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807 N.Y.S.2d 284
11 Misc.3d 219, 807 N.Y.S.2d 284, 2005 N.Y. Slip Op. 25536
(Cite as: 11 Misc.3d 219, 807 N.Y.S.2d 284)
Civil Court, City of New York,
New York County.
CITIBANK (SOUTH DAKOTA), N.A., Plaintiff,
v.
C. MARTIN, Defendant.
Rushmore Recoveries IV, LLC, Assignee of Chase Manhattan Bank, Plaintiff,
v.
Alfredo Viera, Defendant.
Dec. 16, 2005.
Background: Litigation seeking balance due from credit card holder. Issuer brought motion for summary judgment, as did self-described assignee of credit card account.
Holding: The Civil Court, City of New York, New York County, Diane A. Lebedeff, J., held that proponent's summary judgment submissions were insufficient to establish prima facie case.
Ordered accordingly.
West Headnotes
[1] Consumer Credit 8.1
92Bk8.1 Most Cited Cases
In a case where a credit card issuer seeks a balance due from a credit card holder, the information upon which a court may make the determination of whether a credit card's interest rate and related charges are subject to New York's usury limits generally requires no more than: (1) an identification of the organizational character of the credit card issuer, and (2) a statement and description of the law which governs the interest rate and related charges. 3 NYCRR 4.1.
[2] Banks and Banking 270(1)
52k270(1) Most Cited Cases
Federal rules are applicable to the imposition of interest rates by non-bank entities, if the credit arrangements are actually conducted by, or credit receivables assigned to, a national or insured bank or a subsidiary of such banks; however, the federal rules are not extended to independent third-parties acting under an agency agreement or other contract with such a bank. 12 U.S.C.A. § 85; 12 C.F.R. § 7.4001.
[3] Judgment 183
228k183 Most Cited Cases
In a case where a credit card issuer seeks a balance due from credit card holder on summary judgment, a plaintiff should provide a statement of the law of the state which governs the interest rate. McKinney's CPLR 3212.
[4] Judgment 185.3(5)
228k185.3(5) Most Cited Cases
As a part of a credit card issuer's presentation of a prima facie case seeking a balance due from a credit card holder, the motion papers must include a summary judgment affidavit sufficient to tender to the court the original agreement, as well as that any revision thereto, and the affidavit must aver that the documents were mailed to the card holder. McKinney's CPLR 3212.
[5] Judgment 185.1(3)
228k185.1(3) Most Cited Cases
In a case where a credit card issuer seeks a balance due from credit card holder on summary judgment, the affidavit must demonstrate personal knowledge of essential facts or the judgment will be assailable, even if the defendant defaults; an attorney's affirmation generally cannot advance substantive proof. McKinney's CPLR 3212.
[6] Judgment 185.1(6)
228k185.1(6) Most Cited Cases
In a case where a credit card issuer seeks a balance due from credit card holder on summary judgment, if the affidavit is signed and notarized outside New York State, it should be accompanied by a certificate of conformity. McKinney's CPLR 2309, 3212.
[7] Costs 198
102k198 Most Cited Cases
A request for legal fees requires presentation of: (1) an agreement to pay such fees, tendered by an appropriate affidavit, and (2) an attorney's affirmation detailing the fee arrangement, the legal services provided and the relevant factors bearing upon the claim. McKinney's CPLR 3212.
[8] Costs 194.32
102k194.32 Most Cited Cases
[8] Costs 194.38
102k194.38 Most Cited Cases
[8] Costs 194.46
102k194.46 Most Cited Cases
In a case where a credit card issuer seeks a balance due from a credit card holder, exceptions to a right to request legal fees include the following: (1) fee award cannot be based upon a cause of action pleading an account stated; (2) legal fees cannot be awarded for mere collection efforts prior to litigation; and, (3) an out-of-state attorney without an actual office in New York State may not seek such fees.
[9] Costs 194.16
102k194.16 Most Cited Cases
[9] Costs 198
102k198 Most Cited Cases
An agreement to pay legal fees must be submitted on a request for such fees since, absent an agreement to pay such fees, an application for fees may not be granted by New York courts. McKinney's CPLR 3212.
