*1 long- unnecessarily disturbs majority juris- standing Privileges and Immunities attorneys nonresident
prudence and denies right constitutionally-protected
their “on terms of substantial
practice law Pip- York. New
equality” with residents
er,
For
these MELLON BANK OF YORK NEW COMPANY, N.A., Trustee
TRUST Registered Holders Certificate Stanley Capital I Inc. Com Pass-Through Mortgage Cer
mercial Acting by 2007-IQ14,
tificates Series Management Through C-III Asset Servicer,
LLC, As Plaintiff-
Appellant, MORTGAGE
MORGAN STANLEY
CAPITAL, INC., Defendant
-Appellee. No. 14-2619-cv.
Docket Appeals, Court
United States Circuit.
Second Aug.
Argued: April
Decided: *2 n (Steven-W- Perlstein, Steven G. Kobre Klazen, Levinson;
Josef M.- Lara brief), LLP, York, NY, Kim Kobre & New Defendant-Appellee. *3 CABRANES; RAGGI, Before: WESLEY, Judges. Circuit Judge separate in'a WESLEY dissents opinion. RAGGI, Judge:
REENA
Circuit
action, plain
breach-of-contract
tiff Bank of New York Mellon
Com
Trust
(“BNY”
“Trustee”)
pany,
appeals
N.A.
summary judgment
an
in favor of
award
Morgan Stanley Mortgage Capi
defendant
entered,
tal,
(“Morgan Stanley”)
Inc.
17,2014,
June
in the United States District
Court for the Southern District
New
(Colleen McMahon, Judge). BNY
York
con
court erred in
argues
the.district
law,
cluding,
Morgan
as matter
contractually, obliged
not
to
Stanley was
repurchase mortgage
allegedly
loan
is
.representation
sued
contract
(1)
give “no
duty
the Trustee’s
to
days of
within
business
tice
cure”
three
becoming
of material
aware
breach was
repur
precedent
the seller’s
condition
obligation, Bank N.Y.
Tr.
Mellon
chase
Morgan Stanley Mortg. Capital,
v.
Co.
(“BNY
0505(CM)(GWG)
Inc.,
11 Civ.
No.
(S.D.N.Y.
/”),
“Special Servicer became aware .of a mate- rial breach of Repre- the Environmental The district court derived days sentation more than three business identified —an gan Stanley represented May in 2007 that representation by breach of this March underlying there was material default making September 2010 notice City See id. View.Loan. . 781-82.. untimely, BNY WL .breach 3146824, at *23. This conclusion is -not chal- Spe- 6. The" district court concluded that and, thus, lenged appeal on we do not discuss possession cial Servicer all facts neces- it'further. sary investigate bring and a claim for (ii) two-year if or within the Agreement, three business within
give “notice cure” Date, commencing Closing becoming aware days of the Servicer recourse, replace, MLPA Section at its without option material breach—from of-Repre- Upon Breach Mortgage Loan ... to which such any titled “Remedies .by the Made and Warranties Qualifying sentations relates with Substi- defect examining the begin by Seller.” If ... Mortgage Loan. such Materi- tute text, as follows: states which relevant Mortgage cause the al Breach would any of the is a breach “qualified mort- [I]f Loan to other than be required warranties representations (as"defined Code), in then gage” regarding the sentence, to made Seller notwithstanding previous be substitution, Mortgage Loans of the characteristics repurchase or must oc- such cur, Mortgaged Properties the related days from the earlier and/or within (i) breach, ... either [such] ... or was the.Seller discovered the date in- adversely affects materially and or defect. notified holders of the Certificates terests the- added).7 (emphasis J.A. 454-55 (ii) Loan, Mortgage or in the related (A) materially ... both fact, language quoted identifies of the Mort- adversely affects the value in- obligations (corresponding to the three (B) Mortgage Loan gage Loan and numbers). First, no- highlighted serted Mortgage Loan Specially is a Serviced obligation, requires tice-of-breach which ... ..., discovering such party [1] the Trustee, Master any party —whether notify, promptly Breach shall Material Servicer, Servicer, or even party..[2] writing, the other “discovering” a material breach Seller— (but any event within three Promptly representation promptly notify the oth- becoming aware Days) upon Business discovery of such breach. party of its er Breach, the Mas- ... any such Material Second, obligation, request-for-cure shall, Servi- ter Servicer Servicer, and requires the Master which Seller, may, request cer Servicer, promptly, but permits the days Seller’s re- than 90 from the later days of any event three business within ... Material ceipt of the notice siach “becoming aware” material ' Breach, ... Material cure such the Seller cure' breach Breach____ receipt of 'the of notice. days within 90 [3], hereby covenants and The Seller Third, cure-or-repurchase obligation, ... Material agrees such (a) to requires the either Seller or cured Breach cannot be corrected of re- the material breach within the above aspects all material notice, (b) if cannot ceiving or the breach shall, ], period[ the Seller cured, replace repurchase peri of such cure before termination mortgage loan. defective (i) od!], repurchase the affected either demonstrates, As this Section parsing Purchaser Mortgage Loan ... from the *8 “notice to cure.” We nowhere references assignee Price as or its at Purchase district court used understand the to have Pooling Servicing defined in the 2.3(a) similar, challenges ley party. party neither was a As 7. Section of'the PSA contains identical, but not and recourse lan- approach we the same appeal, that do J.A, 121-22, guage. See district court considering any language discrepan- without language as it focused on the in the MLPA MLPA and the PSA. cies between the Morgan was the Stan- contract to which
305
185). Thus,
phrase,as a
for
determining
“[i]n
shorthand.reference
whether a
,notice-of-breach
request-for-
both the
particular agreement makes an event a
where,
concluding that
as
obligations,
condition[,]
cure
interpret
will
doubtful
.courts
case,
party,
in this
is the
“dis-
language
embodying
promise
as
a
or con-
covering” the material
it can be
condition rather
express
structive
than an
said
have become “aware”
the breach
Id.;
Unigard
condition.”
Sec. Ins. Co.
(triggering
obligation)
request-for-cure
Co.,
576, 581,
v. N. River Ins.
