Appellate Judges

State Supreme Court Rules Jury, Not Judge Decides. Not So The Second Circuit, a Federal Court

The State Supreme Court held that the issues should be decided by the jury, not a judge. But truthfully, its decision is based on the parties.

Since the Financial Recession, the judiciary has been tasked to defend the Banks at all costs. This is evident with the flip-flopping opinions on appeal, which, when compared between cases and courts, generally will contradict one another in order to lean toward the bank, especially when there’s been a negative decision for them in the lower court(s).

Herein, we’ve taken the NY appellate court deciding to reverse a decision in favor of the insurer of loans and said – it needs to go to a jury trial. However, when it does go to a jury trial, then they reverse the jury too.

For example, in this article, the jury awarded $1.2 Billion dollars against Countrywide (Bank of America) and other penalties, but the Court of Appeals for the Second Circuit (Federal court) reversed.

This happens often, so jury trials are being nullified and undermined and basically becoming extinct as only around 5% of cases go to a jury nowadays.

We’re also fed up with the over-complication of the facts and obfuscation of all these laws which courts use as a means to throw smoke and mirrors on a cut and dried case. In short, cases involving ‘Financial Institution Fraud’ (FIF) as the FBI calls it, are what all these cases – post financial crisis – 2008. The evidence of FRAUD and GREED and CORRUPTION is overwhelming. Yet, the banksters have been walking free from both criminal and civil trials since the greatest scandal on the American people took place, also known  as the Great Recession. And it’s the judiciary who were tasked to implement this sinister scheme to allow banks to steal homes from citizens. It is undoubtedly, the most reckless and shameful of acts ever performed at the behest of  the American Government, which is owned and operated by Wall St.

Jury, Not Judge, Must Decide Meaning of Representations

OCT 18,  2018 | REPUBLISHED BY LIT: JUL 25, 2021

New York’s intermediate appellate court reversed a grant of summary judgment in favor of plaintiff MBIA Ins. Corp.[1] MBIA, an insurer of RMBS trusts and a common plaintiff in this type of litigation, had sued Credit Suisse, the sponsor of the trusts.

The trial court had ruled as a matter of law that a “No Monetary Default” representation and warranty (R&W) encompassed borrower misrepresentation. The trial court also had ruled as a matter of law that the “Mortgage Loan Schedule” R&W guaranteed not just that the Mortgage Loan Schedule (MLS) had accurately transcribed information from the loan file, but also the underlying accuracy of the information in the MLS.

In a unanimous panel opinion authored by Judge Manzanet-Daniels, the Supreme Court Appellate Division reversed on both points. The Court held that both issues should be decided by the jury.

Regarding the “No Monetary Default” R&W, the Court followed its prior decision in Ambac Assur. Corp. v. Countrywide Home Loans, Inc. interpreting a materially-identical R&W.[2] The First Department had concluded that “the better course is to hold a trial to inquire into and develop the facts to clarify the relevant legal principles and their application to the [R&Ws].”[3]

Regarding the “Mortgage Loan Schedule” R&W, the Court again looked to previous case law, this time turning to Delaware. In Bear Stearns Mtge. Funding Trust 2007-AR2 v EMC Mtge., LLC, the Delaware Chancery Court had held that a trial was required to determine whether a materially-identical MLS Rep guaranteed “underlying truthfulness,” as opposed to “accurate transcription.”[4]

Both of these R&Ws,”No Monetary Default” and “Mortgage Loan Schedule”, have been frequently litigated in mortgage cases, and likely will be again in the future. The MBIA v. Credit Suisse ruling provides defendants (whether sponsors, originators, or others) with additional authority to resist summary judgment and, at a minimum, argue their cases to the fact-finder at trial.

[1] MBIA Ins. Corp. v. Credit Suisse Sec. (USA) LLC, 2018 BL 330243 (App Div, 1st Dept Sept. 13, 2018).

[2] 151 AD3d 83 (1st Dept 2017)

[3] Id. at 89

[4] 2014 Del Ch LEXIS 300, *5 (Del. Ch. 2014).

FBI Investigates: Financial Institution / Mortgage Fraud

JUL 25, 2021

The FBI is committed to aggressively pursuing those who endanger the stability of our banking system and the safety of assets and personal information the public has entrusted to its care. In financial institution fraud (FIF) investigations, the Bureau continues to concentrate its efforts on organized criminal groups that prey on banks and engage in patterns of activity that lead to large aggregate losses. When FIF schemes involve single actors, the FBI prioritizes cases with high losses or significant community impact.

Financial Institution Fraud (FIF)

Financial institution fraud (FIF) is the class of criminal schemes targeting traditional retail banks, credit unions, and other federally-insured financial institutions. Many FIF schemes involve the compromise of customers’ accounts or personal identifying information (PII); when identities are stolen, both the financial institution and customers are considered victims.

FIF can be categorized as either external—when perpetrators have no affiliation with the victim institution—or internal—when bank employees use their access to accounts and systems and knowledge of policies to commit fraud. Commonly investigated external FIF schemes include stolen or counterfeit checks, account holder impersonation, access device fraud (misuse/unauthorized use of debit cards), credit card scams, and email hacking leading to loss. Unfortunately, as technology creates increased convenience and accessibility for customers, it also creates opportunity for criminal actors.

Embezzlement and misapplication of funds are two of the most common internal FIF schemes encountered in FBI investigations. And when the fraud is egregious enough, it can lead to the complete failure of the federally-insured financial institution.

Mortgage Fraud

Mortgage fraud is a sub-category of FIF. It is crime characterized by some type of material misstatement, misrepresentation, or omission in relation to a mortgage loan which is then relied upon by a lender. A lie that influences a bank’s decision—about whether, for example, to approve a loan, accept a reduced payoff amount, or agree to certain repayment terms—is mortgage fraud. The FBI and other entities charged with investigating mortgage fraud, particularly in the wake of the housing market collapse, have broadened the definition to include frauds targeting distressed homeowners.

There are two distinct areas of mortgage fraud—fraud for profit and fraud for housing.

