Parties - Standing - Action Alleging Failure to Provide Timely Satisfactions of Mortgage

Statutes - Federal Preemption - State Statutory Requirement to Provide Satisfactions of Mortgage

Mortgages - Satisfaction - Compliance with Real Property Law § 275 and RPAPL 1921

Phillips Lytle LLP, Buffalo (Sean C. McPhee and Steven B. Salcedo of counsel), for HSBC Bank USA, N.A. and another, defendants.

Reed Smith LLP, New York City (Diane A. Bettino and David G. Murphy of counsel), for PHH Mortgage Corporation, defendant.

Tusa, P.C., Southold (Joseph S. Tusa of counsel), and Lowey Dannenberg P.C., White Plains (Peter D. St. Phillip, Jr. and Alesandra Greco of counsel), for plaintiffs.

In this action, brought by plaintiffs, John Rubino, Beverly Guity, Emily Freidberg, and Jerome Paticoff, against defendants, HSBC Bank USA, N.A., HSBC Mortgage Corporation (USA), and PHH Mortgage Corporation, plaintiffs allege that they were injured by defendants' failure to provide timely satisfactions of mortgage after plaintiffs had paid off mortgage loans held or serviced by defendants.

Plaintiffs assert claims under Real Property Law § 275 (1), Real Property Actions and Proceedings Law § 1921 (1) and (4), and General Business Law § 349, and common-law claims sounding in breach of contract. Plaintiffs are asserting these claims both for themselves, individually, and on behalf of a putative class.^[FN1]

Defendants now move to dismiss plaintiffs' individual claims under CPLR 3211 (a) (2), (3), (5), and (7); and move to dismiss plaintiffs' class claims under CPLR 3211 (a) (7) and 901 (b). The branches of the motion seeking dismissal of the individual claims under CPLR 3211 (a) (2), (3), and (5) are denied. The branch of the motion seeking dismissal of the individual claims under CPLR 3211 (a) (7) is granted in part and denied in part. The branch of the motion seeking dismissal of the class claims under CPLR 3211 (a) (7) is granted in part and denied in part without prejudice.

Standing is a threshold justiciability inquiry. It is intended "to ensure that a party seeking relief has a sufficiently cognizable stake in the outcome so as to present a court with a dispute that is capable of judicial resolution." (Security Pac. Natl. Bank v Evans, 31 AD3d 278, 279 [1st Dept 2006].) The "most critical requirement of standing"—and the one defendants {**87 Misc 3d at 916}challenge here—is the "presence of injury in fact—an actual legal stake in the matter being adjudicated." (Id. [internal quotation marks omitted].) This court has little difficulty concluding that plaintiffs have satisfied the injury-in-fact requirement.

Plaintiffs are suing to vindicate a statutory right conferred on them by the Legislature: To receive satisfactions of their mortgages within a specified period of time after those mortgages are paid off. (See Real Property Law § 275; RPAPL 1921.) Indeed, the Legislature has determined that protecting this right—and avoiding the harms that occur when the right is violated—is sufficiently important that mortgagors whose rights to receive satisfactions are abridged should be able to bring actions for monetary recovery against the mortgagees responsible. (See Real Property Law § 275 [1]; RPAPL 1921 [1], [4].) The Legislature itself has thus made clear that a particular group of individuals (mortgagors) have an actual stake in the matter (obtaining a satisfaction of mortgage upon paying off the mortgage, or monetary recovery for the failure to provide the satisfaction timely) and set the terms by which this dispute may be judicially resolved. No more is required for standing to exist.

In nonetheless challenging plaintiffs' standing, defendants rely on federal decisions applying the standing requirements of article III of the Federal Constitution.^[FN2] However, although federal standing doctrine and New York standing doctrine have some basic principles in common, they are not identical.^[FN3] (See Society of Plastics Indus. v County of Suffolk, 77 NY2d 761, 771-773 [1991].) And defendants provide no authority that{**87 Misc 3d at 917} plaintiffs' allegations that defendants violated the statutory (and contractual) rights at issue here would be insufficient to confer standing as a matter of New York law.^[FN4]

Defendants move under CPLR 3211 (a) (2) to dismiss this action for lack of subject-matter jurisdiction as preempted. (See Sharabani v Simon Prop. Group, Inc., 96 AD3d 24, 27 [2d Dept 2012] [considering whether the motion court lacked subject-matter jurisdiction on the ground that plaintiff's state-law claims were preempted by the federal Home Owners' Loan Act].) This branch of the motion is denied.