79 N.Y.2d
n at the
samp
(trig-
it “discovered” it
time
292,
290,
584 N.Y.S.2d
306 Indeed, hoivever,” 5, its con even within MLPA Section “provided, as phrase
scored lan employed drafters the unmistakable immediately preceding to precedent dition guage detailing Morgan in condition Oppenheimer v. guaranties); see & Co. , Stanley’s obligation. id. at Co., repurchase Sеe Appel Dixon 86 Oppenheim, & 455 (stating that “covenants and 691, 737, Seller 660 at 636 NY.S.2d at N.Y.2d that, ... agrees any such Material “if’ (recognizing “unless 415 N.E.2d or Breach cannot be corrected in all cured language of and until” “unmistakable as aspects [90-day] material within condition”). n ]; (i) ... shall [ the’ Seller either request- repurchase Mortgage to couch the affected Loan The failure n (ii) recourse, in ...: or ... explicit languáge ’replace, without provision for-cure added)). significant (emphasis particularly any Mortgage is here Loan” condition short, plain In sophisticated else 5 makes that Mor- drafters Section gán required repurchase to or employed precisely language Stanley where such replace if it prece loan is unable to undoubted conditions defective establish - See, e.g., (providing representation 448 in to cure the dent. J.A. defective 90-day period actions event afforded the MLPA. MLPA for certain “in the Mortgage comparable language, Loans There is no contract that ... ... are held however, (emphasis remedy of the Seller” that obli property be the conditions added)); (providing gation in on a much less on id. at 450 MLPA agent designee request being to exercise such made within three purchaser’s Data, rights Purchaser,has days. business See Realtime LLC v. “provided provid Melone, 748, 750-51, prior notice of 104 961 ed the A.D.3d iden Seller .the. (in 2013) tity designee agent” (emphasis N.Y.S.2d 277-78 such added)); voking est (stating expressio also id. at 264 canon unius PSA exclusio language mastеr alterius to contract servicer must as conclude that “successor obligations conditioning employee “upon” bonus sale sume all of the the terminat ... implies apply ed as a of assets that bonus does not Master condition based); becoming distributions otherwise see also Master added)); (emphasis County id. 341 International Fid. Ins. Co. v. hereunder” Rockland, (S.D.N.Y. 412 prec F.Supp.2d “as a (stating PSA 2000) provided “[sophisticated (recognizing indemnification edent Section,” “notify lawyers presumed in this ... must be indemnitee know must Indemnifying applicable Party parallel in writ how to construction use and identi (em ing” any impart cal wording meaning of commencement identical action so, added)).8 tó phasis they when intend do how use any played any ambiguities provisions whether in MLPA There is no indication BNY Rather, Morgan .part drafting-the against MLPA. properly Morgan ate Stan construed to have docu- appears drafted this .Stanley ley Village County as See Ilion drafter. v. ment, Morgan Stanley same Vice Presi- as the Herkimer, N.Y.3d ' agreement signed debt behalf both (2014). N.E.3d It Morgan Stanley Stanley Capital requires ambiguous pro suffices that the law Inc., contracting parties. sole See J.A. promises visions rather to be construed BNY, Trustee, as the named While precedent. Oppenheimer than conditions PSA, party is no to the indication Co., Co., Oppenheim, Appel, & Dixon & agree- drafting role in record as to its N.Y.2d 636 N.Y.S.2d at event, point ment. because the is not N.E.2d 415. raised, to consider occasion .have
307 suming construction to triggering words and estab- that notice different meaning”). lish 60-day period prece distinctions cure was condition repurchase obligation holding to dent language em- very contract adequate); Morgan notice Tr. Co. v. Guar. ployed by parties our dis- undermines Bay Franchise Mortg. Acceptance View colleague’s Morgan senting conclusión'that Co., 8613(SAS), 00 Civ. 2002 No. 'WL Stanley to cure expected cannot be breach- (S.D.N.Y. 818082, 2002) *4-5 Apr. at es of it has notified but for been (applying recognizing New York law request has not formal which it received a request to cure precedent as condition Dissenting Op., post for See at 315- cure. fact, trigger 30-day where was exclusive obligation repurchase 17. In its to is. which, met, if period, gave cure not to inability to rise only on its cure conditioned - And, 90-day period. repurchase obligation). within the cure clear, period the MLPA that cure makes
triggered exclusively “the re- Seller’s Even notice-of- MLPA’s of the ceipt notice ... Material provision might a be construed as Breach,” request not Servicer’s condition it is nec because added). 454 (emphasis cure. J.A. essary trigger for the cure afforded n WhileNew Morgan Stanley,9 request-for-cure pro its York courts have construed comparable vision serves essential func prec triggering some events as conditions Morgan Stanley tion could without which edent, they only done when the have so not or perform understand cure obli its trigger necessary ability party’s a gation. Becausе not free “re are See, perform obligation e.g., at we issue. a parties write into contract conditions Capital Joseph ALJ v. David J. L.P. by adding excising did not insert terms Co., 1127(A), 15 Misc.3d 2007 WL construction,” guise under Slamow 2007) *2, *5 (Sup.Ct. (holding Mar. Col, Del 174 A.D.2d prece notice of disallowance 1991), Dep’t N.Y.S.2d here repayment obligation dent defendant’s because, simply triggering conclude that whatever necessary notice afford de , of-breach, might apply to rationale opportunity to fendant cure disallowance to request it does for cure. not period, upon of which within failure extend plain language obligates of the The MLPA plaintiff repayment), could demand aff'd 154, 155 (1st Morgan Stanley repurchase toor A.D.3d 2008); loan of the Mun. noticed Assured Guar. defective also Prods., Inc., receipt of a of breach. Corp. v. The DB Structured .obli 720, 731, 742-44, gation receipt makes no Misc.3d mention 887-88, 2011) (as- (Sup.Ct. July request cure.10 895-97 because, question 9. We need not 316 n. undermined decide this conclusion is noted, express assignment 'MLPA’s Morgan Stanley as earlier defends the breach, signaling but judgment only by function to notice of district court’s reference to assignment mandatory request- request-for-cure obligation. also to its the contract’s obligation to Servicer. for-cure the Master that, upon becoming Judge implausible (explaining Wesley deems it See J.A. 454 obligated any Stanley Master Servi- would to cure in aware material cer-must, request. request may, of. the absence He maintains that cure). parse Servicer was under no We the difference be- need for cure the Master Servicer's and the tween obligations provided signaling request-for-cure essential demand further 315-17, because, event, post