52, 55-57.) Like the Representations and Warranties themselves, these
notice and repurchase obligations were an essential factor in certificateholders’
decisions to invest because they shifted significant economic risks from the Trust’s
investors to Defendants. (R. 41-42 ¶¶ 55-57.)
Through these various obligations and promises, Defendants assumed the
economic underwriting risk for the mortgage loans; a risk that they, as the parties
9
originating and selling the mortgage loans, were uniquely able to assess. (R. 50 ¶
78.) This risk-shifting and, accordingly, Defendants’ Representations and
Warranties, were essential to the investors’ willingness to pay Defendants
approximately $1.9 billion for certificates issued by the Trust. (R. 33 ¶ 29.)
C. JPMMAC’s MLS Representation and Warranty
This appeal concerns the interpretation of one of the representations and
warranties JPMMAC made in the PSA. Specifically, JPMMAC represented that
“[w]ith respect to the period from such Whole Loan Sale Date [October 30, 2006]
to and including the Closing Date [December 20, 2006]”—the warranty period—
“[t]he information set forth in the Mortgage Loan Schedule and the tape delivered
by the Seller to the Purchaser is true, correct and complete in all material respects”
(the “MLS Representation”).2 (R. 225 § 2.06(a)(iii); 402, Schedule 4(a).)
The Mortgage Loan Schedule, as defined in the MLSA, was a schedule that
described each mortgage loan involved in the MLSA transaction and was annexed
as Exhibit A to the Assignment and Conveyance that WMC Mortgage Corp.
executed in favor of JPMMAC. (R. 74.) It contained between 44 and 55 pieces of
information for each mortgage loan, depending on the loan type. (R. 74-77.) The
overwhelming majority of information on the MLS recorded fixed data as of the
2 The term Mortgage Loan Schedule for purposes of the MLS Representation is defined in the
Mortgage Loan Sale and Interim Servicing Agreement dated July 1, 2005 (the “MLSA”). (R.
402.) (“Defined terms used but not defined in this Schedule 4 shall have the respective meanings
assigned to them in the Mortgage Loan Purchase Agreement.”).
10
date of the loan’s origination. (Id.)
For example, the MLS set forth:
(a) the Mortgagor’s name;
(b) the Mortgagor’s social security number;
(c) the Mortgagor’s monthly gross income;
(d) a code indicating whether the loan is an adjustable rate, fixed rate, or
balloon Mortgage Loan;
(e) the loan-to-value ratio (“LTV”) at origination;
(f) the Mortgage Interest Rate at the time of origination;
(g) the original principal amount of the Mortgage Loan;
(h) the Mortgage Loan purpose;
(i) the occupancy status of the Mortgaged Property at the time of
origination; and
(j) the debt-to-income ratio (“DTI”) at origination of the Mortgage
Loan.3
(Id.) Each of these items, and others on the MLS, was fixed at origination and
could not change thereafter. (Id.) In its Complaint, the Securities Administrator
alleged that many of the mortgage loans in the Trust “were materially misstated on
the MLS, thereby misleading investors about the quality and content of the
mortgage loans in which they were investing.” (R. 47 ¶ 73(a).)
Because these inaccuracies were fixed at origination, JPMMAC could have
discovered the truth or falsity of most information on the MLS and loan tape
before it purchased the loans from WMC, before it chose these loans for sale to the
3 Capitalized terms in this list are defined in the MLSA.
11
Trust, and before it made the MLS Representation. In fact, JPMMAC’s parent
company—J.P. Morgan Chase & Company (“JPMC”)—acknowledged in its $13
billion settlement with the United States Department of Justice (“DOJ”) arising out
of its misconduct in connection with this Trust, that there were loans in the Trust
that breached WMC’s underwriting guidelines and that JPMC’s employees had
been informed by its “due diligence vendors that a number of loans included in at
least some of the loan pools that it purchased and subsequently securitized did not
comply with the originators’ underwriting guidelines.” (R. 807-808.)
JPMC further acknowledged that its subsidiaries performed due diligence of
loans prior to acquisition and securitization to: “(1) confirm that the mortgage
loans were originated consistent with specific origination guidelines provided by
the seller, (2) confirm the mortgage loans were originated in compliance with
Federal, State, and local laws, rules, and regulations, and (3) confirm that the
property collateral had the value represented in the appraisal at the time of
origination.”4 (Id.)
Given its acknowledged pre-securitization due diligence, JPMMAC should
have been aware of any loan flaws before including these loans among those to be
sold to the Depositor (and transferred to the Trust). JPMMAC could have avoided
4 JPMC’s settlement with the DOJ arose from the DOJ’s investigation of many securitizations,
including the Trust. That settlement confirms that there were loans in each of the RMBS
reviewed by the Justice Department that did not comply with underwriting guidelines, including
loans in the Trust. (R. 807-808.)
