Defective Notice of Intention to Foreclose Requires Dismissal Without Prejudice

Bank of New York v. Laks, 422 N.J. Super. 201 (App. Div. 2011).  N.J.S.A. 2A:50-56(c)(11), a part of the Fair Foreclosure Act (“FFA”), requires a lender who plans to foreclose on a mortgage to serve a notice of intention on the borrower.  The statute requires that the notice of intention state the “name and address of the lender.”  Here, the notice listed the name and address of the mortgage servicer, not the lender.  In an opinion by Judge Grall, the Appellate Division held that the notice did not comply with the statute.  Moreover, that failure required dismissal of the foreclosure complaint without prejudice.

Judge Grall’s decision reversed a contrary ruling below.  The panel noted, however, that the issue posed was one of statutory interpretation, on which review is de novo.

The FFA was adopted to give homeowners “every opportunity to pay their home mortgages, and thus keep their homes,” and to benefit lenders by allowing residential debtors to cure their defaults.  The notice of intention, a pre-condition to filing a foreclosure suit, must contain the lender’s name and address because that information is “helpful to a debtor interested in curing default.”

Judge Grall noted that the FFA defines “lender” as the person, corporation or entity “which makes or holds a residential mortgage, and any person, corporation or entity to which such residential mortgage is assigned.”  A mortgage servicer does not fit that definition.

Plaintiff argued that, despite the definition of “lender,” the notice served its purpose because “had Laks wanted to dispute the event of default or the amount required to cure, [the servicer] could have resolved the dispute on plaintiff’s behalf.”  Judge Grall rejected that contention based on multiple principles of statutory interpretation. 

First, a definition that states what a term means excludes any other meanings.  Second, plaintiff’s reading would have made superfluous the words “of the lender” in the FFA provision about the notice of intention, which the courts will not do.  Third, the Legislature knew how to allow a lender’s agent to suffice for purposes of the FFA, as evidenced by its decision to do just that in another section of the statute.  Judge Grall also observed that the panel’s result would help avoid borrower confusion as to who the lender is, which was one goal of the Legislature in adopting the FFA.

The remedy for the defective notice implicated a split in prior decisions on this issue.  Some earlier Appellate Division authority had dismissed complaints without prejudice for failure to give the necessary notice correctly, while other authority allowed re-service of a corrected notice.  This panel chose dismissal without prejudice.  

Based on the language of the FFA, that seems to be the correct result.  Indeed, in at least one other comparable statutory context, the Anti-Eviction Act, N.J.S.A. 2A:18-61.1 et seq., courts likewise dismiss cases when required notices do not conform strictly to statutory requirements.  Nonetheless, the split in the cases as to the remedy for a defective FFA notice of intention might lead the Supreme Court to grant review and remove any doubts on this issue.