Dissenting Op., MLPA has not functions. *11 sum, Thus, (1) obligation the district court held the to when to “sending- request days cure is cure is a notice unmistak within three business required trigger period language in conditional nor ably to the cure neither framed I, necessary Stanley’s Morgan a for buyback-obligation,” trigger the . BNY 2013 and (2) added), is, remedy obligations; (emphasis of *17 it breach WL at notice - fact, 90-day the trigger in for the only referring to the exclusive could have been which, Stanley within was Morgan obligation, the MLPA’s notice-of-breach to obligated repurchase; toor and 90-day period. for the cure trigger exclusive the of of is timeliness notice breach pertains the dis That to same conclusion contractually con days, to three limited because the trict court’s statement that the MLPA cannot be construed clude provision “expressly MLPA’s repurchase make of to either notice breach cure,” Morgan to refers back to the notice request days for cure or three business Stanley’s repurchase obligation to is “de precedent Morgan Stanley’s to conditions (alteration pendent notice.” Id. on that remedy obligations. & Oppenheimer omitted). See quotation and internal marks Co., v. Oppenheim, Appel, Co. & Dixon provision repurchase expressly the What at N.Y.2d 636 N.Y.S.2d at is dis refers to “the date the back Seller Rather, timely Tor request N.E.2d of notified the breach covered was is properly promise, as construed a cure defect,” 455; it nowhere mentions J.A. which on should reviewed remand be “notice went to The district court cure.” performance. for substantial See Israel v. on, however, “notice to to conclude that Chabra, 537 F.3d cure” was a condition performed within three to business be. Timing C. The the Re- Servicer’s of days: condition “The notice to cure is a quest Cure Cannot Preclude. for repurchase obligation, precedent- the Finding Substantial of Perform- bargained for parties plainly ance as a Matter Lawof ‘three day* provision the contract.” 3146824,. determined, BNY at *21. 2013 WL We district court disagree. law, first of of part Even the matter Servicer’s March (cid:127)18, quoted might support Stanley Morgan sentence find -the communication to obligation, request MLPA’s noticé-of-breach notice cure subject II, untimely. parties bargain BNY plainly did- WL three-day To limitation conclude that the *9.iWe here In applicable only request timing request cure. deed, preclude finding when it recited MLPA cannot “[t]he 'substantial gave performance three as- a matter of law. In ex II, breach,” conclusion, plaining send out notice of BNY we first examine *3, informing court reasoning WL at' the district court’s district timeliness ac- analysis, misstated the some which we contract. 12) alleged Representation unequivocally identified for cure as a breach of taking prеcedent, compensates parties accordingly, situation here, account, Morgan Stanley alleged among things, where to have other into the issue See, cure-or-repurchase obligation performance. e.g., breached its substantial Schwartz Pierce, 1348, 1350-51, alleged to have breached 57 A.D.3d 2008) (affirm its. cure within three 163-65 damages days, promises ing jury law considers two broken award where found both (three, contract). Stanley’s parties to when one considers breach of in: parts reasoning are at odds BNY faults this other sev cept, but language of MLPA. plain grounds. argu-, eral We here on focus- ment derives the well established detailed; already requires As MLPA that,, principle provisions where contract promptly give of breach party language, use different courts must as discovering rep- upon material breach parties--intended sume the different mean It requires resentation. a Servicer also ings. See Frank B. Hall & Co. N.Y. v. promptly requesting act after be- *12 Assocs., 958, Orient Overseas 48 N.Y.2d coming only aware of is the breach. But it 425 401 N.Y.S.2d 189 N.E.2d to MLPA as the latter that the (1979). Thus, argues, BNY “discovering” days. cabins to business promptness three court, however, something breach to must mean different appears The district breach, where, here,, from of “becoming with have the aware” concluded that as Servicer, coming of discovering party, necessarily the “awareness” after “dis notice prompt covery” indeed, not breach is not made within -after of communication — (“The days. id. MLPA three at *3 triggered by the noticе of breach discov gave days to the. Servicer three ery absurdity avoid the of requiring a —to breach.”); of at any (within out notice id. send *9 request to' cure three (holding notice to awareness) because Servicer’s requir business of days before Morgan Stanley was not sent three ing 'party discovering the to the breach days of to business what found be court give (subject notice to an undefined “absolute, drop-dead date” for awareness obligation), thereby promptness triggering breach, of “breach therefore notice was period. the untimely”). of hav- the Servicer’s view BNY’s sense when makes the argument breach, ing the district discovered .party discovering Servicer is (1) court concluded difference circumstance, it gen- breach. In that will obligations’ triggering words—“discov- erally only upon receipt be of the discover- ering,” “becoming of’—was “of aware of er’s notice breach moment,” '3146824, no BNY 2013 WL acquires necessary for it to awareness (2) *20; awareness, discovery, like occurs Further, to cure. the extent the only of investigation conclusion an investigation discoverer an conducted breach, inyésti- suspected provided breach that the .Servicer has need gation is concluded within a reasonable duplicate, can reasonably latter be time, *19-21; see id. at the Servicer (3) expected its for cure make with- reasonably investigation concluded its receiving in three business and, thus, become “aware” breach. (a) alleged Stanley’s by “February breach 16, when prepared‘her Wilkicki memoran- But, when- the Servicer is the Unell, (b) or certainly “by
dum” Febru- discovering we cannot cate party ary agreed when Unell with Wilkieki’s conclude, gorically urges, as BNY that it assessment and her send instructed notice,” of the breach until does become aware in no than but event later (c) it transmits its breach to “February appraisal own when the draft II, in,” 2745Ó11, Dictionary may others. BNY definitions admit came 2014 at *9. WL discovery without possibility aware delay some two Compare weeks after Third New these «lates ness. Webster’s .last (2002) a request («iefining transmit held un- Int’l “dis Dictionary timely as a matter law. . cover” “to for the first time obtain is to gation indicates word “to knowledge of’ or detect
sight or
flexibly
light
of’),
(defining
construed more
with id. at 152
presence
realization,
per-
totality of circumstances.
