Lehman Bros. Holdings, Inc. v. National Bank
875 F. Supp. 2d 911
E.D. Ark.2012Background
- LBHI sues NBA for breach of warranties and repurchase/indemnity under Loan Purchase Agreements and Seller’s Guide, involving five Dwek loans and one Olt loan.
- Aurora (agent for LBB/LBHI) enforced remedies; Assignment Agreement (Jan 31, 2011) purportedly passes rights from LBB to LBHI.
- Olt loan: origination appraisal inflated; LBHI claims repurchase/indemnity due; demand letter Feb 1, 2006; no repurchase.
- Dwek loans: misrepresentations in borrower’s application; LBHI notified Sept 14, 2009; no repurchase/indemnity.
- LBB initially purchased from NBA (2003) and sold to LBHI (2003); LBHI asserts Assignment Agreement assigns LBB’s rights/remedies to LBHI.
- Court denies NBA summary judgment in part and grants LBHI summary judgment on some aspects; damages to be determined at trial.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the claims are time-barred under statute of limitations | LBHI argues six-year contract limitation applies; Article 2 does not govern mortgages | NBA argues Article 2 applies (four-year SOL) since loans are goods; Olt and Dwek events timed earlier | LBHI's contract claims timely under six-year contract SOL |
| Whether LBHI had rights to demand repurchase/indemnity via Assignment Agreement | LBHI stands in LBB’s shoes and need not prove independent reliance | Assignment may not pass rights if prior agreement not clearly assigned | Court finds Assignment Agreement assigns rights/remedies to LBHI; LBHI may pursue repurchase/indemnity |
| Whether res judicata/collateral estoppel bars damages on the Dwek loans | Res judicata collateral estoppel do not apply; bankruptcy orders did not resolve value of Dwek properties | Bankruptcy orders bar claims related to Dwek loans | Collateral estoppel/res judicata do not bar LBHI’s Dwek damages claim |
| Whether LBHI waived damages for the Dwek loans | Waiver requires written modification; no written waiver present | Negotiated purchase prices implied waiver | No evidence of a written waiver; waiver claim rejected |
| Whether damages are proven and mitigated; prejudgment interest | Damages computed per contract provisions; seek prejudgment interest | Challenge to business records hearsay; mitigation issues unresolved | Genuine fact issues remain on damages and mitigation; partial denial of summary judgment on damages |
Key Cases Cited
- Amsterdam Sav. Bank FSB v. Marine Midland Bank, 121 A.D.2d 815 (N.Y. App. Div. 1986) (mortgage sales not governed by Article 2 of the UCC)
- Oppenheimer v. Title Guarantee & Trust Co., 253 A.D. 356 (N.Y. App. Div. 1938) (mortgages not goods; Article 2 generally inapplicable to mortgages)
- Flyer v. Sullivan, 284 A.D. 697 (N.Y. App. Div. 1954) (bond or chose in action; implied limitations on remedies)
- LaSalle Bank Nat’l Ass’n v. Lehman Bros. Holdings, Inc., 237 F.Supp.2d 618 (D. Md. 2002) (independent contract breach when repurchase upon demand; accrual timing)
- Towers Charter & Marine Corp. v. Cadillac Ins. Co., 894 F.2d 516 (2d Cir. 1990) (practice guidance on evidentiary and contractual interpretation)