Commercial Division Blog
Residence of Trustee Not Determinative of Place of Injury for Purposes of Applying New York's Borrowing Statute
On November 25, 2015, Justice Friedman of the New York County Commercial Division issued a decision in Deutsche Bank National Trust Co. v. Barclays Bank PLC, 2015 NY Slip Op. 32252(U), addressing the application of New York's borrowing statute to claims for breach of representations and warranties asserted by the trustee of a residential mortgaged-backed securities trust. Under New York's borrowing statute, CPLR 202, a claim brought by a foreign plaintiff must be timely both under the applicable New York statute of limitations and under the law of the jurisdiction where the cause of action accrued. In cases involving purely economic loss, "the place of injury usually is where the plaintiff resides and sustains the economic impact of the loss." Global Fin. Corp. v. Triarc Corp., 93 N.Y.2d 525, 528 (1999). Relying on federal cases "applying the borrowing statute to cases brought by non-RMBS trustees," Justice Friedman found that "the California residence of the trustees is not a reliable indicator of the place where the injury occurred." The court explained:
The trusts were established in the [Pooling and Servicing Agreements], pursuant to New York law. . . . [T]he rights of the parties to the PSAs are governed by New York law. The trustees hold the mortgage loans on behalf of the trusts, for the benefit of the certificateholders. . . . The trust corpus was therefore allegedly diminished as a result of the loss in value of the loans. . . .
The other factors considered by the courts in determining the place of injury to non-RMBS trustees lack apparent relevance in the RMBS context. These factors do not, in any event, point to California. . . .
The court accordingly concludes that defendants in both actions fail to make a prima facie showing that the cause of action accrued in California and therefore that the four-year statute of limitations bars maintenance of these actions.