Opinion
Index No. 31752/2020
10-26-2022
BAYVIEW LOAN SERVICING, LLC, Plaintiff, v. Karen L. ALTOMONTE a/k/a/ Karen Lynn Altomonte, Mortgage Electronic Registration Systems, Inc., "MERS" Acting Solely as Nominee for American Home Mortgage; American Home Mortgage; Board of Directors of the Village Fairgrounds Homeowners Association; Sterling National Bank fka Provident Bank; LVNV Funding LLC; Capital One Bank (USA), N.A.; Midland Funding, LLC; "John Doe #1- #50" and "Mary Roe #1- #50", the last two names being fictitious, it being intended to name all other parties who may have some interest in or lien upon the premises described in the complaint, Defendants.
Schiller, Knapp, Lefkowitz & Hertzel, LLP, for Plaintiff Legal Aid Society of Rockland County, Derek Tarson, Esq., of counsel, for Defendant Karen Altomonte
Schiller, Knapp, Lefkowitz & Hertzel, LLP, for Plaintiff
Legal Aid Society of Rockland County, Derek Tarson, Esq., of counsel, for Defendant Karen Altomonte
Thomas P. Zugibe, J.
The motion is determined as follows.
Plaintiff commenced this residential foreclosure action in 2020 concerning the real property located at 34 Zugibe Court in West Haverstraw, New York, alleging that defendant borrower defaulted in payment on the parties’ 2015 loan modification. Defendant brings this CPLR 3211(a)(1) motion to dismiss alleging that plaintiff's RPAPL 1304 pre-commencement notice violated that statute's separate-envelope requirement (see ( Bank of America, N.A. v. Kessler, 202 A.D.3d 10, 160 N.Y.S.3d 277 [2d Dept. 2021] )). Plaintiff concedes that its RPAPL 1304 notice included a "mini-Miranda " warning under the Fair Debt Collection Practices Act ("FDCPA") (see 15 USC § 1692e [11]), but offers a raft of arguments why Kessler was wrongly decided, why the FDCPA pre-empts RPAPL 1304, and why this Court should stay this action pending further appeal of Kessler .
The Court need not belabor the issues. Plaintiff's strict compliance with RPAPL 1304 was a condition precedent to commence this foreclosure action (see Kessler , 202 A.D.3d at 14, 160 N.Y.S.3d 277 ; CV XXVIII, LLC v. Trippiedi , 187 A.D.3d 847, 850, 134 N.Y.S.3d 49 [2d Dept. 2020] ; U.S. Bank, N.A. v. Haliotis , 185 A.D.3d 756, 758, 128 N.Y.S.3d 17 [2d Dept. 2020] ). Plaintiff's RPAPL 1304 notice included extensive language that RPAPL 1304(1) does not specify for inclusion in a pre-commencement notice. RPAPL 1304(2) is clear that the pre-commencement notice "required by this section shall be sent by the lender, assignee or mortgage loan servicer in a separate envelope from any other mailing or notice." Additional language not "required by this section" violates the separate-envelope requirement as Kessler and its progeny have construed it over a dozen times in recent months (see e.g. Deutsche Bank Natl. Trust Co. v. Ghosh , 208 A.D.3d 851, 174 N.Y.S.3d 708 [2d Dept.2022] ; JPMorgan Chase Bank, N.A. v. Dedvukaj , 207 A.D.3d 532, 169 N.Y.S.3d 805 [2d Dept. 2022] ; U.S. Bank, N.A. v. Lanzetta , 207 A.D.3d 501, 169 N.Y.S.3d 533 [2d Dept.2022] ; Wells Fargo Bank, N.A. v. Bedell , 205 A.D.3d 1064, 166 N.Y.S.3d 905 [2d Dept.2022] ; HSBC Bank USA, N.A. v. Hibbert , 205 A.D.3d 783, 784, 165 N.Y.S.3d 860 [2d Dept. 2022] ; US Bank, N.A. v. Drakakis , 205 A.D.3d 756, 757, 165 N.Y.S.3d 745 [2d Dept. 2022] ; Bank of NY Mellon v. Govan , 204 A.D.3d 878, 164 N.Y.S.3d 840 [2d Dept. 2022] ; HSBC Bank USA, N.A. v. Jahaly , 204 A.D.3d 648, 163 N.Y.S.3d 843 [2d Dept. 2022] ; US Bank, N.A. v. Hinds , 203 A.D.3d 1210, 165 N.Y.S.3d 127 [2d Dept.2022] ; Deutsche Bank Natl. Trust Co. v. Bancic , 203 A.D.3d 1130, 165 N.Y.S.3d 132 [2d Dept. 2022] ; Deutsche Bank Natl. Trust Co. v. Salva , 203 A.D.3d 700, 160 N.Y.S.3d 645 [2d Dept. 2022] ; US Bank, N.A. v. Kaplan , 202 A.D.3d 1144, 159 N.Y.S.3d 915 [2d Dept. 2022] ; Ocwen Loan Servicing, LLC v. Sirianni , 202 A.D.3d 702, 163 N.Y.S.3d 110 [2d Dept. 2022] ; Wells Fargo Bank, N.A. v. DeFeo , 200 A.D.3d 1105, 161 N.Y.S.3d 218 [2d Dept. 2021] ; CitiMortgage, Inc. v. Dente , 200 A.D.3d 1025, 155 N.Y.S.3d 813 [2d Dept. 2021] ). As such, defendant carries her prima facie burden to demonstrate entitlement to judgment sustaining his RPAPL 1304 affirmative defense and, on that basis, obtain summary judgment dismissing this action.