12
liability under its MLS Representation by: (i) not purchasing any loans containing
loan-level defects that would cause the MLS to contain false information;
(ii) removing loans with any such defects from the MLS and substituting non-
breaching loans that would not cause the MLS to be untrue in any way; and
(iii) requiring WMC to cure any loan-level defects it discovered that would cause
the MLS to contain false information before securitizing such breaching loans. (R.
67; 84-98 § 7.01; 100-102 § 7.03.)
D. Defendants Breach Their Representations and Warranties and
Repurchase Obligation.
Defendants’ Representations and Warranties, including—most relevant to
this appeal—JPMMAC’s MLS Representation, were false for many of the
mortgage loans in the Trust. On September 18, 2012, the Securities Administrator
sent to Defendants a breach notice detailing breaches of one or more of
Defendants’ Representations and Warranties for over 3,000 mortgage loans,
breaches that materially and adversely affect the loans’ value or the
certificateholders’ interests therein. (R. 43-46 ¶¶ 64-71.) The Securities
Administrator sent Defendants another letter from the Directing Certificateholders
on November 30, 2012 that identified additional breaches for 186 of the loans
identified earlier, as well as for an additional 161 loans that had not been
previously identified. (Id.) Together, the September 18 and November 30, 2012
letters (the “Breach Notices”) provided Defendants with notice of widespread MLS
13
Representation breaches. (R. 46-48 ¶¶ 72-73.) Defendants have refused to cure or
repurchase any of the approximately 3,200 breaching loans. (R. 51 ¶¶ 83-84.)
E. The Securities Administrator’s Complaint
On February 24, 2013, the Securities Administrator filed its Complaint
against WMC and Appellants alleging eight causes of action: (1) breach of
contract against WMC for breaching its Representations and Warranties;
(2) breach of contract against WMC for its failure to repurchase breaching
mortgage loans; (3) breach of contract against JPMMAC for breach of its
Representations and Warranties; (4) breach of contract against JPMMAC for its
failure to repurchase breaching mortgage loans; (5) breach of contract against
WMC for its failure to indemnify the Securities Administrator and the Trustee in
connection with its enforcement of Defendants’ Representations and Warranties;
(6) breach of contract against JPM for its failure to provide the Trustee with access
to the mortgage loan files; (7) breach of contract against WMC, JPMMAC, and
JPM for their failure to notify the Securities Administrator and Trustee of breaches
of the Defendants’ Representations and Warranties; and (8) declaratory judgment
ordering Defendants to comply with their repurchase obligations as to the
identified breaching mortgage loans and as yet identified breaching mortgage
loans. (R. 52-59 ¶¶ 86-129.)
14
This appeal primarily relates to the Securities Administrator’s third and
fourth causes of action, brought against JPMMAC for its breached Representations
and Warranties, including its MLS Representation, and its subsequent failure to
repurchase loans as to which those representations were breached. In its
Complaint, with respect to those causes of action, the Securities Administrator
alleges that JPMMAC made its representations and warranties, including the MLS
Representation. (R. 37 ¶¶ 44-45.) The Securities Administrator also alleges that:
(i) widespread inaccuracies in the MLS breached JPMMAC’s MLS
Representation; (ii) JPMMAC has a repurchase obligation as to mortgage loans in
breach of JPMMAC’s MLS Representation; and (iii) that JPMMAC breached its
repurchase obligation by failing to repurchase breaching mortgage loans. (R. 40-
42 ¶¶ 53-57; 43-48 ¶¶ 64-73; 50-52 ¶¶ 80-85; 53-54 ¶¶ 95-103.)
F. JPMMAC’s Motion to Dismiss
On April 26, 2013, JPMMAC moved to dismiss arguing, as it does here, that
its MLS Representation covered only instances where “any issues with the
Mortgage Loans arose” during the warranty period and that the Securities
Administrator had not alleged any such instances. (R. 489.) In other words,
JPMMAC claimed that it could be liable only to the extent the MLS and loan tape
became inaccurate during that period. (Id.) However, this is not all that
JPMMAC’s MLS Representation warrantied. To support its position, JPMMAC
15
argued to the motion court that: “All of the reps made by JPMMAC are to things
that conceivably change from the date of WMC’s reps through the date of the
closing.” (R. 706 at 16:8-10.) As shown above, this is inaccurate; much of the
“information set forth in the Mortgage Loan Schedule” that JPMMAC warrantied
as “true, correct and complete in all material respects” was data fixed as of the
origination date that could not vary thereafter. (R. 74-77.)
On November 21, 2013, the motion court denied JPMMAC’s motion to
dismiss (the “Order”). The motion court focused on JPMMAC’s MLS
Representation and observed (as JPMMAC now appears to concede, contrary to its
claims at oral argument) that the MLS contains numerous data points that were
fixed as of the corresponding loan’s origination date. (R. 20-22.) The motion
court reasoned that “[a]s written, JPMMAC warranted the loan tapes’ truth,” and
that “[i]f JPMMAC did not intend to warrant loan level defects, it should have
drafted the PSA differently.” (R. 22.) Because the Securities Administrator’s
Complaint alleged that the MLS and loan tape were untrue, the motion court
denied JPMMAC’s motion to dismiss as a matter of law. (R. 20-22.)
