The Bank of N.Y. Mellon v. Luria

• Decision Date: 18 July 2022
• Docket Number: Index No. 800018/2020
• Parties: The Bank of New York Mellon etc., Plaintiff, v. Ann Luria, et al., Defendants.
• Court: New York Supreme Court

2022 NY Slip Op 22218

The Bank of New York Mellon etc., Plaintiff,
v.
Ann Luria, et al., Defendants.

Index No. 800018/2020

Supreme Court, Putnam County

July 18, 2022

Plaintiff is represented by Zacahary Gold, of Friedman Vartolo.

Defendant is represented by Mary Aufrecht, of Clair Gjertsen & Weathers, PLLC.

HON. VICTOR G. GROSSMAN, J.S.C.

The following papers numbered 1 to 8 were read on Defendant's motion for renewal of this Court's prior decision and order awarding Plaintiff summary judgment of foreclosure:

Notice of Motion - Affirmation / Exhibits - Affidavit 1-3

Affirmation in Opposition / Exhibit 4

Reply Affirmation / Exhibit 5

Supplemental Affidavit (Plaintiff) - Supplemental Memorandum 6-7

Supplemental Affirmation (Defendant) / Exhibits 8

Upon the foregoing papers it is ORDERED that the motion is disposed of as follows:

FACTUAL AND PROCEDURAL BACKGROUND

This is a mortgage foreclosure action. The plaintiff Bank has been awarded summary judgment on its foreclosure claim, but a Judgment of Foreclosure and Sale remains to be entered. Defendant borrower Ann Luria now moves for renewal on the basis of the Second Department's recent decision in Bank of America v. Kessler, 202 A.D.3d 10 (2d Dept. 2021). She contends that Plaintiff's 90-day notice did not comply with the requirements of RPAPL §1304, as interpreted by Kessler, because in addition to the language prescribed in Section 1304(1) it contained the following language:

Nationstar is a debt collector. This is an attempt to collect a debt and any information obtained will be used for that purpose. However, if you are currently in bankruptcy or have received a discharge in bankruptcy, this communication is not an attempt to collect a debt from you personally to the extent that it is included in your bankruptcy or has been discharged, but is provided for informational purposes only

Relying on Kessler and its progeny - especially Ocwen Loan Servicing, LLC v. Sirianni, 202 A.D.3d 702 (2d Dept. 2022) - Defendant argues that by including this language in the 90-day notice Plaintiff violated RPAPL §1304(2), which provides that "[t]he notices required by this section shall be sent by the lender, assignee or mortgage loan servicer in a separate envelope from any other mailing or notice."

In an Interim Decision dated May 11, 2022, this Court wrote:

The additional "material" included in the November 29, 2016 90-day notice was a brief advisory dictated by the Federal Debt Collection Practices Act ("FDCPA"), 15 USC §1692 et seq. There were two components. First

Nationstar is a debt collector. This is an attempt to collect a debt and any information obtained will be used for that purpose.

The "debt collector" advisory is what is colloquially known as the "mini-Miranda" warning required in certain communications with a debtor by the FDCPA. See, 15 USC §1692e(11). Second:

However, if you are currently in bankruptcy or have received a discharge in bankruptcy, this communication is not an attempt to collect a debt from you personally to the extent that it is included in your bankruptcy or has been discharged, but is provided for informational purposes only.

The "bankruptcy" advisory was patently designed to avoid any imputation that the §1304 notice implicitly conveyed a "false representation of the character, amount, or legal status of any debt; or [t]he threat to take any action that cannot legally be taken or that is not intended to be taken" in violation of the FDCPA. See, 15 USC §1692e, subd. (2)(A), (5).

The RPAPL §1304 notice at issue here was sent by Nationstar Mortgage on or about November 29, 2016. At that time, there was case authority to the effect that noteholders or mortgage servicers whose interests were acquired after the mortgage was in default may be considered "debt collectors" subject to the strictures of the FDCPA. See, e.g., JPMorgan Chase Bank, N.A. v. Mantle, 134 A.D.3d 903 (2d Dept. 2015); Roth v. Citimortgage Inc., 756 F.3d 178, 183 (2d Cir. 2014). It appears from the record here that the Defendant borrower defaulted on her mortgage obligations as of January 1, 2012; that post-default Nationstar acquired an interest in the mortgage by an assignment executed on October 8, 2012 and recorded December 3, 2012; and, again post-default, that plaintiff Bank of New York Mellon acquired an interest in the mortgage by an assignment executed on December 5, 2016 and recorded January 10, 2017. In November 2016, then, Nationstar had good reason to believe that the language it appended to the RPAPL §1304 notice was required to assure its compliance with the FDCPA. If it was so required, then there arises a serious question whether Kessler's "bright-line" rule is preempted by the FDCPA. See, 15 USC §1692n.

