Credit Suisse Fin. Corp. v Markson

[*1] Credit Suisse Fin. Corp. v Markson 2008 NY Slip Op 52262(U) [21 Misc 3d 1128(A)] Decided on November 10, 2008 Supreme Court, Kings County Rivera, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 November 10, 2008
Supreme Court, Kings County

Credit Suisse Financial Corporation, Plaintiff,

against

Holly Markson, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., AS NOMINEE FOR CREDIT SUISSE FINANCIAL CORPORATION,and "JOHN DOE" AND "JANE DOE" the last two names being fictious, Defendants. HOLLY MARKSON, Third-Party Plaintiff, NEUFVILLE MORTGAGE CORP., PATRICK MCDONALD,MILLENNIUM MARKETING, INC., ROBERT MOJICA, DORELL MCKENZIE, WYLLIE DACON & ASSOCIATES, and INGRID WYLIE Third-Party Defendants.



10116/2007

Francois A. Rivera, J.

By notice of motion, sequence number three, filed on May 20, 2008, defendant/ third-party plaintiff Holly Markson (hereinafter the movant) moves for an order pursuant to New York Banking Law §6-L(10) and (11): voiding certain mortgage loan transactions; restraining plaintiff and its agents from providing any negative information concerning the loan transactions to any credit agency, and awarding the movant attorney fees in conjunction with the defense of the action. Plaintiff opposes the motion.

On September 2, 2008, after oral argument was completed, this court scheduled a hearing to be conducted on November 18, 2009, to determine, inter alia, whether the home loan transactions in question were high cost loans as defined under New York State Banking Law 6-L. Movant is directed to produce a complete set of the pleadings for admission at the preliminary trial. This decision sets forth the courts' reasoning for ordering a trial of the issue despite apparent deficiencies in the movant's papers.

On March 23, 2007, plaintiff commenced this action to foreclose a mortgage on real property by filing a summons and verified complaint in the Kings County Clerk's office. Issue was joined in or about August of 2007. The real property in question is located at 2004 Bergen Street, Brooklyn, New York.

Motion Papers

The movant's motion papers consist of her affidavit and her attorney's affirmation.

The plaintiff's opposition papers consists of its attorney's affirmation and eighteen annexed exhibits marked A through R. Exhibit A and B are copies of two notes and mortgages made by the movant on August 31, 2006, in the respective amounts of $520,000.00 and $129,000.00. Exhibit C is a copy of the affidavit of service of the summons and verified complaint. Exhibit D is the loan application signed by the movant. Exhibit E is an unsigned document labeled Uniform Underwriting and Transmittal Summary. Exhibit F is an unsigned document labeled Verbal Employment Verification. Exhibit G is a form purportedly used by the plaintiff to confirm the movant's rent. Exhibit H contains copies of the movant's credit report from three credit reporting agencies. Exhibit I through L and N through R are mortgage loan related documents that the movant signed in August of 2006 and that are hereafter described by their respective headings. Exhibit I is a good faith estimate form. Exhibit J is a notice of right to receive a copy of an appraisal. Exhibit K is a truth in lending disclosure statement. Exhibit L is a U.S. Department of Housing and Urban Development settlement statement. Exhibit M is a template adjustable rate mortgage disclosure statement. Exhibit N is an undated borrower's certification and authorization to release information. Exhibit O is an equal credit opportunity act notice.Exhibit P is a fair credit reporting act statement. Exhibit Q is a an initial escrow account disclosure statement by the plaintiff. Exhibit R is a New York interest rate lock commitment form.

The movants' reply to plaintiff's opposition papers consists of her affidavit, her attorney's affirmation and five annexed exhibits marked A through E. Exhibit A purports to be a table of treasury yield curve rates. Exhibit B and C are two residential loan applications that the movant signed respectively on June 11 and 29, 2006. Exhibit D contains the movants income tax W-2 forms for the year 2004 and 2005. Exhibit E are copies of the movants weekly paystubs for the [*2]period of June 25, July 2, and July 9, 2006.