[10] Costs 198
102k198 Most Cited Cases
On a request for legal fees, affirmation by the attorney must be sufficient to permit the attorney fee request to be weighed on the merits as to services already rendered; the affirmation should provide information regarding the nature and extent of the services, the actual time spent, the necessity therefore, the nature of the issues involved, the professional standing of the attorney and those providing services, and the results achieved. McKinney's CPLR 3212.
[11] Action 13
13k13 Most Cited Cases
The standing doctrine embraces several judicially self-imposed limits on the exercise of jurisdiction, such as the general prohibition on a litigant's raising another person's legal rights.
[12] Action 13
13k13 Most Cited Cases
[12] Pretrial Procedure 690
307Ak690 Most Cited Cases
A lack of standing renders the litigation a nullity, subject to dismissal without prejudice.
[13] Assignments 134
38k134 Most Cited Cases
An assignee has the burden to prove the assignment; an assignee must tender proof of assignment of a particular account or, if there was an oral assignment, evidence of consideration paid and delivery of the assignment.
[14] Account Stated 1
11k1 Most Cited Cases
On an account stated claim, the plaintiff must establish an independent basis for liability, as well as prove any agreement to pay any interest appearing on the account; the plaintiff also must demonstrate mailing of the account or advance alternate proof showing the account was received.
[15] Pleading 233.1
302k233.1 Most Cited Cases
[15] Process 163
313k163 Most Cited Cases
[15] Process 167
313k167 Most Cited Cases
In a case where a credit card issuer seeks a balance due from a credit card
holder, an attorney finding a deficiency in the summons and complaint and wishing to continue the action has two choices: (1) to move for leave to amend the pleading and file it nunc pro tunc prior to making a summary judgment motion, or (2) to present an argument that the error is immaterial or curable, and tender any necessary cure, perhaps as part of the summary judgment motion. McKinney's CPLR 3212.
[16] Consumer Credit 8.1
92Bk8.1 Most Cited Cases
In a case where a credit card issuer seeks a balance due from a credit card holder, generally, if the parties' agreement provides that interest shall be paid at a specified rate until the principal is paid, the rate of interest set forth in the agreement governs until the principal is paid or the agreement is merged into a judgment; this rule may be altered if the account is assigned by a national or Federal Deposit Insurance Corporation (FDIC) insured bank to a non-bank assignee, for such an assignee may be limited to the statutory interest after the assignment.
[17] Account Stated 1
11k1 Most Cited Cases
A request for contract interest should not be made if judgment is requested on an account stated, for this claim is independent of any contract provision.
[18] Consumer Credit 8.1
92Bk8.1 Most Cited Cases
After maturity, in the absence of other agreement, interest is computed as damages according to the rate then prescribed by law, whether that is more or less than the contract rate, in a case where a credit card issuer seeks a balance due from a credit card holder.
**287 Edward J. Damsky, Esq., Forster & Garbus, Farmingdale, for Plaintiff Citibank (South Dakota), N.A.
C. Martin, Defendant pro se.
David Waldman, Esq., Mel S. Harris and Associates, LLC, New York, for Plaintiff Rushmore Recoveries IV.
Kathleen Turley, Esq., 32B-J Legal Services, New York, for Defendant Alfredo Viera.
DIANE A. LEBEDEFF, J.
*220 With great frequency, courts are presented with summary judgment motions by credit card issuers seeking a balance due from credit card holders which motions fail to meet essential standards of proof and form in one or more particulars (Friends of Animals v. Assoc. Fur Mfrs., 46 N.Y.2d 1065, 1067, 416 N.Y.S.2d 790, 390 N.E.2d 298 [1979], "To obtain summary judgment it is necessary that the movant establish [a] cause of action or defense sufficiently to warrant the court as a matter of law in directing judgment' in [movant's] favor [CPLR 3212, subd. (b) ], and [movant] must do so by tender of proof in admissible form").
Two summary judgment motions, one brought by a national bank credit card issuer and another commenced by a self-described assignee of a credit card account, highlight the essential principles governing a summary judgment motion in a credit card collection case, which motions are consolidated for decision. This decision focuses on the presentation of a prima facie case and limitations upon a plaintiff's claim to recover a credit card debt, although the principles advanced herein concomitantly shed light on affirmative defenses relating to the issues covered.
