Opinion
Index No. 500788/2019
12-01-2022
Specialized Loan Servicing, LLC, Plaintiff, v. Paul Chan, DANA CHAN, BANK OF AMERICA, N.A. AS SUCCESSOR BY MERGER TO COUNTRYWIDE BANK, N.A., and "John Doe" and/or "Jane Doe" No. 1-10 inclusive, the last ten names being fictitious and unknown to plaintiff, the persons or parties intended being the tenants, occupants, persons, corporations or heirs at law, if any, having or claiming an interest in or lien upon the premises described in the complaint, Defendants.
HON. GINA C. CAPONE, J.S.C.
The following papers, numbered 1-18, were read and considered on (1) the motion of the Plaintiff to, inter alia, confirm the Referee's Report and for a Judgment of Foreclosure and Sale (Mot. Seq. 2) and (2) the cross motion of the Defendant Paul Chan, which is for renewal of the Plaintiff's motion for summary judgment and an order of reference pursuant to CPLR 2221(e) and, upon renewal, an order vacating this Court's March 30, 2022, order, and granting summary judgment in favor of the Defendant, dismissing the complaint (Mot. Seq. 3).
PAPERS NUMBERED
Notice of Motion/ Attorney Affirmation in Support/ Affidavit 1-7
of Military Service/ Exhibits 1-4
Notice of Cross Motion/ Attorney Affirmation in Opposition to 8-16
Motion and in Support of Cross Motion/ Exhibits A-F
Attorney Affirmation in Further Support of Motion and in 17-18
Opposition to Cross Motion/ Exhibits 1
Specialized Loan Servicing, LLC (hereinafter the Plaintiff) commenced this mortgage foreclosure action against, among others, the Defendant Paul Chan to foreclose upon property located at 30 Kings Ridge Road, Mahopac, New York (hereinafter the subject premises) on or about May 20, 2019. The Defendant Paul Chan interposed an answer in which he asserted various affirmative defenses, including, inter alia, that the Plaintiff failed to comply with the notice requirements of RPAPL § 1304.
In February 2020, the Plaintiff moved, inter alia, for summary judgment on the complaint and for an order of reference, which was opposed by Mr. Chan, with Mr. Chan asserting that summary judgment should be denied because, inter alia, the Plaintiff failed to strictly comply with RPAPL § 1304. By a Decision and Order dated March 30, 2022 , the Court granted the Plaintiff's motion and appointed a referee to compute the amount due and owing.
Shortly after the motion for summary judgment was filed, the COVID-19 pandemic struck, and Governor Cuomo issued his "New York on Pause" Executive Order. On March 17, 2020, courthouse operations were limited to essential matters only. Thereafter, pursuant to various Administrative Orders ("AO") issued by the New York State Unified Court System's Chief Administrative Judge Lawrence Marks, various types of filings and processes were phased back in. Importantly, while all foreclosure matters were permitted to resume statewide in October 2020, the Court was not permitted to decide any fully submitted and pending motions until the Court had held an AO157/20 status conference. In this case, that conference was held on September 10, 2020. The Court was informed that, because the loan at issue here was federally funded, proceedings in relation thereto were stayed pursuant to the CARES Act and the Federal Housing Finance Agency's extension of the moratorium on foreclosures. In late December 2020, the COVID-19 Emergency Eviction and Foreclosure Prevention Act (hereinafter the Law) was signed into law, staying all foreclosure matters for 60 days. The Law also provided the option to homeowners to submit a Hardship Declaration that would stay the action further beyond the initial 60-days. A Hardship Declaration was filed on March 18, 2021, thereby staying the action to August 31, 2021 (AO 159/21). The Law was subsequently amended to extend the stay of residential mortgage foreclosure actions where a hardship declaration had been filed to January 15, 2022 (AO 262/21). On January 16, 2022, upon the expiration of the Law, the resumption of all residential mortgage foreclosure actions was directed to proceed in normal course (AO 35/22). As such, as of January 16, 2022, any stay or tolling of time as a result of the COVID-19 pandemic ended and this case was to resume under the normal course. In an abundance of caution, the Court held a conference with counsel and the parties on January 27, 2022, and, at that point, the motion was deemed fully submitted and ready for decision.