See United
as “marked
“aware”
conclusion,
Annunziata,
knowledge”).11
ception,
Fid. & Guar. Co.
States
where,
here,
however,
790, 792,
not transfer
does
N.Y.2d
observed,
correctly
court
as the district
(recognizing that
N.E.2d
discovery of
party
á
charges
the law
provision
in one
condition included
where
it has had
reasonable
after
another, it “must be as-
omitted
investigate and confirm
opportunity
ac-
intentional under
sumed
have been
short,
effectively
when
suspicions
construction”);
cepted
of contract
—in
canons
suspi-
aware,
simply
than
becomes
rather
Servs.,
Nobo
Sterling
Inc. v. 1155
Inv’r
thus
cious,
The reason the law
of breach.
LLC,
Assocs.,
30 A.D.3d
breach is to avoid
delays discovery
2006) (same).
litigation
-for
before
creating an incentive
*13
injury.
it has suffered
party knows
a
that
conclude that the dis
We further
(col-
3146824,
at *19
BNY
WL
See
identify
trict court
the reason
could
cases);
(acknowledging
*21
lecting
id.
for
conclusion
Servi-
able
date
circumstances,
confirming
complex
three
investigation
even
cer’s
—or
months).
can take several
investigation
of
possible
dates —as a matter
conclusion
as matter
hold
a
therefore decline
We
promptness of breach dis
law.
Where
a
who discovers
of
that a
law
Servicer
depends
resolution
covery
questioned,
is
charged with awareness
cannot be
totality
circum
on an assessment
The fact that the
it
notice.
until
transmits
stances,
including
necessarily
the credibili
trans-
in this
case simultaneously
ty
weight particular
witnesses and
'
cure with its
mitted its
for
request
gen
will
matters are
evidence
Such
bear.
necessarily
mean
breach does
rath
erally
by the trier of fact
determined
requisite
was filed within
the former
court,
particularly
er than the
when
Rather,
timeli-
days.
three business
question is
ultimate
reasonableness.
of both notice of breach and
ness
Nassau,
County
Ins. Co. v.
Hartford
may
as the district court
for cure
depend,_
541,
1028, 1030,
416 N.Y.S.2d
N.Y.2d
they
whether
recognized, on
were sent
(1979) (noting
“ques
3H breach-investigation period, Grp., Mut. Ins. reasonable A.D.3d Vale Vt. disputes- might persist as whether other 2013) (stating party.fails that where e.g., commissioning the initial or events— comply requiring with condition appraisals unreasonably pro- review — notice, may delay be excused timely longed investigation. the dis- While reasonable, generally “ques be which will explana- trict court Wilkicki’s dismissed jury”). for a while the tion of fact appraisals implausible, tions for these as February court identified district hr light the record most when we view received a appraisal the date Wilkicki draft BNY, favorable to Cannot we' conclude that Property, as “the abso City fór the View precluded reasonable factfinder as lute, for a in date” reasonable drop-dead reaching any matter of law from other concluded, a to have factfinder vestigation .Thus, dispute cannot conclusion. wheré, here, the might determine that See, e.g., summary judgment. resolved on not an investigating party is individual but Morano, Dillon v. 497 F.3d 253-54 entity, degree of chain- corporate some (2d Cir.2007) summary award of (vacating part a reasonable of-eommand review is where, judgment permissibility defen- entity per should be investigation, and it, explanation dant’s conduct turned to undertake such review before mitted necessarily credibility involved de- discovering becoming charged' question jury). that was termination jury to so aware of the breach. Were case, in this it could extend the inves find Further, request for cure is not *14 16, conclusion to March tigation’s date if precedent, a condition even factfinder 2009, first president Centerline’s was when for were to that the time reason- conclude notice of asked to breach authorize investigation able of breach ended more on investigation for cure based 18, than three business before March event, his subordinates. 2009, it still have to would decide the 18, 2009 transmittal would have March question performance. of substantial prompt even under a three-business- been day limitation.12 performance is per “Substantial formance, being course, permitted the deviations if a .Of even factfinder were minor, unimportant, inadvertent, and unin- within a include review chain:of-command that, Wesley disagrees, оbserving covery contract. Judge under the insurance See Co., law, corporation New v. Fin. Ins. 322 F.3d under New York York Univ. First Here, Morgan knowledge agents. Stanley did charged of its at 753 & n. 2. with the similarly Dissenting Op., post ..But none of confirm its breach the MLPA to at 318. See noted, already conclusion in the Wilkicki. As such circum cases reach that cited stances, entity corporate conducting law a reasonable time for of a affords context doing investigation investigation, creating one of breach to an much less so avoid litigation. agent University premature con York incentive That as the trustee. New Co., including supports 322 750 cern chain-of-com v. First Financial Insurance F.3d some (2d Cir.2003), investiga "precisely not offer mand tion, reasonable does review 12, situation," demanding Dissenting Op., post 320 n! than action as soon as rather agent any corporate agent conclusion re reaches a that case involved neither an authority gardless of his to act on for the acting of a trustee nor a breach behalf LLP, corporatiori. investigation scope to. the v. KPMG 15 similar nature Kirschner 465, 508, 517, Instead, 446, here., 938 N.Y.3d 912 one issue an was insurer . (2010) (acknowledging gen charged investigative agent’s with N.E.2d 941 its scope agents’ erally, only au knowledge of the in acts within of breach' as date the imputed to agent thority "presumptively their facts to the are sured conceded certain precluding principals”). effectively re- admitted the 312 Esswein, charged 220 can v. date when BNY with