Fraud for profit:

Those who commit this type of mortgage fraud are often industry insiders using their specialized knowledge or authority to commit or facilitate the fraud. Current investigations and widespread reporting indicate a high percentage of mortgage fraud involves collusion by industry insiders, such as bank officers, appraisers, mortgage brokers, attorneys, loan originators, and other professionals engaged in the industry. Fraud for profit aims not to secure housing, but rather to misuse the mortgage lending process to steal cash and equity from lenders or homeowners.

The FBI prioritizes fraud for profit cases.

Fraud for housing:

This type of fraud is typically represented by illegal actions taken by a borrower motivated to acquire or maintain ownership of a house. The borrower may, for example, misrepresent income and asset information on a loan application or entice an appraiser to manipulate a property’s appraised value.

The FBI seeks to maximize its impact on the mortgage fraud and financial institution fraud as a whole thorough collaboration.

For example, the Bureau operates Financial Crimes Task Forces within several field offices throughout the country that act as force multipliers in addressing large scale financial fraud schemes. Comprised of federal, state, and local regulatory and law enforcement agencies who work together on a daily basis, these tasks forces have been an effective way to merge valuable resources of participating agencies.

The FBI also participates in both formal and ad hoc interagency working groups that address FIF and mortgage fraud matters. These task forces and working groups—comprised of federal, state, and local regulatory and law enforcement agencies nationwide, along with private industry to include bank security investigators—meet routinely to share intelligence, de-conflict cases, and initiate joint investigations.

By leveraging the skills, knowledge, and resources of various government agencies and private industry, the FBI and its partners are able to bring more perpetrators of fraud to justice.

Common Mortgage Fraud Schemes

Foreclosure rescue schemes: The perpetrators identify homeowners who are in foreclosure or at risk of defaulting on their mortgage loan and then mislead them into believing they can save their homes by transferring the deed or putting the property in the name of an investor. The perpetrators profit by selling the property to an investor or straw borrower, creating equity using a fraudulent appraisal, and stealing the seller proceeds or fees paid by the homeowners. The homeowners are sometimes told they can pay rent for at least a year and repurchase the property once their credit has been reestablished. However, the perpetrators fail to make the mortgage payments and usually the property goes into foreclosure.

Loan modification schemes: Similar to foreclosure rescue scams, these schemes involve perpetrators purporting to assist homeowners who are delinquent in their mortgage payments and are on the verge of losing their home by offering to renegotiate the terms of the homeowners’ loan with the lender. The scammers, however, demand large fees up front and often negotiate unfavorable terms for the clients, or do not negotiate at all. Usually, the homeowners ultimately lose their homes.

Illegal property flipping: Property is purchased, falsely appraised at a higher value, and then quickly sold. What makes property flipping illegal is the fraudulent appraisal information or false information provided during the transactions. The schemes typically involve one or more of the following: fraudulent appraisals; falsified loan documentation; inflated buyer income; or kickbacks to buyers, investors, property/loan brokers, appraisers, and title company employees.

Builder bailout/condo conversion: Builders facing rising inventory and declining demand for newly constructed homes employ bailout schemes to offset losses. Builders find buyers who obtain loans for the properties but who then allow the properties to go into foreclosure. In a condo conversion scheme, apartment complexes purchased by developers during a housing boom are converted into condos, and in a declining real estate market, developers often have excess inventory of units. So developers recruit straw buyers with cash-back incentives and inflate the value of the condos to obtain a larger sales price at closing. In addition to failing to disclose the cash-back incentives to the lender, the straw buyers’ income and asset information are often inflated in order for them to qualify for properties that they otherwise would be ineligible or unqualified to purchase.

Equity skimming: An investor may use a straw buyer, false income documents, and false credit reports to obtain a mortgage loan in the straw buyer’s name. Subsequent to closing, the straw buyer signs the property over to the investor in a quit claim deed, which relinquishes all rights to the property and provides no guaranty to title. The investor does not make any mortgage payments and rents the property until foreclosure takes place several months later.

Silent second: The buyer of a property borrows the down payment from the seller through the issuance of a non-disclosed second mortgage. The primary lender believes the borrower has invested his own money in the down payment, when in fact, it is borrowed. The second mortgage may not be recorded to further conceal its status from the primary lender.

Home equity conversion mortgage (HECM): A HECM is a reverse mortgage loan product insured by the Federal Housing Administration to borrowers who are 62 years or older, own their own property (or have a small mortgage balance), occupy the property as their primary residence, and participate in HECM counseling. It provides homeowners access to equity in their homes, usually in a lump sum payment. Perpetrators taking advantage of the HECM program recruit seniors through local churches, investment seminars, and television, radio, billboard, and mailer advertisements.

The scammers then obtain a HECM in the name of the recruited homeowner to convert equity in the homes into cash. The scammers keep the cash and pay a fee to the senior citizen or take the full amount unbeknownst to the senior citizen. No loan payment or repayment is required until the borrower no longer uses the house as a primary residence.

In the scheme, the appraisals on the home are vastly inflated and the lender does not detect the fraud until the homeowner dies and the true value of the property is discovered.

Commercial real estate loans: Owners of distressed commercial real estate (or those acting on their behalf) obtain financing by manipulating the property’s appraised value. Bogus leases may be created to exaggerate the building’s profitability, thus inflating the value as determined using the ‘income method’ for property valuation.

Fraudulent appraisals trick lenders into extending loans to the owner. As cash flows are lower than stated, the borrower struggles to maintain the property and repairs are neglected. By the time the commercial loans are in default, the lender is often left with dilapidated or difficult-to-rent commercial property. Many of the methods of committing mortgage fraud that are found in residential real estate are also present in commercial loan fraud.

Air loans: This is a nonexistent property loan where there is usually no collateral. Air loans involve brokers who invent borrowers and properties, establish accounts for payments, and maintain custodial accounts for escrows. They may establish an office with a bank of telephones, each one used as the fake employer, appraiser, credit agency, etc., to fraudulently deceive creditors who attempt to verify information on loan applications.