The Plaintiff's Motion for a Judgment of Foreclosure and Sale
By notice of motion filed August 17, 2022, the Plaintiff moved to confirm the Referee's Report and for a Judgment of Foreclosure and Sale (Mot. Seq 2).
The Defendants' Motion to Renew
By notice of cross motion, filed October 7, 2022, Mr. Chan moved for leave to renew his opposition to the Plaintiff's motion for summary judgment and an order of reference in light of the Second Department's decision of Bank of America v Kessler (202 A.D.3d 10 [2d Dept 2021]), which was handed down December 15, 2021, and also opposed Plaintiff's motion for Judgment of Foreclosure and Sale. Counsel for Mr. Chan argues that, in light of the holding of Kessler, the notices in this case were not compliant with RPAPL § 1304(2), in that the notices contained additional language and notices extraneous to the required statutory language. Accordingly, pursuant to Kessler, as well as subsequent decisional law from the Second Department interpreting and applying Kessler, renewal should be granted and, upon renewal, the Plaintiff's motion for summary judgment should be denied and the complaint dismissed.
In opposition, counsel for the Plaintiff contends that Kessler is not new law and, therefore, Mr. Chan cannot reply upon Kessler as a basis for renewal. Plaintiff further argues that Mr. Chan cannot move to renewal because he failed to cross-move for relief in opposition to the Plaintiff's motion for summary judgment and an order of reference. Finally, Plaintiff contends that, even if this Court were to consider Mr. Chan's argument regarding Kessler, the Court previously considered Mr. Chan's RPAPL § 1304 arguments and rejected same, constituting a ruling that is now law of the case. Accordingly, any arguments with respect to RPAPL § 1304 not raised before were waived. Counsel further contends that Kessler may run afoul of the Supremacy Clause and should not be applied retroactively.
The Court will first consider Mr. Chan's cross motion, as determination thereof may render determination of the Plaintiff's motion, academic.
Leave to Renew Pursuant to CPLR 2221(e)(2)
As is relevant to this motion, a motion for leave to renew... "shall demonstrate that there has been a change in the law that would change the prior determination" (CPLR 2221[e][2]). "A clarification of the decisional law is a sufficient change in the law to support renewal" (Dinallo v DAL Elec., 60 A.D.3d 620 [2d Dept 2009]; Roundabout Theatre Co. v Tishman Realty & Constr. Co., 302 A.D.2d 272 [2d Dept 2003]). "[A] motion for leave to renew based upon a change in the law must be made prior to the entry of a final judgment or before the time to appeal has expired" (Dinallo v DAL Elec., 60 A.D.3d at 621).
Here, there is no dispute that the motion for leave to renew has been timely made, as final judgment has not been issued in this matter. Moreover, the law is well settled that a defendant can raise the argument that the plaintiff did not strictly comply with RPAPL § 1304 at any time during the action (see HSBC Bank USA, N.A. v Cardona, 193 A.D.3d 696, 698 [2d Dept 2021]).
RPAPL § 1304 (1) provides that "at least ninety days before a lender, an assignee or a mortgage loan servicer commences legal action against the borrower,... including mortgage foreclosure, such lender, assignee or mortgage loan servicer shall give notice to the borrower." "The statute further provides the required content for the notice and provides that the notice must be sent by registered or certified mail and also by first-class mail to the last known address of the borrower" (Citibank, N.A. v Conti-Scheurer, 172 A.D.3d 17, 20 [2d Dept 2019]) and" in a separate envelope from any other mailing or notice" (RPAPL § 1304[2] [emphasis added]). Strict compliance with RPAPL § 1304 notice to the borrower is a condition precedent to the commencement of a foreclosure action (see Citibank, N.A. v Conti-Scheurer, 172 A.D.3d at 20).
