Discover Bank v Shimer

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[*1] Discover Bank v Shimer 2012 NY Slip Op 51316(U) Decided on July 17, 2012 District Court Of Nassau County, First District Ciaffa, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law ยง 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on July 17, 2012
District Court of Nassau County, First District

Discover Bank, Plaintiff,


Patrick B. Shimer, Defendant.


Zwicker & Associates, P.C., Attorney for Plaintiff, 120 Allens Creek Road, Rochester, New York 14618, 585-506-9850; Joseph J. Giordano, Esq., Attorney for Defendant, 2901 Long Beach Road, Suite 9, Oceanside, New York 11572, 516-442-4200.

Michael A. Ciaffa, J.

Plaintiff moves for summary judgment upon a claimed credit card debt. Although no opposition to the motion has been received, to date, "[b]asic summary judgment principles have long held that it is the movant's burden to present evidence demonstrating [its] prima facie entitlement to judgment as a matter of law." Zecca v. Riccardeli, 293 AD2d 31, 34 (2d Dept 2002). "Even where there is no opposition to a summary judgment motion, the Court is not relieved of its obligation to ensure that the movant has demonstrated [its] entitlement to the relief requested." Id.; see also Manufacturers & Traders Trust Co. v. Riggins, 2012 NY Slip Op 50814 (Dist Ct Nassau Co.), quoting Zecca v Riccardeli, supra; Winegrad v. NYU Med Center, 64 NY2d 851, 853 (1985).

To meet its burden on this motion, plaintiff must tender "evidentiary proof in admissible form." See American Express v. Badalamenti, 2010 NY Slip Op 52238 (Dist Ct Nassau Co.), quoting Zuckerman v. City of NY, 49 NY2d 557, 562 (1980). Once again, plaintiff's moving papers fall short. See, e.g. Discover Bank v Parisi, index no. 25361/10, decision dated June 21, 2012 (Dist Ct Nassau Co.); Discover Bank v. Kivita, index no. 15445/10, decision dated March 29, 2011 (Dist Ct Nassau Co.); Discover Bank v. Shea, index no. 23257/10, decision dated February 8, 2011 (Dist Ct Nassau Co.).

Plaintiff's papers include a series of monthly credit card statements, regular on their face, which appear to show purchases, credits, payments, finance charges, and fees that were recorded on a "Discover Card" account in defendant's name, between November 2008 and June 2011. The statements end with a two page document covering account transactions between June 5, 2011 and June 30, 2011. In pertinent part, that statement shows a "Previous Balance" of $4,676.98, "Payments and Credits" in the same amount ($4,676.98), and a "New Balance" of "$0.00." Under the heading "Transactions" the statement reflects an "internal charge-off" of the amount of the previous balance [*2]($4,676.98). The amount of the "New Balance" ($0.00) is listed in three places on the statement.

As noted by plaintiff's counsel, such credit card statements are generally "trustworthy and reliable." But if the last statement of the account's status as of June 30, 2011 is accepted as accurate, it merely shows a balance of "$0.00." It further suggests that defendant's debt may have been discharged, cancelled, or forgiven by plaintiff in June 2011, in exchange for a "bad debt" tax write-off. See Discover Bank v Kivita, supra.

In Discover Bank v Kivita, supra, this Court denied a similar summary judgment motion by plaintiff, noting that any such charge-off may have triggered a mandatory duty under IRS regulations to issue a 1099-C form to defendant, with attendant tax consequences for defendant ( A debt is deemed cancelled under the IRS regulations when a creditor stops collection activity after a defined period pursuant to an established business practice. Id. A creditor typically does so in order to take advantage of IRS rules allowing tax deductions for "bad debts"( Such actions by a creditor, in turn, may render it inequitable to allow it to belatedly enforce the alleged debt after it received the tax benefit of the "charge-off." See, e.g. CACH LLC v Fatima, 2011 NY Slip Op 51510 (Dist Ct Nassau Co.), citing In re Welsh, 2006 WL 3859233 (Bankr Ct ED Pa 2006), quoting In re Crosby, 261 BR 470, 474 (Bankr Ct D Kan 2001)["The actual (or at least potential) tax consequences of the form make it inequitableto allow the [creditor] to enforce its claims against the debtors"]; see also Amtrust Bank v Fossett, 223 Ariz 438, 224 P3d 935 (App 2009) (issuance of Form 1099-C after debt was written off is "prima facie evidence" that debt had been discharged by creditor, sufficient to create an issue of fact); Discover Bank v Kivita, supra.