APPLICABLE LAW

CPLR 2214 (a) and (c) provide in pertinent part as follows: Motion papers; service; time. (a) Notice of motion. A notice of motion shall specify the time and place of the hearing on the motion, the supporting papers upon which the motion is based, the relief demanded and the grounds therefor. Relief in the alternative or of several different types may be demanded.

... (c) Furnishing papers to the court. Each party shall furnish to the court all papers served by him. The moving party shall furnish at the hearing all other papers not already in the possession of the court necessary to the consideration of the questions involved.

CPLR 2218. Trial of issue raised on motion. The court may order that an issue of fact raised on a motion shall be separately tried by the court or a referee. If the issue is triable of right by jury, the court shall give the parties an opportunity to demand a jury trial of such issue. Failure to make such demand within the time limited by the court, or, if no such time is limited, before trial begins, shall be deemed a waiver of the right to trial by jury. An order under this rule shall specify the issue to be tried.

New York State Banking Law provision 6-L (1)(a) sets forth the definition of terms pertinent to high cost home loans.

Subsection (1)(d) provides that : a "High-cost home loan" means a home loan in which the terms of the loan exceed one or more of the thresholds as defined in paragraph (g) of this subdivision. Subsection (1)(g) "Thresholds" means: (i) For a first lien mortgage loan, the annual percentage rate of the home loan at consummation of the transaction exceeds eight percentage points over the yield on treasury securities having comparable periods of maturity to the loan maturity measured as of the fifteenth day of the month immediately preceding the month in which the application for the extension of credit is received by the lender; or for a subordinate mortgage lien, the annual percentage rate of the home loan at consummation of the transaction equals or exceeds nine percentage points over the yield on treasury securities having comparable periods of maturity on the fifteenth day of the month immediately preceding the month in which the application for extension of credit is received by the lender; as determined by the following rules: if the terms of the home loan offer any initial or introductory period, and the annual percentage rate is less than that which will apply after the end of such initial or introductory period, then the annual percentage rate that shall be taken into account for purposes of this section shall be the rate which applies after the initial or introductory period; or [*3] (ii) The total points and fees exceed: five percent of the total loan amount if the total loan amount is fifty thousand dollars or more; or six percent of the total loan amount if the total loan amount is fifty thousand dollars or more and the loan is a purchase money loan guaranteed by the federal housing administration or the veterans administration; or the greater of six percent of the total loan amount or fifteen hundred dollars, if the total loan amount is less than fifty thousand dollars; provided, the following discount points shall be excluded from the calculation of the total points and fees payable by the borrower: (1) Up to and including two bona fide loan discount points payable by the borrower in connection with the loan transaction, but only if the interest rate from which the loan's interest rate will be discounted does not exceed by more than one percentage point the yield on United States treasury securities having comparable periods of maturity to the loan maturity measured as of the fifteenth day of the month immediately preceding the month in which the application is received; (2) Any and all bona fide loan discount points funded directly or indirectly through a grant from a federal, state or local government agency or 501(c)(3) organization.

New York State Banking Law provision 6-L(5) provides that the attorney general, the superintendent, or any party to a high-cost home loan may enforce the provisions of this section.

Subsection (10) provides that upon a finding by the court of an intentional violation by the lender of this section, or regulation thereunder, the home loan agreement shall be rendered void, and the lender shall have no right to collect, receive or retain any principal, interest, or other charges whatsoever with respect to the loan, and the borrower may recover any payments made under the agreement. Subsection (11) provides that upon a judicial finding that a high-cost home loan violates any provision of this section, whether such violation is raised as an affirmative claim or as a defense, the loan transaction may be rescinded. Such remedy of rescission shall be available as a defense without time limitation.