In opposition, plaintiff argues that an additional notice conveying federally required materials inside an RPAPL 1304 envelope cannot violate Kessler and its progeny under two recent cases sounding in federal preemption (see CIT Bank, N.A. v. Neris , ––– F. Supp. 3d ––––, 2022 WL 1799497 [S.D.N.Y., Jun 2, 2022] ); Bank of N.Y. Mellon v. Luria , 76 Misc. 3d 724, 171 N.Y.S.3d 807 [Sup. Ct. Putnam Co, 2022] [" Luria I "]. The thrust of Neris and Luria I was that a residential foreclosure plaintiff is a debt collector under the FDCPA (see 15 USC § 1692a [6][A], [F]; see also Cohen v. Rosicki, Rosicki & Assocs. , 897 F.3d 75 [2d Cir. 2018], cf. Obduskey v. McCarthy & Holthus LLP , ––– U.S. ––––, 139 S. Ct. 1029, 203 L.Ed.2d 390 [2019] ), and therefore must issue a so-called FDCPA "mini-Miranda " warning on its "initial communication" to the debtor to collect on that debt (see 15 USC § 1692e [11]; cf. 15 USC § 1692a [11] [excluding formal pleadings from FDCPA "mini-Miranda " requirement]). The argument continues that an RPAPL 1304 notice constituting a debt-collection communication therefore must convey this "mini-Miranda " warning, so under the Supremacy Clause (see US Const, art VI, cl 2 ), the separate-envelope requirement of RPAPL 1304(2) — and Kessler and its progeny construing that requirement — must yield to the FDCPA.
Plaintiff's argument fails. Plaintiff fails to show that anything in RPAPL 1304, or any federal or state statute, requires that the 90-day pre-commencement notice of RPAPL 1304(1) must be the first debt-collection notice that a foreclosure plaintiff sends a future defendant about an impending foreclosure action. Relatedly, plaintiff fails to show why it could not comply with the FDCPA by sending its "mini-Miranda " notice first, in a separate envelope from its RPAPL 1304 notice, and thereby comply with both statutes. By its terms, the FDCPA only preempts inconsistent state laws to the extent of the inconsistency (see 15 USC § 1692n ). Because plaintiff fails to show — and this Court perceives no reason — why plaintiff could not comply with the FDCPA "mini-Miranda " warning prior to sending an RPAPL 1304 notice, this Court has no basis to find a facial conflict between the two statutes that would preempt RPAPL 1304.
Moreover, even if theoretically there might be a facial conflict between the FDCPA's "mini-Miranda " requirement and RPAPL 1304, plaintiff fails to show the further preemption requirement of FDCPA remedial superiority. While the contours of FDCPA preemption have been hotly contested (see generally Arellano v. Clark County Collection Serv., LLC , 875 F.3d 1213 [9th Cir. 2017] ; Aker v. Americollect, Inc. , 854 F.3d 397 [7th Cir. 2017] ), one clear agreement among reviewing courts takes at face value the FDCPA's plain language, and its corresponding congressional intent, not to preempt any state law whose protection "affords any consumer [ ] greater than the protection provided by [the FDCPA]" ( 15 USC § 1692n ). Thus, the typical section 1692n preemption analysis turns on which law accords superior protection to the class of consumers who are the respective laws’ intended beneficiaries (see e.g. McDermott v. Marcus, Errico, Emmer & Brooks, P.C. , 775 F.3d 109 [1st Cir. 2014] ; Desmond v. Phillips & Cohen Assocs., Ltd. , 724 F. Supp. 2d 562 [W.D.Pa. 2010] ; Yang v. DTS Fin. Group , 570 F. Supp. 2d 1257, 1261 [S.D.Cal. 2008] ; Alkan v. Citimortgage, Inc. , 336 F. Supp. 2d 1061 [N.D.Cal. 2004] ).