Defendants contend that plaintiffs' claims under Real Property Law § 275 and RPAPL 1921 are preempted by federal regulations implementing the National Bank Act. (See NYSCEF Doc No. 16 at 11-12, citing 12 CFR 34.4.) This court is not persuaded that the regulations on which defendants rely have preemptive effect here.^[FN5]

Defendants point to regulatory language that a "national bank may make real estate loans" pursuant to its power to do so under federal law "without regard to" enumerated state-law requirements concerning, among other things, the "[p]rocessing, origination, servicing, sale or purchase of, or investment or participation in, mortgages." (12 CFR 34.4 [a] [10].) Defendants' reliance on section 34.4 is unpersuasive.

To begin with, this court is not persuaded that the requirements for providing mortgage satisfactions imposed by Real{**87 Misc 3d at 918} Property Law § 275 and RPAPL 1921 are within the scope of 12 CFR 34.4 (a) (10). Those statutes do not concern how real-estate loans are made; how those loans are originated, transferred, or securitized; or how lender practices relating to mortgage-loan payments and payment information are handled. To the contrary, the statutes come into play only once the underlying loan has been fully paid off and the mortgage satisfied, because they address only the formal recordation of the mortgage's having been satisfied. (See Zink v First Niagara Bank, N.A., 18 F Supp 3d 363, 369 [WD NY 2014] [making this point]; accord Pinchot v Charter One Bank, F.S.B., 99 Ohio St 3d 390, 396-398, 792 NE2d 1105, 1112-1114 [2003] [same, in discussing whether Ohio's analogous mortgage-satisfaction statute is preempted by 12 CFR 34.4].)

Additionally, 12 CFR 34.4 (b) (6) provides that state laws on the "[a]cquisition and transfer of real property" are not "inconsistent with the real estate lending powers of national banks," and that these state laws "apply to national banks to the extent consistent with" Barnett Bank of Marion Cty., N. A. v Nelson (517 US 25 [1996]). Real Property Law § 275 and RPAPL 1921 are within the exception to preemption of section 34.4 (b) (6); their entire purpose is to facilitate the transfer of real property that once was—but is no longer—subject to a mortgage.

To be sure, the requirements of these statutes still must satisfy the non-interference standard of Barnett Bank. This court concludes that they do. In applying this standard, a court "must make a practical assessment of the nature and degree of the interference caused by a state law," and whether the "state law prevents or significantly interferes with the national bank's exercise of its powers." (Cantero v Bank of America, N.A., 602 US 205, 219-220 [2024].) Here, Real Property Law § 275 and RPAPL 1921 provide that when a real-estate loan (by any mortgage lender) has been fully paid off, and the lender's security interest satisfied, the lender must promptly ensure that this satisfaction is formally recorded. But these state statutes do not regulate the loans themselves; their terms, interest rates, or payment structure; the manner in which loan payments are made to and handled by the lender; or how the lender may exercise its security interest in the event of a default. In light of the limits on these statutes' scope, they do not significantly interfere with national banks' exercise of their powers.{**87 Misc 3d at 919}

In arguing that sections 275 and 1921 are preempted, defendants do not identify any conflict between these provisions and federal bank powers. In fact, they do not identify any case—state or federal—holding that 12 CFR 34.4, or the National Bank Act itself, preempts state-law requirements governing recordation of mortgage satisfactions.

Instead, defendants rely on two federal district court decisions assessing the preemptive effect of a different regulation, former 12 CFR 560.2.^[FN6] (See NYSCEF Doc No. 16 at 11-12, citing McAnaney v Astoria Fin. Corp., 665 F Supp 2d 132 [ED NY 2009]; Cassese v Washington Mut., Inc., 255 FRD 89 [ED NY 2008].) It is undisputed that McAnaney and Cassese (and former section 560.2) would not apply directly here: Former section 560.2 governed only activities of savings and loan associations, and neither defendant here is a savings and loan. Defendants argue that these decisions are nonetheless instructive, because former section 560.2 and current 12 CFR 34.4 use very similar language to describe the state regulatory activity they preempt. (See NYSCEF Doc No. 16 at 12.) This argument is unpersuasive.

While section 560.2 was in place, it preempted the entire field of state lending regulation of savings and loan associations, except as specifically provided. (See former 12 CFR 560.2 [a]; McAnaney, 665 F Supp 2d at 156-158 [discussing section 560.2's preemptive scope].) The language in former section 560.2 that is similar to current section 34.4, describing different categories of state regulations that are preempted, was expressly characterized by section 560.2 as "illustrative examples," rather than a complete list. (Former 12 CFR 560.2 [b] [capitalization omitted; emphasis added].) Section 34.4, on the other hand, preempts only those regulatory activities that it specifically enumerates; and also includes an express exception for some state regulations that might otherwise be within that preemptive scope. (See 12 CFR 34.4 [a], [b]; Zink, 18 F Supp 3d at 367-369 [discussing the differences between sections 560.2 and 34.4].) Although the two regulations include similar language, the preemptive import of that language, in context, is materially different.

