Wells Fargo Bank, National Association v. UBS AG
Attorneys and Parties
Brief Summary
Commercial mortgage-backed securities (CMBS) representations and warranties; trustee/special servicer breach-of-contract claims; application of New York's borrowing statute to statute-of-limitations defenses.
The Supreme Court, New York County denied UBS's motion to dismiss, holding that the complaint adequately pleaded a breach of contract based on alleged knowledge of borrower Beech Hill's undisclosed indebtedness.
The denial of the motion to dismiss; the Appellate Division reversed and dismissed the complaint.
Applying CPLR 202 [borrowing statute requiring use of the shorter limitations period of the jurisdiction where a nonresident's cause of action accrued], the claim accrued outside New York in 2018 and was governed by Kansas's five-year (Kan. Stat. Ann. § 60-511[1] [five-year contract statute of limitations]) or Pennsylvania's four-year (42 Pa. Cons. Stat. § 5525 [four-year contract statute of limitations]) limitations periods. Filed in 2024, the action was time-barred.
Background
Plaintiff trustee (through its special servicer) sued UBS over a 2018 Mortgage Loan Purchase Agreement (MLPA) through which a trust acquired commercial mortgage loans later securitized under a Pooling and Servicing Agreement (PSA). One loan was a $27.2 million mortgage to Beech Hill NH LLC. Beech Hill represented in its loan agreement that it would not incur other indebtedness, but allegedly had an existing several-million-dollar loan from RCB Equities when it executed the agreement. Plaintiff alleged UBS breached Representation 37 of the MLPA by selling the loan while, to its knowledge (as imputed by documents in the mortgage file), Beech Hill was in material default due to the undisclosed RCB debt.
Lower Court Decision
The Supreme Court, New York County (Bannon, J.) denied UBS's CPLR 3211 motion to dismiss, finding the complaint sufficiently alleged a breach of contract because UBS purportedly had knowledge, via the mortgage file, of Beech Hill's additional indebtedness contrary to its representations.
Appellate Division Reversal
The Appellate Division unanimously reversed on the law, with costs, and dismissed the complaint, directing the Clerk to enter judgment for UBS. While acknowledging the complaint adequately stated a contract claim, the court held the action was time-barred under CPLR 202 given that the claim accrued in 2018 and the prosecuting entity (Midland Loan Services, with ties to Kansas and Pennsylvania) was out-of-state; applying those jurisdictions' shorter limitations periods rendered the 2024 suit untimely.
Legal Significance
The decision reinforces that New York's borrowing statute (CPLR 202) governs limitations periods for nonresident claims accruing outside New York, even in complex CMBS representation-and-warranty cases. Trustees and special servicers litigating in New York must satisfy the shortest applicable limitations period from the place of accrual, regardless of whether the pleading otherwise states a viable claim.
In CMBS rep-and-warranty actions brought by out-of-state trustees or servicers, verify accrual and the shortest out-of-state statute of limitations under CPLR 202 at the outset; a well-pleaded claim can still be dismissed as untimely.