The question in this case is whether the trustee of a residential mortgage-backed securities trust is a “plaintiff” within the meaning of CPLR 205(a) when the prior action was commenced by the trust’s certificate holders.
A residential mortgage-backed security (RMBS) entitles its holder to a fixed income stream from monthly residential mortgage payments. In a typical RMBS securitization, a “sponsor” purchases a group of mortgage loans, puts them together into a pool, and then sells them to a trust. The trust then collects the monthly mortgage payments and distributes a portion of them to investors in the trust, i.e., the holders of the RMBS certificates.
In this case, a collection of RMBS certificate holders sued the sponsor of their deal in an action that was ultimately dismissed for failure to satisfy a condition precedent to suit. Within six months of that dismissal, the trustee of the same RMBS deal initiated an action asserting essentially the same claims. When defendants moved to dismiss the new action as untimely, the trustee argued that its claims were timely under CPLR 205.
CPLR 205(a) provides that if a timely action is dismissed for any reason (except several reasons that are not relevant here), “the plaintiff, or, if the plaintiff dies, and the cause of action survives, his or her executor or administrator, may commence a new action upon the same transaction or occurrence or series of transactions or occurrences within six months after the termination.” In Reliance Ins. Co. v. PolyVision Corp., 9 N.Y.3d 52 (2007), the Court of Appeals held that the six-month extension from CPLR 205 “is explicitly, and exclusively, bestowed on ‘the plaintiff’ who prosecuted the initial action.” The extension was therefore not available, the Court held, to a subsequent suitor that was not the original plaintiff but was instead a “different [but] related corporate entity.”
In this case, Supreme Court dismissed the trustee’s action as untimely, citing Reliance and holding that CPLR 205 was not available to the trustee because it was not “the plaintiff” in the earlier dismissed action. While the trustee’s appeal of that decision was pending, the First Department addressed this precise issue in U.S. Bank NA v. DLJ Mortgage Capital, Inc., 141 A.D.3d 431 (1st Dep’t 2016), and held that an RMBS trustee could not rely on CPLR 205 to revive an earlier dismissed action that had been commenced by its certificate holders. The First Department refused to depart from that precedent in this case, and thus affirmed the dismissal of the trustee’s action as untimely.
The Court of Appeals granted the trustee leave to appeal.