THE COURT OF APPEALS AND REBUTTING PRESUMPTION OF OFFICE MAILING BUSINESS PRACTICE - RPAPL 1304

CIT BANK NA v. Schiffman, 2021 NY Slip Op 1933 - NY: Court of Appeals March 30, 2021:

"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 NY2d 943, 944 [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 NY2d 922, 923 [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 NY3d 1169, 1170 [2014]; see also Nassau Ins. Co. v Murray, 46 NY2d 828, 829 [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 NY2d at 830). Such proof need not be supplied by the employee charged with mailing the document (see Bossuk v Steinberg, 58 NY2d 916, 919 [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 NY3d at 1170; see also Nassau Ins. Co., 46 NY2d 828). 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, posted and sealed, as well as how the mail was transmitted to the postal service (22 NY3d at 1170, affg 111 AD3d 1242, 1244 [4th Dept 2013]).

The particular issue before us here is what showing a borrower must make to rebut the presumption created through proof of a standard office mailing procedure in the context of RPAPL 1304 notices. In this Court, defendants essentially argue that a lender's showing of compliance with section 1304 through an affidavit of a routine office mailing procedure can be rebutted by the borrower's denial of receipt, accompanied by a showing that any aspect of the routine office procedure was not followed. CIT does not disagree that a denial of receipt and a showing of noncompliance can raise a fact issue but contends that this is true only if the deviation from procedure is material and related to the mailing process in a manner that would affect whether the document was mailed to the appropriate party.

It is well-settled that "[d]enial of receipt . . . standing alone, is insufficient . . .. In addition to a claim of no receipt, there must be a showing that [the] routine office practice was not followed or was so careless that it would be unreasonable to assume that the notice was mailed" (Nassau Ins. Co., 46 NY2d at 829-830). While we set forth these general principles in Nassau Ins. Co., we did not elaborate upon the nature or extent of the departure from stated office routine necessary to rebut the presumption. Asked by the Second Circuit for further guidance on that issue, we clarify that to rebut the presumption, there must be proof of a material deviation from an aspect of the office procedure that would call into doubt whether the notice was properly mailed, impacting the likelihood of delivery to the intended recipient. Put another way, the crux of the inquiry is whether the evidence of a defect casts doubt on the reliability of a key aspect of the process such that the inference that the notice was properly prepared and mailed is significantly undermined. Minor deviations of little consequence are insufficient.

What is necessary to rebut the presumption that a RPAPL 1304 notice was mailed will depend, in part, on the nature of the practices detailed in the affidavit. Moreover, contextual considerations may also factor into the analysis. For example, here, CIT points out that residential notes and mortgages are negotiable instruments that often change hands at various points during their duration, which may impact the timing of the creation and mailing of RPAPL 1304 notices—a contextual factor a court could consider in assessing whether a purported deviation from routine procedure was material. We reject defendants' argument that a single deviation from any aspect of the routine office procedure necessarily rebuts the presumption of mailing. Such a standard would undermine the purpose of the presumption because, in practice, it would require entities to retain actual proof of mailing for every document that could be potentially relevant in a future lawsuit. As we recognized almost a century ago, such an approach would be financially and logistically impractical given the reality that commercial entities create and process significant volumes of mail and may experience frequent employee turnover—circumstances that apply not only to banks, but many other businesses and government agencies (see generally Johnson v Lutz, 253 NY 124, 126-127 [1930] [addressing adoption of the business records rule]). Instead, New York courts have applied a workable rule that balances the practical considerations underpinning the presumption against the need to ensure the reliability of a routine office practice with respect to the creation and mailing of notices, which we have further clarified today in the context of notices mailed pursuant to section 1304.

The Second Circuit has not asked us to address how the standard should be applied in this case and we therefore express no view on that question (see e.g. Engel v CBS, Inc., 93 NY2d 195, 207 [1999])."