tentional.” Cramer A.D. 1927) 634, (2d Dep’t 634 awareness breach. 220 N.Y.S. ; omitted) (internal marks quotation strongly These circumstances Commc’ns, Inc., Ams. 84 Bernard v. Las support performance substantial insofar as (2d Cir.1996); 103, In F.3d 108 Callanan delay requesting a cure that was never Smiroldo, 717, dus., 100 A.D.2d Inc. v. possible likely be would deemed trivial. 1984). (3d 612 N.Y.S.2d. note, recently As this court had occasion to .be atoned “will Such deviations sometimes contracting parties agree to no “[w]hen resulting damage.” allowance provision, it is reasonable tice-and-cure Kent, Youngs, Inc. v. N.Y. & Jacob they assump do so assume 889.(1921) (Cardozo, J.). 239, 241, 129 N.E. tion that the breaches which would be used question per of' substantial terminate the contract be curable would usually Hyundai, one “of fact and should breaches.” Ltd. formance v. Giuffre Am., Hyundai as a matter of law where Motor be decided 756 F.3d (2d Cir.2014) (internal quotation the inferences are certain.” Merrill marks Inc., omitted) Lynch Allegheny Energy, (emphasis original). & Co. Cir.2007) pot (collecting require F.3d York common law will “New cases, including Hadden v. Consol. Edison strict compliance with a contractual notice- of N.Y., provision providing opportu Co. 34 N.Y.2d 356 N.Y.S.2d and-eure an (assessing nity to cure 312 N.E.2d would be useless.” Id. at eases), performance (collecting of sever substantial basis al factors such as absolute and relative Morgan Stanley attempts distinguish default, magnitude of on con effect cases cited therein on the Giuffre willfulness, degree to purpose, tract’s ground that they propriety considered the injured party under benefited who, by parties of actions taken instead contract)). Thus, points to a while .BNY providing opportunity to terminated supporting number factors substantial contracts commenced actions dam- *15 performance, do not we here decide the ages. It futility that the of cure submits question in its a favor as of law. matter here is excuse for the Servicer’s failure only We conclude that the does not record timely request cure because that “is the permit performance to substantial be re Morgan Stanley’s mechanism for obli- jected of as a matter law. See Jacob & gation triggered.” 46. Appellee be Br. Kent, Youngs, Inc. v. 230 N.Y. at because, argument The as fails we have per (explaining N.E. 889 that substantial concluded, already notice of not which, “if question degree, formance is of cure, request singular for is the for trigger doubt,” by there is must “tri be answered Morgan Stanley’s remedy obligations. facts”). ers the Further, it is no means evident that the conclusion, reaching
In
that
reiterate
is
we
timeliness
notice
essential
this
First,
undisputed
trigger
90-day
certain
facts.
BNY
the
did
cure
request
begin
transmit a
for
not
run
Morgan
cure
would
until notice was
thus,
Stanley;
only performance
Morgan
the
received
harm to
Stanley
issue
Second,
delay
delay
in
in
is timeliness.
trans-
a
could offset
mittal,
findings,
remedy obligations.
Jur.2d,
on the
even
district court’s
See 63 N.Y.
(2006) (stat-
range
§
Guaranty
Suretyship
to four weeks.
&
was
two
Third,
ing
giving
of representa-
speci-
noticed breach
that
notice within
where
curable, regardless
precedent
tion
time is nоt
was
fied
limitation,
time
giving
of not
such
which doe's
cabin the
liability, ‘‘consequence
obligation
notice-of-breach
as
does the
relieve
may
be to
exonerate”
obligation.
“only
request-for-cure
to the extent
to notice
party entitled
damage
sustained
reason
4.
that
The fact
the notice-of-breach
n omission”);
Youngs, Inc.
see also Jacob &
upon
party’s
a
“discover-
arises
Kent,
It is indeed
to be “ex
precedent
requires
press
precedent
“despite
conditions
condition
exists
is,
by
parties in
stated
press”
lan
explicitly
the lack
conditional
—that
of
language.” Oppenheimer
“unmistakable
unmistakably
guage”
long
so
as
“was
Co.,
Appel, Dixon
Oppenheim,
Co. v.
&
&
required”
obligation
another
came
before
690-91,
86 N.Y.2d
636 N.Y.S.2d
Capital
into
ALJ
L.P. v.
forcé.
David
(internal
quotation
415
660 N.E.2d
Co.,
208, 208,
Joseph
48 A.D.3d
851
J.
omitted).
But there is
indication
marks
2008)
(1st Dep’t
(emphasis
154
N.Y.S.2d
of “un
that the standard
Oppenheimer
added);
Analytical
E.
see also
v.
Walton
language”
the Court
mistakable
—which
Labs,
Inc., 246
667
A.D.2d
Restatement
drew from the Second
(2d.
1998)
con
Dep’t
(finding
N.Y.S.2d 407
specific,
tálismanic
requires
Contracts —
premised on the structure
precedent
dition
86 N.Y.2d at
Oppenheimer,
words. See
notwithstanding
the lack
provision,
660 N.E.2d
Capital
language);
of1conditional
Winfield
(quoting
(Second)
Con
.of
Restatement
Glass, Inc.,
Corp. Mahopac
v.
Auto
(1981)).-
fact,
cm't. a
In
§
tracts
A.D.2d
617 N.Y.S.2d
clearly rejects
Restatement
view:
‘
1994) (same).
courts,
New York
language is
particular form
neces
“No
therefore,
strong evi
specific words are
condition, al
sary to make an event a
of,
to,
necessary
dence
but
conditions
that,’
‘on
though such words as
precedent;
inquiry,
core
as in all con
‘if are
‘provided that’ and
often used
tracts,”
give
parties’
to the
effect
duty
An intention to make a
purpose.
this
intent,”
expressed through
as
“clear
by
gen
manifested
may be
conditional
language” they use.
“unmistаkable
agreement,
as well as
eral nature of an
specific
language.”
(Second)
Restatement
language
So what
then
does
§
a.1
226 cmt.
Contracts
negotiated
structure
contract —
Appeals
of the Court
A recent case
léngth by sophisticated
arms’
commercial
analysis:
the Court con-
confirms
us'
entities —tell
about breaches
requiring negotiation
provision
strued
agreement
provided
and the remedies
as an
execution
additional terms
reference,
For
those breaches?
ease
party’s
to a
express condition
again
obligations
here
are the three
fiber-optic
supply
capacity
ante,
majority
opinion,
identified
words,
on no conditional
identi-
but relied
304:
solely from
fying
parties’
“clear intent”
exists,
par-
If
a material
“the
agreement.
the nature and structure
ty
...
discovering such Material
S.A.R.L.,
Breach
Grp.,
Corp.
