Opinion
CV-1666/14
09-14-2015
SLM Private Credit Student Loan Trust 2004-B, Plaintiff, v. Sheila Bonet, Defendant.
For Plaintiff: Kevin Knab Forster & Garbus LLP Sheila Bonet, Pro Se Defendant
For Plaintiff:
Kevin Knab
Forster & Garbus LLP
Sheila Bonet, Pro Se Defendant
Eddie J. McShan, J.
The following papers numbered 1 to 17 were read on this motion and cross-motion.
Noon Calendar of PAPERS NUMBERED
Notice of Motion-Order to Show Cause - Exhibits and Affirmation Annexed————————-1-10
Answering Affidavit and Exhibits- (Oral Argument and Exhibit)————————————————11-14
Replying Affidavit and Exhibits———————————————————————————————————15
Other
Upon the foregoing cited papers, the Decision/Order of this Motion is as follows:
Plaintiff commenced the instant proceeding on January 29, 2014 to recover $3,737.24 with interest from December 17, 2013 allegedly due under a promissory note for a loan application dated December 15, 2003. Before this Court is Plaintiff's motion for summary judgment pursuant to CPLR § 3212. Defendant opposes the Plaintiff's application raising several affirmative defenses. Summary Judgment
Plaintiff asserts that it is entitled to a judgment as a matter of law because Defendant breached the terms of her student loan by failing to make the required payments. Plaintiff submits the affidavit of Mary Kay Mauer, an employee of Navient Solutions, Inc. (Navient), in support of its application. Ms. Mauer indicates that she is the custodian of records for Navient which is an administrator and agent for the Plaintiff. She also indicates that employees of Navient compile business records memorializing account activity and transaction in order to preserve the accuracy of the transaction. Ms. Mauer asserts that she is competent to testify on behalf of the Plaintiff based upon her personal knowledge of the Plaintiff's business records. She states that the Defendant now owes $3,737.24 with interest based upon her review of the record.
Plaintiff also submits a Memorandum of Law (memo) from its attorney in further support of its application for summary judgment. Plaintiff argues in the memo that it has standing to bring the instant proceeding to enforce a promissory note entered into between Sallie Mae Inc., currently known as Navient, and the Defendant. Plaintiff states that once the loan is approved, the monies are disbursed to either the educational institution or the borrower from one of the several banks enlisted in the process. Plaintiff alleges that the promissory note is then transferred to SLM Private Credit Student Loan Trust 2004-B, a Delaware statutory trust created pursuant to 12 Delaware § 3401 et seq. Plaintiff notes that 12 Delaware § 3804 grants the trust the authority to be sued or to sue in its own name where it has suffered economic damage or injury.
Plaintiff asserts that it is the proper original creditor of the loan. Plaintiff notes that Sallie Mae is the entity which created the loan despite the fact that Stillwater National Bank & Trust Co. (Stillwater) is listed as the lender in the CEC Signature Loan application. Plaintiff argues that the servicing agent of Sallie Mae and not Stillwater, creates the loan application forms, determines whether to grant the loan, and the terms of the loan. Plaintiff insists that the Stillwater was never the legal owner of the loan, and was obligated to transfer the loans made by Sallie Mae to the Plaintiff at a time prior to the Defendant's application. Plaintiff suggests that by understanding the process of the creation, disbursement, and collection of the loan, the bank which is the source of the funds is not involved in any step of the creation or processing of the loan. Plaintiff asserts that it is the owner of the promissory note by default.
Plaintiff contends that Navient, as the servicing agent of the Plaintiff, creates and keeps its business records from the initial application, to the loan note, to the default letter including all recordings of the disbursements and payments. Plaintiff suggests that Ms. Mauer is not testifying to the business records of another entity because such records are created, recorded and utilized by the servicing agent of all the Sallie Mae's trust entities. Plaintiff suggests that the Defendant has not proffered any testimony or evidence that another entity owns the loan. Plaintiff also suggests that the Defendant does not contradict its evidence indicating that she applied for the loan, that the loan was approved and disbursed, and that she failed to repay the sums owed.
