New York Court of Appeals Provides Guidance on RPAPL 1304 and 1306 Print PDF
On March 30, 2021, the New York Court of Appeals (the “Court”), provided additional guidance on RPAPL 1304 and 1306 compliance requirements.
In CIT Bank v. Schiffman, No. 11 (Mar. 30, 2021), the U.S. Court of Appeals for the Second Circuit had certified two questions involving the application of RPAPL 1304 and 1306 to the Court. In the Court’s own words: “First, the Second Circuit asks how a borrower can rebut a lender's proof of compliance with RPAPL 1304 when that proof is in the form of a standard office mailing procedure. We respond that where a presumption of mailing and receipt arises from such evidence it may be rebutted by proof of a material deviation from the ordinary practice that calls into doubt whether the notice was properly mailed. Second, with respect to the RPAPL 1306 filing, we are asked if the statute requires the inclusion of information about each individual liable on the loan. We conclude that it does not and that information about only one borrower is sufficient.”
RPAPL 1304: As to proof of compliance with RPAPL 1304, CIT Bank relied on the rule that permits the plaintiff to establish compliance with RPAPL 1304 through proof of "an established and regularly followed office procedure." CIT Bank provided an affidavit stating it was plaintiff’s routine practice that envelopes for 90-day notices were “created upon default.” Here, however, the notices of default were dated almost a year after default.
In opposition to CIT Bank’s motion for summary judgment, the Schiffmans denied receipt of the 90-day notice and argued that CIT Bank failed to prove compliance with RPAPL 1304 since “it was evident from the fact that the notices were dated almost a year after default that the bank had deviated from its routine office practice of generating the envelopes for the 90-day notices ‘upon default.’” The defendants essentially argued that proof of mailing can be rebutted by showing “that any aspect of the routine office procedure was not followed,” whereas the plaintiff argued that the defendant must show a “material deviation … related to the mailing process in a manner that would affect whether the document was mailed to the appropriate party.” The Court of Appeals agreed with the plaintiff and opined:
"There must be proof of a material deviation from an aspect of the office procedure that would call into doubt whether the notice was properly mailed, impacting the likelihood of delivery to the intended recipient.
Put another way, the crux of the inquiry is whether the evidence of a defect casts doubt on the reliability of a key aspect of the process such that the inference that the notice was properly prepared and mailed is significantly undermined. Minor deviations of little consequence are insufficient. … What is necessary to rebut the presumption that a RPAPL 1304 notice was mailed will depend, in part, on the nature of the practices detailed in the affidavit.
Moreover, contextual considerations may also factor into the analysis. For example, here, CIT points out that residential notes and mortgages are negotiable instruments that often change hands at various points during their duration, which may impact the timing of the creation and mailing of RPAPL 1304 notices—a contextual factor a court could consider in assessing whether a purported deviation from routine procedure was material."
RPAPL 1306: As to proof of compliance with RPAPL 1306, the filing with the Department of Financial Services (“DFS”) listed only one of the two borrowers. The Court concluded that listing only one borrower on the filing complied with RPAPL 1306, noting that RPAPL 1306 refers to “borrower” whereas RPAPL 1304 refers to “borrower or borrowers.”
In addition, the language of RPAPL 1306 and its legislative history show “that the principal objective of the filings is to provide statistical data permitting DFS to accurately track and analyze loans at risk of foreclosure and properly allocate foreclosure counseling resources statewide.” As the Court opined, “[t]his objective is fulfilled by a filing that references at least one borrower.”
In issuing this Opinion, the Court of Appeals took a common sense approach to the RPAPL and recognized that the focus should be on whether the borrower was prejudiced rather than a microscopic examination of the mortgagee’s procedures for any slight deviation therefrom.