Bank of New York Mellon v. Luria, 75 Misc.3d 1205 (A) at *3-4 (Sup. Ct. Putnam Co. 2022).

Based inter alia on the foregoing, the Court invited the parties to make supplemental submissions addressed among other things to the relevance of the Federal Debt Collection Practices Act to the case at bar.

The Plaintiff proffered evidence that (1) Nationstar Mortgage never possessed an ownership interest in the Defendant's loan, (2) Nationstar was at all times acting solely as a mortgage servicer on behalf of the beneficial owner, and (3) Nationstar first undertook to act as a mortgage servicer for Defendant's loan approximately six months after the loan was in default. Plaintiff accordingly argues that Nationstar was a "debt collector" within the meaning of the FDCPA, and that the language cited by Defendant as a violation of Kessler was inserted in compliance with the requirements of the FDCPA.

Defendant asserts that this Court is bound by Second Department holdings, particularly Sirianni, supra, that inclusion of such language as that at issue here in an RPAPL §1304 notice violates Kessler's "bright line" rule. ^[1] Defendant further argues that the language at issue was not required by federal law to be included in the Section 1304 90-day notice because Nationstar was not a "debt collector" nor was that notice issued "in connection with the collection of any debt" within the meaning of the FDCPA.

KESSLER AND ITS PROGENY DO NOT RESOLVE THE FDCPA PREEMPTION ISSUE PRESENTED IN THIS CASE

As a threshold matter, the Court must address the Defendant's contention that Kessler and Sirianni, supra, are dispositive of the issues presented here and require the relief Defendant requests irrespective of any issues arising under the FDCPA.

The FDCPA per 15 U.S.C. §1692n may preempt RPAPL §1304 as interpreted by Kessler and Sirianni. Section 1692n provides:

This subchapter does not annul, alter, or affect, or exempt any person subject to the provisions of this subchapter from complying with the laws of any State with respect to debt collection practices, except to the extent that those laws are inconsistent with any provision of this subchapter, and then only to the extent of the inconsistency.

For purposes of this section, a State law is not inconsistent with this subchapter if the protection such law affords any consumer is greater than the protection provided by this subchapter.

In the wake of this Court's Interim Decision, one federal district court, faced with an RPAPL §1304 notice containing essentially the same FDCPA-related language as that presented here, observed that" Kessler did not grapple with how the separate envelope rule conflicts with a debt collector's obligations under the FDCPA," expressly found that the Kessler rule conflicts with the requirements of 15 U.S.C. §1692e(11) and declined to follow Kessler. See, CIT Bank, N.A. v. Neris, 2022 WL 1799497 at *5-6 (S.D.NY, June 2, 2022). Indeed, the Second Department has never addressed the FDCPA preemption issue presented by the case at bar, perhaps because the issue has never previously arisen. ^[2]

Article 6, Clause 2 of the United States Constitution provides in pertinent part that "[t]his Constitution, and the Laws of the United States which shall be made in Pursuance thereof shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or laws of any State to the Contrary notwithstanding." State law is pre-empted under the Supremacy Clause by a federal statute if and to the extent that Congress has so directed through explicit statutory language. See, English v. General Electric Co., 496 U.S. 72, 78-79 (1990). If and to the extent that the FDCPA by virtue of 15 U.S.C. §1692n preempts Section 1304 as interpreted by Kessler, the FDCPA is supreme and precludes application of the Kessler "bright line" rule to the motion before this Court. Since the Second Department has yet to grapple with FDCPA preemption issues, one lower court - in U.S. Bank N.A. as Trustee v. Sackaris, 74 Misc.3d 923 (Sup. Ct. Suffolk Co. 2022) - properly declined to apply Kessler without first conducting an analysis to determine whether RPAPL §1304 as interpreted by Kessler and its progeny was inconsistent with the requirements of the FDCPA. See, id. at 925-926. This Court not only may but must do likewise.

RPAPL §1304 AND BANK OF AMERICA, N.A. v. KESSLER

RPAPL §1304(1) provides that, "Notwithstanding any other provision of law, with regard to a home loan, at least 90 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 which shall include the following" Compliance with the requirements of RPAPL §1304 is a condition precedent to an action to foreclose a mortgage. See, e.g., Everhome Mortgage Co. v. Aber, 195 A.D.3d 682 (2d Dept. 2021).

Section 1304(1) requires inter alia that borrowers be given information about housing counseling...