Plaintiffs' claims under Real Property Law § 275 and RPAPL 1921 are not preempted.{**87 Misc 3d at 920}

Defendants next move under CPLR 3211 (a) (5) to dismiss the action as untimely. This branch of defendants' motion is also denied.

The parties differ first on the applicable limitations period governing plaintiffs' claims. Plaintiffs argue that the claims are subject to six-year statutes of limitations (under which the claims would indisputably be timely). Defendants argue that the claims are subject to three-year statutes of limitations (under which the claims would be untimely absent the benefit of tolling). This court concludes that most, but not all, claims are subject to six-year limitations periods.

A. The Real Property Law § 275 and RPAPL 1921 Claims

Plaintiffs argue that their claims under Real Property Law § 275 and RPAPL 1921 are entitled to a six-year limitations period under CPLR 213—presumably as actions "upon a mortgage of real property" within the meaning of CPLR 213 (4). (See NYSCEF Doc No. 19 at 19.) Defendants contend that the 275 and 1921 claims are instead governed by the three-year limitations period set by CPLR 214 (2) for actions "to recover upon a liability, penalty or forfeiture created or imposed by statute." (See NYSCEF Doc No. 16 at 5-6.) This court agrees with plaintiffs.

CPLR 214 (2) provides that CPLR 214's three-year limitations period applies "except as provided in sections 213 and 215." When a given claim comes within the scope both of CPLR 213 and 214 (2), the longer CPLR 213 limitations period applies. (See Mandarino v Travelers Prop. Cas. Ins. Co., 37 AD3d 775, 775-776 [2d Dept 2007].) The question here, therefore, is whether plaintiff's Real Property Law § 275 and RPAPL 1921 claims are governed by CPLR 213. Plaintiffs argue that these claims should be understood as brought "upon a mortgage" within the meaning of CPLR 213 (4). This argument is persuasive.

As discussed above, Real Property Law § 275 and RPAPL 1921 provide ways for a mortgagor to ensure that once a mortgage loan is fully paid off, the mortgage will be formally treated as satisfied and no longer encumbering title to the property. For example, RPAPL 1921 (2) allows a party to seek cancellation/discharge of a mortgage based on its having been{**87 Misc 3d at 921} paid off.^[FN7] And the Appellate Division has held that this provision is governed by a six-year limitations period. (See Matter of Key Bank of N.Y. v Del Norte, 251 AD2d 740, 741-742 [3d Dept 1998].) In other words, an action under RPAPL 1921 (2) to seek cancellation of a mortgage of record on the ground that the underlying loan has been paid off is considered, for limitations purposes, to be an action on that underlying note or an action on the mortgage. And this court sees no material difference between the section 1921 (2) claim at issue in Key Bank and plaintiffs' claims, which seek monetary recovery under Real Property Law § 275 (1) and RPAPL 1921 (1) and (4) based on the mortgages not having been timely satisfied of record.

Monetary claims under subdivision (1) of section 275 and under subdivisions (1) and (4) of section 1921, and cancellation claims under subdivision (2) of section 1921, all seek to vindicate a mortgagor's right to have a lien on title removed once the note secured by the loan has been repaid. True, monetary claims under sections 275 and 1921 may be brought after the lien has been removed, rather than before (as with cancellation claims). But the core interest sought to be protected through these actions is the same. And it is the "gravamen or essence of the cause of action that determines the applicable Statute of Limitations."^[FN8] (Western Elec. Co. v Brenner, 41 NY2d 291, 293 [1977].) For this reason, this court respectfully declines to follow the decision of the U.S. District Court for the Southern District of New York in Whittenburg v Bank of Am., N.A. (2015 WL 2330307, *2, 2015 US Dist LEXIS 66019, *5-8 [SD NY, Mar. 24, 2015, No. 14 CV 947 (VB)]), cited{**87 Misc 3d at 922} by defendants (NYSCEF Doc No. 16 at 6). Whittenburg held that claims under Real Property Law § 275 (1) and RPAPL 1921 (1) are not actions on a mortgage for limitations purposes because the claims "arise[ ] only from defendant's alleged failure to comply with statutory provisions after plaintiffs' mortgage was satisfied," and are thus "independent of plaintiffs' mortgage." (2015 WL 2330307, *2, 2015 US Dist LEXIS 66019, *6-7.) This argument is not without force. But the distinction it seeks to draw between the bases of claims under section 1921 (2) and under section 275 (1) and section 1921 (1) ultimately slices the apple too thin.