On December 15, 2021, in Bank of America, N.A. v Kessler (202 A.D.3d 10 [2d Dept 2021]), the Appellate Division, Second Department held that the "inclusion of any material in the separate envelope sent to the borrower under RPAPL § 1304 that is not expressly delineated in [the statute] constitutes a violation of the separate envelope requirement of RPAPL § 1304(2)" (Bank of America, N.A. v Kessler, 202 A.D.3d at 14 [emphasis added]).
In the nearly one year since Kessler was handed down, the Second Department has had more than a dozen opportunities to apply the strict compliance standard announced in Kessler across a number of cases and has consistently adhered to the bright line standard articulated in Kessler without exception (see Bank of New York Mellon v Greene, __ A.D.3d __, 2022 WL 17332468 [November 30, 2022; 2d Dept] [Plaintiff failed to strictly comply with RPAPL 1304 by including information concerning the rights of a debtor in bankruptcy and in military service]; HSBC Bank USA v Schneps, __A.D.3d__, 2022 WL 16827142 [November 9, 2022; 2d Dept] [Plaintiff failed to comply with RPAPL § 1304 by including additional notices sent in the same envelope with 90-day notice]; Deutsche Bank v Ghosh, 208 A.D.3d 708 [2d Dept 2022] [copies of 90-day notices showed additional notices not contemplated by RPAPL § 1304, warranting denial of motion for summary judgment]; JP Morgan Chase Bank v Dedvukaj, 207 A.D.3d 532 [2d Dept 2022] [inclusion of additional notices not contemplated by RPAPL § 1304 established that Plaintiff had failed to comply strictly with RPAPL § 1304]; US Bank National Assn v Lanzetta, 207 A.D.3d 501 [2d Dept 2022] [inclusion of additional material warranted denial of Plaintiff's summary judgment motion and grant of cross motion to dismiss the complaint for failure to comply with RPAPL § 1304] Wells Fargo v Bedell, 205 A.D.3d 1064 [2d Dept 2022][inclusion of separate notice language pertaining to the rights of a debtor in military service and a debtor in bankruptcy violated separate envelope statutory requirement]; Deutsche Bank v Bonal, 205 A.D.3d 884 [2d Dept 2022][failure to establish mailing of notices in separate envelope warranted denial of Plaintiff's motion for summary judgment]; Prof-2014-S2 Legal Title Trust II v DeMarco, 205 A.D.3d 943 [2d Dept 2022][content of notices did not comply with RPAPL § 1304 warranting denial of motion for summary judgment and grant of cross motion for dismissal of complaint]; HSBC Bank v Hibbert, 205 A.D.3d 783 [2d Dept 2022][same] US Bank v Drakakis, 205 A.D.3d 756 [2d Dept 2022][inclusion of document titled "-onsumer Notice Pursuant to 15 USC Section 1692[G]" violated the "separate envelope" mandate of RPAPL § 1304(2)]; HSBC Bank v DiBenedetti, 205 A.D.3d 687 [2d Dept 2022][Plaintiff could not establish that it strictly complied with RPAPL § 1304 where additional material was sent in the same envelope as the 90-day notice]; Bank of New York Mellon v Govan, 204 A.D.3d 878 [2d Dept 2022][inclusion of separate notice concerning the rights of a debtor in bankruptcy and military service violates the separate envelope mandate of RPAPL § 1304(2)]; HSBC Bank USA, National Association v Jahaly, 204 A.D.3d 648 [2d Dept 2022][inclusion of additional notices not contemplated by RPAPL § 1304 constitute failure to strictly comply with RPAPL § 1304]; US Bank National Association v Hinds, 203 A.D.3d 1210 [2d Dept 2022][same]; Deutsche Bank v Bancic, 203 A.D.3d 1130 [2d Dept 2022][additional notices and verbiage referencing bankruptcy and the rights of military service members]; Deutsche Bank v Salva, 203 A.D.3d 700 [2d Dept 2022][inclusion of "Important Disclosures" regarding bankruptcy and rights for military personnel]; Ocwen Loan Servicing, LLC v Sirianni, 202 A.D.3d 702 [2d Dept 2022][inclusion of two notices pertaining to the Federal Fair Debt Collection Practices Act and bankruptcy violated "separate envelope" mandate]; Wells Fargo v DeFeo, 200 A.D.3d 1105 [2d Dept 2021][inclusion of notice concerning Home Affordable Modification Program and bankruptcy issues violated the "separate envelope" mandate]; Citimortgage, Inc. v Dente, 200 A.D.3d 1025 [2d Dept 2021][inclusion of notice regarding chapter 11 bankruptcy violated "separate envelope" mandate]).
