CIT Bank N.A. v. Schiffman

• Decision Date: 30 March 2021
• Docket Number: No. 11,11
• Citation: 36 N.Y.3d 550,168 N.E.3d 1138,145 N.Y.S.3d 1
• Parties: CIT BANK N.A., Respondent, v. Pamela SCHIFFMAN, et al., Appellants, et al., Defendants.
• Court: New York Court of Appeals Court of Appeals

36 N.Y.3d 550

168 N.E.3d 1138

145 N.Y.S.3d 1

CIT BANK N.A., Respondent,

v.Pamela SCHIFFMAN, et al., Appellants, et al., Defendants.

No. 11

Court of Appeals of New York.

March 30, 2021

OPINION OF THE COURT

DiFIORE, Chief Judge.

In New York, prior to commencing a residential foreclosure action, a lender must comply with certain requirements set forth in the Real Property Actions and Proceedings Law (RPAPL). As relevant here, these include, under section 1304, providing certain notices to the borrower 90 days before commencing a foreclosure action and, under section 1306, completing an electronic filing providing certain borrower information to the State Department of Financial Services (DFS). In this appeal involving a foreclosure action commenced in federal court, the United States Court of Appeals for the Second Circuit has posed two questions to this Court implicating what a lender must do to comply with these statutes. 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.

As stated by the Second Circuit, in 2008 defendant Pamela Schiffman executed a $326,000 note secured by a mortgage on property she owned with her husband, defendant Jerry Schiffman. The couple jointly executed a Consolidation, Extension and Modification Agreement combining prior obligations on the property into a single agreement, and later entered into a loan modification agreement. The mortgage was assigned to OneWest Bank, F.S.B., which—after defendants’ payment default in December 2014—later became known as plaintiff CIT Bank N.A. (CIT). Following the default, CIT commenced this foreclosure action against the Schiffmans in October 2016 in the United States District Court for the Eastern District of New York. Defendants answered, asserting (among other defenses) that CIT failed to comply with RPAPL 1304 and 1306.

CIT moved for summary judgment against defendants, arguing it had established its prima facie entitlement to a judgment of foreclosure and, as relevant here, that it had satisfied the requirements of RPAPL 1304 and 1306 in November 2015, almost a year before commencing suit, by mailing the notices and submitting the electronic filing within three days of that mailing. To demonstrate compliance with RPAPL 1304, CIT submitted the affidavit of employee Rachel Hook in which she attested to her personal knowledge of CIT's routine office practice relating to the generation, addressing, and mailing of 90–day notices, which she described in the affidavit. Copies of the notices and envelopes purportedly mailed to Pamela and Jerry Schiffman were attached to the motion papers. As relevant to the first certified question, Hook's affidavit stated that, as part of CIT's routine practice, envelopes for the 90–day notices are "created upon default." CIT also submitted a copy of its completed RPAPL 1306 electronic filing statement, which listed Pamela Schiffman as the borrower and stated that the filing was completed on the same day as the mailing of the 90–day notice. Defendants opposed summary judgment, denying receipt of the section 1304 notices, asserting the Hook affidavit was insufficient to create a presumption of receipt for various reasons, and contending that CIT failed to satisfy section 1306 by listing only Pamela, and not also Jerry, on the filing.

The motion was referred to a magistrate judge, who recommended that the court grant CIT's motion for summary judgment. Adopting that recommendation, District Court granted summary judgment to CIT, concluding that the bank satisfied both RPAPL 1304 and 1306. Defendants appealed, arguing, among other things, that the District Court erred in concluding that CIT proved compliance with RPAPL 1304. Specifically, defendants contended that 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." Defendants also reiterated their argument that CIT failed to comply with RPAPL 1306 because the requisite filing listed only one of their names.

On appeal, the Second Circuit did not resolve defendants’ argument that, even if a presumption arose, the "nearly one-year gap" between the date of the notice and defendants’ initial payment default rebutted the presumption, creating a triable question of fact.^* Determining that it needed guidance from this Court as to the type of showing necessary to rebut the presumption in this context, the Second Circuit certified the first question, which asks:

"Where a foreclosure plaintiff seeks to establish compliance with RPAPL § 1304 through proof of a standard office mailing procedure, and the defendant both denies receipt and seeks to rebut the presumption of receipt by showing that the mailing procedure was not followed, what showing must the defendant make to render inadequate the plaintiff's proof of compliance with § 1304 ?" ( CIT Bank N.A. v. Schiffman, 948 F. 3d 529, 538 [2d Cir.2020] ).