Here, plaintiff fails to show that the FDCPA accords superior consumer protection relative to RPAPL 1304 to the class of residential foreclosure defendants who are the New York statute's intended beneficiaries. Moreover, this Court is skeptical that any residential foreclosure plaintiff could make that showing. The FDCPA "mini-Miranda " warning requires only that a debt collector specify on "initial communication" with the alleged debtor "that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose," and that future communications specify their origin from a debt collector attempting to collect a debt ( 15 USC § 1692e [11]). These forced disclosures inform debtors about who the collector is and the purpose for which information will be used. By sharp contrast, the RPAPL 1304 notice gives alleged mortgage debtors concrete tools to avoid litigation and thereby retain their homes against foreclosure — including a payoff amount, a 90-day period in which to make workout options, a list of free and trained housing counselors in their area prepared to offer assistance, contact information for the Department of Financial Services and Office of the Attorney General, and a list of specific rights (see RPAPL 1304[1] ). The numerosity and breadth of these RPAPL 1304 protections accord far greater consumer protections than the FDCPA "mini-Miranda " warning alone, and thus the FDCPA does not preempt RPAPL 1304 under the FDCPA's own terms (see 15 USC § 1692n ).
To be sure, two courts have credited the argument that RPAPL 1304 does not accord greater protections than the FDCPA in relation to mortgage debt collection, and therefore the latter preempts the former (see CIT Bank, N.A. v. Neris , 605 F. Supp. 3d 521 [S.D.N.Y., June 2, 2022] ); Bank of N.Y. Mellon v. Luria , 76 Misc. 3d 724, 171 N.Y.S.3d 807, 2022 N.Y. Slip Op. 22218 [Sup. Ct. Putnam Co. 2022] [" Luria II "]. Leaving aside that plaintiff does not make a substantial record showing on this issue but mainly cites to these two cases, this Court finds substantial prudential reasons why it could not follow Neris and Luria II even were it inclined to do so.
Before the Luria II court was the volume of Kessler case law binding on the trial courts of the Second Department, including Kessler itself, which addressed the FDCPA mini-Miranda issue in relationship with the RPAPL 1304(2) separate-envelope requirement. Following fast on Kessler ’s heels, Lanzetta , Siriani and Drakakis consistently reaffirmed that RPAPL 1304 notices transmitting the FDCPA "mini-Miranda " warning, or consumer information about bankruptcy, thereby violate the separate-envelope requirement. Neither plaintiff here, nor Luria II , addressed the prudential issues that would arise if this Court, or any others bound to apply clear Appellate Division precedents, could set aside those precedents in the manner plaintiff requests. As for Neris , if federal preemption considerations are to pull Kessler and its progeny from the ground root and branch, only the New York Court of Appeals can do so — a result the Kessler court itself invited that Court to consider (see NY Const, art VI, § 3 [b][6]; CPLR 5602[a][1][i] ). Moreover, Kessler expressly relied on a line of appellate cases whose results and purposes this Court also must honor. This appellate thrust began with the Court of Appeals articulating a formalist, "clear rule" approach to the law of de-accelerating mortgage debt to vindicate policy objectives of clarity, consistency and predictability in the law of residential foreclosures (see ( Freedom Mtge. Corp. v. Engel, 37 N.Y.3d 1, 32, 146 N.Y.S.3d 542, 169 N.E.3d 912 [2021] )). Months later, in a case of "first impression," the Second Department held that each borrower entitled to receive an RPAPL 1304 pre-commencement notice also has a right to receive such notice in a "separate envelope" from communications to any other borrower ( Wells Fargo Bank, N.A. v. Yapkowitz , 199 A.D.3d 126, 128, 155 N.Y.S.3d 163 [2d Dept. 2021] ). Kessler then relied expressly on both Yapkowitz and Engel , and particularly the Engel policy objectives, to extend the "separate envelope" mandate — even, as here, for a sole borrower — to bar any language beyond the exact language of RPAPL 1304(1) itself (see Kessler , 202 A.D.3d at 18, 160 N.Y.S.3d 277 ). Kessler even narrated the necessity of its own "bright-line rule" lest courts entangle themselves in "exactly the type of judicial scrutiny" concerning motive and context that Engel disallowed ( Engel , 202 A.D.3d at 16-17, 160 N.Y.S.3d 277 ).