G. JPMMAC’s Motion to Reargue
On February 5, 2014, JPMMAC moved for reargument of the motion court’s
November 21, 2013 order. (R. 475-496.) In that motion, JPMMAC raised the
same arguments it raises on appeal.
16
First, as here, JPMMAC argued that certain items on the MLS were not
fixed as of origination and thus, JPMMAC asserted, the motion court erred by
noting that “the accuracy of the loan tape cannot change” and that “[e]ither the
loan tape accurately reflected reality at origination, or it did not.” (R. 737-738,
741, 745.) Second, as here, JPMMAC argued that the motion court’s interpretation
of JPMMAC’s MLS Representation “render[ed] part of the contract language pure
surplusage.” (R. 744.) Third, as here, JPMMAC argued that the motion court’s
interpretation “turns the economics of the underlying transaction on its head.” (R.
744-745.)
The motion court denied JPMMAC’s motion for reargument, explaining:
[T]he majority of information in the loan schedule was fixed at
origination. For example, what the borrower’s income was at the time
he applied for the mortgage, as well as the loan-to-value ratio and
occupancy status of the property at the time, was immutable. This is
some of the most critical information to RMBS investors since it is
highly material to whether a borrower is likely to pay off the
mortgage. As discussed in the [November 21,] 2013 Order, the truth
of this information could not change over time. Taking the
complaint’s allegations as true, as the court must on a motion to
dismiss, the court assumes that the information in the loan schedule
that was fixed at origination was false at origination and, hence, it was
equally false during the Temporal Period [i.e., JPMMAC’s warranty
period]. JPMorgan is essentially arguing that since some of the loan
schedule information could have or actually did change after
origination, JPMorgan is only responsible for the revisable
information and not the information fixed at origination. This
argument cannot be squared with the actual text of the PSA.
Assuming, arguendo, that JPMorgan is correct about the handful of
items that changed post-origination, JPMorgan is only responsible for
such items that if they were false during the Temporal Period – it does
17
not follow that JPMorgan has no liability for the unalterable items.
Rather, to determine if [JPMMAC’s MLS Representation] was
breached, the relevant inquiry is whether any information in the loan
schedule was incorrect during the Temporal Period. Whether the truth
of some of the information could change over time is irrelevant. If the
borrower’s stated income was false at origination, it was false during
the Temporal Period. . . . Here, the plain meaning of [JPMMAC’s
MLS Representation] is that JPMorgan is liable for any inaccurate
material information in the loan schedule.
(R. 856-859.)
ARGUMENT
I. THE MOTION COURT CORRECTLY INTERPRETED
JPMMAC’S MLS REPRESENTATION
A. The motion court’s interpretation is consistent with and
based on the PSA’s plain language
As the motion court held, the Securities Administrator’s claim against
JPMMAC is consistent with the PSA’s plain language and, accordingly, the
Securities Administrator’s Complaint adequately stated a claim under New York
law. See D.B. Zwirn Special Opportunities Fund, L.P. v. SCC Acquisitions, Inc.,
74 A.D.3d 530, 532 (1st Dep’t 2010) (“It is well settled that a contractual provision
that is ‘clear on its face must be enforced according to the plain meaning of its
terms.’”) (internal ellipses omitted); Kasowitz, Benson, Torres & Friedman, LLP v.
Reade, 98 A.D.3d 403, 406 (1st Dep’t 2012) (“The fundamental, neutral precept of
contract interpretation is that agreements are construed in accord with the parties’
intent, and that the best evidence of what parties to a written agreement intend is
what they say in their writing.”).
18
JPMMAC’s MLS Representation reads as follows:
With respect to the period from such Whole Loan Sale Date to and
including the Closing Date, the Seller hereby makes the
representations and warranties contained in paragraph (a) … [that]
[t]he information set forth in the Mortgage Loan Schedule and the
tape delivered by the Seller to the Purchaser is true, correct and
complete in all material respects.
(R. 225 § 2.06(a)(iii); 402, Schedule 4(a).) This unambiguous language provides
that JPMMAC is liable if the MLS and loan tape information is not “true, correct
and complete” at any point during the warranty period, regardless of when the
MLS misrepresentation first was made. (Id.) The Securities Administrator’s
allegations of incorrect information on the MLS and loan tape thus adequately
pleaded JPMMAC’s liability under this representation. (R. 43-47 ¶¶ 64-73(a).)