Notwithstanding these decisions, the issue is not addressed in plaintiff's moving

papers. No effort is made to explain why plaintiff should be allowed to bring suit upon the prior balance while it retains the tax benefit of the charge-off, with resultant potential tax consequences to plaintiff under IRS regulations. More importantly, no effort is made to explain why plaintiff issued a statement to defendant in June, 2011 showing a "$ 0.00" new balance owed. In light of that decision by plaintiff, as memorialized in the last statement issued to defendant, to reduce the stated balance owed to "$0.00", the Court cannot conclude, as a matter of law, that defendant is liable for the amount of the previous balance ($4,676.98) on the ground that there was an "account stated" between the parties. At a very minimum, additional evidence from plaintiff is required.

The Court further notes that plaintiff's papers include no proof respecting the terms of the cardmember agreement in effect when defendant's account was opened in 2008, or any proof that plaintiff's 2010 cardmember agreement (plaintiff's Ex C) was duly mailed to defendant in the ordinary course of plaintiff's business. Submission of such proof is ordinarily required to establish the terms governing the account, and to establish the [*3]defendant's breach of his obligation and the proper amount of plaintiff's damages. See, e.g. Discover Bank v Parisi, supra; Discover Bank v. Kivita, supra; Citibank v. Zaharis, index no. 20670/10, decision dated October 18, 2011 (Sup Ct. Queens Co); Citibank v. Martin, 11 Misc 3d 219 (Civ Ct NY Co 2005). In the absence of such proof, plaintiff's moving papers are insufficient to demonstrate its entitlement to judgment, as a matter of law, upon its breach of contract cause of action.

Fianlly, plaintiff's papers are inadequate to meet its burden of submitting evidentiary proof of its claims "in admissible form." Like any other generally "reliable" business records, monthly credit card statements are "admissible in evidence" under CPLR 4518 as proof of an "act, transaction, occurrence or event" only if supported by a "sufficient foundation." See, e.g. Unifund CCR Partners v. Youngman, 89 AD3d 1377 (4th Dept 2011).

"A proper foundation for the admission of a business record must be provided by someone with personal knowledge of the maker's business practices and procedures." Unifund CCR Partners, supra, quoting West Val. Fire Dist. v. Village of Springville, 294 AD2d 949, 950 (4th Dept 2002). Plaintiff's papers superficially seek to satisfy this requirement through the submission of an affidavit from Stacey Holmes, a "Legal Placement Account Manager" for a "servicing affiliate" of plaintiff. The affidavit signed by Ms. Holmes has the look and feel of a "robo-signed" affidavit that was "prepared in blank in advance of knowing who would sign the affidavit." See American Express v. Badalamenti, 2010 NY Slip Op 52238 (Dist Ct Nassau Co.), quoting American Express v. Bajek, 2010 NY Slip Op 52005 (Sup Ct Orange Co.). Although she purportedly made the affidavit based upon her "personal knowledge" and/or her "review of the Plaintiff's business records," she evidently had no idea, when she signed the affidavit, that the last statement on the account showed a "$0.00" new balance. The affidavit, moreover, is identical, except for the amount claimed, to affidavits from other individuals employed by this servicing affiliate. See e.g. Discover Bank v Parisi, supra. While suspicion of robo-signing "does not automatically indicate impropriety," see American Express v. Badalamenti, supra, quoting American Express v. Bajek, supra, it "gives this Court pause." American Express v. Badalamenti, supra; see also Discover Bank v Parisi, supra.