A party moving for summary judgment bears the burden of making a prima facie showing of entitlement to judgment as a matter of law, providing sufficient evidence to eliminate any material issues of fact from the case (Winegrad v New York Univ. Med. Ctr., 64 NY2d 851 [1985]). The moving party's evidence, most importantly, must be in admissible form (Friends of Animals, Inc. v Assoc. Fur Mfr., Inc., 46 NY2d 1065 [1979]). The nonmoving party must establish, by admissible evidence, the existence of a factual issue requiring a trial to determine the dispute (Zuckerman v City of New York, 49 NY2d 492 [1980]). The nonmoving party cannot provide conclusory allegations of fact or law to defeat a summary judgment application (Century Ctr. Ltd. v Davis, 100 AD2d 564 [2d Dept 1984]). In considering whether to grant a summary judgment motion, a "drastic remedy" in this State, this court looks to find issues rather than to determine them, and to evaluate whether the alleged factual issues are genuine or lack substance (Sillman v Twentieth Century Fox Film Corp., 3 NY2d 394, 404-05 [1957]). Summary judgment should not be granted where there is any doubt as to the existence of a triable issue ( Moskowitz v Garlock, 23 AD2d 943 [3d Dept 1965]).
In the instant matter, the Court finds that Plaintiff failed to meet its prima facie burden establishing that it is entitled to a judgment as a matter of law (Winegrad, 64 NY2d 851). Ms. Mauer's affidavit is insufficient on this record to establish that Plaintiff is the originator and owner of the promissory note. Ms. Mauer's affidavit only establishes that Navient is the Plaintiff's administrator and agent. Although the memo submitted by the Plaintiff's attorney is educational regarding the student loan process at issue herein, the unsworn document provides no probative value of the facts and circumstances of this proceeding (See for example Blazer v Tri-County Ambulette Serv., Inc., 285 AD2d 575 [2d Dept 2001]). The documents submitted on this record do not corroborate Plaintiff's attorney's arguments that Plaintiff is the originator of the loan. Questions of fact continue to exist as to Stillwater's and Navient's possible entitlement to the loan proceeds. Someone with personal knowledge of the loan process and/or supporting documents are required to establish the Plaintiff's standing.
The Court further finds that Ms. Mauer's affidavit is insufficient to establish the breach of the promissory note even if Plaintiff's standing were established on this record. It is well established that the Plaintiff in a breach of contract action must first prove each of the essential elements of a breach to establish its prima facie cause of action (Dee v Rakower, 112 AD3d 204 [2d Dept 2013]). Those elements include the existence of the contract, the plaintiff's performance pursuant to the contract, the defendant's breach of his or her contractual obligations, and damages resulting from the breach (Id). Ms. Mauer's affidavit fails to establish the existence of the promissory note between the Plaintiff and Defendant. Moreover, her affidavit does not establish Plaintiff's performance thereunder. Although the supporting documents, including the loan application, approval letter, and truth in lending disclosure suggest that the Plaintiff was approved for the loan, there in nothing in Ms. Mauer's affidavit to indicate that the Defendant accepted the loan. In addition, Plaintiff seeks judgment in an amount significantly higher than the approved amount noted in the truth in lending disclosure. There is no explanation as to how the damages the Plaintiff seeks were calculated. Capacity to Sue
The Court notes that this matter is currently scheduled for trial on September 17, 2015. Although the sufficiency of the opposition papers to a summary judgment motion need not be considered where the movant has failed to establish a prima facie case to a judgment as a matter of law (Winegrad, 64 NY2d 851), Defendant raised several affirmative defenses and arguments that warrant further discussion. In addition to challenging the Plaintiff's standing in this matter, Defendant also challenges Plaintiffs capacity to sue. Defendant argues that the Plaintiff has failed to establish that it is in fact a Delaware statutory trust. She also argues that even assuming that the Plaintiff is a trust, only its trustee has the capacity to sue. She notes that a trustee for the Plaintiff did not commence the instant action on behalf of the trust nor is a named party. Defendant asserts that while 12 Delaware § 3804 may grant a trust the capacity to sue in Delaware, it does not grant such capacity to sue in New York State.