It would be particularly anomalous to impose a three-year limitations period on claims under RPAPL 1921 (1) and (4) when claims under RPAPL 1921 (2) are subject to a six-year statute of limitations. Indeed, the Legislature enacted RPAPL 1921 (4) in 1993 (see L 1993, ch 132, § 2)—and then went further and enacted Real Property Law § 275 (1) and RPAPL 1921 (1) in 2005 (see L 2005, ch 467, § 2)—precisely because the Legislature viewed the existing remedies under RPAPL 1921 as insufficient to ensure that mortgagees and mortgage servicers were complying with their obligations to provide satisfactions promptly upon mortgages being paid off. (See Assembly Mem in Support, Bill Jacket, L 1993, ch 132 at 6; Senate Mem in Support, Bill Jacket, L 2005, ch 467 at 4.) Given that sections 275 (1) and 1921 (1) and (4) were intended to provide remedies beyond the cancellation-of-mortgage relief available under section 1921 (2), it would make little sense to impose a much more stringent statute of limitations on those additional remedies, compared with subdivision (2).

In short, Real Property Law § 275 (1) claims, and RPAPL 1921 (1) and (4) claims, are all subject to six-year statutes of limitations. Applying that limitations period here, plaintiffs' claims under these statutes are timely.^[FN9]

B. The Breach of Contract Claims

Defendants also argue that plaintiffs' claims for breach of their mortgage agreements are untimely because those claims{**87 Misc 3d at 923} are based on alleged violations of Real Property Law § 275 (1) and RPAPL 1921, and are therefore subject to the same limitations period as the sections 275 (1) and 1921 claims discussed above. (See NYSCEF Doc No. 16 at 6-7.) Even assuming this argument is correct, however, the argument does not provide a basis to dismiss the breach-of-mortgage agreement claims. Because, as discussed above, the sections 275 (1) and 1921 claims are subject to a six-year statute of limitations, the same would be true of the breach-of-mortgage-agreement claims, even on defendants' argument. And the claims were timely brought within that limitations period.

C. The General Business Law § 349 Claims

Defendants seek dismissal of plaintiffs' General Business Law § 349 claims as untimely, contending that these claims are governed by the three-year statute of limitations of CPLR 214 (2). Defendants are correct that CPLR 214 (2) governs these claims. (See Corsello v Verizon N.Y., Inc., 18 NY3d 777, 789 [2012].)

Plaintiffs do not seriously dispute this point. Instead, they argue that the General Business Law § 349 claims are nonetheless timely because they are entitled to the benefit of cross-jurisdictional tolling in light of the two prior federal class actions in which they were involved that asserted untimely-satisfaction-related claims. (See NYSCEF Doc No. 19 at 22-24, citing American Pipe & Constr. Co. v Utah, 414 US 538 [1974].) This argument has considerable force, at least with respect to the prior class action in which plaintiffs here were class members, as opposed to the class action in which they were the named plaintiffs. (See Badzio v Americare Certified Special Servs., Inc., 177 AD3d 838, 841-842 [2d Dept 2019] [cross-jurisdictional tolling afforded to subsequent class action when plaintiffs in the second action were unnamed class members in the first action].)^[FN10] This court need not definitively resolve the cross-jurisdictional-tolling question here, though. Even assuming that plaintiffs' General Business Law § 349 claims would be timely in light of the toll, the court agrees with defendants{**87 Misc 3d at 924} that those claims are subject to dismissal regardless for failure to state a cause of action. That issue is discussed further below.

Defendants argue that some of plaintiffs' claims on behalf of themselves as individuals (as opposed to on behalf of a putative class) should be dismissed under CPLR 3211 (a) (7) for failure to state a cause of action. With respect to the individual-capacity claims that defendants challenge, the court considers defendants' arguments claim by claim; and, within each claim, plaintiff by plaintiff to the extent needed.

On a CPLR 3211 (a) (7) motion to dismiss, "the pleading is to be afforded a liberal construction and the court will accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory." (Leon v Martinez, 84 NY2d 83, 87-88 [1994] [alteration omitted].)

A. Plaintiffs' Real Property Law § 275 (1) and RPAPL 1921 (1) Claims

Defendants move to dismiss plaintiff Guity's individual-capacity claims brought under both Real Property Law § 275 and RPAPL 1921 (1), and move to dismiss the individual-capacity claims of plaintiffs Paticoff and Freidberg brought under RPAPL 1921 (1).

