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ACE Sec. Corp. v. DB Structured Prods. Inc – Case Brief Summary (New York)

In ACE Sec. Corp. v. DB Structured Prods. Inc. (112 AD3d 522 [1st Dept 2013], lv granted 23 NY3d 906 [2014] the action was commenced by certificate holders before the time to cure under the repurchase demands had elapsed.

The Court held that " the certificate holders' failure to comply with a condition precedent to commencing suit rendered their summons with notice a nullity." (112 AD3d at 523, citing Southern Wine & Spirits of Am., Inc. v. Impact Envtl. Eng'g, PLLC, 80 AD3d 505, 915 N.Y.S.2d 541, supra [discussed at n 4].) The Court also held that "the certificate holders lacked standing to commence the action on behalf of the trust." (Id.)

Distinguishing cases in which the original and substituted plaintiffs were affiliated, the Court further held that the "substitution of the trustee as plaintiff [does not] permit us to deem timely filed the trustee's complaint." (Id.) The ACE decision thus did not state, or hold, that the failure to comply with the condition precedent of service of a repurchase demand rendered the action "untimely."

In ACE, the trial court held that the plaintiffs' "failure to wait the requisite time to bring suit [i.e., to serve a timely repurchase demand before commencement of the action] is irrelevant given the Sponsor's repudiation of its repurchase obligations under the PSA." (40 Misc 3d at 568.) The Appellate Division held that the plaintiffs' "failure to comply with a condition precedent to commencing suit rendered their summons with notice a nullity." (112 AD3d at 523.) Although the Appellate Division did not expressly address the Trustee's repudiation claim, it thus implicitly rejected it. The court must do so here as well. Moreover, ACE holds that the failure to comply with a repurchase demand is not an independent breach of contract. (Id.)