The Plaintiff contends that Kessler does not constitute "a change in law" and, therefore, it's handing down by the Appellate Division does not provide a basis for the Defendant to move for leave to renew. Rather, according to the Plaintiff," Kessler 'merely clarifies existing law'" (NYSCEF Doc 114, ¶ 6). This Court disagrees with Plaintiff's contention and notes, in any event, at least in the Second Department, "[a] clarification of the decisional law is a sufficient change in the law to support renewal" (Dinallo v DAL Elec., 60 A.D.3d 620 [2d Dept 2009]; see Opalinski v City of New York, 164 A.D.3d 1354, 1355 [2d Dept 2018]; Roundabout Theatre Co. v Tishman Realty & Constr. Co., 302 A.D.2d 272 [2d Dept 2003]). Moreover, for the reasons articulated by our sister Court in Deutsche Bank v Aber (176 N.Y.S.3d 441 [September 28, 2022; Sup Ct, Rockland Cty]), this Court finds that Kessler constituted a sufficient change in law or clarification of decisional law to support an application for renewal and, further, that permitting renewal in these circumstances is sound policy. Indeed, even anecdotally, it cannot be disputed that, since Kessler was handed down, the Supreme Court has received many applications and motions citing to Kessler as a watershed pronouncement of a bright line rule regarding the content and form of RPAPL § 1304 notices previously not expressly stated by any Appellate authority from both Bank and Borrowers' counsel. Accordingly, this Court finds that the Appellate Division's decision in Kessler constitutes a sufficient "change in law" to support Mr. Chan's cross motion for renewal (see Deutsche Bank v Aber, 176 N.Y.S.3d 441 [September 28, 2022; Sup Ct, Rockland Cty]; U.S. Bank National Assn v DeJesus, 75 Misc.3d 1211(A) [June 1, 2022; Sup Ct, Putnam Cty]). This Court is mindful that not all sister Courts in this State have come to the same conclusion (see U.S. Bank NA v Wahl, 75 Misc.3d 1238 (A) [August 1, 2022; Sup Ct, Suffolk Cty]; Wilmington Sav. Fund. Soc., FSB v Sotomayor, 2022 WL 1559439 [Sup Ct, Westchester Cty, May 12, 2022]; Bank of New York Mellon v Abraham, 75 Misc.3d 876 [May 2, 2022; Sup Ct, Suffolk Cty]). However, unless and until the Appellate Division weighs in directly on whether Kessler constitutes a sufficient change or clarification of law to support a motion for renewal pursuant to CPLR § 2221(e), this Court is free to render its own determination on the matter.
