Am. Express Nat'l Bank v. Plaine

1

2023 NY Slip Op 34602(U)

AMERICAN EXPRESS NATIONAL BANK, Appellant, v. DAVID PLAINE AKA DAVID A. PLAINE, Respondent.

Index No. 2023-0085

County Court, Tompkins County

July 13, 2023

Unpublished Opinion

Zwicker & Associates, P.C

Attorneys for Appellant

Joseph Jakas, Esq.

Respondent, pro se

Present: Hon. JOSEPH R. CASSIDY County Court Judge

DECISION AND ORDER

JOSEPH R. CASSIDY, COUNTY COURT JUDGE.

Motion to Dismiss

Before the Court is an appeal from a Decision and Order of the Ithaca City Court (Peacock, J.) entered on February 10, 2023 denying Appellant's motion for summary judgment and granting partial summary judgment to the defendant in a credit card collection action.

Procedural History

On or about August 24,2021, Plaintiff-Appellant American Express National Bank (hereinafter "Plaintiff" or "American Express"), a national bank, filed a collection action against the Defendant-Respondent David A. Plaine (hereinafter "Defendant" or "Mr. Plaine"). Plaintiff sought a judgment of $ 4,191.20 for a balance due on a Lowe's Business Rewards credit card issued by American Express. Mr. Plaine answered the Complaint by filing a letter dated September 15, 2021 in which he did not dispute the debt and sought to establish a repayment plan. On November 21, 2022, Plaintiff filed a Motion for Summary Judgment, made returnable on submission on January 12,2023. Mr. Plaine did not submit a reply or otherwise oppose the motion. On February 10. 2023, Ithaca City Court issued a Decision and Order in which it denied Plaintiffs motion for summary judgment and sua sponte granted partial summary judgment to the Defendant.

Appellant filed a timely Notice of Appeal from the Decision and Order and moved for a stay of the proceedings below. This Court granted the stay. Plaintiff filed a Notice of Argument and Supporting Brief, along with an Affidavit of Service indicating service on the Defendant. Defendant did not submit a response and the deadline to do so has passed. The Court deems the matter fully submitted.

Factual Background

The undisputed facts are as follows: Plaintiff American Express National Bank is a national bank with its headquarters located in Utah. American Express owns Lowes-branded Business Rewards credit cards. Mr. Plaine opened a Lowes Business Rewards credit card account on or about April 1, 2013. The account is governed by a Cardmember Agreement. The Cardmember Agreement stipulates that "Utah law and federal law govern this Agreement and the Account...without regards to internal principles of conflicts of law. We are located in Utah. We hold the account in Utah. We entered into this Agreement with you in Utah." The Agreement sets forth an annual percentage rate (APR) of the prime rate plus 14.99%, a penalty APR of the prime rate plus 23.99%, and late fees of up to $35.00.

Plaintiff asserts that Defendant defaulted on the Cardmember Agreement on or about April 28, 2022 with a charge-off balance of $ 4,191.20 in principal, interest and accumulated late fees. Plaintiffs motion for summary judgment included the Cardmember Agreement, Mr. Plaine's credit card statements from June 27, 2017 to May 27, 2022, affidavits of service, and a sworn affidavit from the custodian of the records of Mr. Plaine's account. Mr. Plaine did not reply to the motion.

On February 10, 2023, City Court issued a written Decision and Order. The Court granted the motion in part, finding that Defendant was liable to Plaintiff for an unspecified amount, but also granted partial summary judgment in favor of the Defendant, sua sponte, because it found Plaintiff charged an interest rate in excess of New York's criminal usury statutes.

On appeal, Plaintiff contends that 1) City Court's Decision and Order is erroneous on the law; 2) City Court improperly shifted the burden of proof from the Defendant to the Plaintiff; and 3) City Court's proceedings violated fundamental principles of due process.

Discussion

I. Standard for Summary Judgment

To prevail on a motion for summary judgment, the moving party "must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case." Winegard v. New York Univ. Med. Ctr., 64 N.Y.2d 851, 853 [1985]. If the movant satisfies this requirement, the burden shifts to the opposing party to present evidentiary proof, in admissible form, of a material fact requiring a trial. Alvarez v. Prospect Hosp., 68 N.Y.2d 320, 324 [1986]; Zuckerman v. City of New York, 49 N.Y.2d 557, 562 [1980]. Affidavits from those with personal knowledge of the facts are the primary source of proof in a motion for summary judgment. CPLR § 3212 [b]; Siegal NY Practice § 281 6th ed.; Viviane Etienne Med. Care, P.C. v. Country-Wide Ins. Co., 25 N.Y.3d 498, 508 [2015].

