The Third Department Adopts The Second Department’s Holding In Yapkowitz, Which Requires That RPAPL 1304 Notices Be Separately Sent In Separate Envelopes To Each Borrower
Print Article- Posted on: Nov 6 2023
This Blog has written numerous articles about RPAPL 1304. See, e.g., [here], [here], [here], [here], [here] and [here] and the Blog articles linked to therein. By way of brief background as discussed in prior articles, RPAPL 1304 requires that at least ninety days before commencing legal action against a borrower with respect to a “home loan” (as defined in the relevant statutes), a lender must: send written notice to the borrower by certified and regular mail that the loan is in default; provide a list of approved housing agencies that offer free or low-cost counseling; and, advise that legal action may be commenced after ninety days if no action is taken to resolve the matter. One purpose of RPAPL 1304 is to enable defaulted borrowers to “benefit from the information provided in the notice and the 90–day period during which the parties could attempt to work out the default without imminent threat of a foreclosure action, in an effort to further the ultimate goal of reducing the number of foreclosures”. CIT Bank N.A. v. Schiffman, 36 N.Y.3d 550, 555 (2021) (citation and internal quotation marks omitted).
The failure of a lender to comply with RPAPL 1304 will result in the dismissal of a foreclosure complaint. See, e.g., U.S. Bank N.A. v. Beymer, 161 A.D.3d 543 (1st Dep’t 2018). Indeed, “proper service of the notice containing the statutorily mandated content is a condition precedent to the commencement of a foreclosure action.” U.S. Bank N.A. v. Taormina, 187 A.D.3d 1095, 1096 (2nd Dep’t 2020) (citations omitted). When failure to comply with RPAPL 1304 is raised as an affirmative defense, the foreclosing lender must demonstrate its compliance with the statute as part of its prima facie case. Bank of America, N.A. v. Wheatly, 158 A.D.3d 736, 737 (2nd Dep’t 2018) (citations omitted). However, a “defense based on noncompliance with RPAPL 1304 may be raised at any time during the action.” Nationstar Mortgage, LLC v. Matles, 185 A.D.3d 703, 706 (2nd Dep’t 2020) (citations and internal quotation marks omitted). In Wells Fargo Bank, N.A. v. Davidson, 202 A.D.3d 880 (2nd Dep’t 2022), in reversing a judgment of foreclosure and sale and granting summary judgment to the borrowers, the Court stated that “[c]ontrary to the [lender’s] contention, the [borrowers] did not waive their contention that the [lender] failed to comply with RPAPL 1304 as a defense based on noncompliance with RPAPL 1304 may be raised at any time prior to the entry of a judgment of foreclosure and sale.” Davidson, 202 A.D.3d at 882 (citations, internal quotation marks and brackets omitted); see also U.S. Bank Nat. Ass’n v. Zakarin, 208 A.D.3d 1275, 1277 (2nd Dep’t 2022).
A source of frequent litigation regarding RPAPL 1304 notices centers on the sufficiency of the notice itself. For example, in Wells Fargo Bank, N.A. v. Yapkowitz, 199 A.D.3d 126 (2nd Dep’t 2021), the Court, after surveying and analyzing case law on RPAPL 1304, held that the requirements of RPAPL 1304 were not satisfied where a single notice is addressed to more than one borrower because each borrower is entitled to a separate notice in its own envelope addressed to each borrower. [Eds. Note: this blog wrote about Yapkowitz promptly upon the decision being rendered [here].] The First Department, in U.S. Bank Nat. Ass’n v. Maioriello, 207 A.D.3d 428 (2022), adopted the Second Department’s holding in Yapkowitz when, citing to Yapkowitz, stated that “[p]laintiff’s mailing of a 90-day notice jointly addressed to both borrowers did not comply with RPAPL 1304.” Maioriello, 207 A.D.3d at 428.
On October 26, 2023, the Third Department, in Deutsche Bank Nat. Trust Co. v. Zatari, adopted the Second Department’s holding in Yapkowitz regarding jointly addressed RPAPL 1304 notices and, in so doing, stated:
As to the merits, [the borrowers] contend that [the lender] failed to properly serve [the borrowers] with the requisite 90-day notice of foreclosure inasmuch as the notices needed to be sent to each [borrower] individually, rather than in the same envelope. RPAPL 1304 requires that “at least [90] days before a lender, an assignee or a mortgage loan servicer commences legal action against the borrower, or borrowers at the property address and any other address of record, including mortgage foreclosure, such lender, assignee or mortgage loan servicer shall give notice to the borrower” (RPAPL 1304 [1]). Notice must be sent “by registered or certified mail and also by first-class mail to the last known address of the borrower, and to the residence that is the subject of the mortgage,” and “shall be sent in a separate envelope from any other mailing or notice” (RPAPL 1304 [2]. Proper service of the RPAPL 1304 notice containing the statutorily-mandated content is a condition precedent to the commencement of a foreclosure action and the plaintiff’s failure to show strict compliance requires dismissal.
Although this Court has not passed on the issue of whether joint borrowers can receive notice in the same envelope, the First and Second Departments have (see U.S. Bank N.A. v Maioriello, 207 AD3d 428, 428 [1st Dept 2022]; Wells Fargo Bank, N.A. v Yapkowitz, 199 AD3d 126, 133-136 [2d Dept 2021]). Specifically, the Second Department has interpreted the “separate envelope” requirement set forth in RPAPL 1304 (2) to also mean that notices cannot be sent to more than one borrower in the same envelope, and that each borrower should receive separate notices (see Wells Fargo Bank, N.A. v Yapkowitz, 199 AD3d at 133-136). The First Department has since applied this holding (see U.S. Bank N.A. v Maioriello, 207 AD3d at 428). As the Second Department noted, the language of RPAPL 1304 (1) is careful to distinguish a borrower, singular, from borrowers, plural (see Wells Fargo Bank, N.A. v Yapkowitz, 199 AD3d at 134). However, RPAPL 1304 (2), which requires that notices be sent in separate envelopes, only discusses “borrower,” singular (see Wells Fargo Bank, N.A. v Yapkowitz, 199 AD3d at 134; RPAPL 1304 [2]). In that case, the Court also drew attention to the fact that, although it is possible that whichever borrower reads the notice would alert the other borrower of the mailing, this is not always what occurs (see Wells Fargo Bank, N.A. v Yapkowitz, 199 AD3d at 135). Accordingly, we now also adopt the holding of the Second Department in Wells Fargo Bank, N.A. Thus, given that the requisite 90-day notices were jointly addressed to both borrowers, [the lender] did not comply with RPAPL 1304 (see U.S. Bank N.A. v Maiorello, 207 AD3d at 428; Wells Fargo Bank, N.A. v Yapkowitz, 199 AD3d at 134). As such, given that [the lender] failed to comply with RPAPL 1304, Supreme Court erred in denying [borrowers’] cross-motion for summary judgment dismissing the complaint and granting [the lender’s] motion confirming the referee’s report and granting the foreclosure and sale of the property. [Some citations, internal quotation marks, brackets and ellipses omitted.]
Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP.
This article is for informational purposes and is not intended to be and should not be taken as legal advice.
