First Department Reaffirms That Assignor’s Residence Determines Place of Accrual of Breach of Contract Claim

On December 12, 2023, the Appellate Division, First Department issued a decision in IKB International, S.A. in Liquidation v. Wells Fargo Bank, N.A. and several other consolidated actions, Case Nos. 2022-04133, 2022-04134, 2022-04178, and 2022-04194. Schlam Stone & Dolan serves as co-counsel for Plaintiffs-Respondents in these actions. The First Department affirmed the trial court’s rejection of the argument by Defendants-Appellants on summary judgment that the German statute of limitations governed the timeliness of Plaintiffs’ breach of contract claims, holding that the law of the place of the party that assigned the claims to Plaintiffs, in this case Ireland, was the proper foreign law to consider pursuant to New York’s borrowing statute, CPLR 202. The First Department explained:

Supreme Court properly found that the cause of action accrued in Ireland where Rio Debt Holdings resided. New York State’s borrowing statute, CPLR 202, provides that if a nonresident sues on a cause of action accruing outside of New York, the claim must be timely under the limitation periods of both New York and the jurisdiction where the cause of action accrued (Global Fin. Corp. v Triarc Corp., 93 NY2d 525, 528 [1999]). Furthermore, in contract cases involving a purely economic injury, such as this one, accrual is determined by the “place of injury” — usually, where the plaintiff resides and has felt the economic impact of loss (Deutsche Bank Natl. Trust Co. v Barclays Bank PLC, 34 NY3d 327, 335 [2019]; Global Fin. Corp., 93 NY2d at 528-529). Here, however, because plaintiff is asserting claims solely as an assignee, the residence of the assignor — Rio Debt Holdings — will determine the place of accrual (see e.g. Portfolio Recovery Assoc., LLC v King, 14 NY3d 410, 416 [2010]).

We decline to employ a multifactor test to determine where plaintiffs’ purported injury was felt, as such a test is contrary to Court of Appeals precedent (Deutsche Bank, 34 NY3d at 335-339). Even giving full weight to defendants’ argument that the residence of the party “who became poorer” is controlling, that entity is Rio Debt Holdings, as it owned the relevant residential mortgage-backed securities certificates at the time of the alleged loss and received the unpaid distributions on the certificates in Ireland (MLRN LLC v U.S. Bank, N.A., 217 AD3d 576, 578 [1st Dept 2023]).

While determining that the trial court properly held the German statute inapplicable, the First Department reversed the trial court insofar as it found the Irish statute of limitations period applied alone, noting that “[t]he borrowing statute calls for the comparison of New York’s period with the foreign limitations period. If the foreign limitations period is shorter, the shorter net period will determine the timeliness of the action.”

Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning the statute of limitations for your claims, New York’s borrowing statute, or motions for summary judgment.