1. Plaintiff Guity

Defendants argue that Guity lacks a cause of action under sections 275 (1) and 1921 (1) because she did not pay the full amount of principal and interest that she owed—and therefore was (assertedly) not entitled under these statutes to receive a mortgage satisfaction. (See NYSCEF Doc No. 16 at 14.)

As an initial matter, this argument is overbroad. As the complaint makes clear, Guity took out two mortgage loans, not one. (See NYSCEF Doc No. 1 at 9-10 ¶¶ 44-57.) Defendants' arguments pertain only to the first loan, which was cleared during a short sale, and not also to the second loan.^[FN11] (See id. ¶¶ 48, 57.) With respect to the first loan, though, this court{**87 Misc 3d at 925} agrees with defendants that Guity was not statutorily entitled to have received a satisfaction within a particular time period, and thus lacks a cause of action under sections 275 (1) and 1921 (1).

As discussed above, Real Property Law § 275 (1) provides that when "a mortgage upon real property is due and payable, and the full amount of principal and interest due on the mortgage is paid, a certificate of discharge of mortgage shall be given to the mortgagor." Similarly, RPAPL 1921 (1) provides that the mortgagee must provide a mortgage satisfaction within the statutory period "[a]fter payment of authorized principal, interest and any other amounts due thereunder or otherwise owed by law has actually been made."

Here, it is undisputed that Guity did not pay the full amount due under the first mortgage loan—indeed, that defendants expressly told her they had agreed to accept the proceeds of the short sale as satisfying her mortgage obligations notwithstanding that the amount of those proceeds would be less than the full amount due. (See NYSCEF Doc No. 1 ¶ 48.) In these circumstances, the court agrees with defendants that Guity has not alleged that she met the requirements of sections 275 (1) and 1921 (1) with respect to the first loan.

Guity's opposition to dismissal does not identify case law holding that a mortgagee that treats short-sale proceeds as clearing a mortgage loan is thereby subject to section 275 or section 1921 (1). Instead, she points to the representation by defendants that they would release their mortgage lien upon completion of the short sale. (See NYSCEF Doc No. 19 at 13, quoting NYSCEF Doc No. 1 ¶ 48.) That representation, however, does not undertake to release the lien, through delivery of a satisfaction, within a particular time—much less by the particular deadlines provided for by sections 275 (1) and 1921 (1). Nor does Guity allege, or argue in opposition to the dismissal motion, that she detrimentally relied on defendants' representation (or that she was injured as a result of any detrimental reliance).

Guity also suggests that if sections 275 (1) and 1921 (1) do not apply in the circumstances of her first loan, "banks would be under no obligation to clear stale mortgage liens related to short sales, encumbering those properties for time eternal." (NYSCEF Doc No. 19 at 13.) But even absent application of these statutes, any cloud on title created by a stale mortgage lien following a short sale may be cleared through filing an affidavit{**87 Misc 3d at 926} of satisfaction under RPAPL 1921 (5), or by bringing a quiet-title action under RPAPL 1501.

Guity thus does not have a cause of action with regard to her first mortgage loan. Her claim survives, however, with respect to her second mortgage loan.

2. Plaintiffs Paticoff and Freidberg

Defendants argue that Paticoff and Freidberg fail to state a cause of action under RPAPL 1921 (1). Defendants point out that these plaintiffs' mortgages secured home equity lines of credit; and that for this type of mortgage, the deadlines of section 1921 (1) come into effect only once the mortgagor has made a written request for a satisfaction. (See NYSCEF Doc No. 16 at 19-20.) That is true; but it does not aid defendants here. Paticoff and Freidberg have sufficiently established, both in the complaint and in affidavits and accompanying documents filed in opposition to the motion to dismiss, that they made written requests to defendants for satisfactions of mortgage more than 30 days before the satisfactions were delivered. (See NYSCEF Doc No. 1 ¶ 86 [Paticoff allegation]; NYSCEF Doc No. 31 [Paticoff satisfaction request]; NYSCEF Doc No. 37 ¶¶ 4-5 [Freidberg aff]; NYSCEF Doc No. 38 [Freidberg satisfaction request].) This showing is sufficient to show that Paticoff and Freidberg have a cause of action under RPAPL 1921 (1).

B. Plaintiffs' RPAPL 1921 (4) Claims

Defendants argue that none of the plaintiffs state a cause of action under RPAPL 1921 (4). This court disagrees.

Section 1921 (4) provides that when the real property secured by a mortgage is "improved by a one-to-six family, owner occupied, residential structure or residential condominium unit," the mortgagee must, within 90 days of the loan being paid off, "deliver the satisfaction of mortgage." If the mortgagee does not do so, it shall be liable to the mortgagor for damages "in the amount of five hundred dollars or the economic loss" suffered as a result, "whichever is greater." (Id.)