Tyco
IDT
n shall
209, 212, 214,
notify, writing,
the oth-
promptly
N.Y.3d
>
(2009).2 Similarly,
party....”
lower New
er
N.E.2d 913
peared;
simply required
§
38:16
the contract
1. See also 13 Williston
Contracts
which,
(4th
2000) ("Any
when
words
ed..
goods,
pro
shipment
of'
failure
properly
inteipreted
construed
“failure
vide such
was deemed a
*17
”
court,
perform-
the notion that the
make clear
‘perform[
precedent’
all conditions
]
dependent
promise
of a
in a contract
is
ance
recovery.”
[plaintiff] from
86 N.Y.2d
"barred
or
will create an
on some
act
event
other
693-94, 636 N.Y.S.2d
J.A. 454-55. We all the third majority opinion The' seems disturbed fact clearly Morgan Stanley’s by clause conditions the deadline cure is request from the for cure down repurchase-or-replace obligation on the counted request and so concludes that the itself has particular of a circumstance: existence repurchase no conditional over the force “any that ... Material Breach cannot be obligation obligation. But the repurchase aspects corrected cured all material curing the depends on the Seller within the above cure J.A. period [ ].” cir- period; that cure added); ante, (emphasis Majority Op.,, can exist if the cumstance as an (identifying at 306 this clause exam- request first makes ple language of condi- “unmistakable creates) (and obligation which includes tion”). this lan- Similarly, agree legal to cure it. deadline guage repurchase obligation makes the Nothing the fact that the deadline about dependent obligation on the to cure within another ninety established after majority period. the cure But where the changes the fact that it is the event I obli- opinion and is whether that depart example, it into existence. For brings period the cure gation cure within parties into a contract imagine two enter from the breach or arises becoming “Upon, aware that reads: request to cure. breach, may material opinion concludes be- majority Seller,’not than ten later request'that period ninety-day cause the is calculated full, moon, days following the next cure from the of the notice of date breach.” such material An. by the no- period triggered must be come the cure does not cure within ante, (“[A]s Op., Majority tice. See of the lunar into existence as result clear, period is the MLPA makes cycle; triggered by —the exclusively triggered simply provides ‘the re- Seller’s “not than” clause later breach,’ by which way to the deadline ceipt of the notice ... Material determine *18 require reading repurchase the comply. simply, way Put the would the must Seller (cure) silentio, object obligation creating, an a as sub an obli- request and identifies days following particular gation simply noti- (ninety cure arises deadline event); request, simply breach.5 It is unfathom- absent fication of identified silently parties imply, no object is no and deadline.3 able that the would there lay signif- explicitly, than out rather such a is confirmed interpretation by This obligation requiring icant one cure Special If simple the Ser- counterfactual: every a notice of material breach which not option to re- had its vicer exercised Instead, par- breach transmitted. the cure, Morgan Stanley still quest would explicitly repurchase ties conditioned the repurchase obliged have to cure been obligation running peri- on the of the cure plain loan? answer —on the face the The cure, period without od actual and cure be “no.” The con- of the contract —must only through Spe- existence comes into lacking any conspicuously language tract is request.6 cial Servicer’s making breach every cure material Compare-this .obligatory provi- on absent a framework with the request the Seller by To in that sions considered district courts-in our to cure.4. construe contract back, rights obligations Stepping it makes sense the re- cer’s are 3. contractual relevant, quest pro to cure its deadline from the therefore and while the MLPA calculates party request notice of breach. Either Seller vided that the "shall” Master Servicer —-the may cure, Special Special the one to dis- provided be Servi- only Servicer— cover breach the first instance request "May” "may” cer 454. cure. J.A. notify party. must then the other See J.A. permissive, only possess this context can If discovers the breach and the Seller meaning, mandatory, than rather see N.Y. notice, provides Special Servicer then has Aasen, Corp. Elec. Gas 157 A.D.2d State & days request three whether decide 1990), If right or lose to do so. it chooses to its imposed obligation and the MLPA thus no three, right request day its exercise Special request cure. As I Servicer to days may eighty-seven be until the explained, does have notice of a breach already the Seller end the cure —but trigger to cure the breach —the notice, days by discovery, its own three cure, request obliges what Seller of the nature and circumstances period. A re cure within the defined cure contrast, By Special if the Servicer breach. Servicer,, quest Special to cure there breach, notify it can discovers the both told fore the Seller that the former was exer Seller of cure in the same cúre, cising option providing to demand document, in case the has the Seller exactly signaling func same and demand event, ninety days same of notice. either as the in ALJ tions notice of disallowance , system exactly has that the .Seller ensures 7; .Capital. Majority note also see infra ninety days knowing no about the ante, Op., (acknowledging Capi AU less, more before deadline and no occurs. precedent). tal’s notice as a condition suggests majority opinion 4. The this consider- above, 5. As described Servicer MLPA-assigned is irrelevant because the ation cure, not to then the date of decides signaling function to -the notice legal .signifi- the notification of breach has the Master had "man- later, nothing happens, ninety obligation.” cance— and no one cafes. datory Majority request-for-cure ante, However, Op., n. 10. the loan at at 307 ' issue was transferred to ,in-November ante, majority opinion appears distracted Majority Op., see the District cure” misno- Court’s point at which the Master Servicer "notice.to review, engaged in de mer—but we are novo "obligated ceased to to service and admin- applying a more deferen- except specified and even if we were ister” the loan as to certain standard, functions, certainly obligated requesting none of which include tial are J.A, accept the Only Servi- Court’s labels. District
317
not occur within
only
notice
cure
timely
when
does
that have concluded
Circuit
period
cure
precedent
cure
not constitute a condition
the.
did
—and
cases,
obligation
only
that arises
out of the
an
obligations:
those
repurchase
request.