The motion court predicated its decision on this reality. (R. 22 (“If
JPMMAC did not intend to warrant loan level defects, it should have drafted the
PSA differently… As written, JPMMAC warranted the loan tapes’ truth.”).) The
motion court’s reasoning is, accordingly, consistent with the MLS Representation’s
unambiguous language. The mere fact that JPMMAC now proposes a self-serving
alternative interpretation does not render the agreement’s unambiguous language
retroactively ambiguous, as JPMMAC suggests. App. Br. at 27-29; see Mount
Vernon Fire Ins. Co. v. Creative Housing Ltd., 88 N.Y.2d 347, 352 (1996)
(“[P]rovisions in a contract are not ambiguous merely because the parties interpret
them differently.”); accord Moore v. Kopel, 237 A.D.2d 124, 125 (1st Dep’t 1997).
19
More specifically, JPMMAC devoted considerable effort below to arguing
that its MLS Representation was among so-called “‘bring down’ representations
and warranties.” (R. 487-490.) However, JPMMAC could not point to any “bring
down” language in its MLS Representation, its other representations and
warranties, or the PSA. In response, the Securities Administrator not only
established the conflict between JPMMAC’s assertion and the PSA’s plain
language but also showed the motion court that, contrary to JPMMAC’s bald
assertion, an actual “‘bring down’ representation and warranty” is materially
different from the PSA’s language here. (R. 560 (“to the Depositor's knowledge,
no event has occurred in the period from the Aames Servicing Transfer Date to the
Closing Date that would render such representations and warranties to be untrue in
any material respect”); see also R. 719-720.)
JPMMAC’s false “bring down” argument now exposed, JPMMAC’s current
brief responds in two ways: First, JPMMAC tries to distance itself from its former
argument, treating its prior “bring down” assertions as if this term had been raised
by the motion court. See, e.g., App. Br. at 3 (“also referred to as ‘bring down’
warranties in the court below”). Second, JPMMAC attacks the Securities
Administrator’s right to expose its fallacious argument. See Section IV, infra.
JPMMAC’s wholesale retreat on the “bring down” issue, central to its
position below, reveals much about its current argument’s lack of merit.
20
B. The motion court’s interpretation does not render any
portion of the MLS Representation meaningless
JPMMAC argues (at 19-20) that the motion court’s decision renders the
warranty period in JPMMAC’s MLS Representation “surplusage,” “superfluous,”
and “meaningless.” In doing so, JPMMAC argues, in effect, that unless the Court
credits JPMMAC’s self-serving interpretation of this provision, unsupported by the
PSA’s plain language, then the MLS Representation’s warranty period has no
purpose at all.
As stated above, JPMMAC argued before the motion court that, because of
the warranty period, it could be liable only if the MLS and loan tape became untrue
during that period. The motion court rejected this argument because, under the
plain language of its MLS Representation, JPMMAC “warranted the loan tapes’
truth.” (R. 22.) The motion court also found it “hard to see the logic” of
JPMMAC’s interpretation when the overwhelming majority of MLS data that
JPMMAC was warrantying as true during the warranty period could not
conceivably become untrue during this period as its truth was fixed as of the
corresponding loan’s origination date. (R. 21-22.)
The motion court’s reasoning, however, did not render the warranty period
meaningless or “surplusage.” Nothing in the decision eliminates the warranty
period from serving the purposes given it in the PSA: in this case, making clear
that JPMMAC is not liable for loan misrepresentations reflected only in pre-
21
warranty-period documents; that JPMMAC is only liable if those
misrepresentations were retained on the MLS or loan tape during the warranty
period.
For instance, because the MLS Representation includes the warranty period,
JPMMAC could have declined, prior to the warranty period, to purchase loans
from WMC that it determined suffered from loan-level defects. This would
prevent the MLS from bearing false information during the warranty period (and
thus cause JPMMAC to avoid liability under its MLS Representation).
Likewise, if, prior to the Whole Loan Sale Date (the date that begins the
warranty period), JPMMAC had required WMC to substitute new non-breaching
loans for breaching loans, it would have avoided allowing false information to
remain on the MLS during the warranty period (and thus avoided liability under its
MLS Representation). (R. 84-98 § 7.01; 100-102 § 7.03.) Only the inclusion of
the warranty period in the MLS Representation made this option possible.
And to the extent the MLS and loan tape do contain variable characteristics
(including, as JPMMAC points out, mortgage loans’ payment status and principal
balance), the warranty period protects JPMMAC from MLS falsities that pre-date
or post-date that time period.
The warranty period’s limited time span thus could protect JPMMAC in
many ways, none of which the motion court’s holding forecloses. Therefore, the
22
motion court’s rejection of JPMMAC’s interpretation in no way renders the
warranty period “surplusage” or “meaningless,” as JPMMAC claims. Rather, the
court’s decision retained the purposes for the warranty period that the PSA
afforded. The motion court cannot be faulted for rejecting purposes suggested only
by JPMMAC after the fact, and that find no support in the PSA’s plain language.
