EILEEN BRANSTEN, J.

In this action for common-law fraud, aiding and abetting fraud, and fraudulent inducement, defendants Morgan Stanley ("MS"), Morgan Stanley & Co., Inc. ("MS & Co."), Morgan Stanley ABS Capital I Inc. ("MSAC"), Morgan Stanley Capital I Inc. ("MSC"), Morgan Stanley Mortgage Capital Inc. ("MSMC"), and Morgan Stanley Mortgage Capital Holdings LLC bring the instant motion to dismiss the amended complaint, pursuant to CPLR 3211. Defendants contend that plaintiffs lack standing to bring fraud claims and that plaintiffs have not pled the requisite elements to state a cause of action sounding in fraud. Plaintiffs FSA Asset Management LLC ("FSAM"), Dexia SA/NV, Dexia Holdings, Inc. ("DHI"), and Dexia Crédit Local SA ("DCL") oppose the motion.

I. Background

This action concerns 29 residential mortgage-backed securities ("RMBS"), which FSAM purchased from MS & Co in 2006 and 2007, for a total of $626 million. On June 30, 2009, FSAM assigned the securities to Dexia SA/NV, DHI, and DCL for face value, via a put option transaction. By the time this instant action was filed, all 29 RMBS at issue had been downgraded to "junk" status.

Investors in RMBS receive payments from the cash flow generated by thousands of mortgages, which have been deposited into designated pools. The actual securities held by the investor are pass-through participation certificates, which are an ownership interest in the issuing trust, the entity that holds the pools.

The first step in the securitization process is the creation of a pool of designated mortgages by the sponsor. The mortgages can be originated by the sponsor itself, purchased from other financial institutions, or be a mixture of self-originated and purchased loans. Before creating the pool, the sponsor reviews a sample of the mortgages in order to verify that they comport with underwriting guidelines.

After the pool of designated mortgages has been created by the sponsor, the mortgages are transferred to the depositor. The depositor carves up the projected cash flow from the mortgages into tranches; the tranches are ordered by seniority on the basis of risk, thus, any losses in the loan pool are applied to the junior (riskiest) tranches first. Once the tranche structure has been finalized, the proposed security is sent to rating agencies for evaluation. Next, the depositor transfers the mortgage pool to the issuing trust, which issues participation certificates for each tranche. The issuing trust then conveys the participation certificates to the depositor as consideration for the mortgages.

Once the depositor is in possession of the participation certificates, the underwriter will begin marketing the RMBS to potential investors, providing them with free writing prospectuses and term sheets. The depositor then transfers the certificates to the underwriter, who will sell them to investors and remit the proceeds to the depositor, minus underwriting fees.

In this action, MS & Co. underwrote and sold all the RMBS in dispute, MSMC was the sponsor of 15 of the 21 securitizations, MSAC served as depositor for 17 of the securitizations, and MSC served as depositor for three of the securitizations.

Plaintiffs allege they were fraudulently induced into purchasing the RMBS by defendants. Specifically, plaintiffs allege defendants misrepresented the due diligence and underwriting standards on the underlying mortgages, misrepresented the loan to value ("LTV") ratios of the mortgaged properties, and misrepresented the debt to income ("DTI") ratios of the borrowers. Plaintiffs further contend that defendants misrepresented the risks associated with the RMBS in general, and made misrepresentations to rating agencies, resulting in artificially high ratings. Plaintiffs assert that in reliance on defendants' misrepresentations, they were damaged by paying far more for the RMBS than they were worth. Plaintiffs pray for compensatory, rescissory and punitive damages, as well as costs and expenses incurred in this action.

II. Discussion

In their motion papers, defendants argue that the assignee-plaintiffs Dexia SA/NV, DHI and DCL, do not have standing to sue, because the put option transaction assigned only ownership and contractual rights, not claims sounding in tort. Defendants further argue that assignor-plaintiff FSAM may not assert fraud claims, because it was made whole when it received face value for the RMBS from the assignee-plaintiffs and therefore suffered no damages.

Plaintiffs oppose the motion, arguing that the court must take the allegation that the fraud claims were assigned by FSAM as true and, thus, deny dismissal. Plaintiffs further argue that the put option transaction did validly assign fraud claims.