*221 Identifying Credit Card Issuer and Refuting Application of Local Usury
Laws
[1] In credit card cases, the first concern of any court is whether the amount at issue is a lawful claim, which brings up for consideration whether the credit card's interest rate and related charges are subject to this state's usury limits. [FN1] The information **288 upon which a court may make that determination generally requires no more than (1) an identification of the organizational character of the credit card issuer, and (2) a statement and description of the law which governs the interest rate and related charges.
FN1. The New York State Banking Board sets the generally effective civil interest rate, which is currently 16.00% per annum (3 N.Y.C.R.R. 4.1; L. 1980, ch. 883). New York's criminal usury laws apply to an annual interest rate of 25.00 % or more (P.L. §§ 190.40 and 190.42). Some of credit card charges are excluded from a usury calculation (Personal Property Law § 413[5][b]; Zachary v. R.H. Macy & Co., Inc., 31 N.Y.2d 443, 457, 340 N.Y.S.2d 908, 293 N.E.2d 80 [1972], rearg. denied 32 N.Y.2d 705, 343 N.Y.S.2d 1026, 296 N.E.2d 459 [1973], excluded charges are classified as "charges for the privilege of purchasing on credit, expressed as a time-price differential" [internal quotation marks omitted] ).
Not every state's usury laws follow the New York model (see, for historical and current American usury concepts, Shimon A. Berger, Note, Adding Insult to Injury: How In re Venture Mortgage Fund Exposes the Inequitable Results of New York's Usury Remedies, 29 Fordham Urb. L.J. 2193 [2002]; Lynn Drysdale and Kathleen E. Keest, The Two-Tiered Consumer Financial Services Marketplace: The Fringe Banking System and its Challenge to Current Thinking about the Role of Usury Laws in Today's Society, 51 S.C. L. Rev. 589 [2000], some states permit loans with effective annual interest rates of 400 to 1,000 %, such as "payday" loans; Todd J. Zywicki, The Economics of Credit Cards, 3 Chap. L. Rev. 79 [2000] ).
Credit card issuers identified as either a national bank or a bank insured by the Federal Deposit Insurance Corporation ("FDIC") may impose interest rates higher than those of this State by reason of federal preemption, which essentially permits use of the lawful rates of a bank's home state. [FN2] A majority of credit cards in the United States are issued by such federally *222 regulated banks, which have structured their credit card operations to benefit from favorable interest rate provisions (Mark Furletti, The Debate over the National Bank Act and the Preemption of State Efforts to Regulate Credit Cards, 77 Temp. L. Rev. 425 [Summer 2004]; also see, recognizing federal preemption where bank supervised by Office of Thrift Supervision, ALBANK, FSB v. Foland, 177 Misc.2d 569, 676 N.Y.S.2d 461 [City Ct. Albany 1998] ). [FN3]
FN2. National banks, pursuant to the National Bank Act (12 U.S.C. § 85), may charge credit-card customers the higher of the rate permitted by the bank's home state or of the home state of the bank's customer (Marquette Nat. Bank of Minneapolis v. First of Omaha Service, 439 U.S. 299, 318, 99 S.Ct. 540, 58 L.Ed.2d 534 [1978]; see also, as to "most favored lender doctrine," Fisher v. First National Bank, 548 F.2d 255, 259 [8th Cir.1977], and 12 C.F.R. § 7.4001[b] ). Banks insured by the FDIC are subject to similar rules (12 U.S.C. § 1831d[a]; see, FDIC proposed rule, 70 F.R. 60019 [October 14, 2005], extending to insured banks rules similar to those governing national banks; see also Greenwood Trust Co. v. Commonwealth of Mass., 971 F.2d 818, 826 fn. 7 [1st Cir.1992], cert. denied 506 U.S. 1052, 113 S.Ct. 974, 122 L.Ed.2d 129 [1993], only "niggling variations" distinguish the two governing acts). Usury claims against such banks are subject to a two-year statute of limitations and recovery is limited to twice the interest paid (12 U.S.C. §§ 86 and 1831d[b] ).