Judge Wesley, Second Circuit Court of Appeals Nullifies $1.2B Award by Jury

So this $1.2 Billion dollar judicial award against Countrywide’s fraud and predatory was announced in 2014, reaffirmed in 2015 by Judge Jed S. Rakoff, and as expected appealed and the award reversed and remanded to dismiss the case by a corrupt Appeals Court in 2016 with one of the most ridiculous arguments in an opinion authored by Judge Richard C. Wesley of the 2nd Circuit that we have ever read; United States ex rel. O’Donnell v. Countrywide Home Loans, Inc., 822 F.3d 650 (2d Cir. 2016)

MBIA Ins. Corp. v Credit Suisse Sec. (USA) LLC

NY Slip Op 06060

Decided on September 13, 2018


Appellate Division, First Department

Manzanet-Daniels, J., J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the Official Reports.

Decided on September 13, 2018 SUPREME COURT, APPELLATE DIVISION First Judicial Department
Dianne T. Renwick,J.P.
Sallie Manzanet-Daniels
Richard T. Andrias
Cynthia S. Kern
Jeffrey K. Oing, JJ.

[*1]MBIA Insurance Corp., Plaintiff-Appellant-Respondent,


Credit Suisse Securities (USA) LLC, et al., Defendants-Respondents-Appellants, Select Portfolio Servicing, Inc., Defendant.

Cross appeals from the order of the Supreme Court, New York County (Shirley Werner Kornreich, J.), entered March 31, 2017, which, insofar as appealed from as limited by the briefs, granted defendants’ motion for summary judgment dismissing the fraudulent inducement claim, denied so much of plaintiff’s motion for summary judgment as sought a ruling that an insurer does not have to prove loss causation in connection with a fraudulent inducement claim, granted so much of plaintiff’s motion as sought a ruling on the meaning of the “No Monetary Default” representation and the “Mortgage Loan Schedule” representation in the Pooling and Service Agreement for the subject residential mortgage-backed securitization transaction, and denied plaintiff’s motion to supplement the record in opposition to defendants’ motion.

Patterson Belknap Webb & Tyler LLP, New York (Erik Haas and Catherine A. Williams of counsel),

and Kasowitz Benson Torres LLP, New York (Marc E. Kasowitz and Kenneth R. David of counsel), for appellant-respondent.

Orrick, Herrington & Sutcliffe LLP, New York (Barry S. Levin, John Ansbro, Richard A. Jacobsen and Paul F. Rugani of counsel), for respondents-appellants.


This appeal concerns the propriety of the motion court’s dismissal of plaintiff’s (MBIA) fraudulent inducement claim and concomitant ruling that MBIA is required to prove loss causation as an element of its fraud claim.

In 2007, defendant DLJ Mortgage Capital Inc. (DLJ), as sponsor, amassed a loan “pool” comprised of over 15,000 second- lien residential mortgage loans with an aggregate outstanding principal balance of approximately $900 million, which was then transferred to a trust, known as the Home Equity Mortgage Trust 2007-2 (HEMT 2007-2), formed by defendant Credit Suisse Securities (USA) LLC.

Credit Suisse then served as the underwriter of the mortgage loan pool, and marketed residential mortgage-backed securities to investors.

Credit Suisse solicited MBIA, a monoline insurance company, to issue an irrevocable financial guaranty insurance policy guaranteeing payments of interest and principal to purchasers of the securities in the event that the pool of loans in the trust did not generate sufficient income to cover the payments.

After having an opportunity to perform due diligence and evaluate the transaction’s risks,[FN1] MBIA issued a $767 million unconditional and irrevocable insurance policy on HEMT 2007-2. The deal documents contained a number of representations and warranties (R & W). The representations at issue here are the “No Monetary Default” representation (No Monetary Default Rep) and the “Mortgage Loan Schedule” representation (MLS Rep).

The former provided that

“[t]here is no material monetary default existing under any Mortgage or the related Mortgage Note and there is no material event that, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration under the Mortgage or the related Mortgage Note….”

The latter provided that “[t]he information set forth in the Mortgage Loan Schedule . . . is complete, true and correct in all material respects as of the Cut-off Date.” The attached schedule contained information about the transaction loans, including debt-to-income ratio, the borrowers’ credit scores, and the original principal balances.

The insurance agreement limited MBIA’s remedy for breach of the Pooling and Service Agreement’s (PSA) warranties to the “repurchase protocol” set forth in section 2.03(e) of the PSA, which makes repurchase the sole remedy as to any non-conforming loan where the loan breach materially and adversely affects the interests of the certificateholders or MBIA.

As a result of the 2008 financial crisis, loans representing 51% of the original loan balance defaulted, requiring MBIA to make over $296 million in claim payments. MBIA demanded that Credit Suisse repurchase those loans. Credit Suisse declined to repurchase them.

On December 24, 2009, MBIA initiated this action, alleging that it was fraudulently induced to participate in the transaction by defendants’ false representations concerning:

(1) the attributes of the securitized loans;

(2) defendants’ adherence to certain strict underwriting guidelines used to select the loans underlying the transaction;


(3) the due diligence conducted by defendants on the securitized loans to ensure compliance with the guidelines.

MBIA also alleged that defendants induced it to participate in the transaction by making numerous false R & Ws in the insurance agreement and in other transaction documents.

The complaint asserted various causes of action, including fraudulent inducement, breach of R & Ws, breach of the repurchase obligation, breach of the implied duty of good faith and fair dealing, and material breach of the insurance agreement.

On January 30, 2013, MBIA filed an amended complaint asserting, inter alia, fraudulent inducement, breach of the insurance agreement, and breach of the PSA’s repurchase protocol, and seeking compensatory, consequential, rescissory, and punitive damages.

MBIA moved for summary judgment on the meaning of the MLS Rep and the No Monetary Default Rep, and on the standard applicable to its fraudulent inducement claim. MBIA argued that Insurance Law §§ 3105 and 3106 eliminated the common-law elements of loss causation and justifiable reliance.

Credit Suisse and DLJ (defendants) moved for summary judgment dismissing the fraudulent inducement claim, arguing that MBIA was unable to establish the element of justifiable reliance and that the fraud claim should be dismissed because the damages sought were duplicative of the damages available on the contractual “put-back” claims.

They also sought a ruling that the MLS Rep and the No Monetary Default Rep should not be interpreted as tantamount to a “no-fraud representation.”

The motion court granted in part and denied in part the motions for summary judgment.

