United States District Court, E.D. New York
MEMORANDUM & ORDER
NICHOLAS G. GARAUFIS, UNITED STATES DISTRICT JUDGE.
Isaac Stern moves to dismiss this mortgage-foreclosure action
on the grounds that Plaintiff Courchevel 1850 LLC
("Courchevel 1850") never served him with notice of
the impending foreclosure, as he claims Section 1304 of the
New York Real Property Actions and Proceedings Law
("RPAPL") requires. (Mot. to Dismiss (Dkt. 104);
Mem. in Supp. of Mot. to Dismiss ("Stern Mem.")
(Dkt. 104-6).) For the reasons that follow, the motion is
following statement of facts is taken from Plaintiffs
complaint (Dkt. 1), the well-pleaded allegations of which the
court accepts as true for purposes of this motion. See
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
2005, Stem borrowed $190, 000 from National City Bank under a
line of credit secured by a mortgage on real property located
at 355A Halsey Street in Brooklyn (the "Property").
(Compl. ¶¶ 1, 50-51; see also Note (Dkt.
1-2); Mortgage (Dkt. 1-3).) The terms of the line of credit
were reflected in an "equity reserve agreement,"
which the court refers to as the "Note" for the
sake of brevity. Several years later, National City Bank was
acquired by PNC Bank, see The PNC Financial Services Group,
Annual Report (Form 10-K) (Mar. 11, 2010) at 2, 25, which
thereafter endorsed the Note to non-party American Servicing
Group, LLC (Compl. ¶ 54). After several further
assignments, the Note wound up in Plaintiffs hands.
(Id. ¶¶ 55-57.)
failed to make a payment due "on the first day of June
22, 2005" [sic] and remains in default on the
Note. (Id. ¶ 58.) On December 15, 2016,
Plaintiff notified Stern that it intended to treat the entire
balance outstanding under the Note as immediately due, and
gave him 30 days to cure his default, as the Mortgage
required. (Id. ¶ 59.) Plaintiff did not,
however, send Stern a notice that he was at risk of
foreclosure because Stern no longer owned or resided at the
Property and so, in Plaintiffs view, was not entitled to such
notice under RPAPL § 1304. (Id. ¶ 60.) As
the parties appear to agree, sometime after he executed the
Note and Mortgage but before Plaintiff instituted this
action, Stern sold the Property, which was subdivided into
four units that now belong to new owners. (Compl.
¶¶ 7-16; Affirm, of Isaac Stern ("Stern
Affirm.") (Dkt. 104-2) ¶ 3; Pl. Mem. in Opp'n
to Mot. to Dismiss ("Pl. Mem.") (Dkt. 104-7) at 5.)
March 30, 2017, after Stern failed to pay off the Note,
Plaintiff commenced this action to foreclose on the Mortgage,
naming as defendants Stern, the new owners of the subdivided
Property, several financial institutions that hold mortgages
allegedly junior to the Mortgage, and several government
agencies and creditors alleged to hold liens on the Property.
(Compl. ¶¶ 7-44.) Stern then moved to dismiss the
complaint on the grounds that Plaintiff had not served him
with a pre-foreclosure notice in accordance with RPAPL §
1304. (Stern Mem. at 1; Stern Affirm. ¶ 3.)
purpose of a Rule 12(b)(6) motion is to test the legal
sufficiency of a plaintiff s complaint. Patane v.
Clark, 508 F.3d 106, 111-12 (2d Cir. 2007) (per curiam).
"To survive a motion to dismiss, a complaint must
contain sufficient well-pleaded factual allegations, accepted
as true, to 'state a claim to relief that is plausible on
its face.'" Iqbal, 556 U.S. at 678 (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). When considering a Rule 12(b)(6) motion,
the court accepts the plaintiffs well-pleaded factual
allegations as true and draws all reasonable inferences in
the plaintiffs favor. Id; ATSI Commc'ns.
Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir.
