3This case is very instructive and interesting reading and is one of the few reportedcases nationwide on this particular subject.
See also Steed Finance LDC v. Nomura Securities Intern., Inc.
, 148 Fed. Appx.66 (C.A.2 N.Y., 2005). In this case the investor in mortgage-backed securities brought asecurities fraud action against the originator of the mortgage loans. The United StatesDistrict Court for the Southern District of New York entered summary judgment in favorof the originator, and the investor appealed. The Court of Appeals held that: (1) theinvestor had access to all of the critical disclosure documents and was sufficientlyapprised of the potential risks associated with the loan to a hospital, and could not showthat it justifiably relied on any of the alleged misrepresentations or omissions; (2) theoriginator did not act with scienter required to support a securities fraud claim when itallegedly misrepresented to the investor that the hospital loan qualified as a Real EstateMortgage Investment Conduit loan and, (3) the originator was not liable to the investoron a negligent misrepresentation theory under New York law.
Ruling in Favor of Borrower – the
1601 McCarthy Boulevard
A 2005 California case,
1601 McCarthy Boulevard LLC v. GMAC Commercial Mortgage Corp.
, Case No. CGC-03-425848, California Superior Court (March 21, 2005)(unreported trial court decision) -- albeit a lower-court decision that apparently was notappealed -- concerned the actions of GMAC Commercial Mortgage Corp. (“GMAC”), asspecial servicer for a securitized loan. This case contains an interesting discussion on theuse of “material adverse change” clauses, as well as loan-workout planning and conflictsof interest. Unlike the situation in the
Blue Hills Office Park
, the specialservicer was “slammed” in this case. The following is an excellent analysis of this caseby Prof. Dale Whitman (as the “Daily Development” on the DIRT listserv for March 30,2005,
; the DIRT listserv, a superb resource for real estatelawyers, was created by, and is monitored and edited by, Professor Patrick A. Randolphof the University of Missouri -- Kansas City School of Law):LENDER LIABILITY; SPECIAL SERVICERS: Specialservicer loses suit by borrower for return of leasetermination fee, plus big punitive damages judgment.
1601 McCarthy Blvd. v. GMAC Commercial MortgageCorp
., Case No. CGC-03-425848, California SuperiorCourt, Mar. 21, 2005 (Unreported trial court decision)When commercial mortgage loans are securitized, it iscommon to have at least two servicers appointed: aprimary or master servicer, who will service the loans inthe securitized pool so long as they are current, and aspecial servicer who will take over servicing of defaultedloans. The special servicer is typically designated by the