Cadelrock Joint Venture, L.P. v Callender, Supreme Court, Kings County, Index No. 3354/2011

Justice Carolyn Demarest has held that a note holder suing on a note secured by real property must serve the notice required by Real Property Actions and Proceedings Law 1304 even though the lender is not seeking foreclosure.

RPAPL 1304  is applicable to actions at law to recover on a note securing a  “home loan” in addition to actions for foreclosure.

In Cadelrock,  the holder of the note and mortgage  obtained a default judgment against the borrower  in an action at law to recover on the note  as opposed to an action in equity to foreclose on the mortgage.  The  borrower-defendant sought to  vacate the default judgment and dismissed the action on the grounds that the lender failed to serve the notice required under Real Property Actions and Proceedings Law  1304.  This statute requires 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, including mortgage foreclosure, such lender, assignee or mortgage loan servicer shall give notice to the borrower”  in the manner prescribed by the statute.

The lender conceded that the  underlying loan was a “home loan” for purposes  of the statute but argued  that the statute did not apply  because it was suing only on the note  and not seeking foreclosure.  Although not expressly discussed in the court’s opinion, it is likely that the lender, for whatever strategic reasons,  elected to sue on the note  as opposed to seek foreclosure as is required by New York’s  election of remedies statutes,  Real Property  Actions and Proceedings  Law 1301.

Justice Demarest ruled that as a remedial statute , Real Property Actions and Proceedings Law 1304  was to be “liberally construed .”  Justice Demarest found that the  “plain terms”  of the statute  were not limited to foreclosures.  Accordingly,  the court vacated the default and dismiss the action.

The lesson of Cadelrock is  even when not seeking foreclosure  and only proceeding  on the note,  lender must serve the ninety day  notice prescribed  by  Real Property Actions and Proceedings law  1304  when seeking to recover on a “home  loan.”