Matter of Dekom v New York Dept. of Fin. Servs.
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Matter of Dekom v New York Dept. of Fin. Servs. 2012 NY Slip Op 32310(U) August 31, 2012 Sup Ct, New York County Docket Number: 103072/12 Judge: Donna M. Mills Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. NNED ON 91712012 [* 1] SUPREME COURT OF THE STATE OF NEW YOKK- NEW YORK COUNTY PRESENT : DONNA M, MILLS PART 58 Justice .- . _- In the Muller ofthe Applicution of MA H7 'IN LIEKOM, INDEXNO. Petitioner, 103072/12-- MOTION DATE -againstSEQ. NO. 001 MOTION ' NEW YORK DEPARTMENT OF FINANCIAL SERVICES, et al., Respondents. The followiiig papers, numbered 1 to MOTION No. CAL were read on this motion PAPERS NUMBERED Notice ofMotioii/Order to Show Cause-Affidavits- Exhibits .... Answering Affidavits- Exhibits Replying Aflidavits , p 3 I-+ Dated: Check one: , . J FINAL DISPOSITION / + , , h * % * DOhJb$!.lln +Mi!-% \A *!.%E NON-FJNAL DISPOSITION [* 2] SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: PART 58 _-_____-- -_._____ ____________l_____l__- --------------------- In the Matter of the Application of MARTIN DEKOM, Petitioner, - against - INDEX NO. IO3072112 DECIS IONIORDER NEW YORK DEPARTMENT OF FINANCIAL SERVICES, et al., Respondents. For a Judgment Pursuant to Article 78 of the Civil Practice Law and Rules DONNA MILLS, J.: Martin Dekom ( Petitioner ) seeks, by order to show cause a writ of mandamus compelling Rhoda Ricketts, Benjamin Lawsky, and Ruchika Sharma (collectively State Respondents ), to cease and desist from requiring licensed Mortgage Loan Officer s ( MLOs ) to produce credit reports and background checks following their initial application; to produce a list of all individuals who have seen, reviewed, or had access to petitioner s credit report; to terminate the employment of all responsible decision-makers at the New York State Department of Financial Services ( DFS ); and a declaratory judgment that Petitioner is of sufficient fitness, character, and responsibility to possess an MLO license. BACKGROUND Petitioner is a MLO who specializes in the market of reverse mortgages. Defendant DFS is an agency of the State of New York, which is responsible, inter alia, for approving mortgage loan originator license applications and renewals. In demonstrating financial responsibility, an MLO applicant is required to submit a credit report in accordance with the New York Banking Law. Applicants are also required to submit certain parts of the application electronically through the National Mortgage Licensing System and Registry [* 3] ( NMLS ) . Petitioner was licensed as an MLO on September 30, 201 0. He was then required to renew his license by December 31, 2010. Petitioner s licensing document was issued to Petitioner on March 15, 201 1. The License indicated that it would expire on December 31, 201 1.. On December 12, 201 1, Petitioner initiated his license renewal request in the NMLS System for the December 31,201I MLO license renewal. The Renewal Instructions specified, among other requirements, that Petitioner was to authorize an updated credit report through the NMLS System. It would then be made available to the State Respondents. On or about March 1, 2012, Petitioner was reported as not having authorized a credit report which was required for the renewal process, Since Petitioner had not provided the credit report, the State Respondents updated the NMLS System on March 2, 2012 to indicate that Petitioner s licensing status was approved but inactive. The change in licensing status meant that Petitioner could no longer work as an MLO n New York State. On March 5, 2012 Petitioner s credit report and credit score were made available to the State Respondents through the NMLS System. The credit report indicated that Petitioner owed mortgage payments to Bank of America that were 120 days past due. On March 22, 2012, Petitioner was asked by the State Respondents to provide documentation supporting any action taken to address the past due mortgage payment owed to Bank of America. In response to the State Respondents request for an explanation pertaining to the derogatory credit matter with Bank of America, Petitioner responded by insisting that a credit report update was only required for his initial MLO license and not for a renewal of the license. Petitioner now brings this Article 78 proceeding on the grounds that the State Respondents failed to perform a duty enjoined upon them by law; proceeded in excess of jurisdiction; made a determination in violation of lawful procedure; made a determination 2 [* 4] that was arbitrary and capricious; abused discretion as to the measure of penalty imposed; and made a determination without hearing and is on the entire record, unsupported by substantial evidence. DISCUSSION An Article 78 proceeding is a special proceeding. It may be summarily determined upon the pleadings, papers, and admissions to the extent that no triable issues of fact are raised. (CPLR 409 [b]; 