The Federal Reserve System's website has an institution search page which will identify any bank by type and home state (http:// 132.200.33.161 /nicSearch/servlet/ NICServlet?$GRP $= INSTSEARCH&REQ =DOM&MODE= SEARCH). The Code of Federal Regulations is accessed most easily through a search page maintained by the General Printing Office, currently in a test format (
http://ecfr.gpoaccess. gov/cgi/t/text/text-idx? c=ecfr&tpl=Žindex.tpl). Both internet sites were accessed on December 16, 2005.
FN3. In relation to a national or insured bank, almost all charges not related to a purchase are embraced by the term "interest" (see Smiley v. Citibank [South Dakota] N.A., 517 U.S. 735, 740, 116 S.Ct. 1730, 135 L.Ed.2d 25 [1996], deferring to definition of "interest" for national banks by the Comptroller of the Currency to include "fees connected with credit extension or availability: numerical periodic rates, late fees, not sufficient funds [NSF] fees, overlimit fees, annual fees, cash advance fees, and membership fees"; 12 C.F.R. § 7.4001[a]; Marcia G. Robeson, Annotation, Computation of Service or Interest Charge on Bank Credit Cards as Usurious under National Bank Act [12 U.S.C.A. § 85], 38 A.L.R. Fed. 805 [brackets in title] ). The June, 1996, decision in Smiley v. Citibank (South Dakota) N.A., supra, adopting a broad definition of "interest," brought to a close a period of consumer oriented class action claims asserting such related charges were limited by the state law of the credit card holder, which litigation is well summarized in a law review article published approximately three months before the decision (Kevin G. Toh, Note, Are Credit-Card Late Fees "Interest"? Delineating the Preemptive Reach of Section 85 of the National Bank Act of 1864 and Section 521 of the Depository Institutions Deregulation and Monetary Control Act of 1980, 94 Mich. L. Rev. 1294 [1996] ).
[2] As to non-bank entities, if the credit arrangements are actually conducted by, or credit receivables assigned to, a national or insured bank or a subsidiary of such banks, the federal rules are applicable **289 (Krispin v. May Department Stores Co., 218 F.3d 919 [8th Cir.2000], store credit card system was that of a national bank, the wholly owned subsidiary of store; 12 C.F.R. §§ 7.4006 and 362.4, subsidiaries). The federal rules are not extended to independent third-parties acting under an agency agreement or other contract with such a bank (BankWest, Inc. v. Baker, 411 F.3d 1289 [11th Cir.2005], "payday" loan store fronts).
[3] As to summary judgment motion papers, a plaintiff should provide a statement of the law of the state which governs the interest rate *223(Daggs v. Phoenix Nat'l Bank, 177 U.S. 549, 555, 20 S.Ct. 732, 44 L.Ed. 882 [1900], state law governs interest rates, even if it allows any rate agreed to by the parties). This information provides an assurance that the judgment requested for a credit card delinquency is properly claimed and not excessive in amount (Neuman v. Greenblatt, 260 A.D.2d 616, 617, 688 N.Y.S.2d 257 [2d Dept.1999], excessive judgment is a nullity, even if fixed following inquest).
Credit Card Agreements and Documents To Be Tendered by Affidavit
[4] As a part of a credit card issuer's presentation of a prima facie case, the motion papers also must include an affidavit sufficient to tender to the court the original agreement, as well as that any revision thereto, and the affidavit must aver that the documents were mailed to the card holder. [FN4] The same affidavit typically advances copies of credit card statements which serve to evidence a buyer's subsequent use of the credit card and acceptance of the original or revised terms of credit (Chase Manhattan Bank [Nat. Ass'n], Bank Americard Division v. Hobbs, 94 Misc.2d 780, 405 N.Y.S.2d 967 [Civ.Ct. Kings Co.1978], also holding statements admissible as business record; Citibank [S.D.] N.A. v. Roberts, 304 A.D.2d 901, 757 N.Y.S.2d 365 [3d Dept.2003], payments indicated acceptance of credit arrangement). The affidavit often addresses whether there was any proper protest of any charged purchase within 60 days of a statement (15 U.S.C. § 1601; 12 C.F.R § 226.13[b][1], a provision in 12 C.F.R, part 226, referred to as "Regulation Z" or "Truth in Lending" regulations).