C. JPMMAC’s interpretation contradicts the PSA’s plain
language and renders its MLS Representation meaningless
as to the majority of the MLS
Instead of honoring the MLS Representation’s plain language, JPMMAC
invites the Appellate Division to rewrite this provision to read as follows:
With respect to the period from such Whole Loan Sale Date to and
including the Closing Date, the Seller hereby makes the
representations and warranties contained in paragraph represents and
warrants (a) … [that] [t]he information set forth in the Mortgage Loan
Schedule and the tape delivered by the Seller to the Purchaser is has
not become untrue, incorrect and or incomplete in all any material
respects during the period from such Whole Loan Sale Date to and
including the Closing Date.
But “a court may not rewrite or impose different or additional contractual terms,
nor may a court ignore unequivocal language, search for evidence of the parties’
intent outside of the contract, or read the contract so as to distort its apparent
meaning.” Cappelli v. Cappelli, 286 A.D.2d 359, 360 (2d Dep’t 2001); see BDC
Finance, L.L.C. v. Barclays Bank PLC, 110 A.D.3d 582, 587 (1st Dep’t 2013)
(“Since the Delivery of Collateral clause is contained in an agreement negotiated
by two sophisticated commercial entities, the court should not, in the guise of
23
contractual interpretation, alter the plain language of the clause.”).
Further, JPMMAC’s interpretation renders most of the MLS Representation
superfluous. The overwhelming majority of MLS and loan tape information is
stated as of the date of origination, its truth is fixed as of that date, and thus it could
never possibly become untrue thereafter under any circumstance. (R. 74-77.) But
by its terms, JPMMAC’s MLS Representation warranties the truth of all “[t]he
information set forth in the Mortgage Loan Schedule and” loan tape. (R. 225
§ 2.06(a)(iii); 402, Schedule 4(a).). Thus, JPMMAC conveniently interprets the
MLS Representation as applying mostly to information that could never become
untrue after origination, and warrantying against this impossibility during the
warranty period. In other words, it is JPMMAC’s interpretation, not the Securities
Administrator’s and the motion court’s, that would render almost all of the MLS
Representation “meaningless.”
II. THE MOTION COURT’S INTERPRETATION DID NOT RELY
ON AN ERRONEOUS FACTUAL SUPPOSITION
JPMMAC claims (at 21-22) that the motion court erred by purportedly
misapprehending that none of the information for each loan on the Mortgage Loan
Schedule (as defined in the PSA) could change after origination, when in fact “the
mortgage loan schedule contains several items that that can change prior to closing
or that are not even knowable until sometime after origination.” App. Br. at 2.
JPMMAC made the identical argument to the motion court in its motion to reargue
24
(R. 742-744), and the motion court made it clear in its decision denying
reargument that JPMMAC’s assertion, even if true, had no effect on the soundness
of its decision. As the court stated: The “majority of information in the loan
schedule is fixed at origination”; this “is some of the most crucial information to
RMBS investors since it is highly material to whether a borrower is likely to pay
off the mortgage”; and “the truth of this information could not change over time.”
(R. 856-857.) The presence of additional, less crucial, but unfixed information
does not alter this analysis. Moreover, in reaching this decision, the motion court
showed unequivocally that, contrary to JPMMAC’s current argument, it was not
guided by an “erroneous factual supposition” when deciding JPMMAC’s motion to
dismiss. App. Br. at 21.
Furthermore, whether the MLS contained no items that could change after
closing or “several” that could change after closing does not undercut the motion
court’s reliance on the MLS Representation’s plain language, which confirms that
JPMMAC warranted the accuracy of the information on the MLS and loan tape
during the entire warranty period, whether or not the information could change
after origination. See Section I.A supra. As the motion court understood, and as
JPMMAC concedes, almost all of that information was fixed at origination, such as
the value of the mortgaged property, the loan-to-value ratio, the borrower’s credit
score, the mortgage rate, and the original principal balance of the loan. If
25
JPMMAC ignored misrepresentations made at origination regarding these material
pieces of information—and retained those loans and misstatements on the MLS
during the warranty period—then JPMMAC would be liable for breach.
As for the “several items” on the MLS “that can change prior to closing or
that are not even knowable until sometime after origination,” App. Br. at 21,
JPMMAC made the same representation: JPMMAC represented that those items
would be true during the entire warranty period. To the extent any of them were
untrue before the warranty period and continued to be untrue during the warranty
period, or first became untrue during the warranty period, JPMMAC would be
liable for their breach.
Indeed, the fact that the MLS included some data entries which could vary
over time hurts JPMMAC’s argument much more than it helps it. It underscores
the fact that the MLS was subject to modification and correction. Any entry that
“can change” can also be corrected to state the truth during the warranty period.
Indeed, if entries on the MLS “can change,” then even entries with a fixed truth as
of origination could, if that truth were misstated, be corrected to state the truth
during JPMMAC’s warranty period. By its MLS Representation, JPMMAC
warrantied that, by whatever means were required, it would ensure that from the
Whole Loan Sale Date to closing, nothing would appear on the MLS or loan tape
other than “true, correct and complete” information.