Pursuant to Lien Law § 77, enforcement of a trust can be made by "the holder of any trust claim, including any person subrogated to the right of a beneficiary of the trust holding a trust claim, in a representative action brought for the benefit of all beneficiaries of the trust. An action to enforce the trust may also be maintained by the trustee." The Restatement [Second] of Trusts § 280 also states that if a contract right is held in trusts, the trustee can maintain an action against the promissor. It is well established that it is the duty of the trustee to defend and protect the title to the trust estate and as a legal title is in the trustee, only the trustee can sue and be sued in a court of law ( see Matter of Straut, 126 NY 201 [1891]). If the trustee or holder of the trust is not a named party seeking to enforce the contract, the case should be dismissed because the plaintiff does not have capacity to sue ( Orentreich v Prudential Ins. Co. of Am., 275 AD2d 685 [1st Dept 2000]).
Initially, the Court finds that the Plaintiff has waived the affirmative defense that the Plaintiff lacks the capacity to sue because she did not raise it in a pre-answer motion nor in either of her responsive pleading (see CPLR § 3211[a][3] and CPLR 3211[e]). Nevertheless, the Court would find the affirmative defense without merit. It is clear here that the trustee is not a named party in the caption. However, Plaintiff is a foreign trust governed by the laws of the state of Delaware. The Court takes notice that 12 Delaware § 3804 grants a trust the capacity to sue and be sued. New York courts have the power to grant comity to a foreign state's legislation so long as there is fair notice and does not violate State policy (Ehrlich-Bober & Co. v Univ. of Houston, 49 NY2d 574 [1980]). "The doctrine of comity is not a rule of law, but one of practice, convenience and expediency" (Id. citing Mast, Foos & Co. v Stover Mfg. Co., 177 US 485 [1900]). The doctrine of comity does not bind courts to another state's law, but is a voluntary decision to encourage uniformity and harmony "among participants in a system of co-operative federalism" (Id.).
Moreover, New York courts will not grant comity when it conflicts with the public policy of the State (J. Zeevi & Sons v Grindlays Bank, 37 NY2d 220 [1975]). When determining the public policy of the State, courts "are not free to indulge in mere individual notions of expediency and fairness but must look to the law as expressed in statute and judicial decision and to the prevailing attitudes of the community" (Ehrlich-Bober & Co., 49 NY2d 574; see Loucks v Standard Oil Co of NY, 224 NY 99 [1918]; see also Intercontinental Hotels Corp. (Puerto Rico) v Golden, 15 NY2d 9 [1964]). New York policy will not always invariably prevail either (Ehrlich-Bober & Co., 49 NY2d 574). It is also important to point out that this public policy exception to the doctrine of comity is very rarely invoked (Greschler v Greschler, 51 NY2d 368 [1980]). Only "where the original claim is repugnant to fundamental notions of what is decent and just in the state where enforcement is sought" will it offend public policy (Restatement [Second] Conflict of Laws; see also J. Zeevi & Sons, 37 NY2d 220).
The Court finds that granting comity to the Delaware statute at issue herein is not repugnant to New York State's public policy. The Court finds no prejudice to the Defendant by allowing the Plaintiff, a Delaware statutory trust, to sue in its own name as allowed by 12 Delaware § 3804. Defendant has received fair notice of the Plaintiff's attempt to collect the alleged student loan. In addition, Defendant will be able to assert all of the defenses and affirmative defenses she plead in her amended pleading at the trial in this matter.
Defendant further challenges Plaintiff's capacity to sue by arguing that the Plaintiff is a foreign entity not registered with the New York's Secretary of State but doing business in New York State. Defendant asserts that Plaintiff should be precluded from using the New York courts to collect debts pursuant to Business Corporation Law § 1312(a). She notes that courts have held that the entity issuing and servicing, or seeking to recover money due on credit cards issued to New York residents has a permanent and continuous presence in New York. Defendant asserts that Sallie Mae, the alleged loan originator, is actively involved with students attending New York schools and notes that Plaintiff has brought more than 800 lawsuits in New York State in 2014 alone. Defendant suggests that Plaintiff is engaging in intrastate activities and must be registered with the Secretary of State.
