UPON DUE DELIBERATION AND CONSIDERATION BY THE COURT of the foregoing papers, including e-filed documents/exhibits numbered 111 through and including 140; 143 through 149; and 151 through 154, this motion is decided as follows The Defendants Ioannou and John M. Ioannou P.C (“the Moving Defendants) move the Court by Notice of Cross Motion (mot seq 015) for an Order which, inter alia, denies the motion for summary judgment filed by the Plaintiff HPHD Investors Group LLC (the “Plaintiff”), in its entirety; and grants Answering Defendants’ cross-motion for dismissal of this action based upon Plaintiff’s alleged failure to comply with the “Help for Homeowners” notice requirement under Real Property Actions and Proceedings Law (“RPAPL”) §1303. Through a correspondence with the Court, the Plaintiff withdrew its motion for summary judgment referenced in branch “1″ of the instant motion (NYSCEF Doc. No. 150; 152) and the Court marked both motion sequence 014 and 015 as withdrawn. The Moving Defendants protested the withdrawal of motion sequence 015 in correspondence as well as in conference before the Court (NYSCEF Doc. 154). On the consent of the parties, the Court restored motion sequence 015 to the calendar and marked the instant motion fully submitted. This is an action to foreclose a certain commercial mortgage in the original amount of $3,000,000.00 held by HPHD Investors Group LLC, (“Plaintiff”) and secured by the premises located at 1257 Plandome Road, Manhasset, NY 11030 (“Plandome Property”) and 39 Makamah Beach Road, Northport, NY 11767 (“Northport Property”). The Moving Defendants seek dismissal of the foreclosure action for failure to serve the notice required by RPAPL §1303 upon John M. Ioannou as such notice relates to the Plandome Property. On December 2011, John M. Ioannou (“Defendant Ioannou”), individually and as president of John M. Ioannou, P.C. and Elaine Ioannou executed a note in favor of the plaintiff in the sum of $3,000,000, which was secured by mortgages against certain properties owned by John and Elaine. In October 2013, the Plaintiff commenced this action to foreclose those mortgages. Thereafter, the Plaintiff moved for summary judgment on the complaint insofar as it was asserted against the defendants, to strike the defendants’ answer, and for an order of reference; and in response the defendants cross-moved for leave to amend their answer. In an Order entered on September 28, 2017, the Supreme Court granted the Plaintiff’s motion and denied the Defendants’ cross motion. On June 15, 2018, the Court entered a judgment of foreclosure and sale and directed the sale of the subject properties. The Appellate Division reversed the Supreme Court Judgment of Foreclosure and Sale finding that the defendants raised a question of fact as to whether the note and mortgages were procured by fraudulent inducement. The Defendant Ioannou submitted an affidavit to the Supreme Court in opposition to the Plaintiff’s summary judgment motion which provides that Ioannou had a close relationship with the Plaintiff’s owner, Dean Facatselis, and that Facatselis promised Ioannou that certain mortgage terms would not be enforced. (HPHD Investors Group LLC v. Ioannou, 188 AD3d 1168 [2nd Dept. 2020]). The Appellate Division further granted the defendants leave to amend their answer to add an affirmative defense of fraudulent inducement, and denied the Plaintiff’s motion to confirm the referee’s report as well as the Plaintiff’s application for a judgment of foreclosure and sale. The matter was remanded from the Appellate Division to the Supreme Court for determination consistent with Appellate Division’s decision (Id.) Most importantly regarding the instant motion, the Moving Defendants did not raise the lack of RPAPL §1303 notice as a defense in their initial appeal, and the Appellate Division decision did not address this issue. Through this Decision and Order, the Court considers for the first time the Moving Defendants’ argument that the Plaintiffs failed to comply with RPAPL §1303, which requires the foreclosing party in an action “involving residential real property” to deliver, along with the summons and complaint, a notice entitled “Help for Homeowners in Foreclosure” to mortgagors of “owner-occupied, one-to-four family dwellings.” (RPAPL §1303[1]). The RPAPL §1303 notice is a requirement for all foreclosure actions “involving residential real property,” and there is no requirement that the loan be a “home loan,” unlike the requirements of RPAPL §1304. RPAPL §1303 mandates that the notice include specific language relating to the summons and complaint, sources of information and assistance, rights and obligations, and foreclosure rescue scams. It also mandates that the notice be in bold, 14-point type and printed on colored paper that is other than the color of the summons and complaint, and that the title of the notice be in bold, 20-point type. As with notice