26
III. THE MOTION COURT’S INTERPRETATION IS
CONSISTENT WITH THE TRUST’S STRUCTURE
JPMMAC’s claim (at 25-26) that the motion court’s interpretation turns “the
economics of this transaction on its head” misrepresents both the court’s order and
its own role in this transaction.
JPMMAC asserts again that “under the motion court’s reading of the
JPMMAC’s mortgage loan schedule warranty, JPMMAC effectively assumed the
same repurchase exposure as WMC.” App. Br. at 25. But as discussed in Section
I.B, supra, the motion court’s decision does not result in JPMMAC having the
same exposure as WMC—because the MLS Representation’s warranty period
narrows JPMMAC’s liability, as compared to WMC, to false statements appearing
on the MLS or loan tape during the warranty period only.5 Nor does JPMMAC’s
MLS Representation give JPMMAC “the same repurchase exposure as WMC”
even during the warranty period because WMC made many additional
representations and warranties unrelated to information on the MLS (and thus
unrelated to JPMMAC’s MLS Representation). (See e.g., R. 93 ¶ (mm) (WMC’s
5 Throughout its brief, JPMMAC fixates on a single sentence from the motion court’s decision,
which states: “Rather than list 40 or 60 separate warranties about borrower income, occupancy,
credit scores, and so forth, in two lines, JPMMAC issued a warranty tantamount to WMC’s.” (R.
21; see App. Br. at 4, 7, 16, 26.) With this statement, the motion court only makes the
unremarkable (and, indeed, obvious) observation that, instead of listing “40 or 60 separate
warranties” specific to each and every item of loan-level information, JPMMAC followed the
WMC model and issued a blanket warranty covering all information appearing on the MLS and
loan tape (in JPMMAC’s case, during the warranty period). JPMMAC ignores that
“tantamount” means comparable, not identical.
27
warranty against pending environmental actions relating to mortgaged properties);
96 ¶ (aaa) (WMC’s warranty that no mortgagor agreed to submit disputes to
arbitration).) There is thus no basis for JPMMAC’s assertion (at 25) that the
motion court and the Securities Administrator have treated the warranty period as a
“mere drafting oversight.”
Moreover, the motion court’s decision is consistent with JPMMAC’s central
role in constructing the loan pool underlying the securitization.
Before JPMMAC purchased the mortgage loans in this deal, it (or one of its
affiliates) performed due diligence on the loans, focusing on how they had been
underwritten. (R. 807-813.) Having performed this due diligence, JPMMAC then
made representations and warranties concerning the underwriting-related attributes
of the loans memorialized on the MLS and the loan tape. (R. 225 § 2.06(a)(iii);
402, Schedule 4(a).)
It is now clear that JPMMAC elected to securitize loans in this transaction
and others even after its due diligence process established that these loans were
defective. (R. 807, 810-813.) Having selected these loans for transfer to the Trust
notwithstanding the results of its own loan-level due diligence; having securitized
these defective loans knowingly; and anticipating that investors would rely on that
due diligence, it was, of course, commercially reasonable that JPMMAC warranty
the MLS’s truthfulness during the warranty period.
28
IV. THE MOTION COURT’S REFERENCE TO A SEPARATE
CONTRACT IS IMMATERIAL
JPMMAC again seeks to avoid its MLS Representation’s plain meaning by
claiming (at 22-24) that the motion court’s holding cannot stand where it made
reference to another separate securitization contract (the “RMBS Contract”) in its
decision. This argument fails.
First, as discussed in Section I, supra, whether or not the motion court relied
on the RMBS Contract, the MLS Representation’s unambiguous language shows
that JPMMAC is liable if the MLS or loan tape was not accurate at any point
during the warranty period, regardless of when that inaccuracy first arose.
Accordingly, the motion court’s decision was correct under New York law. See
D.B. Zwirn Special Opportunities Fund, 74 A.D.3d at 532; Reade, 98 A.D.3d at
406.
Second, by JPMMAC’s misguided argument to the motion court—an
argument that it now wisely discards—that its MLS Representation was among
various “‘bring down’ representations and warranties” (R. 487-490), JPMMAC
opened the door to the Securities Administrator showing the motion court that the
PSA’s plain language bears no resemblance to the plain language of a “bring
down” representation or warranty. In truth, it was JPMMAC that went outside the
four corners of the pleadings with this erroneous assertion. Having done so,
JPMMAC cannot complain that the Securities Administrator responded.
29
Third, the RBMS Contract that the Securities Administrator cited in its
motion opposition papers (R. 554-560) was no more “extrinsic evidence” than
treatise references quoting “‘bring down’ representations and warranties,” or
similar excerpts from reported court decisions, are “extrinsic evidence.” Indeed,
this Court recently analyzed the plain language of an unambiguous agreement in
part by comparing the parties’ language, deviating from a form agreement, to the
unmodified form language used by other parties. Banco Espirito Santo, S.A. v.
