The law can often be a stern mistress. This aphorism applies perhaps with no greater force than it does in the area of statutes of limitation, the rules which govern the time periods in which certain types of lawsuits must be filed. A recent case from Colorado demonstrates how strict these limitations can be and how tricky they can sometimes be to apply.
In July of 2005, the California Mortgage Corporation (“CMC”) made a mortgage loan to Ismael Septimo relating to particular real estate in Sacramento. About three months later the company sold the mortgage to Lehman Brothers Holdings, Inc. (“Lehman Brothers”), a Delaware corporation with its principal place of business in New York. The terms and conditions of the sale were spelled out in a Loan Purchase Agreement (“Agreement”) which incorporated a Seller’s Guide to which both parties to the sale agreed.
After Lehman Brothers turned around and itself sold the mortgage to the Federal National Mortgage Association (“FNMA”), the FNMA demanded Lehman Brothers to repurchase the loan because of mortgage defects including misrepresentations concerning purchaser’s occupancy and proper sales price. Lehman Brothers repurchased the mortgage on July 14, 2008 and on July 28, 2008 demanded CMC buy it back from them. Almost five years after the CMC failed to comply with that demand, Lehman Brothers sued CMC for breach of contract and breach of express warranty for, among other things, its failure to make material disclosures before entering in to the aforementioned Agreement.
CMC filed a motion for summary judgment in the federal court to which the case was transferred contending the applicable statute of limitations barred the suit at the time Lehman Brothers filed. Lehman Brothers argued that its particular claims did not accrue until July 28, 2008, the date it bought the loan back from FNMA. But the court rejected that argument finding that Lehman Brothers had a legal right to demand payment” on October 2, 2005, when Plaintiff purchased the subject loan and, accordingly, that is the date in which the statute of limitations started to run.
Lehman Brothers also claimed that it was a New York resident for purposes of determining which state’s law applies because New York constituted its principal place of business. But the District Court found that, as Lehman Brothers was a federally chartered savings association, and not a corporation, it was a national creation and, under the rules governing such associations, the principal place of business is the institution’s home office which the Court determined is Wilmington, Delaware.
As Delaware possesses a three-year statute of limitations, this action should have been filed within three years of the date of accrual, October 2, 2005. For these reasons, the Court granted CMC’s motion for summary judgment effectively dismissing this case, Lehman Brothers Holdings, Inc. v. California Mortgage Corporation, Civil Action No. 13-cv-02113-CMA-KMT (US. Dist. Ct. D. CO. 2014) proving again what a stern mistress these statutes of limitation can be.
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