DISCUSSION

At oral argument of the motion, the movant advised the court that the substantive law in support of her motion was derived solely from New York Banking Law 6-(L). The court asked the movant to explain why the motion papers did not cite or apparently rely on any provision of the CPLR as a procedural vehicle for bringing the motion.

In response, the movant contended that New York State Banking Law provision 6-L(5) authorized her, as a party to the high cost loan, the same authority as the attorney general, or the superintendent of banking to seek enforcement of its provisions and provided the procedural mechanism for bringing the motion.

The focus of plaintiff's oral argument and opposition papers was that the loans in question [*4]were not high cost loans. This left the court with a procedural dilemma. Is it appropriate to order a separate trial pursuant to CPLR 2218, to determine the limited issue of whether the mortgage loans in question were high cost loans? Should the question of whether the procedural provisions of the CPLR are required or unnecessary in light of New York State Banking Law provision 6-L(5) be decided first?

CPLR 2218 authorizes the court, on any motion, to order a separate trial of an issue of fact arising in a motion. "When this power to order the trial of an issue arising on a motion is invoked, it amounts to a kind of preference for the matter, especially since the power is, as a rule, properly exercised only when the result of the preliminary trial has some reasonable chance of putting an end to the litigation. Since it amounts to a preference, it should be exercised only in narrow instances" (see, Siegel, NY Practice §2218 [4th ed.]).

New York Banking Law 6-L (2) prohibits certain practices by lending institutions when offering High Cost Loans (LaSalle Bank, N.A. v. Shearson, 19 Misc 3d 433 [NY Sup 2008]). New York Banking Law 6-L(7) sets forth the remedies available to the borrower by those found liable for violating the statute. They include actual, consequential and incidental damages as well as statutory damages. New York Banking Law 6-L(8) and (9) expands the list of available remedies to include reasonable attorney fees and injunctive relief to the borrower.

The movant has invoked these remedies which are exclusively available to borrowers under New York Banking Law 6-Lfor proscribed predatory lending practices in relation to providing high cost loans. Therefore, if the loans in question are not high cost loans within the statutory parameters of New York Banking Law 6-L, that fact alone requires the motion to be denied in its entirety.

The question of whether the CPLR applies to the instant motion is not without consequences. Assuming the CPLR does apply, the movant would be required to identify whether the application for an accelerated judgment was made pursuant to either CPLR 3211 or CPLR 3212. It is noted that neither the movant nor the plaintiff annexed a copy of the pleadings to their respective motion papers. A motion made pursuant to CPLR 3211 which alleges a complete defense to the allegations made in a complaint would probably require that the complaint be attached to establish the validity of the defense pursuant to CPLR 2214(c) (see Alizio v. Perpignano, 225 AD2d 723, 640 [1996]). A motion made pursuant to CPLR 3212 would requires the annexing of pleadings under section 3212(b). The requirement that a motion for summary judgment be supported by the pleadings is mandatory. In fact, the failure to include the pleadings would render the motion procedurally defective and subject to denial on that basis alone (see Matsyuk v. Konkalipos, 35 AD3d 675 [2nd Dept 2006]). Thus, under either CPLR 3211 or 3212, the motion would have to be denied without prejudice on procedural grounds in its current form.

Rather than reject a motion on procedural grounds, the court finds it more efficient to conduct a preliminary trial on the limited factual issue as to whether the loans in question are high cost loans. Resolution of this fact has some reasonable chance of putting an end to the litigation and would promote judicial economy by resolving a potentially case dispositive issue.

The parties have been contacted and directed to prepare for the preliminary trial, previously scheduled for November 18, 2008, and currently scheduled to December 9, 2008. The movant will have the burden of going forward and the burden of proving that the loans in [*5]question were high cost loans as defined in New York Banking Law §6-L. The movant is also directed to produce a complete set of the pleadings for admission at the preliminary trial.

The foregoing constitutes the decision and order of this court.

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J.S.C.