Another loan repurchase action involving $254 million in residential mortgage-backed securities sailed through the pleadings stage after a Manhattan Commercial Division judge denied dismissal of most claims in a recent decision.

In a decision dated June 26, Justice Marcy Friedman held in Nomura Asset Acceptance Corporation Alternative Loan Trust, Series 2006-S4 v. Nomura Credit & Capital, 653390/2012, that the breach of contract claim was not time-barred under the statute of limitations and that the sole repurchase remedy provision in the parties’ agreement did not eliminate availability of damages.

HSBC Bank, as the trustee bringing suit on behalf of the RMBS certificate-holders, sued Nomura, a mortgage financing company, for its alleged failure to cure or repurchase shoddy mortgage loans that did not live up to representations and warranties in the agreements.

The trustee filed suit on Sept. 27, 2012 for breach of contract, specific performance and damages. Nomura claimed the suit was untimely since it was filed more than six years after representations were made on the “as of” date listed on the pooling and serving agreement, which was Sept. 1, 2006.

Friedman held that the accrual date of the claim was not the “as of” date but the closing date of the agreement, which in this case was Sept. 28, 2012. In a footnote, the judge noted that other jurists that have ruled on this issue since Ace Securities v. Deutsche Structured Products, 112 AD3d 522 (1st Dept. 2013)—a case that held the statute of limitations accrues not upon failure to cure or repurchase loans but upon date of the transaction—“have generally held that the closing date governs.”

The judge also said the trust can seek damages for breach of representations under the contract’s sole remedy provision, which provides for repurchase of mortgage loans.

“The court concurs with the numerous courts which, in determining motions to dismiss, have held that the damages claims are maintainable under similar sole remedy provisions,” particularly in cases where “specific performance is impossible because repurchase of the loans is not or cannot be made,” Friedman stated.

The judge, however, dismissed the rescissory damages claim, stating that the trust waived its right to seek such damages upon agreeing to the sole remedy provision, noting that “this holding is consistent with the decisions of the New York state courts” that have also ruled on this point.

Friedman was designated in a May 2013 administrative order to handle new RMBS suits to promote greater uniformity in the case law.

The plaintiff trustee is represented by a team led by Marc Kasowitz and Michael Fay of Kasowitz Benson Torres & Friedman. Nomura is represented by a team led by Joseph Frank and Matthew Craner, partners at Shearman & Sterling.