A. Standing

Plaintiffs contend that the Amended Complaint's allegation that FSAM assigned "all right, title and interest' in the RMBS assets (including all rights and remedies sought in this action) [emphasis added]," (Am. Compl. ¶ 21), is sufficient in and of itself to survive defendants' motion to dismiss. The Court disagrees. "While a complaint is to be liberally construed in favor of plaintiff on a CPLR 3211 motion to dismiss, the court is not required to accept factual allegations that are plainly contradicted by the documentary evidence or legal conclusions that are unsupportable based upon the undisputed facts." Robinson v. Robinson, 303 A.D.2d 234, 235 (1st Dep't 2003). Defendants proffer the put option transaction as documentary evidence to support their argument that a valid assignment was not effected.1

The assignment language in the put option transaction is narrower than that in the amended complaint, conveying only "all right, title and interest in the Put Settlement Assets." See Reply Affirmation of James P. Rouhandeh, Ex. 1 at 11. "[T]he provisions of a contract prevail over conclusory allegations of the complaint.'" Sterling Resources Int'l, LLC v. Leerink Swann LLC, 92 A.D.3d 538, 538 (1st Dep't 2012) (quoting 805 Third Ave. Co. v. M.W. Realty Ass'n, 58 N.Y.2d 447, 451 (1983)). The court may determine the scope of the assignment from the four corners of the put option transaction. "In the absence of any ambiguity, we look solely to the language used by the parties to discern the contract's meaning." Vermont Teddy Bear Co. v. 538 Madison Realty Co., 1 N.Y.3d 470, 475 (2004).

Under New York law, absent language demonstrating an intent to do so, tort claims do not automatically pass to an assignee. The landmark case for this proposition is Fox v Hirschfeld, 157 App. Div. 364 (1st Dep't 1913). In Fox, the plaintiff alleged that he was fraudulently induced into overpaying for an apartment, but did not learn of the fraud until after closing. However, before the closing took place, the plaintiff had assignedthe purchase contract to his wife. The assignment language used by the plaintiff in Fox, is nearly identical to that used by FSAM, "I hereby sell, assign, transfer ... all my right, title, and interest in and to the within contract." Id. at 366 (internal quotation marks omitted).

The Fox defendants moved to dismiss for lack of standing, on the ground that the plaintiff had assigned the fraud claims to his wife, and the trial court granted the motion. On appeal, the First Department reversed, stating "The cause of action was, of course, assignable but the language employed in the assignment of the contract was not appropriate to assign a cause of action arising, not under the contract, but for the fraudulent representations of the defendant..." Id. at 368 (internal citations omitted).

The central holding of Fox remains good law. State of Cal. Pub. Emp. Ret. Sys. v. Shearman & Sterling, 95 N.Y.2d 427, 432 (2000) (holding that assignment of "right, title and interest in, to and under the [loan] documents" did not assign malpractice claims against the attorneys who drafted the loan documents); Argyle Capital Mgmt. Corp. v. Lowenthal, Landau, Fischer & Bring, 261 A.D.2d 282, 283 (1st Dep't 1999) ("[t]he assignment by which its interest in Jet Freight was transferred to Exchequer cannot be read to convey more than Over The Rainbow's ownership interest; there is no indication in the assignment that the transfer of any claim, much less one for fraud, was contemplated by the parties"); Banque Arabe et Internationale D'Investissement v. Maryland Nat'l Bank, 57 F.3.d 146, 151 (2d Cir. 1995) ("Under New York law, the assignment of the right to assert contract claims does not automatically entail the right to assert tort claims arising from that contract.")

While there must be a demonstration of intent to assign claims sounding in tort, "New York law does not require specific boilerplate language to accomplish the transfer of causes of action sounding in tort. Rather, any act or words are sufficient which show an intention of transferring the chose in action to the assignee.'" Id. at 151-152.

Like in Fox, the Banque Arabe court specifically held that the phrase "right, title and interest" was not demonstrative of an intent to assign tort claims, concluding that "this reference to the contract may be deemed insufficient under Fox to transfer claims for rescission or fraud in the inducement. Id. at 152. Although the Banque Arabe court did conclude there was a valid assignment of fraud claims, this holding was in reliance on additional factors and broader language elsewhere in the assignment, specifically

Id. at 152. The put option transaction has no such reference to the overall transaction between FSAM and defendants. It conveys only the "right, title and interest" in the RMBS.

