Deutsche Bank National Trust Company v. Arrigo
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Attorneys and Parties
Brief Summary
Residential mortgage foreclosure involving compliance with RPAPL 1304 [pre-foreclosure notice to borrower as a condition precedent to commencing a residential foreclosure action], RPAPL 1306 [requirement to file notice information with the New York State Department of Financial Services], and Banking Law § 6-1 [contains certain protections against predatory lending for high-cost home loans].
The Supreme Court, Suffolk County, granted the lender summary judgment against Michael E. Arrigo, struck his answer and affirmative defenses based on RPAPL 1304, RPAPL 1306, and Banking Law § 6-1, denied his cross-motion for summary judgment dismissing the complaint, and issued an order of reference.
The Appellate Division modified the order by denying the branches of the plaintiff's motion seeking summary judgment against Michael E. Arrigo, striking his answer and fifth affirmative defense under Banking Law § 6-1, and obtaining an order of reference. The rest of the order, as reviewed, was affirmed.
The plaintiff made a prima facie showing of compliance with RPAPL 1304 and RPAPL 1306 through the loan servicer's affidavit, mailing records, certified mail receipt, and Department of Financial Services proof of filing. But it failed to establish prima facie compliance with Banking Law § 6-1 because there were triable issues as to whether the loan was a high-cost home loan, including whether points and fees exceeded five percent of the total loan amount. The court also held that the Banking Law § 6-1 defense was not time-barred when asserted defensively in recoupment against an assignee.
Background
In October 2006, Susan M. Arrigo and Michael E. Arrigo executed a $296,000 note secured by a mortgage on Bay Shore property. In 2015, Deutsche Bank commenced this foreclosure action. The plaintiff moved for summary judgment against Michael E. Arrigo, to strike affirmative defenses alleging noncompliance with RPAPL 1304, RPAPL 1306, and Banking Law § 6-1, and for an order of reference. Michael E. Arrigo opposed and cross-moved for summary judgment dismissing the complaint on those same grounds. During the appeal, Michael E. Arrigo died, and Susan M. Arrigo, as administrator of his estate, was substituted for him.
Lower Court Decision
The lower court held that the plaintiff had shown compliance with the pre-foreclosure notice and filing statutes and with Banking Law § 6-1, granted summary judgment on the complaint insofar as asserted against Michael E. Arrigo, struck his third, fourth, and fifth affirmative defenses, denied his cross-motion for summary judgment dismissing the complaint, and made statements concerning CPLR 205(a).
Appellate Division Reversal
The Appellate Division dismissed Susan M. Arrigo's appeal in her individual capacity because she was not aggrieved, and also dismissed the appeal from the portion of the order discussing CPLR 205(a) because those statements were dicta and did not aggrieve the estate. On the merits, it agreed that the plaintiff proved compliance with RPAPL 1304 and RPAPL 1306. The Verdooren affidavit, attached RPAPL 1304 notice, envelopes showing certified and first-class mailing, and the signed United States Postal Service certified mail receipt were sufficient to establish mailing, and the decedent's denial of receipt did not raise a triable issue. The plaintiff also proved RPAPL 1306 compliance through a Department of Financial Services proof of filing statement. However, the court held that the plaintiff failed to establish compliance with Banking Law § 6-1 because factual issues remained as to whether the loan qualified as a high-cost home loan based on the points-and-fees threshold. Accordingly, the order was modified to deny summary judgment, denial of the Banking Law defense, and the order of reference.
Legal Significance
The decision reinforces that a foreclosure plaintiff may prove RPAPL 1304 compliance through competent business-record evidence of standard mailing procedures and corroborating mailing documents, including signed certified mail receipts. It also confirms that RPAPL 1306 compliance may be shown with a Department of Financial Services proof of filing statement. Most importantly, it clarifies that Banking Law § 6-1 defenses may be asserted without time limitation in recoupment against an assignee in a foreclosure action, and that a lender seeking summary judgment must affirmatively eliminate factual disputes over whether the loan meets the statute's high-cost thresholds.
A foreclosing lender can win on RPAPL 1304 and RPAPL 1306 with solid mailing and filing proof, but it cannot obtain summary judgment or an order of reference if it fails to negate a viable Banking Law § 6-1 predatory-lending defense, especially where there is a factual dispute over whether loan points and fees exceeded the statutory threshold.