2007). On a Rule 12(b)(6) motion, the court's review is
generally limited to the allegations of the complaint, as
well as "any written instrument attached to it as an
exhibit or any statements or documents incorporated in it by
reference," Chambers v. Time Warner, Inc., 282
F.3d 147, 152 (2d Cir. 2002), and "matters subject to
judicial notice," N.Y. Pet Welfare Ass'n v. City
of New York, 850 F.3d 79, 86 (2d Cir. 2017).
motion turns on a discrete question of law. Under New York
law, "[p]roper service of RPAPL [§] 1304 notice on
the borrower or borrowers is a condition precedent to the
commencement of a foreclosure action, and the plaintiff has
the burden of establishing satisfaction with this
condition." Deutsche Bank Nat'l Tr. Co. v.
Spanos, 961 N.Y.S.2d 200, 202 (App. Div. 2013) (quoting
Aurora Loan Servs., LLC v. Weisblum, 923 N.Y.S.2d
609, 616 (App. Div. 2011)). Does a plaintiff carry that
burden at the pleading stage by alleging that it was not
required to serve RPAPL § 1304 notice on the borrower
because he no longer owned or resided at the subject
property? The court answers this question in the negative: In
the court's view, RPAPL § 1304 requires that
pre-foreclosure notice to be sent to the borrower of what is
at origination a "home loan," even if the borrower
subsequently moves out of the property securing the loan.
court begins with some background on RPAPL § 1304.
"In response to the mortgage foreclosure crisis, New
York enacted the Foreclosure Prevention and Responsible
Lending Act ('FPRLA'), which provides a series of
legal protections and foreclosure prevention opportunities to
homeowners at risk of losing their homes." Avail
Holding LLC, v. Ramos, No. 15-CV-7068 (NGG), 2017 WL
979027, at *2 (E.D.N.Y. Mar. 10, 2017) (citing 2008 N.Y.
Sess. Law ch. 472 (S. 8143-A)). Among these protections is
the requirement, codified at RPAPL § 1304, that a lender
or mortgage servicer provide the borrower of a
"subprime" or "non-traditional home loan"
with certain prescribed notices at least 90 days before
initiating mortgage foreclosure or other legal action with
respect to the loan. 2008 N.Y. Sess. Law ch. 472 (S. 8143-A),
§ 2. As the bill's sponsor explained, the purpose of
the notice was to "urge borrowers to work with their
lender or a housing counseling agency to address their
situation." Introducer's Mem., N.Y. Bill Jacket,
2008 S.B. 8143, ch. 472, at 6; see also Aurora Loan
Servs., 923 N.Y.S.2d at 617 (noting that the
"legislative history [of RPAPL § 1304] noted a
typical lack of communication between distressed homeowners
and their lenders prior to commencement of litigation,
leading to needless foreclosure proceedings"). One year
later, the New York State Legislature expanded RPAPL §
1304 to apply to all "home loan[s]," not just
subprime or non-traditional loans. 2009 N.Y. Sess. Law ch.
507 (S. 66007), § 1-a: see Deutsche Bank Nat.
Trust, 961 N.Y.S.2d at 201.
New York law, a mortgagee must properly serve an RPAPL §
1304 notice before bringing an action to foreclose on a
mortgage securing a qualifying "home loan." See
Aurora Loan Servs., LLC v. Komarovsky, 58 N.Y.S.3d
96, 100 (App. Div. 2017). When a lender, assignee, or
mortgage servicer fails to demonstrate strict compliance with
RPAPL § 1304, its foreclosure action must be dismissed.
Weisblum, 923 N.Y.S.2d at 616; First Nat'l
Bank of Chi. v. Silver, 899 N.Y.S.2d 256, 259-62 (App.
Div. 2000); see also In re Gill 529 B.R. 31, 41
(Bankr. W.D.N.Y. 2015) ("New York Courts routinely
dismiss foreclosure proceedings where a mortgage lender does
not provide notice in strict compliance with the RPAPL §
that background in mind, the court turns to the interpretive
problem raised in this case. At the time Stern executed the
Note and Mortgage, he resided at the Property, which was
described in the recorded Mortgage as a single-family
dwelling. (Mortgage at 2, 7-8.) By the time Plaintiff commenced
this action, however, Stern no longer resided at the
Property. (Compl. ¶ 60.) Plaintiff does not allege that
it served an RPAPL § 1304 notice on Stern before
bringing this action, but contends instead that no such
notice was required because Stern no longer resided at or
owned the Property at the time. (Id.) The question
before the ...