The court granted MBIA partial summary judgment with respect to the meaning of the MLS and No Monetary Default warranties. The court agreed with MBIA that the MLS warranty served to guarantee the accuracy of the information in the MLS, not merely that the information had been accurately transcribed from the loan file.

The court rejected Credit Suisse’s argument that so construing the warranty would in effect be tantamount to imposing a “no fraud rep,” which Credit Suisse had declined to give.

With respect to the No Monetary Default Rep, the court rejected Credit Suisse’s argument that the representation merely provided assurance that borrowers were not materially delinquent on the financial obligations under the mortgages and applied only to curable defaults, finding that such an interpretation would render the ” no material event’ language to be surplusage.”

The court rejected MBIA’s argument that sections 3105 and 3106 of the Insurance Law altered or eliminated any of the elements or standards that would otherwise be applicable to MBIA’s claim that it had been fraudulently induced to issue the financial guaranty insurance for the transaction.

The motion court reasoned that

“[s]ince § 3105 is silent on the issue of loss causation and it is clear from § 3106 that insurance companies cannot avoid liability due to false warranties if such losses are not related to the subject matter of the warranty, harmonizing §§ 3105 and 3106 requires MBIA to prove loss causation when its claim is based on false warranties.”

The motion court accordingly held that MBIA was foreclosed from recovering losses attributable to conforming loans, explaining that those losses “do not arise from a breach,” and represent “the very risk [the insurer] assumed” (internal quotation marks omitted). The court noted that recovery for such conforming loans was “simply a species of rescissory damages,” which under precedent were not recoverable.

The motion court dismissed the remainder of the fraudulent inducement claim on the basis that the available fraud damages were “entirely duplicative of what [MBIA] would recover on its contractual put-back claims.”

The court found that the possibility of punitive damages was not a basis for maintaining an otherwise duplicative fraud claim. Having dismissed the fraud claim on these bases, the motion court did not reach the issue of justifiable reliance.

We now modify to deny plaintiff’s motion for summary judgment as to the meaning of the No Monetary Default Rep and the MLS Rep, and otherwise affirm.

MBIA seeks “Claims Payment Damages” and “Repurchase Damages.” The “Claims Payment Damages” consist of “all claims payments that MBIA has made . . . or will likely incur,” and are designed to put MBIA in the same position it would have been in had the policy never been issued. As such, they constitute rescissory damages and are not recoverable by [*2]plaintiff monoline insurer seeking redress under an irrevocable policy. We have made clear that an insurer is “not entitled to damages amounting to all claims payments it made or will make under the policies,” inasmuch as such damages are “rescissory damages to which the insurer is not entitled”

(see Ambac Assur. Corp. v Countrywide Home Loans, Inc. (151 AD3d 83, 88 [1st Dept 2017], affd ___ NY3d ___, 2018 NY Slip Op 04686 [June 27, 2018]).

“Repurchase Damages” represent the difference between the claims payments MBIA made or is projected to incur, and those MBIA would have made had Credit Suisse repurchased nonconforming lines, i.e., those that breached the representations and warranties.

While such repurchase damages are in theory recoverable, the fraud claim was nonetheless correctly dismissed.

It has long been the rule that parties may not assert fraud claims seeking damages that are duplicative of those recoverable on a cause of action for breach of contract (see e.g. Manas v VMS Assoc., LLC, 53 AD3d 451, 454 [1st Dept 2008]).

As we noted in Manas, fraud damages are meant to redress a different harm than damages on a cause of action for breach of contract.

Contract damages are meant to restore the nonbreaching party to as good a position as it would have been in had the contract been performed; fraud damages are meant to indemnify losses suffered as a result of the fraudulent inducement (see id.).

Where all of the damages are remedied through the contract claim, the fraud claim is duplicative and must be dismissed (see id.; see also Chowaiki & Co. Fine Art Ltd. v Lacher, 115 AD3d 600, 600-601 [1st Dept 2014] [dismissing fraud claim seeking duplicative damages even where, as here, the plaintiff sufficiently alleged breach of an independent duty owed them independent of the contract];

Triad Intl Corp. v Cameron Indus., Inc., 122 AD3d 531, 531-532 [1st Dept 2014] [affirming dismissal of fraud claim where the damages sought on the fraud claim were duplicative, explaining that “plaintiff seeks the same compensatory damages for both claims . . . . Its purported fraud damages are actually contract damages”];

Mosaic Caribe, Ltd. v AllSettled Group, Inc., 117 AD3d 421, 422-423 [1st Dept 2014] [fraud claim duplicative of a breach of contract claim where the fraud claim sought the same damages, namely return of the deposit paid by the plaintiff under the contract]).

MBIA’s claim that a different measure of interest might apply to a judgment related to a fraud, as opposed to a contract claim, is irrelevant, as interest is not an element of compensatory damages either in contract or in fraud.

Nor does MBIA’s request for punitive damages change the result. A party cannot bootstrap a fraud claim seeking duplicative relief merely by alleging a potential for punitive damages (see Mosaic Caribe, 117 AD3d at 422).

In connection with the foregoing, the court correctly determined that the fraudulent inducement claim is subject to the common-law fraud element of loss causation (see Ambac, 151 AD3d at 86-87).

To the extent ever in doubt, the Court of Appeals has now conclusively ruled that the provisions of the Insurance Law cited by MBIA did not displace the common-law elements of justifiable reliance and loss causation in a cause of action for fraudulent inducement (2018 NY Slip Op 04686).

The Court found that “[s]ection 3105 does not provide an affirmative, freestanding, fraud-based case of action” and does not ” inform’ a court’s assessment of the longstanding common law elements of fraudulent inducement” (id. at *3).

Given the grounds for the dismissal of the fraud claim, i.e., duplicative damages, the court properly denied plaintiff’s motion to supplement the record in opposition to defendant’s motion with evidence that would bolster the factual allegations of fraud.

The court erred in granting MBIA’s motion for summary judgment as to the meaning of the No Monetary Default Rep and the MLS Rep.

In Ambac, this Court examined a materially identical No Monetary Default Rep. We held that the motion court erred in interpreting it, as a matter of law, to include borrower misrepresentation, explaining that “the better course is to hold a trial to inquire into and develop the facts to clarify the relevant legal principles and their application to the [] representations and warranties”

(151 AD3d at 89 [internal quotation marks [*3]omitted]).