FN4. New York law requires that a copy of any agreement be mailed to a New York cardholder (Personal Property Law § 413[11][e] ). Both federal regulations and many state laws require that any change of the terms of a credit arrangement be preceded by mailing a notice of a change some specified period of time before it is effective (12 C.F.R § 226.9; see, as to Delaware and South Dakota, respectively, Johnson v. Chase Manhattan Bank USA, N.A., 2 Misc.3d 1003(A), 2004 WL 413213, 2004 N.Y. Slip Op. 50086[u] [Sup.Ct. N.Y. Co.2004, Cahn, J.], and Tully v. Citibank [South Dakota], N.A., 173 S.W.3d 212, 219 [Tex.App.-Texarkana 2005] ).
[5] The affidavit must demonstrate personal knowledge of essential facts or the judgment will be assailable, even if the defendant defaults (Zelnik v. Bidermann Industries U.S.A., Inc., 242 A.D.2d 227, 662 N.Y.S.2d 19 [1st Dept.1997]; Hann v. Morrison, 247 A.D.2d 706, 668 N.Y.S.2d 764 [3d Dept.1998]; 73 N.Y. Jur.2d Judgments § 138, Proof of facts by affidavit or service of verified complaint [2005]; see CPLR 3215 and N.Y.C.C.A. § 1402). An attorney's affirmation generally cannot advance substantive proof (Key Bank of Maine v. Lisi, 225 A.D.2d 669, 639 N.Y.S.2d 482 [2d Dept.1996], "affirmation of ... attorney who had no *224 personal knowledge of the facts ... did not constitute proof in admissible form and it [is] without evidentiary value").
[6] If the affidavit is signed and notarized outside New York State, it should be **290 accompanied by a certificate of conformity (Ford Motor Credit Co. v. Prestige Gown Cleaning Service, Inc., 193 Misc.2d 262, 264, 748 N.Y.S.2d 235 [Civ.Ct. Queens Co.2002, Walker, J.] ); CPLR 2309[c], certificate to accompany an out-of-state oath or affirmation, incorporating by reference Real Property Law § 299-a[1] requirement that such document "must be accompanied by" a certification that the oath was given in conformity with applicable laws. As to a certification of authority, local differences may exist regarding the need to submit this separate certificate (Real Property Law § 311; compare Citibank [South Dakota] N.A. v. Santiago, 4 Misc.3d 138(A), 2004 WL 1869945, 2004 N.Y. Slip Op. 50899[u] [App. Term 1st Dept.2004], not required for notarized affidavit, with Raytsin v. Discover Bank, N.A., 6 Misc.3d 48, 790 N.Y.S.2d 808 [App. Term 2d and 11th J.D.2004], required, official taking oath not described in decision; see also Siegel, N.Y. Prac. § 388 [4th ed. 2005], certificate authenticating the oath giver's authority, often called a "flag," may be required by a court but absence is not jurisdictional). Either certificate may be tendered subsequently, curing the defect nunc pro tunc (see Raynor v. Raynor, 279 A.D. 671, 108 N.Y.S.2d 20 [2d Dept.1951]; Nandy v. Albany Medical Center Hosp., 155 A.D.2d 833, 548 N.Y.S.2d 98 [3rd Dept.1989] ). [FN5]
FN5. A sample certificate of conformity appears in 14 West's McKinney's Forms, Estates and Surrogate Practice § 1:23 (see, as to other permitted certifying officials, Real Property Law § 299-a[1][a] and [c] ), and a sample of a certificate of authentication, for other than a notary, is contained in 14 West's McKinney's Forms, Estates and Surrogate Practice § 1:31.
Legal Fees Request To Be Supported by Contract and Attorney Affirmation
[7] A request for legal fees requires presentation of (1) an agreement to pay such fees, tendered by an appropriate affidavit, and (2) an attorney's affirmation detailing the fee arrangement, the legal services provided and the relevant factors bearing upon the claim.