Another important distinction between the valid assignment of tort claims in Banque Arabe, and the instant case, is that the terms of the assignment in Banque Arabe included the dissolution of the assignor. In Banque Arabe, the court concluded that:

Id. at 152-153. The put option transaction contained no dissolution clause, nor has it been alleged that FSAM has been dissolved. Indeed, there is no allegation or indication that FSAM lacks capacity to pursue fraud claims.

Furthermore, plaintiffs' own pleadings contradict their assertion that FSAM intended to assign fraud claims, in that they allege that "[t]he Dexia Plaintiffs could not have uncovered Morgan Stanley's fraud until 2011, at the earliest, regardless of the amount of due diligence that they performed." (Am. Compl. ¶ 259.) It is unclear how FSAM could have intended to convey fraud claims of which it was not aware, and were not discoverable for a year and a half after the assignment. "It is manifest that the plaintiff did not intend to assign the cause of action ... because neither at the time of the assignment, nor of the execution of the conveyance, had the plaintiff discovered the fraud." Fox, 157 App. Div. at 368. If FSAM had intended to assign fraud claims which they had not yet discovered, it could have included express language to that effect.

The court concludes that FSAM did not assign fraud claims to assignee-plaintiffs Dexia SA/NV, DHI and DCL; to the extent any fraud claims exist, they remain with FSAM alone.

B. FSAM's Fraud Claims

Defendants next argue that, because FSAM has suffered no damages, its fraud claims must be dismissed. This argument is premised on the fact that FSAM was paid face value for the securities by assignee-plaintiffs Dexia SA/NV, DHI and DCL and, thus, was made whole. Defendants also argue that plaintiffs have not properly pled reliance and scienter, and that the offering documents refute any claims of material misrepresentation.

FSAM opposes, claiming that it has been damaged by paying "substantially more for the RMBS than they were actually worth." (Am. Compl. ¶ 260.) It also argues that it properly pled, material misrepresentation, scienter and reasonable reliance.

The elements of plaintiffs' three causes of action for fraud, aiding and abetting fraud and fraudulent inducement are substantially identical. A "cause of action for fraud require[s] a material misrepresentation of a fact, knowledge of its falsity, an intent to induce reliance, justifiable reliance by the plaintiff and damages." Eurycleia Partners, LP v. Seward & Kissel, LLP, 12 N.Y.3d 553, 559 (2009). The failure to validly plead any one of the elements will result in the dismissal of all three causes.

In an action for fraud, "[t]he true measure of damage is indemnity for the actual pecuniary loss sustained as the direct result of the wrong or what is known as the out-of-pocket' rule." Lama Holding Co. v. Smith Barney, 88 N.Y.2d 413, 421 (1996) (internal quotation marks and citations omitted). "Damages are to be calculated to compensate plaintiffs for what they lost because of the fraud, not to compensate them for what they might have gained." Id. FSAM sustained no losses on the RMBS it purchased; it received exactly the purchase price upon the sale to the Dexia plaintiffs. There is also no allegation that pass-through payments due to FSAM as holders of the participation certificates were missed. To the extent FSAM did receive pass through payments, the RMBS were profitable to them, and there can be no claim of damages. See Jung Hing Leung v. Lotus Ride, 198 A.D.2d 155, 156 (1st Dep't 1993).

Even if the court is to accept as true that there have been material misrepresentations, scienter, and justifiable reliance by FSAM, without damages, the claims must be dismissed. Deception without damages is not actionable, nor is deception, in and of itself, a legally cognizable injury. Small v. Lorillard Tobacco Co., 94 N.Y.2d 43, 56-57 (1999).

III. Conclusion

Accordingly, it is

ORDERED that defendants' motion to dismiss the amended complaint herein is granted and the amended complaint is dismissed in its entirety, with costs and disbursements to defendants as taxed by the Clerk of the Court, and the Clerk is directed to enter judgment accordingly in favor of said defendants.