With respect to Plaintiff's contention that Mr. Chan cannot move to renew the Plaintiff's motion for summary judgment and an order of reference because Mr. Chan did not formally cross-move for relief, the Plaintiff has not cited to, and this Court cannot find, any legal authority that says a party who has opposed a motion may not seek, inter alia, renewal of that motion if they did not seek affirmative relief above and beyond, presumably, denial of the motion. It is true that Mr. Chan would not be permitted to seek renewal if he had defaulted in opposing the motion. However, here, it is not disputed that Mr. Chan opposed the motion and, in fact, requested in opposing the Plaintiff's motion for summary judgment that the Court, in reviewing the evidence, find that "a party other than the moving party is entitled to summary judgment" and grant such judgment without need for a cross motion, citing CPLR § 3212[b] (NYSCEF Doc 62, ¶42). As such, contrary to the Plaintiff's contention otherwise, Mr. Chan did seek affirmative relief from the Court on the prior motion.
Finally, with respect to the Plaintiff's contention that Mr. Chan has waived any arguments related to the Plaintiff's compliance with RPAPL § 1304 not previously raised by Mr. Chan in opposition to the Plaintiff's motion for summary judgment and that this Court's prior rejection of Mr. Chan's arguments with respect to compliance with RPAPL § 1304 constitute law of the case, this Court notes, again, that a defendant can raise the argument that the plaintiff did not strictly comply with RPAPL § 1304 at any time during the action (see HSBC Bank USA, N.A. v Cardona, 193 A.D.3d 696, 698 [2d Dept 2021]). Importantly, Mr. Chan has not raised this "new" argument with respect to RPAPL § 1304[2] simply in opposition to the Plaintiff's motion to confirm the Referee's Report and for a Judgment of Foreclosure and Sale (see Wells Fargo Bank, NA v Morales, 178 A.D.3d 881 [2d Dept 2019]), but rather has raised the Plaintiff's strict compliance with RPAPL § 1304(2) in the context of cross motion for leave to renew the prior motion upon the change of law announced in the Second Department's Kessler decision. Mr. Chan could not have raised his arguments based upon the Kessler decision in his prior opposition as Kessler had not yet been handed down. As such, this Court finds that the Court is not precluded from considering Mr. Chan's contention raised in his motion for leave to renew pursuant to the doctrine of law of the case. Accordingly, the Court grants renewal of the Plaintiff's motion for summary judgment and an order of reference pursuant to CPLR 2221(e).
Turning to the merits of Mr. Chan's cross motion and upon review of the RPAPL § 1304 notices sent in this matter (NYSCEF Docs. 110), the Plaintiff failed to strictly comply with the provisions of RPAPL § 1304. Specifically, while pages 1 and 2 of the notices reproduce verbatim the required language articulated in RPAPL § 1304[1], following the conclusion of the statutorily prescribed language, there is additional language advising that the Plaintiff is a debt collector and a "Bankruptcy Notice." The inclusion of these additional "notices" violates the separate envelope mandate of RPAPL § 1304(2) and, accordingly, the Plaintiff, by its submission of these notices in support of its motion for summary judgment (NYSCEF Docs. 4, 33, 51) cannot establish that it strictly complied with RPAPL§ 1304 (see Bank of New York Mellon v Greene, __ A.D.3d __, 2022 WL 17332468 [November 30, 2022; 2d Dept]; JP Morgan Chase Bank v Dedvukaj, 207 A.D.3d at 534; US Bank National Assn v Lanzetta, 207 A.D.3d at 502; Wells Fargo v Bedell, 205 A.D.3d at 1065-1066; HSBC Bank USA v DiBenedetti, 205 A.D.3d at 690; Bank of New York Mellon v Govan, 204 A.D.3d at 879; US Bank National Association v Hinds, 203 A.D.3d at 1212-1213; Deutsche Bank National Trust Co v Bancic, 203 A.D.3d at 1133-1134; Deutsche Bank National Trust Co. v Salva, 203 A.D.3d at 702; Ocwen Loan Servicing, LLC v Sirianni, 202 A.D.3d at 705; Wells Fargo Bank, NA v DeFeo, 200 A.D.3d at 1107; Citi Mortgage, Inc. v Dente, 200 A.D.3d at 1027). Importantly, the Plaintiff does not assert that the RPAPL § 1304 notice sent in this matter strictly complies with RPAPL § 1304, including the separate envelope mandate contained in RPAPL § 1304(2).