A court may grant summary judgment to a non-moving party when it is clear from the submitted papers that "it is warranted by the facts plainly appearing on the papers on both sides, if the relief granted is not too dramatically unlike the relief sought, the proof offered supports it, and there is no prejudice to any party." Frankel v. Stavsky, 40 A.D.3d 918, 918-919 [2nd Dept. 2007].

To make a prima facie showing of its entitlement to judgment in an action to collect a credit card debt, Plaintiff must show 1) The existence of an agreement; 2) Acceptance of the agreement, which it can demonstrate through Defendant's use of the card and payments made thereon; and 2) Breach of contract, which is established by Defendant's failure to make payments on the account. Citibank v. Roberts, 304 A.D.2d 901, 902 [3rd Dept. 2002], Citibank (South Dakota), N.A. v. Keskin, 121 A.D.3d 635, 636 [2nd Dept. 2014]. Tender of a written contract and an uncontroverted assertion that the Defendant failed to pay the amounts due thereunder is sufficient for entitlement to summary judgment Convenient Med. Care v. Medical Bus. Assoc, 291 A.D.2d 617, 618 [3rd Dept. 2002].

Here, Plaintiff provided the Cardmember Agreement, billing statements showing acceptance through use of the card, and an affidavit of American Express's business records custodian showing Defendant defaulted on payments. However, despite the fact that the Defendant acknowledged that he owed the debt. City Court raised affirmative defenses sua sponte and found that Plaintiff failed to provide sufficient proof that it was authorized to charge an interest rate under Utah law.

II. Application of the National Bank Act

American Express is a national bank governed by the National Bank Act codified in Title 12 of the United States Code. As such. Appellant argues, it is permitted to charge the interest rate of its home state of Utah. Under 12 U.S.C. § 85, national banks are expressly permitted to "charge on any loan ... interest at the rate allowed by the laws of the State, Territory, or District where the bank is located." 12 U.S.C. § 85. A national bank is "located" in the state named on its organization certificate, otherwise known as its "home state." Marquette National Bank of Minneapolis v. First Omaha Service Corp., 439 U.S. 299, 309, 99 S.Ct. 540, 546 [1978]. The Marquette ruling is known as the "exportation doctrine," as it permits national banks "to 'export' the consumer credit regulation (or lack thereof) from the state in which they are located to all other states where they have customers," thus circumventing state-enacted consumer protections. Elizabeth R. Schiltz, The Amazing, Elastic, Ever-Expanding Exportation Doctrine and Its Effect on Predatory Lending Regulation, 88 Minn. I.. Rev. 518, 522 [2004].

Interstate national banks are also considered located in any state in which they operate branches, known as "host states."^[1] OCC Interpretive Letter 822 (March 1998), OCC Interpretive Letter 1171 (June 1, 2020). The Office of the Comptroller of Currency (hereinafter "OCC") is tasked with overseeing and regulating national banks. To determine which state's laws govern the interest an interstate national bank may charge, the OCC adopted a framework that evaluates where three non-ministerial functions associated with making a loan occur. Id. These are 1) approving the loan; 2) extending the credit; and 3) disbursing the loan proceeds. Id.

The 2020 Interpretive Letter explains:

Based on this analysis, an interstate national bank may charge interest in accordance with the laws of its home state unless all three non-ministerial functions occur at one or more of the bank's branches in a single host state. If all three non-ministerial functions occur within a branch or branches in a single host state, the bank must use that host state's rates. If some, but not all, of the non- ministerial functions occur in a host state, the bank may elect to use the host state's rates, provided that there is a clear nexus between the loan and the host state based on an assessment of all the facts and circumstances. In this case, the bank may also elect to use the home state's rates. If the non-ministerial functions occur in different states (e.g., both home state and host state(s)) and there are not sufficient contacts to establish a clear nexus between the loan and any host state, the bank must use the home state's rates.

OCC Interpretive Letter # 1171, June 1, 2020 at 3-4 (emphasis added).

Thus, under the OCCs interpretation, a host state's rate must apply only when all three of a national bank's non-ministerial functions occur in that state alone. Otherwise, the bank may apply the rate of its home state.

The National Bank Act preempts state law under the federal preemption doctrine set forth in the Supremacy Clause of Article VI of the U.S. Constitution, which states: "The Laws of the United Slates...shall be the supreme Law of the...