Capi
See ALJ
par
Special
Servicer’s
triggered by either
obligation was
tal,
208, 851
154.7
or its
A.D.3d at
N.Y.S.2d
discovery of its
breach
48
ty’s
own
i.e.,
structure of the
language
the obli Because the
counterparty’s notification —
obligation
through
provision
repurchase
makes the
into
could come
existence
gation
unmistakably contingent
request
to cure.
other than a
mechanism
request
request
Citicorp
Ass’n
LaSalle
Nat’l
See
Bank
No,
Inc.,
7868(HB),
express
-an
Estate,
necessarily
must
constitute
02 Civ.
Real
21671812,
Corp.,
IDT
July
precedent.
condition
13
*3
2003
at
(S.D.N.Y.
WL
401,
214,
16, 2003);
N.Y.3d at
890 N.Y.S.2d
918
Tr.
Holders of
for Certificate
N.E.2d
Passthrough
Lynch Mortg.
913.
Merrill
Certifi
Funding
Love
Series 1999-C1 v.
cates
Express
precedent
conditions
are sub
9890(SAS), 2005
04
WL
Corp.,
Civ.
No..
compli
ject
requirement of strict
to “the
(S.D.N.Y.
2582177,
11,2005); see
Oct.,
at *7
ance,”
or con
promises
in contrast
Real
v. Dexia
also U.S. Bank Nat’l Ass’n
conditions,
only
with which
structive
Mkts.,
12-CV-9412,
Capital
Estate
No.
compliance”
required. Op
“substantial
3368670,
(S.D.N.Y.
9,
,July
*4
2014
at
WL
690, 692, 636
penheimer,
the to majority approach places The opinion’s weight great governance on the internal explains, the majority As the opinion; Servicer, Special structure essential of,the premised is here material breach identified ly corporation deny to permitting the its that it representation Stanley’s .Morgan on simply of a fact because it “awaréness” , knowledge any no and “material- required authorization the to president or cir- adverse environmental ante, Op., Majority issue the notice. affecting any Mortgaged Prop- cumstance principle at 310-12. But “a fundamental report.” in such erty that was not disclosed agency that has the law of informed and ante, 625; Majority Op., see also J.A. corporations for is that “the centuries” Special n. Servicer’s conclu- 301 & 3. agents, knowledge they the acts of and representation of this sion that a breach acquire acting scope the while primarily .rested a docu- had occurred presumptively imputed are authority their Morgan Stanley’s coun- ment showing principals.” to their Kirschner v. KPMG report sel neither knew the environmental LLP, 15 N.Y.3d regulation, state nor relevant addressed (2010); 941 accord Corri 938 N.E.2d violation, thereunder; the notices of issued Co., 58, 68, gan v. 228 Bobbs-Merrill N.Y. fact, only piece of evidence was (explaining 126 260 if N.E. formal, identified employee corporation obtains knowl cure. See J.A. 625-26. request and edge acting scope “while within the of his However, Spe- to the a document sent authority, corporation], on behalf of [the cial Associate General Counsel benefit, corporation] charge is [the - of Spe- the Director February knowledge”).9 presump his This able with ulti- Servicing cial the woman who conclusive, corporate knowledge tion of —and mately signed the notice breach and employee com corporate even never identified, “additional municated the superi information her cure— ,.. facts to demonstrate material and ors: breach, including adverse effect” [Njotice agent of facts to an is construc- departure subsequent tenant’s -and anchor tive notice principal thereof him- tenants, by other lease “dis- terminations self, where arises from is at the ... loan the Trust payments continued subject-matter time connected with the a- for, November 2008 as direct result agency, general upon princi- his income,” rejec- operating insufficient ples public policy, presumed it is agent tion of insurance claim un- -communicated such the borrower’s has facts puted majority opinion require concludes the facts would us conclude that Because Servicer became aware of the merely promise, it ana- was February breach as of least lyzes the rubric of substantial the facts under compliance summary judg- and concludes corporate legal entity, 9. As' a Ser- ment, inappropriate reasonable "necessarily through vicer functions human may as to the extent of factfinders differ officers, agents employees— actors —its including investigation” "some "reasonable knowledge may imput whose conduct , degree review.” Ma- of chain-of-command entity respon- under the ed to the doctrine ante, jority Op., under Sec., at 310-12. Even superior.” deat Inc. v. Prudential-Bache , 3 however, N.A., compliance analysis, substantial 7 N.Y.2d Citibank . (1989) explained infra, undis- New law and the N.E.2d York and, not, Yet, if he still notice should sent.”. J.A. 1266. principal, has be' to the .[ejntrusted having- despite employees responsible two for in principal business, vestigating material breaches particular concluding agent .-with right to his acts sufficient evidence of such a party other has a deem knowledge obligatory upon prin- no notice was sent until March 2009, during which time new material cipal. facts were obtained Servi- Clark, 563, 569, N.E. Hyatt v. N.Y. Though cer. the Trustee’s brief makes (1890); accord Univ. First Fin. N.Y. fact that *21 much of the neither the “Director Co., 750, Ins. 322 753 & 2 F.3d n. nor Servicing of the Associate Gen Cir.2003) (applying principles to these authority eral Counsel had to a.no issue in inquiry calculating and timeliness breach, authority of tice to make the ulti in from delay the date its surer’s imputation; mate is irrelevant to decision grounds for liabili investigator discovered - knowledge what matters is whether the States, v. 195 ty); Apollo Fuel Oil United scoрe was obtained within the of the em 74, (2d Cir.1999) (applying F.3d 76-77 agent’s employment. N.Y. ployee See corporation to same rule conclude the Univ., 2; Hyatt, at n. 322 F.3d 753 & through its' knew of misconduct intentional 569, 891; Hurley, N.Y. at 23 N.E. A.D. knowledge). applies This rule employees’ 550, at 288 N.Y.S. There be.-no 199. can knowledge works the even where such. dispute Director of that the Servic right the cor waiver of a contractual and ing,, ultimately signed who the formal no porate agent any does not have authoriza tice see J.A. of breach and tion the contract make such a under 626, knowledge of the obtained her breach See, Hurley affirmatively. e.g., waiver scope ‘authority and its effects of her Co., Hancock Ins. A.D. Mut. John Life potential to investigate breaches. See J.A. (4th 550, 1936). 