State of New York
Supreme Court : County of Monroe

- against -

Index No. 2001/75

This opinion is uncorrected and is subject to revision in the official Reports

ANDREW V. SIRACUSE, J.

Summary judgment is a useful tool in litigation, but attorneys do not always realize that it is a sword that cuts both ways. The present case, in which a plaintiff unwisely mistook a foreclosure with a genuine issue for one with a pro forma answer, provides an object lesson in the procedure's dangers.

Plaintiff LaSalle National Bank is successor in interest, through assumptions and a pooling agreement, to a $10,000 home equity loan and mortgage executed in 1986 by defendants Emily and Robert Maxwell. The lender was one Astrum Funding Corporation, and the mortgage interest rate was 16.5 percent.

Although strictly irrelevant to the issues in this case, some facts concerning the defendants may not be out of order. Mr. Maxwell has been in a nursing home since 1994, and receives assistance through Medicaid. Mrs. Maxwell is unable to work because of health problems, and has depended on payments from her husband of pension income over and above the $50 Medicaid maximum in order to pay living expenses. In August 1999, for unknown reasons, Mr. Maxwell stopped paying his wife. After fruitless conversations with her husband and the nursing home where he lived, Mrs. Maxwell brought a support petition to compel him to resume his payments, and Family Court granted her a support order on June 25, 2001. In the interim, however, this mortgage went into default, after fourteen years of timely payments. Although there were problems with the initial attempt at service, Mrs. Maxwell was properly served with the summons and complaint in March, 2001.

Through her attorneys Mrs. Maxwell raised two affirmative defenses and a counterclaim. Her first affirmative defense was that plaintiff had failed to prove that Astrum Funding Corporation was a licensed mortgage banker at the time of the mortgage, and could therefore not charge more than the 16 percent maximum rate for loans. The defendant labelled this a failure to state a claim. The second was lack of personal jurisdiction, and the counterclaim was for refund of payments in excess of the usury rate and cancellation of the note and mortgage. In a reply dated April 9, 2001, plaintiff replied by a general denial of the defendant's allegations and a reallegation of the complaint.

Negotiations for reinstatement took place, without success, as defendant made discovery demands. Plaintiff apparently attempted to get a copy of a license they believed Astrum held in 1986, but were unable to do so; a letter from defendant's counsel, dated July 17, 2001, states as much.

With the failure of negotiations, plaintiff moved on September 5, 2001, for summary judgment. The plaintiff's papers addressed the affirmative defense involving the usury statute by alleging that the papers clearly set forth the nature of the claim, the proper parties, the default and the remedy, adding that a motion on this ground needed to be raised in a motion under CPLR 3211 (a) (7). No mention was made of Astrum's status, and no license or copy thereof was provided.

The defendant cross-moved to dismiss and/or for summary judgment, seeking in the alternative penalties for failure to comply with discovery demands. These papers were mailed to the plaintiff's offices on October 4, seven days before the matter was scheduled to be heard.

On October 10, this office and defendant's counsel received a fax from one of plaintiff's attorney's paralegal assistants, asking for an adjournment because defendant had supposedly not complied with plaintiff's CPLR 2214 demand for answering papers seven days before argument. This fax was sent at 6:29 local time, long after this office had closed for the night. The court thus did not receive it until the morning of oral argument.

The court denied the request, offering plaintiff the choice between an appearance the next morning or submission on papers. Plaintiff's counsel chose the latter, and the court hereupon states its decision.

Defendant's responding papers were not untimely. The seven-day rule in CPLR 2214 is for service, not receipt. It does not require respondents to allow extra time for mailing. The CPLR gives parties five additional days to respond to papers that have been mailed, but it does not shorten deadlines to allow for transit time. Service of the responding papers was complete upon mailing (CPLR 2103 [b] [2]).

The merits of the case are clear. The loan, at 16.5 percent, is usurious, and plaintiff has not shown that Astrum was exempt from the usury statutes, which set the maximum rate at 16 percent (Banking Law § 14-a).

Only a purchase money mortgage is exempt generically from the usury statutes. This mortgage, which was in the nature of a home equity loan rather than a purchase money mortgage, could be legally made only by a licensed mortgage banker, a credit union, or some other body entitled to charge more than the statutory rate. Thus, when the defendant raised this issue, it was incumbent upon the plaintiff to show that the lender fell within one of these exceptions. This is a matter exclusively within the plaintiff's knowledge, and once a facially invalid mortgage is shown the burden of production falls on the plaintiff.

LaSalle, which has succeeded to Astrum's rights, has failed even to allege that Astrum is a licensed entity. There is thus no proof at all that opposes the defendant's clear showing that this non-purchase money mortgage is usurious on its face.

There is no triable issue of fact regarding Astrum's status, because there is no proof in admissible form that it was allowed to charge 16.5 percent on a mortgage. Thus, the remedy is summary judgment for the defendant, and a declaration that this usurious mortgage is void (Laskowitz v Getzowitz, 211 App Div 239). It should be noted that there is no procedural bar to treating the motion as one to dismiss for failure to state a claim; such motions can be made "at any subsequent time or in a later pleading, if one is permitted" (CPLR 3211 [e]). In this case, however, it is better treated as one seeking summary judgment on a defense, and by moving for summary judgment on the complaint the plaintiff opened the door to this resolution.

This issue had been raised by defendant more than six months ago, and was repeatedly stressed in the communications between the parties. Yet the plaintiff not only failed to produce the necessary documentation; it chose to move for summary judgment with full knowledge that it lacked crucial proof, and it did so on papers that ignored the issue entirely. One moves for summary judgment at one's peril, and in this case, at least, the plaintiff must bear the loss of its course of action. The complaint is dismissed, with costs, and the note and mortgage declared void. Counsel for defendant may prepare the order.

DATED: Rochester, New York

October 12, 2001

Andrew V. Siracuse, J.S.C.

This opinion is not available for publication in any official or unofficial reports, except the New york Law Journal, without the approval of the State Reporter or the Committee on Opinions (22 NYCRR 7300.1)

Design © 1997 Michael Steinberg. No copyright subsists in the decision texts, which are government documents.

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