Astoria Fed. Sav. & Loan Assn. v McCluskey

[*1] Astoria Fed. Sav. & Loan Assn. v McCluskey 2006 NY Slip Op 51749(U) [13 Misc 3d 1209(A)] Decided on September 18, 2006 District Court Of Suffolk County, Third District Hackeling, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on September 18, 2006
District Court of Suffolk County, Third District

Astoria Federal Savings & Loan Association, Successor to the Long Island Savings Bank, FSB

against

John McCluskey, Defendant.



HUC 2724-06

C. Stephen Hackeling, J.

Astoria Federal Savings and Loan Association ("hereafter "Astoria") the plaintiff in the above action has submitted an ex-parte application, seeking to enter a default judgment in the amount of $6,146.57, together with $1,229.31, representing attorney's fees. The matter requires judicial review due to the fact that attorney's fees are sought. The Court notes that this is one of several similar Astoria default applications.

The Facts

On February 24, 1988, Long Island Savings Bank, the predecessor in interest to Astoria, proffered a "Credit Power Acceptance Form" to the defendant John McClusky which indicated that he had been pre-approved for a credit line. The form asks for employment and bank account information, authorizes a credit check and advises that "the form will constitute your acceptance of the pre-approved credit power line and will serve to update certain information in our files." The form is devoid of any other terms or conditions. Astoria asserts that the form was accompanied by a second page entitled "additional terms of the note" which contains the customary and usual credit card terms and conditions inclusive of a "reasonable costs of collections and attorney's fees" clause. The second page "terms" make no reference to the defendant or to the first page, is not signed and the print thereof is microscopic in nature. The complaint underlying the action is dated March 14, 2006 and though it asserts that the defendant defaulted under the note and now owes $7,375.88; it does not describe the default date or any transaction history and fails to delineate the principal borrowed and what constitutes additional charges and interest.

Issues Presented

1)Is Astoria entitled to attorney's fees under the alleged contract? [*2]

2)Is the Credit Power Acceptance Form a finance contract? If so, what are its terms?

3)Does the Court have the discretion to deny Astoria entry of it's default judgment as aresult of its failure to state the facts underlying its cause of action and the possibleexistence of unasserted affirmative defenses pursuant to CPLR Sec. 213(statute oflimitations) and CPLR Sec. 4544 (consumer transactions 8 point type)?

Discussion

The Court is cognizant of the fact that most "sum certain" contract action default judgments are issued by the Clerk of the Court without judicial review. This matter comes before the Court only because a demand has been made to recover attorney's fees which requires determination as to the a "reasonableness" of the fees sought.

The Court, in reviewing requests for judgment is constrained to follow CPLR 3215.

CPLR 3215 does not contemplate that default judgments are to be rubber-stamped once jurisdiction and a failure to appear have been shown. Some proof of liability is required to satisfy the Court as to the prima facie validity of the uncontested cause of action" Joosten v. Gale, 129 AD2d 531, 535 (NYAD 1st Dept 1987).

Initially, the Court notes that this application for judgment contains an attorney's affirmation, alleging the defendant's default in answering or appearing, and alleging that additional notice (required by CPLR 3215 (g)(3)(i), was given by the plaintiff. It also contains a signed attorney's affirmation attempting to demonstrate the reasonableness of the attorney's fees requested. The Court notes that the complaint is verified by an officer of the plaintiff corporation and verifies certain facts on information and belief only. While a complaint which is verified based completely upon personal knowledge may be used as an affidavit of merits (supporting an application pursuant to CPLR 3215), this complaint, based partially on information and belief, is insufficient. As such, the application is lacking in evidentiary facts including the defendant's default in payment and the balance allegedly due under the agreement, and does not fully support the requested relief. See Oversby v. Linde Div. of Union Carbide Corp., 121 AD2d 373 (N.Y.A.D. 2nd Dept. 1986).

Further, any request for a discretionary attorney's fee must be predicated upon a demonstration of a prima facie cause of action entitlement to the underlying judgment. At first blush the affirmative

defenses of the statute of limitations (CPLR Sec. 213) and microscopic print prohibitation (CPLR 4545) appear colorable as the subject contract is dated 18 years ago and the subject "terms and condition page" can only be read with the assistance of a magnifying glass. However, these defenses are considered affirmative in nature and are waived if not interposed. CPLR Sec. 3018 (b) (h); Cheney v. J. C. Penny Co. 270 AD2d 855 (N.Y.A.D. 4th Dept. 2000); Mendez v. Steen Trucking, Inc., 254 AD2d 271 (N.Y.A.D. 4th Dept. 1998). However, the subject ex-parte application and the underlying complaint details none of the loan agreement transactional history. The terms and conditions second page provides that "the amount of interest [*3]that I will pay on this loan will be allocated using the interest rate and accrual method stated on page one. If no accrual method is stated, then you may utilize any reasonable accrual method for calculating interest. The acceptance form does not refer to an interest rate.

The Court acknowledges that there exist many federal and state banking statutes and regulations that allow banks to erode the common law notion that contracts involve an offer and acceptance sufficient to constitute a "meeting of the minds" as to the nature and extent of the agreement created. NY Jur. Contracts , Sec. 46; 5 (A) Am. Jur. Contracts §68:37; see also Machinery Utilities Co., Inc. v. Fry, 224 A.D. 392 (N.Y.A.D. 1st Dept. 1928). These rules sometimes serve to vitiate the common law rule under the rationale that the federal and state regulation of the banking industry provides for same and that the greater good is served by making credit readily available. Even accepting same, this Court still is of the opinion that to create a legally binding contract both sides must know and agree to its essential terms.

Clearly the "acceptance form" page one contains insufficient information to establish an agreement. Absent an incorporating reference; terms and conditions provided on separate documents which come after a signature are not considered part of the agreement. Dvoskin v. Levitz Furniture Co., 9 Misc 3d 1125 (A) (Dist. Ct. Suffolk 2005) citing to Fleet Capital Leasing v. Angiuli Motors, Inc. 15 A.D.3d 535 (NY AD2d Dept. 2005). See also, Guerra v. Astoria Generating Co., L.P. 8 AD3d 616 (NY AD2d Dept. 2004) which allows for separate independent terms and conditions page which are specifically identified and referenced in a signed writing. As the plaintiff's application fails to establish a prima facie cause of action for contractual breach it must be in all respect denied, including the request for attorney's fees. The Clerk of the Court is directed not to enter a judgment in this matter.

____________________________

J.D.C.