requirements found elsewhere in foreclosure law (see RPAPL §§1304, 1306), the notice required under RPAPL §1303 “is a condition precedent to the commencement of a foreclosure action and the failure to comply is a basis for dismissal of a complaint which may be raised at any time while the action is pending.” (JP Morgan Chase Bank, N.A. v. Lee, 186 A.D.3d 685, [2020]). The defense may be raised while the underlying action is pending — even if the notice issue is not raised as an affirmative defense in a defendant’s answer — but a defendant may not raise a lack of RPAPL §1303 notice for the first time in an appeal. (Nationstar Mtge., LLC v. Gayle, 191 A.D.3d 1003 [2d Dept. 2021]). The Defendants have raised the RPAPL §1303 notice question during the pendency of the action at bar, and the issue is properly before the Court, notwithstanding the reversal of the previous summary judgment determination in favor of the Plaintiff. The Plaintiff asserts that Defendant Ioannou did not “occupy” one of the subject properties at the time the foreclosure action was instituted. The Plaintiff argues that the premises was not “owner occupied” within the meaning of Section 1303 of the RPAPL because the Defendant Ioannou was incarcerated from September 27, 2013, up and until April 6, 2016, and as a result the Defendant could not have occupied the subject property as an “owner-occupier” during that time period. The Plaintiff offered proof of service of the Summons and Complaint upon affixing and mailing the Summons and Complaint to the Subject Premises upon the Defendants John Ioannou, Elaine Ioannou, and John M. Ioannou, P.C., after numerous attempts to serve the Moving Defendants personally at the Plandome and Northport properties. Importantly, these attempts at service post date the Defendant John Ioannou’s initial date of incarceration. In Reply, the Moving Defendants contend that Defendant Ioannou had no intention of abandoning his residence during his incarceration, and returned to reside there after incarceration. Accordingly, the Plaintiff was obligated to serve him notice of the foreclosure under RPAPL §1303 as a condition precedent to the foreclosure action. When considering the validity of service in ordinary circumstances, a process server’s affidavit of service results in the presumption of proper service. (Bank of Am. v. Moody, 147 AD3d 712 [2d Dept. 2017]). However, the Court acknowledges that the question of the unchallenged priority of service under CPLR 308[3] differs from the question raised by the Moving Defendants in their motion to dismiss, which considers the question of whether the Plaintiff failed to satisfy a condition precedent to pursuing this foreclosure action. The transaction at bar differs from the ordinary residential foreclosure action, as the borrowers herein included a professional corporation, of which the Defendant John Ioannou was the Principal. In addition, the foreclosure note involving the subject premises is linked to a collateral agreement between the Plaintiff and the Defendants John Ioannou and Elaine Ioannou with respect to two properties, with the loan being made to the professional corporation and with John Ioannou and Elaine Ioannou bearing joint and several responsibility. Nevertheless, the express language of RPAPL 1303[1] provides that “the foreclosing party in a mortgage foreclosure action, involving residential real property shall provide notice to: (a) any mortgagor if the action relates to an owner-occupied one-to-four family dwelling; and (b) any tenant of a dwelling unit in accordance with the provisions of this section.” A strict reading of RPAPL §1303 is supported by the refusal of the Appellate Division to expand the scope of the notice requirement to proceedings outside of the express statutory language, such as homeowners’ association liens. (Woodbury Homeowners Association v. Godt, 96 AD3d 983 [2nd Dept 2012]). “When the plain language of the statute is precise and unambiguous, it is determinative” (see Bank of America v. Kessler, 202 AD3d 10, 12-13 [2d Dept 2021] lv to appeal granted 2022 NY Slip Op 66274[U], citing to, Matter of 13 Washington Post Co. v. New York State Ins. Dept., 61 NY2d 557, 565 [1984]; see Loehr v. New York State Unified Ct. Sys., 150 AD3d 716, 720 [2017]) Further, RPAPL §1303 has been amended to provide that, in addition to the notice to be provided by the foreclosing party to the mortgagor, if the foreclosure action relates to an owner-occupied one-to-four family dwelling, a notice, in the form prescribed, must also be given to any tenant of a dwelling unit (Rudolph de Winter, Supplementary Practice Commentaries, McKinney’s Consolidated Laws of New York, Annotated, Electronic Edition, RPAPL §1303). The amendment of RPAPL §1303 to require notice to any tenants of a dwelling unit is consistent with an interpretation of the statute that requires a Plaintiff to serve all residents of a dwelling with the