Here, except for the first Guity loan, the complaint alleges for each plaintiff that a satisfaction was not provided within 90 days of payoff.^[FN12] (See NYSCEF Doc No. 1 ¶¶ 38 [Rubino], 58 [second Guity loan], 67 [Freidberg], 81 [Paticoff].) Defendants{**87 Misc 3d at 927} argue that plaintiffs did not sufficiently allege that the structures at issue were one-to-six-family residential structures that are owner occupied. But each plaintiff alleges that the property at issue was their "home." (See id. ¶¶ 26, 28 [Rubino], 55 [second Guity loan], 64 [Freidberg], 77 [Paticoff].) Drawing all inferences in plaintiffs' favor, as required on a CPLR 3211 (a) (7) motion, these allegations are sufficient to satisfy this condition of a 1921 (4) claim.^[FN13]

Defendants contend that plaintiffs have not sufficiently alleged economic loss to state a section 1921 (4) cause of action. This contention does not provide a ground to dismiss plaintiffs' section 1921 (4) claims. Freidberg alleges, among other things, that when she sold the house for which defendants failed to give her a satisfaction of mortgage, she was required to place $15,000 of the sales proceeds into escrow for two months before the sale could close. (See NYSCEF Doc No. 1 ¶¶ 68, 75.) Paticoff alleges, among other things, that when he sold the house for which defendants gave him a satisfaction of mortgage, the sale was delayed because defendants did not timely provide a satisfaction. (See id. ¶¶ 82, 91.) Drawing inferences in favor of plaintiffs, these allegations sufficiently plead that defendants' failure to provide timely satisfactions caused economic loss to Freidberg and Paticoff.

Rubino and Guity do not allege, except in the most conclusory terms, that they suffered any economic losses as a result of defendants' conduct. But the absence of those allegations does not warrant dismissal of these plaintiffs' section 1921 (4) claims. As discussed above, this provision affords a minimum recovery of $500 for failure to provide timely satisfactions. Defendants do not explain why Rubino and Guity have failed to{**87 Misc 3d at 928} state a claim at least for that relief.^[FN14] To be sure, as discussed further below, the question of the measure of recovery on plaintiffs' RPAPL 1921 claims is relevant to whether those claims may be maintained on a class basis. But that issue has no bearing on whether the named plaintiffs' individual claims should be dismissed.

C. Plaintiffs' General Business Law § 349 Claims

Defendants also move to dismiss plaintiffs' General Business Law § 349 claims. This branch of defendants' motion is granted.

To state a cause of action under General Business Law § 349, plaintiffs must allege (1) that defendants' activity was consumer-oriented; (2) that defendants' acts were materially misleading; and (3) that plaintiffs were injured as a result of defendants' deception. (Himmelstein, McConnell, Gribben, Donoghue & Joseph, LLP v Matthew Bender & Co., Inc., 37 NY3d 169, 176 [2021].)

The complaint alleges that defendants engaged in deceptive acts by promising to comply with New York law, both in the mortgage loan agreements themselves and in particular communications with mortgagors, and then (allegedly) violating Real Property Law § 275 and RPAPL 1921. (See NYSCEF Doc No. 1 ¶ 139 [a]-[b].) Plaintiffs also allege that defendants' failure to disclose that they did not comply with those statutes was in itself a deceptive act. (See id. ¶ 139 [c].) These allegations are insufficient.

With respect to defendants' representations in mortgage agreements that defendants comply with New York law, their alleged failure to comply with those representations (or to disclose their noncompliance) does not state a cause of action. For section 349 purposes, "[m]ere allegations that a party entered into a contract lacking the intent to perform are insufficient to establish a claim of misrepresentation or fraud." (Lucker v Bayside Cemetery, 114 AD3d 162, 175 [1st Dept 2013].) Plaintiffs here allege, in essence, that "defendants failed to satisfy their contractual duties, not that they concealed or misrepresented contractual terms." (Id. at 175.) That alleged failure does not support a section 349 claim.{**87 Misc 3d at 929}