Concessionaria Do Rodoanel Oeste S.A., 100 A.D.3d 100, 107 (1st Dep’t 2012)
(“This clear and unambiguous language appears to deal a coup de grace to the
breach of contract claims advanced by plaintiffs, particularly since any deviation
from the ISDA Master Agreement in the ISDA Schedule serves the purpose of
customizing the parties’ contractual arrangements as negotiated by the parties.”);
cf. Waldan Gen. Contractors, Inc. v. Michigan Mut. Ins. Co., 227 Mich. App. 683,
686-87, 577 N.W.2d 139, 141 (Mich. Ct. App. 1998) (“It is true that examining the
policy types within the insurance industry may be helpful in determining the
contractual intent of the policies as evidenced by their language. Nevertheless, the
actual policy language is still the most important factor to be considered. In the
present case, the absence of any standard language in inland marine policies by
various insurers makes it difficult to conclude that the coverage necessarily has the
narrow limits suggested by defendant.”) (citations omitted).
30
Fourth, this is not a case like Equivalent Pharm. Indus., Corp. v. Sec. Pac.
Bus. Credit, Inc., 177 A.D.2d 351 (1st Dep’t 1991), upon which JPMMAC relies in
its brief (at 24), in which a party cited another agreement to undermine the plain
language of the agreement at issue. The Securities Administrator cited the RMBS
Contract’s language to reinforce the plain language of the PSA and MLS
Representation—which contained no “bring down” language—not to overrule the
parties’ plain language (as JPMMAC was attempting with its unsubstantiated
“bring down” assertions). (R. 538-539.)
In its motion decision, the court below noted that the PSA was not drafted in
a way that captured JPMMAC’s interpretation. (R. 22.) The motion court stated
explicitly that it “did not view the terms of other PSAs as dispositive of the instant
PSA’s meaning.” (Id.)6 But even where, as here, courts determine that a contract’s
plain language is unambiguous, they long have unnecessarily pointed out how the
losing party should have drafted the contract if it wanted the plain language to
capture its interpretation. See e.g., Goldstein v. Plotnicki, 301 A.D.2d 483, 484
(1st Dep’t 2003) (affirming motion court’s finding of lack of ambiguity in contract
and noting that “[i]f the rights transferred were to be limited to a specific period,
language to that effect should have been included in the settlement agreement.”);
6 Thus, JPMMAC’s claim (at 24) that “the motion court seem[s] to think that the only way
JPMMAC could have made a gap warranty was to use similar to that found in a Morgan Stanley
securitization contract” is a clear misstatement.
31
Unisys Corp. v. Hercules, Inc., 224 A.D.2d 365, 369 (1st Dep’t 1996) (rejecting
plaintiff’s claim of ambiguity in contractual provision and explaining that “had
plaintiff desired to recoup funds in it advanced to its subsidiary ‘in the ordinary
course of business’, as a matter of ‘long-standing historical practice’, it should
have included an express provision to that effect.”). The motion court did no more
than this here.
V. JPMMAC’S AMBIGUITY ARGUMENT BOTH LACKS MERIT
AND HAS NO PLACE IN A FACIAL CHALLENGE TO THE
PLEADINGS
In the alternative, JPMMAC argues that the MLS Representation is
ambiguous, and that the lower court’s denial of its motion to dismiss should be
“reverse[d]” on that basis and the matter remanded for an evidentiary
determination. App. Br. at 27.
First and foremost, JPMMAC’s argument has no place in an appeal directed
to the facial sufficiency of the pleadings. Even a true ambiguity—not the case
here—warrants the denial of a CPLR 3211(a)(7) motion to dismiss, not the reversal
of that denial, as an ambiguous contract “cannot be construed as a matter of law,
and dismissal under CPLR 3211(a)(7) is not appropriate.” Telerep, LLC v. U.S.
Int'l Media, LLC, 74 A.D.3d 401, 402 (1st Dep’t 2010) (citing Hambrecht & Quist
Guar. Fin., LLC v. El Coronado Holdings, LLC, 27 A.D.3d 204 (1st Dep’t 2006)).
32
However, the MLS Representation is not ambiguous. As discussed in
Section I.A, supra, its plain language sets forth JPMMAC’s straightforward
warranty that the MLS was true and accurate from the Whole-Loan Sale Date
through the Closing Date. Indeed, nothing in the MLS Representation’s plain
language supports JPMMAC’s argument that this warranty is limited only to
circumstances where the MLS becomes untrue during the warranty period. By
law, such a provision is unambiguous. See Uribe v. Merchants Bank of New York,
91 N.Y.2d 336, 341 (1998) (“it is well established that when the meaning of a
contract is plain and clear it is entitled to be enforced according to its terms and not
to be subverted by straining to find an ambiguity which otherwise might not be
thought to exist.”) (internal quotations and ellipses omitted); Riverside South
Planning Corp. v. CRP/Extell Riverside, L.P., 13 N.Y.3d 398, 404 (2009) (“Where
the language chosen by the parties has ‘a definite and precise meaning,’ there is no
ambiguity.”); Diaz v. Lexington Corp., 59 A.D.3d 341, 342 (1st Dep’t 2009)
(“Courts should not strain to find contractual ambiguities where they do not
exist.”).