547, 288 N.Y.S. 1110-11; Univ., also N.Y. see 322 F.3d at law, Spe- simply, Put of matter (calculating delay in 753 & n. 2 insurance cial knew the facts the breach coverage denial from the date investi on and their and adverse effect material grounds denial, gator learned the. 2009,. the loan well before March The authority lack notwithstanding his Special Servicing drafted a Director himself). deny coverage containing memorandum sufficient facts post- of the importantly, Just as awareness of both the constitute none by February on described its material and adverse. effects activities opinion.contributed any February majority 2009.10 Even mate- after February way an Associate rial to the “aware- General company any at the confirmed that ness” None the internal Counsel breach. [Morgan Stanley] the re- “there is evidence that “chain reviéws—not command” supporting paragraph knew” were undisclosed environmen- moval of one notice and representa- tal conditions facts Counsel, “I see tion think the breach the Associate J.A. and concluded General actually also this memorandum was memorandum memorializes facts 10. Note investigation Special Servicing. on an Director of based the loan’s status known beginning To majority 2008. See J.A. 1109- See 1111-17. borrow the November J.A. ante, Thus," considering analogy, Majority Op., opinion’s not even see are corporation merely in which the 311 n. she was aware both that she had situation (and (the fact) only arguably they constructive Americas and that access thus found the of) (its February significance). were these facts—the new 16/2009 (5) seeking receivership change The Trust was 1341-45, approvals without nor the property; managing for the director and by both a senior company, J.A. president The Trust have to would fund any additional facts 1829-30—made legal attempts costs associated either of the corporation, to the available recoup value. or of material and nature of the breach por- J.A. The substantive 897-98. only potentially new adverse effects. February tion of the memoran- appraisal setting the fact arose from “All of these words: dum concluded with million, market collateral’s value $22.3 results, stem from the state code the above оf which was received the initial estimate to, present prior which were violations See J.A. 27,2009. 1739. The February Mortgage during after the sale of the appraisal argues that Trustee Mortgage Loan to the Trust. The Loan Morgan Stanley’s “to confirm that needed repurchased pursuant to the should be the terms of ‘material’ under breach was conditions set forth in the terms and PSA Br. But this Appellant MLPA.” It the applicable MLPA.” J.A. 898. *22 hardly tipped have point could lone data credulity all of to think exceeds bounds aware- Special of the scales facts, that, in the of all face these known materiality light of ness of the breach’s Special anything was but February already as of
what knew aware of the circumstances 2009: as well as its material adverse conse- and quences.11 (1) default; The loan inwas majority opinion’s approach thus The (2) departed, tenant had The anchor from drastically departs York law New reductions, precipitated rent timely governing corporate knowledge and terminations, lease and discontinued request obligations Un- under a contract. tenants; payments by other rent majority opinion, any corpora- all der the (3) regulatory body An Ohio filed a is require tion need do now authorization arising against lawsuit the borrower requests highest for such level—and regula- same environmental regardless by employ- the facts known breach; tory violations at issue officer, highest ees executive below corporation charged for cannot The insurance claim borrower’s denied; legal of those facts.12 liability “awareness” Not was denying grounds coverage, accepting proposition Even ed for and that the dubious knowledge imputed that confirmation of loan valuation some- was to the insurer moved how from "un- purposes determining timeliness. See 322 "aware,” n, appraisal aware” to was con- majority opinion’s The F.3d at 753 & 2. 1730; firmed J.A. March recognize error from its failure arises ante, Majority Op,, It another at 302. took investigation clearly scope of within the five Servicer to send Special Servicing’s employ- Director of J.A, cure. See and ment, regardless ability some her to take 624-26. subsequent external action on behalf of the company. investigation— The results her majority opinion 12. The this dissent criticizes i.e., knowledge significance of facts and citing investigations for not cases related to imputed therefore to the breach —are by agents Majority Op., employees. See Servicer, steps then ante, who must take whatever However, prior at 311 deci- n. 12. our governance necessary internal are in its struc- University precisely in New offers sion York situation; provided by within the time investigator ture to act compa- this line ny agent contracted as an insurer’s discover- contract. Morgan Stanley’s repurchase obligation, approach type passing-the-buck obligation never force. and that came into princi contrary “a fundamental wholly аgency law of has informed the ple 1 respectfully dissent. Kirschner, centuries,” corporations 15 N.Y.3d at completely defeat but it would
N.E.2d limitation purpose temporal remedy namely, the valuable
contractual — diligence when a
certainty obtained counterparty must exercise
sophisticated remedy a defined' America, UNITED STATES timely request Particularly when time. Appellee, to a contractual compliance, the
remedy, requiring strict dramatically majority opinion’s approach HALLORAN, Defendant- Daniel J. pro value such undercuts force and Appellant, visions. Smith, Tabone, Malcolm A. Vincent considered and Court Oppenheimer Savino, Jasmin, Joseph J. Noramie rejected a obviate the rule that would Desmaret, Joseph Defendants. express of an condi consequences harsh No. 15-996-cr. Docket concluding that strict com precedent, tion *23 of Appeals, Court necessary. 86 N.Y.2d United States pliance was 691-92, Second 415. 660 N.E.2d Circuit. majority here releases opinion
Yet the 26, 2016. Argued: Jan. thé burden sophisticated party April Decided: made. agreement with the complying obvious, stating if the At the risk the-
corporation’s governance did not internal three-day turnaround
permit between ‘to of breach and a
awareness time.13 bargained
it should have more facts, no
On these reasonable factfinder
could that the determine on or
only became aware the breach result, As no
after March strict com factfinder could find
reasonable
pliance
with the condition
agreement,
time
prevails
consequences
of their
an arm's
13. “Freedom
contract
length
sophisticated par-
bargaining
Op-
say
between
table.”
transaction
so
at the
these,
.
in the absence of
ties such as
penheimer,
86 N.Y.2d
countervailing public policy concerns there is
(alteration
internal