7801, 7804 [h].) Thus, much like a motion for summary judgment, the court should decide the issues raised on the papers presented and grant judgment for the prevailing party, unless there is an issue of fact requiring a trial. (CPLR 7804 [h]; Matter of York v McGuire, 99 AD2d 1023 [1984], affd 63 NY2d 760 [1984]). The applicable standard of review is whether the administrative decision was: ( I ) made in violation of lawful procedure; (2) affected by an error of law; or (3) arbitrary or capricious or an abuse of discretion, including whether the penalty imposed was an abuse of discretion (CPLR 7803 [3]). An agency abuses its exercise of .discretion if its administrative orders lack a rational basis. [Tlhe proper test is whether there is a rational basis for the administrative orders, the review not being of determinations made after quasi-judicial hearings required by statute or law (Matter of Pel1v Board of Educ. Of Union Free School Dist. No. 1 of Towns of Scarsdale 8 Mamaroneck, Westchester Countv, 34 NY2d 222, 231 [1974]). In reviewing an administrative agency s determination as to whether it is arbitrary and capricious, the test is whether the determination is without sound basis in reason and is generally taken without regard to the facts. ( Matter of Pel1 v. Bd. of Educ. of Union Free School Dist. No. 1 of Towns of Scarsdale & Mamaroneck, Westchester County, 34 N.Y.2d 222, 231, 356 N.Y.S.2d 833, 313 N.E.2d 321 [1974]). Here, as the State Respondents relied on Article 12-E of the NYBL in determining [* 5] that Petitioner s licensing status was approved but inactive, it must be determined whether Petitioner has demonstrated that in doing so, it failed to perform a duty enjoined upon it by law, violated lawful procedure, or was affected by an error of law or was arbitrary and capricious or abused its discretion. The State Respondents, among other activities, regulates financial services providers such as mortgage brokers, mortgage bankers and MLOs, who are licensed and operate in New York State. The Banking Law, Article 12-E, ยง 599(a)-(l), governs the state licensing requirements of MLOs. In 2009, it was amended in response to Congress s enactment, on July 30, 2008, of Title V of the Housing and Recovery Act of 2008, also known as the SAFE Act. The SAFE Act sets forth new minimum licensing standards for MLO applicants in order to increase uniformity, reduce regulatory burden, enhance consumer protection and reduce fraud ... 12 USCA 3 5101). New York, in enacting the new law, had responded to a warning from the federal government that absent a state s adherence to the Act s minimum licensing standards; the Department of Housing and Urban Development would assume responsibility for state MLO licensing. Section 599-a thus provides as follows: The legislature deems it necessary, in order to enhance consumer protection, reduce fraud and ensure the public welfare, that mortgage loan originators who originate mortgage loans on residential real property be subject to regulation by the superintendent and that such regulation be consistent with Title V of The Housing and Economic Recovery Act of 2008, also known as the S.A.F.E. Mortgage Licensing Act, as it may b e amended from time to time, and regulations thereunder or interpretations thereof, that may be adopted from time to time by the Secretary of the U.S. Department of Housing and Urban Development. 4 [* 6] The act of renewing or denying license renewal, as well as suspending or revoking them, is discretionary. Accordingly, mandamus does not lie to compel a discretionary act, (Town of Riverhead v. New York State Dept. of Environmental Conservation, 50 AD3d 81 I, 813 [2d Dept 20081, citing Klostermann v. Cuomo, 61 N.Y.2d 525, 539 [1984]. The first claim seeking a writ of mandamus is dismissed. The law is well established that the courts will not disturb the determination of an administrative agency unless it is arbitrary and capricious, and that a determination will not be so deemed where the record discloses a reasonable basis therefor ( See Matter of Waqer v. State Liquor Authoritv, 4 N.Y.2d 465, 468 [2005]). Upon examination of the papers submitted in this action, this Court finds ample support for the State Respondent's finding that Petitioner's failure to explain t h e derogatory information reported in his credit report indicated a lack of financial responsibility, and the determination to designate Petitioner's MLO license as approved-inactive was rational and was neither arbitrary nor capricious or an abuse of discretion. Accordingly it is ORDERED and ADJUDGED that the petition is denied and the proceeding is dismissed. . .-_ -u i . UNFILED JUDGMENT This judgment has not been entered by the County Clerk and notice of entrv cannot be served based hereon. To obtain entry, courkel or authorized representative must appear in person at the Judgment Clerk's Desk (Room 1418). 5 ENTER: L4K** J.S.C. DONNA M. MILLS, J.S.CI
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