Indeed, as shown in Section I.C, supra, for the MLS Representation to
convey the alternative meaning JPMMAC urges, its plain language would have to
be entirely rewritten. The fact that the MLS Representation omits this additional
language “does not equate to contractual ambiguity.” Greenfield v. Philles
33
Records, Inc., 98 N.Y.2d 562, 573 (2002) (citing Trustees of Freeholders &
Commonalty of Town of Southhampton v. Jessup, 173 N.Y. 84, 90 (1903) (“an
ambiguity never arises out of what was not written at all, but only out of what was
written so blindly and imperfectly that its meaning is doubtful at all.”)).
Nor can JPMMAC, left without a credible textual argument, fabricate
ambiguity by advocating its self-serving and subjective view of its MLS
Representation. See Ashwood Capital, Inc. v. OTG Mgmt., Inc., 99 A.D.3d 1, 8
(1st Dep’t 2012) (party’s “mere assertion that contract language means something
other than what is clear when read in conjunction with the whole contract is not
enough to create an ambiguity”) (internal ellipses omitted); Moore, 237 A.D.2d at
125 (“a contract is not rendered ambiguous just because one of the parties attached
a different, subjective meaning to one of its terms.”); accord New York City Off-
Track Betting Corp. v. Safe Factory Outlet, Inc., 28 A.D.3d 175, 177-78 (1st Dep’t
2006); Crenulated Co., Ltd. v. City of New York, 244 A.D.2d 191, 191 (1st Dep’t
1997).
Finally, JPMMAC’s reliance (at 28-29) on Merrill Lynch Mortgage
Investors Trust, Series 2006-RM4 v. Merrill Lynch Mortgage Lending, Inc., 118
A.D.3d 555 (1st Dep’t 2014) is misplaced. For one, this Court determined there
that the “contract provision at issue is ambiguous,” id., but cited no specific
language nor gave any explanation of this summary determination. Thus, the
34
precedential value of the Court’s ambiguity determination is dubious at best.
Moreover, the cumbersome contractual language at issue in that case,7 bears no
resemblance to the clear, unambiguous language at issue here:
With respect to the period from such Whole Loan Sale Date to and
including the Closing Date, the Seller hereby makes the
representations and warranties contained in paragraph (a) … [that]
[t]he information set forth in the Mortgage Loan Schedule and the
tape delivered by the Seller to the Purchaser is true, correct and
complete in all material respects.
There is no ambiguity here despite JPMMAC’s efforts to fabricate one from whole
cloth.
7 “To the extent that any fact, condition or event with respect to a Mortgage Loan constitutes a
breach of both (i) a representation or warranty of the Transferor under the Transfer Agreement or
Bring Down Letter and (ii) a representation or warranty of the Sponsor under this Agreement, the
sole right or remedy of the Depositor with respect to a breach by the Sponsor of such
representation and warranty (other than a breach by the Sponsor of the representations and
warranties made pursuant to Sections 1.04(b)(vi) and 1.04(b)(vii)) shall be the right to enforce
the obligations of the Transferor under any applicable representation or warranty made by it;
provided, however, that to the extent the Transferor fails to fulfill its contractual obligations
under the Transfer Agreement then the Depositor shall have the right to enforce such obligations
of the Transferor against the Sponsor.” Merrill Lynch Mortgage Investors Trust v. Merrill Lynch
Mortgage Lending, Inc., No. 654403/12, 2013 WL 5085006, *7 (Sup. Ct. N.Y. Cnty. Sept. 10,
2013).
CONCLUSION
For the foregoing reasons, Respondent respectfully submits that the Order of
the Supreme Court, New York County, denying Appellants' motion to dismiss,
should be affirmed in all respects.
Dated: January 20, 2014
Armonk, New York
Respectfully Submitted,
BOIES, SCHILLER & FLEXNER LLP
By: :Lf:;,ijf} L
Richard E. Weill
Ian M. Dumain
Marc Ayala
333 Main Street
Armonk, New York 10504
Telephone: 914-749-8200
Facsimile: 914-749-8300
mshulman@bsfllp.com
rweill@bsfllp.com
idumain@bsfllp.com
mayala@bsfllp.com
Attorneys for Plaintiff The Bank of New
York Mellon, solely as Securities
Administrator for JP. Morgan Mortgage
Acquisition Trust 2006-WMC4
35
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