That holding squarely applies to the No Monetary Default Rep, which is materially identical to the one at issue in Ambac.

Credit Suisse offers a compelling argument that the motion court’s broad interpretation of the representation was not correct.[FN2]

Similar reasoning requires denial of summary judgment as to the meaning of the MLS Rep

(see Bear Stearns Mtge. Funding Trust 2007-AR2 v EMC Mtge. LLC (2014 Del Ch LEXIS 300, *5 [Del Ch 2014] [holding that a trial was required to determine whether a materially identical MLS Rep guaranteed “underlying truthfulness,” as opposed to “accurate transcription”]).

Accordingly, the order of the Supreme Court, New York County (Shirley Werner Kornreich, J.), entered March 31, 2017, which, insofar as appealed from as limited by the briefs, granted defendants’ motion for summary judgment dismissing the fraudulent inducement claim,

denied so much of plaintiff’s motion for summary judgment as sought a ruling that an insurer does not have to prove loss causation in connection with a fraudulent inducement claim,

granted so much of plaintiff’s motion as sought a ruling on the meaning of the “No Monetary Default” representation and the “Mortgage Loan Schedule” representation in the Pooling and Service Agreement for the subject residential mortgage-backed securitization transaction,

and denied plaintiff’s motion to supplement the record in opposition to defendants’ motion, should be modified, on the law, to deny plaintiff’s motion as to the meaning of the representations,

and otherwise affirmed, without costs.

All concur.

Order, Supreme Court, New York County (Shirley Werner Kornreich, J.), entered March 31, 2017, modified, on the law, to deny plaintiff’s motion as to the meaning of the representations, and otherwise affirmed, without costs.

Opinion by Manzanet-Daniels, J. All concur.

Renwick, J.P., Manzanet-Daniels, Andrias, Kern, Oing, JJ.






Footnote 1:

MBIA did not conduct its own loan-level review. Indeed, MBIA admits that it made a business decision to forgo reviewing the loans, a practice it had previously employed.

Footnote 2:

Credit Suisse asserts that “borrower fraud” does not fit within the plain meaning of the second clause of the representation since such misrepresentation (unlike a missed payment or unpaid tax) does not require the “passage of time” to ripen into a default but constitutes a default from the moment it is made (see Bear Stearns Mtge. Funding Trust 2007-AR2 v EMC Mtge. LLC (2014 Del Ch LEXIS 300, *7 [Del Ch 2014] [“fraud generally has no grace period and cannot be cured”]).

Rewind 2008: ResCap Settlement In Re Home Loan Center (HLC) aka LendingTree Update

LendingTree will be responsible for the difference of $58.5 million minus the amount that ResCap receives through the HLC Bankruptcy.

Predatory Lending and Financial Institution Fraud is a Financial Windfall in Federal Court for ResCap

The case is now on appeal to the 8th Circuit. ResCap’s judgment found at least 64 percent of loans sold to RFC were defective.

Why Does RESCAP Receive $1.3 BILLION Dollars in “Liar Loan” Federal Court Wins and the Homeowners Zero?

The Answer; A corrupt judiciary. The elder Burkes mortgage loan is a liar loan yet the Judiciary are determined to steal their homestead.

July 15, 2013

Manhattan Supreme Court Justice Eileen Bransten is either the hardest-working judge in the city — or she’s a flagrant abuser of her state-issued parking pass.

Bransten’s cherry red Cadillac CTS sedan sits parked for hours at “No Standing” and “No Parking” zones in her upper West Side neighborhood — but neighbors say it never gets ticketed because she displays a police placard on the dashboard.

The placard — essentially a park-anywhere card doled out to select court employees — clearly says the user must be on “official police business.”

The placards are typically given to judges so they can park at courthouses or visit a crime scene without worrying about parking rules.

It’s unclear what official business Bransten is doing just steps from her home on 72nd St. near Riverside Drive, but neighbors say they often see the car sporting its placard in the neighborhood on weekends and nights when the courthouse is closed.

The News spotted Bransten’s car parked throughout the leafy neighborhood on three occasions over the span of a week — twice in “No Parking” zones and once in a “No Standing” zone.

One local said the judge’s $40,000 ride — placard prominently displayed in the dashboard — is a fixture all over the area in No-Standing and No Parking zones.

Bransten — a former president of the Association of Justices of the Supreme Court of the State of New York — has “been doing it for years,” said a neighbor, who asked not to be identified.

And she’s not the only judge apparently abusing the perk.

The placard is given out to select court employees for use on ‘official police business.’

Earlier this month, the News caught Ellen Raffaele — the wife of Queens Judge Thomas Raffaele — using her husband’s placard to park outside her job at the Board of Elections without feeding the meter.

And last year, Manhattan Judge Emily Jane Goodman was caught using her judicial placard to park for free at metered spots near her upper West Side home.

The flouting of street parking regulations in an area burdened with cumbersome street cleaning rules, no parking zones, and pricey meters is particularly annoying to residents who don’t enjoy the perk.

“It really enrages me,” said one neighbor, who only wanted to be identified as Elaine, 75. “To me its symbolic of the entitlement, and what’s happened in this country.”

The placards are given to judges so they can park at courthouses or crime scenes without worrying about parking rules.
The placards are given to judges so they can park at courthouses or crime scenes without worrying about parking rules. (Marcus Santos /For the New York Daily News)
Esme Tucker had some advice for Bransten: “Get a garage.”

“She’s cheating,” she said. “I think someone needs to find her in contempt of parking.”

A local parking agent said cops are in no position to decide if a car with a parking placard is actually on “official police business.”

“Would you write up a judge with a legitimate placard in the window?” the agent asked. “I don’t know what she’s doing.”

Bransten’s placard ensures that her car never gets ticketed.

But the agent is quick to write tickets for drivers who aren’t lucky enough to have a free parking pass.

Just around the corner from where Bransten parked her car in a “No Standing” zone one afternoon this month, a FedEx truck was hit with a $115 ticket for violating the same regulation.

Bransten – whose husband John Simpson is a former top aide to Manhattan Borough President Scott Stringer – declined to comment when the News caught up with her as she pulled out of a “No Parking” zone on Riverside Drive.