With respect to CIT's compliance with the RPAPL 1306 electronic filing requirement, the Second Circuit concluded that whether the statute requires a lender to list all borrowers on the filing constitutes an unresolved question of New York law, certifying the second question, which asks: "Where there are multiple borrowers on a single loan, does RPAPL § 1306 require that a lender's filing include information about all borrowers, or does § 1306 require only that a lender's filing include information about one borrower?" ( id. ).

We accepted the questions for review pursuant to section 500.27 of this Court's rules ( CIT Bank N.A. v. Schiffman, 34 N.Y.3d 1137, 119 N.Y.S.3d 419, 142 N.E.3d 102 [2020] ).

Certified Question No. 1

We begin with the first question concerning the showing necessary to rebut the presumption created by proof of a standard office mailing procedure in the section 1304 context. RPAPL 1304(1) provides that "with regard to a home loan, at least ninety days before a lender, an assignee or a mortgage loan servicer commences legal action against the borrower, or borrowers ... including mortgage foreclosure, such lender, assignee or mortgage loan servicer shall give notice to the borrower." The notice must be sent "by registered or certified mail and also by first-class mail" and contain a list of at least five local housing counseling agencies, among other requirements ( RPAPL 1304[2] ). "Notice is considered given as of the date it is mailed" (id. ).

The legislature enacted RPAPL 1304 in 2008 in response to the mortgage crisis, initially making it applicable only to lenders of certain "high-cost," "subprime" and "non-traditional" home loans (L 2008, ch 472, § 2). The scope of the statute was expanded the following year to cover all home loans (L 2009, ch 507, § 1–a; see RPAPL 1304[1], [6][a][1] ). This had the effect of increasing the number of borrowers who would 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 (Governor's Program Bill, 2009 Mem, Bill Jacket, L 2009, ch 507 at 10).

RPAPL 1304 does not indicate what proof a lender must submit in a foreclosure action to demonstrate compliance with the notice requirement. However, in analogous circumstances, this Court has long recognized a party can establish that a notice or other document was sent through evidence of actual mailing (e.g., an affidavit of mailing or service) (see Engel v. Lichterman, 62 N.Y.2d 943, 944, 479 N.Y.S.2d 188, 468 N.E.2d 26 [1984] ) or—as relevant here—by proof of a sender's routine business practice with respect to the creation, addressing, and mailing of documents of that nature. Evidence of "an established and regularly followed office procedure" ( Matter of Gonzalez (Ross), 47 N.Y.2d 922, 923, 419 N.Y.S.2d 488, 393 N.E.2d 482 [1979] ) may give rise to a rebuttable "presumption that such a notification was mailed to and received by [the intended recipient]" ( Preferred Mut. Ins. Co. v. Donnelly, 22 N.Y.3d 1169, 1170, 985 N.Y.S.2d 470, 8 N.E.3d 847 [2014] ; see also Nassau Ins. Co. v. Murray, 46 N.Y.2d 828, 829, 414 N.Y.S.2d 117, 386 N.E.2d 1085 [1978] ). "In order for the presumption to arise, [the] office practice must be geared so as to ensure the likelihood that [the] notice ... is always properly addressed and mailed" ( Nassau Ins. Co., 46 N.Y.2d at 830, 414 N.Y.S.2d 117, 386 N.E.2d 1085 ). Such proof need not be supplied by the employee charged with mailing the document (see Bossuk v. Steinberg, 58 N.Y.2d 916, 919, 460 N.Y.S.2d 509, 447 N.E.2d 56 [1983] ) but can be offered in the form of an affidavit of an employee with "personal knowledge of the practices utilized by the [company] at the time of the alleged mailing" ( Preferred Mut. Ins. Co., 22 N.Y.3d at 1170, 985 N.Y.S.2d 470, 8 N.E.3d 847 ; see also Nassau Ins. Co., 46 N.Y.2d 828, 414 N.Y.S.2d 117, 386 N.E.2d 1085 ). For example, in Preferred Mut. Ins. Co., we deemed an affidavit describing the procedures used by an insurance company "to ensure the accuracy of addresses, as well as office procedure relating to the delivery of mail to the post office" sufficient to support the presumption, where the affidavit explained, among other things, how the notices and envelopes were generated,...