required notice. (RPAPL §1303, as amended by the Laws of 2008, was amended by the Laws of 2009, c. 507, §1 [effective January 14, 2010]). Additionally, it is long-established law in New York that a person does not involuntarily lose their domicile as a result of imprisonment. (Farrell v. Lautob Realty Corp., 204 AD2d 597, 598 [2d Dept 1994]). Ordinarily, a patient or inmate of an institution does not gain or lose a residence or domicile, but retains the domicile they had when they entered the institution. (Corr v. Westchester County Dept. of Social Services, 33 NY2d 111, 115 [1973]) The general rule is that an incarcerated person does not involuntarily give up their domicile as a result of their imprisonment. (Matter of Fid. Natl. Tit. Ins. Co., 34 Misc 3d 508, 509-510 [Sup Ct, NY County 2011]). A residence established earlier in time remains the individual’s domicile until a clear intent to change is established. (Laufer v. Hauge, 140 A.D.2d 671 [2d Dept 1988]). For a change to a new domicile to be effected, there must be a fixed intention to abandon the former location and make the new location a fixed and permanent home. (In re Will of Meyer, 62 A.D.3d 133 [1st Dept 2009]; Matter of Urdang, 194 A.D.2d 615, 599 N.Y.S.2d 60 [2d Dept 1993]). Simply stated, there is no indication in the motion papers submitted that the Defendant John M. Ioannou abandoned his residence and the Plaintiff admits that they did not provide the Moving Defendants with RPAPL §1303 notice. Notwithstanding the structure of the underlying mortgage agreement, the Defendant John M. Ioannou is a mortgagor who did not voluntarily relinquish his residence in the Plandome Property and was entitled to proper RPAPL §1303 notice as a condition precedent to the foreclosure action. New York courts have adhered to a strict construction of the statutory regime informing the foreclosure process, and these requirements are closely scrutinized by the Courts even before a foreclosure proceeding is initiated. For example, similar to the pleading requirements of RPAPL §1303, lenders are required to give written prior notice to borrowers before initiating a foreclosure action. (RPAPL §1304). As most recently decided by the Appellate Division, a lender must establish that it strictly complied with the prior notice requirements of RPAPL §1304 in order to bring a foreclosure action, and a defendant is entitled to summary judgment as a matter of law dismissing the complaint when he demonstrates that the plaintiff did not strictly comply with this statute. (Bank of America, v. Kessler, 202 AD3d 10 [2nd Dept 2021]; lv to appeal granted 2022 NY Slip Op 66274[U]). While the Court of Appeals recently heard argument on Bank of America v. Kessler, Supra., with respect to how the so called “mini-Miranda” warnings must ultimately be provided to mortgagors and tenants who are the subject to or affected by foreclosure proceedings, it is undisputed that a complete failure to provide RPAPL §1304 notice to an owner-occupier of a premises warrants dismissal of a foreclosure action. Consistent with the case law addressing the RPAPL §1304 prior notice regime, the failure of the lender to deliver the RPAPL §1303 required notices along with a summons and complaint to a mortgagor who occupies a premises warrants dismissal of a foreclosure action. In this matter, the Plaintiff failed to satisfy a condition precedent with respect to the filing of its foreclosure action when it did not serve the Moving Defendants with the required notices mandated by RPAPL §1303 is fatal to the Plaintiff’s action. Upon review of the papers submitted, branch 1 of the Defendant’s motion is DENIED as moot, as the motion for summary judgment was withdrawn, and branch 2 of the Defendants’ motion is GRANTED, and the Complaint is DISMISSED. With respect to the Moving Defendants’ counterclaims, the Court has the jurisdiction to retain them even after dismissal of the Complaint, as the counterclaims in essence constitute a complaint by the Moving Defendants against the Plaintiff and alleges a present viable cause of action upon which the Moving Defendants seeks judgment (Edelman v. Edelman, 88 Misc 2d 156, 159 [Sup Ct, Nassau County 1976]). Despite the dismissal of the Complaint by the Court, the separately pleaded counterclaims continue, unless they are withdrawn by the Defendants or voluntarily disposed of by the parties. Accordingly, it is ORDERED that the Court continues the parties’ Stipulation, dated January 3, 2023, which was So Ordered by the Court, and is provided in the Court’s record as NYSCEF Doc No. 156, and it is further ORDERED, that counsels are to complete discovery as per the So Ordered Stipulation, dated January 3, 2023, and are to report for their Certification Conference to be held in Court on March 30, 2023, at 10:00 a.m., unless otherwise directed by the Court. This constitutes the Decision and Order of the Court. Dated: February 14, 2023