[8][9] The agreement to pay legal fees must be submitted for, absent an agreement to pay such fees, an application for fees may not be granted by New York State courts (Mighty Midgets, Inc. v. Centennial Insurance Co., 47 N.Y.2d 12, 21-22, 416 N.Y.S.2d 559, 389 N.E.2d 1080 [1979]; *225Empire Nat. Bank v. Monahan, 82 Misc.2d 808, 370 N.Y.S.2d 840 [Co. Ct. Rockland Co.1975] ). [FN6] New York's Retail Installment Sales Act does permit such a credit card holder to agree to pay an independent collection "attorney's fees not exceeding twenty per centum of the amount due and payable" (Personal Property Law § 413[5]; Chase Manhattan Bank [Nat. Ass'n], Bank Americard Division v. Hobbs, supra, 94 Misc.2d at 784, 405 N.Y.S.2d 967).
FN6. Exceptions to a right to request legal fees include the following: (1) fee award cannot be based upon a cause of action pleading an account stated (HSBC Bank USA v. Schulze, 9 Misc.3d 128(A), 2005 WL 2347649, 2005 N.Y. Slip Op. 51529[u] [App. Term 9th and 10th J.D.2005] ); (2) legal fees cannot be awarded for mere collection efforts prior to litigation (Broadstreets Inc. v. Parlin, 75 Misc.2d 662, 348 N.Y.S.2d 724 [Civ.Ct. N.Y. Co.1973, Sherman, J.] ); and, (3) an out-of-state attorney without an actual office in New York State may not seek such fees (Cheshire Academy v. Lee, 112 Misc.2d 1076, 448 N.Y.S.2d 112 [Civ.Ct. Bronx Co.1982, Saks, J.] ).
[10] The affirmation by the attorney must be sufficient to permit the fee request to be weighed on the merits as to services already rendered (**291Matter of First Nat. Bank of East Islip v. Brower, 42 N.Y.2d 471, 474, 398 N.Y.S.2d 875, 368 N.E.2d 1240 [1977], award is not to be "the contractual imposition of a penalty" and must be for legal services "actually rendered"). The affirmation should provide information regarding the nature and extent of the services, the actual time spent, the necessity therefore, the nature of the issues involved, the professional standing of the attorney and those providing services, and the results achieved (Jordan v. Freeman, 40 A.D.2d 656, 336 N.Y.S.2d 671 [1st Dept.1972] ), although a more cursory affirmation might suffice to support a fee request low enough in amount to be determined upon the basis of judicial observation and judicial notice (Mead v. First Trust & Deposit Co., 60 A.D.2d 71, 79, 400 N.Y.S.2d 936 [4th Dept.1977] ). [FN7]
FN7. As to future fees, there is some support for claiming legal fees later in the same proceeding (see AD 1619 Co. v. VB Management, Inc., 175 Misc.2d 1021, 672 N.Y.S.2d 985 [A.T. 1st Dept.1998], aff'd as modified 259 A.D.2d 382, 687 N.Y.S.2d 127 [1st Dept.1999], lv. app. dismissed 93 N.Y.2d 1030, 697 N.Y.S.2d 552, 719 N.E.2d 912 [1999], permitting raising claim for legal fees after conclusion of appeal), which avoids the problem of splitting a cause of action (compare Marine Midland Bank v. Roberts, 102 Misc.2d 903, 906, 424 N.Y.S.2d 671 [Civ.Ct. Kings Co.1980, Feldman, J.] ).
Claims Requiring Special Proof: Assignment and Account Stated
Two types of claims require special proof. They are claims by an assignee of a credit card account and a request for judgment on an account stated.
[11][12][13] First, as to assigned claims, it is essential that an assignee show its standing, which "doctrine embraces several judicially *226 self-imposed limits on the exercise of ... jurisdiction, such as the general prohibition on a litigant's raising another person's legal rights" (Allen v. Wright, 468 U.S. 737, 751, 104 S.Ct. 3315, 82 L.Ed.2d 556 [1984] ). A lack of standing renders the litigation a nullity, subject to dismissal without prejudice (Pullman Group, LLC v. Prudential Ins. Co. of America, 297 A.D.2d 578, 747 N.Y.S.2d 170 [1st Dept.2002], lv. app. dismissed 99 N.Y.2d 610, 757 N.Y.S.2d 820, 787 N.E.2d 1166 [2003] ). It is the assignee's burden to prove the assign