The judge aldo did not return calls for comment.

A state court spokesman said he didn’t know whether Bransten had violated the terms of the parking perk.

“There may be a reasonable explanation,” insisted spokesman David Bookstaver. “We don’t know the circumstances.”

Judges caught abusing their placard could have them revoked.

Capital One now expects to resume repurchasing shares of common stock through the end of the second quarter of 2018 under its existing board authorization

MCLEAN, Va., May 8, 2018 /PRNewswire

Capital One Financial Corporation (NYSE: COF) today announced the sale of approximately $17 Billion of first and second lien mortgages to DLJ Mortgage Capital, Inc., a subsidiary of Credit Suisse AG. The company expects to complete the transaction and record a gain in the second quarter of 2018. The company had previously announced that it ceased new originations of residential mortgages and home equity loan products.

Capital One

As a result of the portfolio sale, the company now expects to resume repurchasing shares of common stock through the end of the second quarter of 2018 under its existing board authorization.

“Strong market demand enabled us to negotiate and sign this complex transaction more quickly than we thought possible,” said R. Scott Blackley, Chief Financial Officer of Capital One.

The timing and exact amount of any Capital One common stock repurchases will depend on various factors, including market conditions, opportunities for growth, and the company’s capital position and amount of retained earnings. Capital One’s share repurchase program does not include specific price targets, may be executed through open market purchases or privately negotiated transactions, including utilizing Rule 10b5-1 programs, and may be suspended at any time.

Wells Fargo Securities, LLC and Morgan Stanley & Co., LLC acted as financial advisors to Capital One on the transaction. Wachtell, Lipton, Rosen & Katz acted as legal advisor to Capital One on the transaction.

Forward-Looking Statements
Certain statements in this release may constitute forward-looking statements, which involve a number of risks and uncertainties. Capital One cautions readers that any forward-looking information is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking information due to a number of factors, including those listed from time to time in reports that Capital One files with the Securities and Exchange Commission, including, but not limited to, the Annual Report on Form 10-K for the year ended December 31, 2017.

About Capital One
Capital One Financial Corporation ( is a financial holding company whose subsidiaries, which include Capital One, N.A., and Capital One Bank (USA), N.A., had $250.8 billion in deposits and $362.9 billion in total assets as of March 31, 2018. Headquartered in McLean, Virginia, Capital One offers a broad spectrum of financial products and services to consumers, small businesses and commercial clients through a variety of channels. Capital One, N.A. has branches located primarily in New York, Louisiana, Texas, Maryland, Virginia, New Jersey and the District of Columbia. A Fortune 500 company, Capital One trades on the New York Stock Exchange under the symbol “COF” and is included in the S&P 100 index.

Cision View original content with multimedia:

SOURCE Capital One Financial Corporation

Investor Relations, Jeff Norris, 703.720.2455, Danielle Dietz, 703.720.2455, Media Relations, Tatiana Stead, 703.720.2352, Sie Soheili, 703.720.3929

Ambac Assur. Corp. v Countrywide Home Loans, Inc. 2017

NY Slip Op 03919

Decided on May 16, 2017


Appellate Division, First Department Richter, J.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the Official Reports.

Decided on May 16, 2017 SUPREME COURT, APPELLATE DIVISION First Judicial Department
Rosalyn H. Richter, J.P.
Sallie Manzanet-Daniels
Judith J. Gische
Troy K. Webber
Marcy L. Kahn, JJ.

[*1]Ambac Assurance Corporation, et al., Plaintiffs-Appellants-Respondents,


Countrywide Home Loans, Inc., et al., Defendants-Respondents-Appellants, Bank of America Corp., Defendant. The Association of Financial Guaranty Insurers and the Securities Industry and Financial Markets Association, Amici Curiae.

Cross appeals from the orders of the Supreme Court, New York County (Eileen Bransten, J.), entered on or about October 27, 2015, which granted in part and denied in part plaintiffs’ and the Countrywide defendants’ respective motions for summary judgment.

Patterson Belknap Webb & Tyler LLP, New York (Peter W. Tomlinson, Harry Sandick and Robert P. LoBue of counsel), for appellants-respondents.

Simpson Thacher & Bartlett LLP, New York (Joseph M. McLaughlin, Shannon K. McGovern and David J. Woll of counsel), and Goodwin Procter LLP, New York (Brian D. Hail of counsel), for respondents-appellants.

Orrick, Herrington & Sutcliffe LLP, New York (Richard A. Jacobsen of counsel), for the Securities Industry and Financial Markets Association, amicus curiae.

Axinn Veltorp & Harkrider LLP, New York (Donald W. Hawthorne of counsel), for the Association of Financial Guaranty Insurers, amicus curiae.


In this action, Ambac, a financial guaranty insurer, seeks to hold Countrywide liable in connection with 17 residential mortgage-backed securitizations sponsored by Countrywide [FN1]. Upon Countrywide’s application, Ambac issued unconditional and irrevocable insurance policies for the transactions, guaranteeing the payments of principal and interest to the securitizations’ investors.

In its complaint, Ambac alleges, inter alia, that

(i) Countrywide breached various contractual representations and warranties relating to the loans and its business practices;


(ii) Countrywide fraudulently induced Ambac to issue the insurance policies by making false statements about Countrywide’s operations and the loans.

Both Ambac and Countrywide sought summary judgment on a number of issues.

The motion court granted in part and denied in part each of the parties’ motions. Both parties now appeal.

We agree with Countrywide that Ambac is required to prove all of the elements of its fraudulent inducement claim, including justifiable reliance and loss causation. The elements of a fraud cause of action are long-settled.

To establish fraud, a plaintiff must show “a misrepresentation or a material omission of fact which was false and known to be false by [the] defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury”

(Pasternack v Laboratory Corp. of Am. Holdings, 27 NY3d 817, 827 [2016] [internal quotation marks omitted] [alteration in original];

see Eurycleia Partners, LP v Seward & Kissel, LLP, 12 NY3d 553, 559 [2009]).

