Aurora Loan Serv. Llc v. Weisblum

• Decision Date: 17 May 2011
• Parties: AURORA LOAN SERVICES, LLC, respondent,v.Steven WEISBLUM, et al., appellants, et al., defendants.
• Court: New York Supreme Court — Appellate Division

85 A.D.3d 95

923 N.Y.S.2d 609

2011 N.Y. Slip Op. 04184

AURORA LOAN SERVICES, LLC, respondent,

v.Steven WEISBLUM, et al., appellants, et al., defendants.

Supreme Court, Appellate Division, Second Department, New York.

May 17, 2011.

Fred L. Seeman, New York, N.Y. (Peter Kirwin of counsel), for appellants.Knuckles, Komosinski & Elliott, LLP, Elmsford, N.Y. (Fincey John of counsel), for respondent.MARK C. DILLON, J.P., DANIEL D. ANGIOLILLO, ARIEL E. BELEN, and SHERI S. ROMAN, JJ.

ANGIOLILLO, J.

In First Natl. Bank of Chicago v. Silver, 73 A.D.3d 162, 899 N.Y.S.2d 256 (hereinafter Silver ), we held that the plaintiff in a foreclosure action has the burden of demonstrating compliance with Real Property Actions and Proceedings Law § 1303 (hereinafter RPAPL 1303), a notice requirement of the Home Equity Theft Prevention Act ( see Real Property Law § 265–a [hereinafter HETPA] ). Proper service of RPAPL 1303 notice with the summons and complaint is a condition precedent to the commencement of the action, and noncompliance results in dismissal of the complaint. In the appeal before us, we are called upon to consider another notice pursuant to HETPA which must be served at least 90 days prior to commencement of the foreclosure action pursuant to Real Property Actions and Proceedings Law § 1304 (hereinafter RPAPL 1304). Consistent with the rationale of Silver, we determine that proper service of RPAPL 1304 notice is also a condition precedent to the commencement of the action. Here, the plaintiff failed to establish compliance with RPAPL 1304, requiring dismissal of the complaint insofar as asserted against the mortgagors.

Factual and Procedural Background

The plaintiff Aurora Loan Services, LLC (hereinafter Aurora), commenced this foreclosure action against, among others, the defendants Steven Weisblum and Patti Weisblum (hereinafter together the Weisblums) after they defaulted on a consolidated mortgage loan secured by their home in Rye Brook (hereinafter the premises).

On April 7, 2006, the Weisblums obtained a mortgage loan of $672,000 from Credit Suisse Financial Corporation (hereinafter Credit Suisse) and gave a first mortgage on the premises to Mortgage Electronic Registration Systems, Inc. (hereinafter MERS), as nominee for Credit Suisse. After a series of assignments, the first mortgage was ultimately assigned to MERS, as nominee for Lehman Brothers Bank, FSB (hereinafter Lehman Brothers).

On December 11, 2006, the Weisblums obtained a mortgage loan of $32,000 from Lehman Brothers and gave a second mortgage on the premises to MERS, as nominee for Lehman Brothers. On the same date, the Weisblums executed a “Consolidation, Extension and Modification Agreement” (hereinafter the CEMA), whereby the first and second mortgages were consolidated into a single lien in the amount of $704,000 held by MERS, as nominee for Lehman Brothers. In the CEMA, the Weisblums are collectively defined as the “borrower,” and they both signed the agreement. Annexed as an exhibit to the CEMA and expressly incorporated by reference is the consolidated note in the amount of $704,000, dated December 11, 2006. The parties to the consolidated note are Lehman Brothers, as lender, and Steven Weisblum, as borrower.

MERS, as nominee for Lehman Brothers, subsequently executed a written document purporting to assign the first note and mortgage in the amount of $672,000 to the plaintiff Aurora. The date of the assignment, January 16, 2009, is prior to the commencement of this action, but the assignment was recorded on May 6, 2009, after the commencement of this action. Aurora has produced no documents establishing an assignment to it of the second note and mortgage in the amount of $32,000, nor of the consolidated note and CEMA in the amount of $704,000.

The Default and RPAPL 1304 (90–Day) Notice

The Weisblums defaulted on the consolidated note in 2007. At that time, as the above chronology demonstrates, MERS, as nominee for Lehman Brothers, still held the consolidated note and mortgage. On May 21, 2007, Aurora, apparently acting in the capacity of debt collector, sent a letter to Steven Weisblum at the premises, informing him that the loan was in default and he had the right to cure the default.