Since renewal of the Plaintiff's motion for summary judgment and an order of reference has been granted, and upon renewal, this Court has determined that the Plaintiff failed to strictly comply with the notice requirements of RPAPL § 1304 (and specifically the separate envelope mandate contained in RPAPL § 1304[2]), and because strict compliance with RPAPL § 1304 notice to the borrower is a condition precedent to the commencement of a foreclosure action (see Citibank, N.A. v Conti Scheurer, 172 A.D.3d at 20), this Court will grant Mr. Chan's request that this Court search the record and award him summary judgment dismissing the complaint insofar as asserted against him (see CPLR 3212[b]; cf. U.S. Bank National Assn v Zakarin, 208 A.D.3d at 1278; HSBC Bank, USA v DiBenedetti, 205 A.D.3d at 690).
The Plaintiff has also advanced an argument that this Court should not apply the Kessler holding because it violates the Supremacy Clause of the United States Constitution, as the Federal Debt Collection Practices Act (FDCPA) and the Bankruptcy Code supersede RPAPL § 1304. Alternatively, counsel contends that Kessler should not be applied retroactively, relying upon the analysis contained in Bank of New York Mellon v Luria (75 Misc.3d 1205 (A) [May 11, 2022; Sup Ct, Putnam Cty (Grossman, J.)]) and, ironically, quoting that Court's finding that it appears to be "indisputable that Kessler enunciated a new rule of law," which is exactly the opposite of what counsel argued earlier with respect to Mr. Chan's basis for renewal.
The Court of Appeals has agreed to review the Second Department's Kessler decision and that appeal has been fully perfected and briefed. The Court of Appeals has set an oral argument date of January 4, 2023, for that appeal and will issue a determination at some point thereafter addressing whether the Second Department's ruling was correct. Until that determination is handed down, the law that is binding upon this Court is that of the Second Department. The Court of Appeals will have the opportunity to weigh in on whether the Plaintiff's Supremacy Clause and/or Federal Law preemption arguments have merit. With respect to retroactivity, while the Appellate Division did not explicitly state that Kessler would apply retroactively, all of its decisions applying Kessler involve cases where the RPAPL § 1304 notices were sent prior to Kessler being handed down which, at least implies, that the Second Department intended to apply Kessler retroactively.
Based upon the analysis provided above, this Court will grant Mr. Chan's cross motion for leave to renew the Plaintiff's motion for summary judgment and an order of reference and, upon renewal, denies the Plaintiff's motion and, upon searching the record pursuant to CPLR § 3212(b), the Court grants summary judgment dismissing the complaint on the ground that the Plaintiff failed to strictly comply with RPAPL § 1304 which is a condition precedent to commencement of a foreclosure action.
The Plaintiff's Motion for Judgment of Foreclosure and Sale
In light of the foregoing, this Court need not reach the Plaintiff's motion to confirm the Referee's Report and for a Judgment of Foreclosure and Sale. That motion is denied as academic.In light of the foregoing, it is hereby
ORDERED that the cross motion of the Defendant Paul Chan (Mot. Seq. 3), which sought leave to renew the Plaintiff's motion for summary judgment (Mot. Seq. 1) is granted; and it is further
ORDERED that, upon renewal, the Plaintiff's prior motion for summary judgment is denied; and it is further
ORDERED that, upon renewal, this Court grants Defendant Paul Chan's request for summary judgment pursuant to CPLR § 3212(b); and it is further
ORDERED that the complaint is dismissed; and it is further
ORDERED that the Plaintiff's motion (Mot. Seq 2) is denied as academic; and it is further
ORDERED that any relief requested and not specifically granted is denied.
The foregoing constitutes the Decision and Order of this Court.