Plaintiff argues that it has a capacity to sue in this court because its business is engaged in interstate commerce and as such is beyond the scope of Business Corporation Law § 1312(a). Plaintiff admits that it is an entity located outside the state of New York, that it is not registered or authorized to do business within the state of New York, and that it has sued in a New York court. Plaintiff asserts however that it conducts no activity within the state of New York other than soliciting customers. Plaintiff notes that a potential student borrower obtains its application from the educational institution's financial aid office, the application is mailed to and approved by its out-of-state servicing organization, the correspondence to the student borrower is mailed from an out-of-state location, and the funds for this particular loan originated from out-of-state. Plaintiff also notes that it, an entity created and located in the state of Delaware, subsequently owns the loan. Plaintiff argues that there is a presumption that it conducts business in the state where it is formed and accordingly, the burden shifts to the Defendant to prove that the Plaintiff engages in localized business activity to establish that it is barred by Business Corporation Law § 1312(a).
The determination that a foreign corporation is doing business in New York for purposes of Business Corporation Law § 1312(a) is factual in nature (Netherlands Shipmortgage Corp., Ltd. v Madias, et.al., 717 F2d 731 [2d Cir 1983]; see Berkshire Eng'g Corp. v Scott-Paine, 29 Misc 2d 1010 [Columbia County Ct 1961]; see also Lebanon Mill Co., Inc. v Kuhn, 145 Misc 918 [Mun Ct 1932]). Even though there is no precise measure that may be determinative of whether a foreign corporation is doing business in New York and each case must be decided on its own facts (William L. Bonnell Co. v Katz, 23 Misc 2d 1028 Ct 1960), general guidelines exist which are instructive (Madias, 717 F2d 731). An initial principle New York courts use is not all business activity engaged in by a foreign corporation constitutes doing business in New York (Vox Arx, AG v Breitenstein, 52 AD2d 1049 [4th Dept 1976]). Also, it is important to point out that some business activity might be sufficient to subject a foreign corporation to the jurisdiction of New York courts, but may not be enough to constitute doing business under Business Corporation Law § 1312(a) (Von Arx, 52 AD2d 1049; Paper Mfrs. Co. v Ris. Paper Co., Inc., 86 Misc 2d 95 [Civ Ct, New York County 1976]).
A foreign company will only be prevented from maintaining an action in New York state under Business Corporation Law § 1312(a) if the defendant can prove that the plaintiff not only operates in New York state, but that their business is wholly intrastate as well (Domino Media, Inc. v Kranis, 9 F Supp 2d 378 [SD NY 1998]). A foreign company's business is intrastate when it is permanent, continuous, systematic and regular within the state and the intrastate business essential to the corporation (Highfill, Inc. v Bruce & Iris, Inc., 50 AD3d 742 [2d Dept 2008]). The traditional standard for doing business in New York for the purposes contained in Business Corporation Law § 1312(a) is described in Intl. Fuel & Iron Corp. v Donner Steel Co. (242 NY 224 [1926]). The Court of Appeals held, "[t]o come within this section, the foreign corporation must do more than make a single contract, engage in an isolated piece of business, or an occasional undertaking; it must maintain and carry on business with some continuity of act and purpose" ( Id).
Business Corporation Law § 1312(a) does not apply when a company's activities in New York are merely incidental to its business in interstate and international commerce (Audemars Piguet Holding S.A. v Swiss Watch Intl., Inc., 46 F Supp 3d 255 [SD NY 2014]). The New York door-closing statute cannot deny a foreign corporation doing business in New York state from bringing suit when it is engaged in interstate commerce under the protection of USCA Const art I, § 8 (Colonial Mtge. Co. v First Fed. Sav. and Loan Assn. of Rochester, 57 AD2d 1046 [4th Dept 1977]). If a foreign corporation's business in New York is merely soliciting business, no matter how extensive those contacts may be, then the foreign corporation is engaged in interstate commerce and is constitutionally beyond reach of Business Corporation Law § 1312(a) (Paper Mfrs. Co., 86 Misc 2d 95). Solicitation of business and facilitation of sale and delivery of merchandise incidental to business in interstate commerce is not the type of activity that constitutes doing business in New York that would prevent an unregistered foreign company from bringing suit in the state (Digital Ctr., S.L. v Apple Industries, Inc., 94 AD3d 571 [1st Dept 2012] quoting Uribe v Merchants Bank of NY, 266 AD2d 21 [1999]).