On December 11, 2008, Aurora addressed a letter to Steven Weisblum at the premises (hereinafter the “RPAPL 1304 notice”). In the RPAPL 1304 notice, Aurora stated it was acting as a debt collector and informed Steven Weisblum that the loan was in default, he had the right to cure the default, and his failure to cure the default within 90 days may result in Aurora commencing a legal action against him. The RPAPL 1304 notice contained all statutorily-required language, except it did not include “a list of at least five housing counseling agencies” with their “last known addresses and telephone numbers” (RPAPL 1304[2] ). Although reference was made to an enclosure described as “Counseling Agency List Form No. 704–3204–1008,” the record does not contain such an enclosure or reflect that one was served with the notice. Nor did Aurora submit an affidavit of service establishing the content of the RPAPL 1304 notice and its enclosure, if any, or the manner in which, and to whom, the RPAPL 1304 notice was mailed.

The Foreclosure Pleadings and RPAPL 1303 Notice

By summons and complaint dated March 27, 2009, Aurora commenced this foreclosure action, alleging its status as the “holder of a note and mortgage being foreclosed” under an assignment which has been “sent for recording” in the County Clerk's Office. Aurora further alleged it has complied with the provisions of RPAPL 1304, the Weisblums are in default, and the principal balance of $704,000 is due and owing.

Together with the summons and complaint, Aurora served a notice pursuant to RPAPL 1303 entitled “Help for Homeowners in Foreclosure,” containing warnings about foreclosure rescue scams and other information. The notice included all of the statutorily-required content ( see RPAPL 1303[3] ). Affidavits of service established that a process server unsuccessfully attempted to effect personal service and thereafter served the summons, complaint, and RPAPL 1303 notice upon Steven Weisblum and Patti Weisblum by affixing those papers to the door of the premises on April 6, 2009, and mailing copies to the premises by first-class mail on April 8, 2009. The process server averred that the RPAPL 1303 notice, as served, was printed on blue paper, with 20–point type for the heading and 14–point type for the body of the notice.

The Weisblums filed a verified answer dated May 4, 2009, in which they asserted affirmative defenses including Aurora's lack of standing and its failure to comply with the pleading requirements of RPAPL 1302 and the notice requirements of RPAPL 1303 and 1304.

The Motion and Cross Motion for Summary Judgment

Aurora moved for summary judgment on the complaint and for related relief. In a supporting affidavit, a vice president of Aurora averred that the full principal amount of the consolidated note, $704,000, was due and owing, and contended that the Weisblums' affirmative defenses were without merit. Aurora contended that it had properly mailed the RPAPL 1304 notice to Steven Weisblum, who was the only borrower designated on the consolidated note, and properly served the RPAPL 1303 notice on both the Weisblums, as established by the affidavits of service. With respect to its standing, Aurora contended it was the holder of the subject mortgage by delivery without a written assignment and there was no obligation to record a written assignment prior to commencement of the action.

The Weisblums cross-moved for summary judgment dismissing the complaint on the grounds that Aurora failed to properly serve the notices required by RPAPL 1303 and 1304. In their supporting affidavits, Patti Weisblum averred she did not receive either the RPAPL 1303 notice or the RPAPL 1304 notice, and Steven Weisblum averred he did not receive the RPAPL 1304 notice via certified or registered mail. The Weisblums contended that the RPAPL 1303 notice printed on white paper, as shown in the exhibit to Aurora's motion papers, contravened the statutory requirement to print the notice on colored paper. With respect to RPAPL 1304 notice, the Weisblums contended that service upon Steven Weisblum was insufficient because Patti Weisblum was also identified as a “borrower” in the CEMA. Moreover, the Weisblums noted that Aurora failed to submit affidavits of service establishing compliance with the statutory requirement that the RPAPL 1304 notice be sent to both borrowers, Steven Weisblum and Patti Weisblum, by registered or certified mail and also by first class mail.

As an additional ground for summary judgment dismissing the complaint, the Weisblums contended that Aurora did not meet the pleading requirements of RPAPL 1302 and, in effect, did not have standing to maintain this action because it could not plead or demonstrate a proper assignment to it of the CEMA and consolidated note. The Weisblums pointed to various irregularities in the purported assignment to Aurora from MERS, as nominee for Lehman Brothers, dated January 16, 2009, and contended that its recording on May 6, 2009, after this action was commenced in March 2009, rendered it invalid.

In the first order appealed from, dated February 25, 2010, the Supreme Court granted Aurora's motion and denied the cross motion, holding that the affidavits of service established proper service of RPAPL 1303 notice on blue paper, and that the Weisblums' RPAPL 1304 defense was without merit. The Supreme Court determined that, although Patti Weisblum was a “borrower” under the CEMA and entitled to RPAPL 1304 notice, Aurora's failure to serve her with the notice was “not fatal” since the Weisblums both participated in “the mandatory settlement conference” ( see CPLR 3408), and no prejudice to the Weisblums had been identified. Further, the Supreme Court found no merit to...