Upon closer examination of the Legal Placement Account Manager's affidavit, it is apparent that it fails to satisfy the foundational requirements for the submission of plaintiff's "business records" (CPLR 4518). Although the affidavit avers, in conclusory terms, that the account statements were all created and sent to defendant in the regular course of plaintiff's business, and that she is "fully familiar with the Plaintiff's record keeping practices," her affidavit otherwise fails to establish how she acquired such "personal knowledge of [plaintiff's] business practices or procedures..." See Unified CCR Partners v. Youngman, supra; see also Palisades Collection, LLC v. Kedik, 67 AD3d 1329 (4th Dept 2009); CACH, LLC v. Fatima, 2011 NY Slip Op 51510 (Dist Ct Nassau Co.); American Express v. Badalamenti, supra; Discover Bank v Parisi, supra. Moreover, [*4]her affidavit makes no effort to " credit card statements...were made and kept." See Unified CCR Partners v. Youngman, supra; Discover Bank v Parisi, supra.

Notably, plaintiff Discover Bank, "an FDIC insured Delaware State Bank," allegedly operates and maintains its Discover Card accounts from a business address in Salt Lake City, Utah. Payments on defendant's account, in turn, were to be sent to a different address, in Charlotte, North Carolina. Ms. Holmes, however, apparently works at neither address. Her affidavit was signed in Franklin County, Ohio. Indeed, it appears that her sole involvement in the matter arises from her employment by DB Servicing Corporation, a "servicing affiliate" for plaintiff's "collection efforts" regarding "defaulted credit card accounts."

No details are provided respecting that affiliate's involvement, if any, in plaintiff's day to day business operations or its record keeping practices for accounts that are not in default. No effort is made to demonstrate that Ms. Holmes was actually trained to perform any task besides signing off on large groups of mass produced affidavits. And no details are provided respecting when Ms. Holmes was first employed by the servicing affiliate.

Particularly in cases, like this one, where the "business records" at issue were prepared by a different branch of plaintiff's business, it is not too much to ask that plaintiff provide foundation proof from someone who can actually attest to having personal knowledge of plaintiff's record keeping practices during that time period. The affidavit, here, provides the Court with no such assurance.

Appellate decisions in other contexts provide further reason for insisting upon greater foundation proof. In the field of no-fault billings and claims, the appellate courts have often held that "third party billers" who use information furnished by medical providers cannot lay a proper "business record" foundation (CPLR 4518) for submission of the medical provider's bills as proof of given claims. See, e.g. Viviane Etienne Med Care, P.C. v. Country-Wide Ins. Co., 31 Misc 3d 21 (App Term 2d Dept 2011); see also Matter of Carothers v. GEICO, 79 AD3d 864 (2d Dept 2010); Art of Healing Medicine, P.C. v. Travelers Home & Marine Ins., 55 AD3d 644 (2d Dept 2008). The same rules should apply equally to credit card cases. See Discover Bank v Parisi, supra; Discover Bank v. Kivita, supra. Absent proof from a representative of the plaintiff, not presented here, attesting to its own record-keeping practices and procedures, and related proof of its business duty to provide accurate information to its "servicing affiliate," cf Viviane Etienne Med. Care, supra, the affidavit from Ms. Holmes, by itself, is not enough to lay a proper foundation for plaintiff's business records. For this reason as well, the Court declines to grant plaintiff's motion.

In conclusion, plaintiff's moving papers once again fail to satisfy its burden of submitting proof, in proper evidentiary form, supporting its claim for judgment as a matter of law. Consequently, its motion must be denied, and the merits of plaintiff's claims are reserved for trial.

[*5]So Ordered:

District Court Judge

Dated: July 17, 2012

cc:Zwicker & Associates, P.C.

Joseph J. Giordano, Esq.