The Court notes that Luria I raised preemption issues sua sponte and even narrated that it was doing so (see Luria I , 75 Misc. 3d 1205, at *3-4, 171 N.Y.S.3d 807 ). Even had the Luria parties themselves raised such concerns, Luria I observed only that the plaintiff "had good reason to believe that [the "miniMiranda "] language it appended to the RPAPL 1304 notice was required to assure its compliance with the FDCPA" — not that the FDCPA, in fact, required the "miniMiranda " warning (id. ). Luria II ultimately concluded that the FDCPA does conflict with the RPAPL 1304(2) separate-envelope mandate and that the former preempts the latter because, in its view, RPAPL 1304 accords less protection than the FDCPA. While the current record accords this Court no basis to wade into that thicket, the Court observes that Luria II reached its conclusion mainly on agreement with the Kessler dissenter that congressional intent for the FDCPA was clear while the "Kessler majority was unable to discern the Legislature's intent" in promulgating the separate-envelope mandate of RPAPL 1304(2) (Luria II , 76 Misc. 3d 724, 171 N.Y.S.3d 807, 2022 N.Y. Slip Op. 22218, at *8, citing Kessler , 202 A.D.3d at 18, 160 N.Y.S.3d 277 [Miller, J., dissenting]).
For all of the foregoing reasons, it is not for this Court to predict how the Court of Appeals might decide the pending Kessler appeal, much less predict — as plaintiff appears to predict — that the Court of Appeals will overturn Kessler . The prerogative of prognostication lies not with this Court but with federal courts that, in applying New York law, properly may disregard Appellate Division decisions "upon persuasive evidence that the New York Court of Appeals, which has not ruled on [the issues presented], would reach a different conclusion" ( AEI Life LLC v. Lincoln Benefit Life Co. , 892 F.3d 126, 139 n.15 [2d Cir. 2018], quoting Pahuta v. Massey-Ferguson, Inc. , 170 F.3d 125, 134 [2d Cir. 1999] ). Such is precisely what the U.S. District Court did in Neris , which predicted that the New York Court of Appeals would overturn Kessler and, on that basis, declined to follow Kessler and instead held that the FDCPA preempts the RPAPL 1304(2) separate-envelope requirement (see Neris , 605 F. Supp. 3d 521, 527–29 ). Whether or not Neris was correct, this Court must follow Kessler and its progeny unless and until the New York Court of Appeals determines otherwise.
For the above reasons, this Court respectfully parts ways with Luria II and prudentially cannot follow Neris . Applying the law that this Court is bound to follow, this Court cannot grant plaintiff's preemption argument. Instead, under Kessler and its progeny, this Court must conclude that plaintiff's RPAPL 1304 notice is fatally defective for failure to satisfy the separate-envelope requirement of RPAPL 1304(2). Defendant therefore is correct that plaintiff cannot carry its burden to prove strict compliance with RPAPL 1304. On that basis, and because of the inherent prejudice that would inure to defendant while interest accrues and a Notice of Pendency remains on the subject property, the branch of plaintiff's motion to stay this action is denied. Because plaintiff's proof of its strict compliance with RPAPL 1304 is a condition precedent to commence this action, defendant's motion to dismiss this action is granted (see DeMarco , 205 AD3d at 945; Dennis , 181 AD3d at 866; Offley , 170 AD3d at 1241; DePasquale , 113 AD3d at 596).
Conclusion
In the event that the Court of Appeals determines the pending Kessler appeal in a manner that bears on this action, plaintiff is invited to make a CPLR 2221(e) motion for leave to renew this motion, deny dismissal and accord defendant reasonable time to answer the complaint.
The Court has considered the parties’ remaining contentions and deems them to be without merit or moot in light of the foregoing. Accordingly it is hereby
ORDERED that defendant's motion is granted and this action is dismissed; and it is further
ORDERED that the Notice of Pendency is cancelled, and the County Clerk of the County of Rockland is directed to notate such cancellation on the records of the property; and it is further
ORDERED that if the Court of Appeals determines the pending Kessler appeal in a manner that bears on this action, plaintiff may move by Order to Show Cause to renew this motion.
The foregoing constitutes the Decision and Order of this Court.