With respect to the alleged deceptive statements in "correspondence directed to Plaintiffs, including payoff letters, promising to file a timely and lawful Satisfaction of the mortgage liens" (NYSCEF Doc No. 19 at 14), plaintiffs have not sufficiently alleged that these statements were consumer-oriented. The only correspondence-related statements the complaint identifies were made in the short-sale letter sent to Guity. (See NYSCEF Doc No. 1 ¶ 48.) Plaintiffs do not allege, as required in the section 349 context, that the representations appearing in that letter were recurring across short-sale transactions involving defendants, or made pursuant to a standard practice directed toward consumers at large, as opposed to being based on the particular transaction between Guity and defendants. (See Deutsche Bank Natl. Trust Co. v Marino, 234 AD3d 587, 589 [1st Dept 2025] [affirming dismissal of defendant's General Business Law § 349 counterclaim because she alleged "only purported actions taken against her related to her loan, not actions that were recurring and harmful to the public at large"]; cf. Rockefeller Univ. v Aetna Cas. & Sur. Co., 231 AD3d 457, 458-459 [1st Dept 2024] [affirming denial of defendants' motion to dismiss General Business Law § 349 claim, because "the complaint alleges a standard form policy provided to multiple consumers"].) Rather, plaintiffs make only the general, conclusory allegation that defendants "engaged in deceptive acts, policies, and practices in the form of misrepresentations and/or material omissions," including through representing in "payoff statements and other communications" that defendants would discharge mortgage liens. That allegation, without more, is not enough "to transform a private dispute into conduct with further-reaching impact" for General Business Law § 349 purposes. (Scarola v Verizon Communications, Inc., 146 AD3d 692, 693 [1st Dept 2017].)

D. Plaintiffs' Breach-of-Contract Claims

Each plaintiff also asserts a breach-of-contract cause of action, based on the provisions in their mortgage agreements that require the mortgagee to comply with all applicable New York laws and to deliver a satisfaction of mortgage once the loan has been paid off. (See NYSCEF Doc No. 1 ¶¶ 147-155.) Defendants move to dismiss this cause of action as duplicative. This branch of their motion is granted.

A claim is properly dismissed as duplicative of another when it is based on the same wrong and seeks the same damages. (E.g.Mañas v VMS Assoc., LLC, 53 AD3d 451, 453-454 [1st{**87 Misc 3d at 930} Dept 2008].) Here, the breach-of-contract claim is based on defendants' alleged failure to comply with statutory and contractual requirements to deliver timely satisfactions of mortgage. That is the same injury addressed by plaintiffs' Real Property Law § 275 (1) and RPAPL 1921 claims.

Although the damages available in breach of contract could conceivably exceed the monetary recovery available under Real Property Law § 275 (1) and RPAPL 1921 (1), plaintiffs do not identify any contract-based damages that would be unavailable if plaintiff were to prevail on their claims under RPAPL 1921 (4). Nor do plaintiffs provide any authority holding that a plaintiff may nonetheless bring both contract and RPAPL 1921 (4) claims. Plaintiffs' breach-of-contract claims are therefore subject to dismissal as duplicative of their section 1921 (4) claims. (See Mañas, 53 AD3d at 454.)

Defendants also move to dismiss plaintiffs' claims asserted on behalf of a putative class. Plaintiffs argue that it would be premature to consider the availability of class treatment of their claims in advance of a certification motion. They do not, however, otherwise respond to the merits of defendants' motion to dismiss the class claims.

It "will generally be premature to dismiss class action allegations before an answer is served or pre-certification discovery has been taken." (Griffin v Gregory's Coffee Mgt. LLC, 191 AD3d 600, 600 [1st Dept 2021] [internal quotation marks omitted].) A court may, however, properly grant a pre-certification motion to dismiss class claims when it "appears conclusively from the complaint and from the affidavits that there was as a matter of law no basis for class action relief." (Id. at 601 [internal quotation marks omitted].)

Defendants rely on CPLR 901 (b), which bars plaintiffs from bringing an action on behalf of a class to recover a "penalty" or a "minimum measure of recovery" created or imposed by statute unless the statute expressly authorizes class actions.^[FN15] The question, then, is whether defendants have shown conclusively, as a matter of law, that plaintiffs' surviving claims—i.e., causes of action under Real Property Law § 275 (1) and RPAPL 1921—{**87 Misc 3d at 931}may not be pursued on a class basis. The court concludes that defendants have met that burden with respect to the claims under Real Property Law § 275 (1) and RPAPL 1921 (1), but not RPAPL 1921 (4).

A. Plaintiffs' Real Property Law § 275 and RPAPL 1921 (1) Claims

Defendants argue that the monetary liabilities imposed by Real Property Law § 275 (1) and RPAPL 1921 (1) are penalties foreclosed from class treatment by CPLR 901 (b). This court agrees.

In assessing whether a monetary remedy is compensatory or penal for CPLR 901 (b) purposes, courts look both at how the remedy is described and how it functions in its particular statutory context. (See Borden v 400 E. 55th St. Assoc., L.P., 24 NY3d 382, 395-397 [2014].)