In the instant matter, the parties present conflicting arguments as to whether the plaintiff is engaged in intrastate or interstate activities. As noted hereinabove, a foreign corporation is doing business in New York for purposes of Business Corporation Law § 1312(a) is factual in nature (Netherlands Shipmortgage Corp. Ltd., 717 F2d 731). The Court would be unable to determine the nature of the Plaintiff's activities for purposes of Business Corporation Law § 1312(a) in light of the conflicting affidavits. Such a determination must be made at trial and it would have been the Defendant's burden to establish that the Plaintiff is engaged in intrastate commerce had she not waived the affirmative defense of lack of capacity as noted hereinabove (See for example Great White Whale Adv., Inc., v First Festival Prods., 81 AD2d 704 [3d Dept 1981]). Statute of Limitations
Defendant argues that Plaintiff did not commence the instant proceeding within the prescribed statute of limitations. She suggests that Oklahoma's five-year statute of limitations for breach of contract or promissory note applies to the instant matter because the lender Stillwater Bank's home state is Oklahoma. Defendant notes that according to the Plaintiff's account ledger, the breach occurred in or around 2004 when repayment period was scheduled to begin and no payments were made, but the action was commenced in or around January 2014. The Court notes that the Plaintiff did not respond to the Defendant's argument that the statute of limitations has expired.
According to the approval letter and ledger provided by the Plaintiff, the Defendant's loan was approved on December 29, 2003. The Plaintiff charged off the loan on December 31, 2008. The Plaintiff's ledger includes activity until April 10, 2014. The instant proceeding was commenced on January 29, 2014. The Court is unable to determine which states' time limitation is appropriate in this proceeding in light of the standing issues discussed above. Plaintiff is organized in the State of Delaware, and Stillwater is organized in the state of Oklahoma. The Court takes notice that the statute of limitation for promissory notes in the state of Delaware is three years and five years for the state of Oklahoma.
After searching the record, the Court also finds that the Defendant, as the nonmoving party, may be entitled to summary judgment and dismissal of this action based upon the expiration of the statute of limitations. CPLR § 3212(b) provides in part that " . . . If it shall appear that any party other than the moving party is entitled to a summary judgment, the court may grant such judgment without the necessity of a cross-motion." Caselaw has clearly established that a court may search the record and grant summary judgment in favor of a nonmoving party only with respect to a cause of action or issue that is the subject of the motion before the court (See for example Dunham v Hilco Const. Co., Inc., 89 NY2d 425 [1996]; Lee v City of Rochester, 254 AD2d 790 [4th Dept 1998]).
As noted hereinabove, Plaintiff did not address the Defendant's statute of limitation arguments. The Court notes that if the Plaintiff establishes its standing as disputed above, Delaware's statute of limitation of three years will be applicable. It will be the Plaintiff's burden to establish that this proceeding is not barred by the statute of limitations as the Defendant preserved the affirmative defense in her answer. The Court is unable to determine if the activities included on the Plaintiff's ledger after the charge off date tolled the statute of limitations. Accordingly, the Court reserves decision on dismissing this matter pursuant to CPLR § 3212(b) until after the Plaintiff presents it case-in-chief at the trial in this matter.
In light of the foregoing, it is hereby
ORDERED AND ADJUDGED that the Plaintiff's summary judgment motion is hereby denied in its entirety based upon the findings above; and it is further
ORDERED AND ADJUDGED that the parties shall appear for the trial in the matter currently scheduled for September 17, 2015 at 9:30 a.m.
The foregoing shall constitute the decision and order of this Court.
Dated: September 14, 2015
_____________________________
Eddie J. McShan, J.C.C.