The element of justifiable reliance is “essential” to any fraud claim

(Basis Yield Alpha Fund Master v Morgan Stanley, 136 AD3d 136, 140 [1st Dept 2015];

see Danann Realty Corp. v Harris, 5 NY2d 317, 322 [1959]

[it is a “fundamental precept” that reliance must be justifiable in order to state a cause of action for fraud]). The Court of Appeals recently reaffirmed, in a fraud action brought by a financial guaranty insurer like Ambac here, the necessity of proving justifiable reliance

(see ACA Fin. Guar. Corp. v Goldman, Sachs & Co., 25 NY3d 1043, 1044 [2015] [“To plead a claim for fraud in the inducement . . . , [a] plaintiff must allege facts to support the claim that it justifiably relied on the alleged misrepresentations”]).

A plaintiff asserting a fraud claim must also “demonstrate that a defendant’s misrepresentations were the direct and proximate cause of the claimed losses”

(Vandashield Ltd v Isaacson, 146 AD3d 552, 553 [1st Dept 2017] [internal quotation marks omitted]).

“To establish causation, [a] plaintiff must show both that [the] defendant’s misrepresentation induced [the] plaintiff to engage in the transaction in question (transaction causation) and that the misrepresentations directly caused the loss about which [the] plaintiff complains (loss causation)”

(Laub v Faessel, 297 AD2d 28, 31 [1st Dept 2002]).

“Loss causation is the fundamental core of the common-law concept of proximate cause” and “[a]n essential element” of a fraud claim (id.).

This Court has repeatedly reaffirmed this principle (see e.g. Basis PAC-Rim Opportunity Fund (Master) v TCW Asset Mgt. Co., — AD3d &mdash, 2017 NY Slip Op 01644 [1st Dept 2017];

Gregor v Rossi, 120 AD3d 447, 448 [1st Dept 2014]; Nam Tai Elec., Inc. [*2]v UBS PaineWebber Inc., 46 AD3d 486, 488 [1st Dept 2007]; Water St. Leasehold LLC v Deloitte & Touche LLP, 19 AD3d 183, 185 [1st Dept 2005], lv denied 6 NY3d 706 [2006]).

There is no merit to Ambac’s contention that Insurance Law § 3105 dispenses with the common-law requirement of proving justifiable reliance and loss causation. Nor can that statute be used affirmatively as a basis to recover monetary damages. Insurance Law § 3105 provides that a material misrepresentation “shall avoid [a] contract of insurance” and “defeat recovery thereunder” (Insurance Law § 3105[b][1]).

This Court recently observed that “Insurance Law § 3105 does not, by its terms, create a cause of action, but merely codifies common law [insurance] principles”

(CIFG Assur. N. Am., Inc. v J.P. Morgan Sec. LLC, 146 AD3d 60, 68 [1st Dept 2016];

[FN2] see Kaplan & Gross, Commentaries on the Revised Insurance Law of New York § 149 at 338 [1940]

[predecessor statute to section 3105 “restates generally, . . . in codified form, common law principles long established in the field of insurance”]).

At the outset, we note that, in its complaint, Ambac does not even reference Insurance Law § 3105, and pleads only

common-law fraudulent inducement. Nevertheless, Ambac contends that its fraud claim is “informed” by that statute. By its express terms, Insurance Law § 3105 has no applicability here. It merely permits an insurer, in the event of a material misrepresentation, to either “avoid [a] contract of insurance” (i.e., pursue the remedy of rescission) or “defeat recovery” under the insurance contract (i.e., defeat an insured’s claim for payment) (Insurance Law § 3105[b][1];

see 128 Hester LLC v New York Mar. & Gen. Ins. Co., 126 AD3d 447, 447 [1st Dept 2015]

[“a material misrepresentation made at the time an insurance policy is being procured may lead to a policy being rescinded and/or avoided”]).

Cases applying Insurance Law § 3105 arise in the context of either a declaratory judgment action by an insurer seeking rescission of an insurance policy or an insurer asserting a defense to an insured’s claim for payment under the policy

(see e.g. Arch Specialty Ins. Co. v Kam Cheung Constr., Inc., 104 AD3d 599 [1st Dept 2013]; Rampersant v Nationwide Mut. Fire Ins. Co., 71 AD3d 972 [2d Dept 2010];

Kiss Constr. NY, Inc. v Rutgers Cas. Ins. Co., 61 AD3d 412 [1st Dept 2009];

Vebeliunas v American Nat. Fire Ins. Co., 156 AD2d 555 [2d Dept 1989]).

Here, Ambac seeks neither to rescind the policies, which are unconditional and irrevocable, nor to defeat a claim by an insured for payment. Instead, Ambac seeks to assert Insurance Law § 3105 as an affirmative claim seeking monetary damages. Under these circumstances, Insurance Law § 3105 is not applicable.[FN3]

Furthermore, Insurance Law § 3105 contains no language suggesting that the legislature intended to relax the well-settled elements of a common-law fraud cause of action. Statutes in derogation of the common law must be strictly construed

(see Artibee v Home Place Corp., 28 NY3d 739, 748 [2017]).

“The common law is never abrogated by implication, but on the [*3]contrary it must be held no further changed than the clear import of the language used in a statute absolutely requires”

(Gottlieb v Kenneth D. Laub & Co., 82 NY2d 457, 465 [1993], quoting McKinney’s Cons Laws of NY, Book 1, Statutes § 301[b]).

Here, the words “fraud,” “justifiable reliance” and “causation” appear nowhere in the statute. Nor does Ambac cite to any statement of legislative intent or legislative history indicating that Insurance Law § 3105 was intended to alter the essential elements of a fraud claim.[FN4]

The court correctly found that Ambac is not entitled to damages amounting to all claims payments it made or will make under the policies, regardless of whether they arise from a breach or misrepresentation. Although Ambac describes the relief it seeks as compensatory damages, it is no different from rescissory damages to which Ambac is not entitled

(see MBIA Ins. Corp., 105 AD3d at 412

[precluding financial guaranty insurer that has issued irrevocable policies from obtaining rescissory damages];

Assured Guar. Mun. Corp. v RBS Sec., Inc., 2014 WL 1855766, *2, 2014 US Dist LEXIS 63811, *4-5 [SD NY May 8, 2014, No. 13-Civ-2019 (JGK)]

[“The plaintiff cannot escape the language of its pleadings by labeling the rescissory damages it seeks as compensatory damages'”]).