The language of sections 275 (1) and 1921 (1) do not characterize the nature of the monetary recovery afforded to mortgagors—whether to do so as compensatory or as penalty.^[FN16] But the structure of that recovery indicates that it is a penalty. That is, both statutes provide that when mortgagees fail to provide timely mortgage satisfactions, they will be subject to monetary liability in amounts fixed by statute, escalating at set intervals, that are not tied to any actual damages suffered by mortgagors. This monetary recovery is thus in the nature of statutory liquidated damages, which may not be sought in a class action absent express authorization. (See Carter v Frito-Lay, Inc., 74 AD2d 550, 550 [1st Dept 1980]; accord Brown v Mahdessian, 206 AD3d 511, 511 [1st Dept 2022] [describing a statutory liquidated-damages provision as imposing a penalty].)

Moreover, the Legislature added these monetary remedies in 2005 on top of the late-satisfaction damages remedy added by section 1921 (4) in 1993—itself an effort by the Legislature to provide greater incentives for mortgagees to provide satisfactions promptly after mortgages are paid off. (See L 2005, ch 467, § 2; L 1993, ch 132, § 2; Assembly Mem in Support, Bill Jacket, L 1993, ch 132 at 6; Senate Mem in Support, Bill Jacket, L 2005, ch 467 at 4.) The history of RPAPL 1921 reflects a persistent and intensifying effort by the Legislature to use monetary remedies to deter mortgagees from delaying in{**87 Misc 3d at 932} providing mortgage satisfactions. This emphasis on deterrence underscores that the liquidated damages provided for by Real Property Law § 275 (1) and RPAPL 1921 (1) are penalties, such that claims under those statutes may not be asserted on a class basis. And, as noted above, plaintiffs do not offer any reason why they may nonetheless pursue class claims under sections 275 (1) and 1921 (1).

B. Plaintiffs' RPAPL 1921 (4) Claims

With respect to plaintiffs' claims under RPAPL 1921 (4), this court concludes that it would be premature to resolve now whether those claims may be pursued on behalf of a class.

Section 1921 (4) imposes monetary liability for untimely satisfactions of $500 or economic loss, whichever is greater. Defendants do not contend that economic-loss damages are a penalty. And, as discussed above, at least two of the named plaintiffs (Freidberg and Paticoff) have sufficiently alleged economic losses due to defendants' conduct. For these plaintiffs, therefore, unlike Real Property Law § 275 (1) and RPAPL 1921 (1), section 1921 (4) offers multiple remedies, only one of which is foreclosed from class treatment by CPLR 901 (b). And Freidberg and Paticoff may choose to forgo section 1921 (4)'s minimum measure of recovery so as to enable them to maintain claims under this subdivision on behalf of a class. (See Borden, 24 NY3d at 397-398; Mahdessian, 206 AD3d at 511; Super Glue Corp. v Avis Rent A Car Sys., 132 AD2d 604, 606 [2d Dept 1987].) Given that possibility, it would be premature for this court to resolve the availability of class claims under RPAPL 1921 (4) on a precertification motion to dismiss. This branch of defendants' motion is denied without prejudice to renewal at the class-certification stage.

Accordingly, it is ordered that the branches of defendants' motion seeking dismissal of the action under CPLR 3211 (a) (2) and (3) are denied; and it is further ordered that the branch of defendants' motion seeking dismissal of the action under CPLR 3211 (a) (5) is denied as to plaintiffs' breach-of-contract claims and statutory claims under Real Property Law § 275 and RPAPL 1921; and denied as academic as to plaintiffs' statutory claims under General Business Law § 349; and it is further ordered that the branch of defendants' motion seeking dismissal of the action under CPLR 3211 (a) (7) is granted as to plaintiffs' breach-of-contract claims and statutory claims under General Business Law § 349, and as to plaintiff Guity's statutory claims under Real Property Law § 275 and RPAPL 1921 (1){**87 Misc 3d at 933} to the extent those claims are based on her first mortgage loan; and is otherwise denied; and it is further ordered that the branch of defendants' motion seeking dismissal under CPLR 3211 (a) (7) and CPLR 901 (b) of plaintiffs' claims as brought on behalf of a putative class is granted with respect to plaintiffs' claims brought under Real Property Law § 275 and RPAPL 1921 (1), and denied without prejudice with respect to plaintiffs' claims brought under RPAPL 1921 (4); and it is further ordered that defendants shall serve and file an answer to plaintiffs' complaint, as narrowed by this decision, within 40 days of service of a copy of this order with notice of its entry.