We are persuaded by the arguments made by amicus curiae Securities Industry and Financial Markets Association that sound policy reasons support our conclusion. Ruling otherwise would inequitably allow Ambac to recoup the money it paid out for loans that complied with all warranties, and for which there were no misrepresentations, but which resulted in default due to the housing market collapse or other risks Ambac insured against. By issuing the irrevocable insurance policies, Ambac accepted the risk that an economic downturn could cause the loans to default and trigger its obligation to pay.

The court improperly found that the “repurchase protocol” is not Ambac’s sole remedy for its claims of breaches of various contractual representations and warranties. Section 2.01(l) of the agreements broadly provides that “the remedy with respect to any defective Mortgage Loan . . . shall be limited to [the repurchase protocol]” (emphasis added). The plain language of this provision indicates that the repurchase protocol applies to a breach of any representation or warranty relating to defective loans, and not just those specifically incorporated into section 2.01(l).

Ambac cannot avoid the consequences of the sole remedy provision by relying on what it terms “transaction-level” representations about Countrywide’s operations and financial condition, because the heart of Ambac’s lawsuit is that it was injured due to a large number of defective loans

(see Assured Guar. Corp. v EMC Mtge., LLC, 39 Misc 3d 1207[A], 2013 NY Slip Op 50519[U], *4-6 [Sup Ct, NY County 2013]).

Ambac’s reliance on Nomura Home Equity Loan, Inc., Series 2006-FM2 v Nomura Credit & Capital, Inc. (133 AD3d 96 [1st Dept 2015]) is unavailing because the sole remedy provision in that case was narrower than the one here (id. at 101).

The motion court should not have dismissed Ambac’s sixth cause of action to the extent it seeks reimbursement of certain claims payments. The plain language of Section 3.03(b) of the relevant agreements entitles Ambac to “reimbursement from Countrywide” and “full recourse against Countrywide” for claims paid as a result of Countrywide’s failure to abide by the repurchase protocol

(see Syncora Guar. Inc. v EMC Mtge., LLC, 39 Misc 3d 1211[A], 2013 NY [*4]Slip Op 50569[U], *4-6 [Sup Ct, NY County 2013]). Section 3.03(b)

makes clear that the sole remedy provision does not apply to such reimbursement claims.

However, the court correctly found that Section 3.03(c) does not evince an “unmistakably clear” intent to permit Ambac to seek reimbursement for attorneys’ fees incurred in its litigation against Countrywide

(Hooper Assoc. v AGS Computers, 74 NY2d 487, 492 [1989]).

It cannot be said that the language in that section is “exclusively or unequivocally referable to claims between the parties themselves or support[s] an inference that [Countrywide] promised to indemnify [Ambac] for counsel fees in an action on the [insurance] contract[s]”

(id.; see Gotham Partners, L.P. v High Riv. Ltd. Partnership, 76 AD3d 203, 206 [1st Dept 2010], lv denied 17 NY3d 713 [2011]).

The court erred in interpreting the “No Default” and “No Material Monetary Default” representations and warranties, as a matter of law, to include borrower misrepresentation. “[T]he better course is to hold a trial to inquire into and develop the facts to clarify the relevant legal principles and their application to” these representations and warranties (Bear Stearns Mtge. Funding Trust 2007-AR2 v EMC Mtge. LLC, 2014 WL 2469668, *2 ¶ 6 [Del Ch, June 2, 2014, No. 6861-VCL]).

Similarly, we find that disputed issues of fact exist with respect to whether the Title Insurance representation and warranty was intended to apply to every loan, including the 1,311 loans under $100,000, and as to whether Countrywide satisfied this representation and warranty with respect to certain loans.

Likewise, Ambac has not shown, as a matter of law, that 85 “stated-value loans” were subject to the “Qualified Appraiser” representation and warranty.

Finally, the court correctly found that Countrywide failed to present sufficient evidence on its summary judgment motion to establish that Ambac’s alleged purchase of discounted bonds in the securitizations mitigated its losses. In the absence of a more complete record, we decline to render what would essentially be an advisory opinion as to whether, if Countrywide obtains further information about Ambac’s alleged purchase of these bonds, it can present this evidence at trial.

Accordingly, the orders of the Supreme Court, New York County (Eileen Bransten, J.), entered on or about October 27, 2015, which granted in part and denied in part plaintiffs’ and the Countrywide defendants’ respective motions for summary judgment, should be modified, on the law, to the extent indicated herein, and otherwise affirmed, without costs.

All concur.

Orders, Supreme Court, New York County (Eileen Bransten, J.), entered on or about October 27, 2015, modified, on the law, to the extent indicated herein, and otherwise affirmed, without costs.

Opinion by Richter, J.P. All concur.

Richter, J.P., Manzanet-Daniels, Gische, Webber, Kahn, JJ.



ENTERED: MAY 16, 2017



Footnote 1:

Plaintiffs, Ambac Assurance Corporation and the Segregated Account of Ambac Assurance Corporation, are collectively referred to as Ambac. The Countrywide defendants are collectively referred as Countrywide.

Footnote 2:

In CIFG, we addressed the limited question of whether a certain entity was an “applicant for insurance” within the meaning of Insurance Law § 3105 (see 146 AD3d at 66). The parties there did not raise the issue presented here of whether that statute could be used as an affirmative basis to pursue monetary damages.

Footnote 3:

We recognize that MBIA Ins. Corp. v Countrywide Home Loans, Inc. (105 AD3d 412 [1st Dept 2013]) interpreted Insurance Law § 3105 differently and found that the plaintiff was not required to establish loss causation to prevail on its fraud claim. We decline to follow that part of the decision.

Footnote 4:

For the same reasons, Insurance Law § 3106, which allows an insurer, under certain circumstances, to “avoid an insurance contract” and “defeat recovery thereunder” for a breach of warranty (§ 3106[b]), is not applicable to Ambac’s breach of warranty causes of action, and does not alter the elements of a common-law breach of contract claim.

State Supreme Court Rules Jury, Not Judge Decides. Not So The Second Circuit, a Federal Court
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