Opinion
Index No. 152623/2023
12-23-2023
American Express National Bank, Plaintiff, v. Kara Ellis and NOBLE PUBLISHING INC., Defendants.
Anthony J. Migliaccio, Esq., New York, NY, for plaintiff.
Unpublished Opinion
Anthony J. Migliaccio, Esq., New York, NY, for plaintiff.
No appearance for defendants.
Gerald Lebovits, J.
The following e-filed documents, listed by NYSCEF document number (Motion 001) 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23 were read on this motion for DEFAULT JUDGMENT.
In this action on sums allegedly owed on a business credit card, plaintiff, American Express National Bank, moves without opposition under CPLR 3215 for default judgment against defendants, Kara Ellis and Noble Publishing Inc. The motion is denied, and the action is dismissed as against defendant Noble Publishing Inc.
Plaintiff's affidavit of service reflects that it served Noble Publishing by the leave-and-mail method of CPLR 308 (2). (See NYSCEF No. 6.) But CPLR 308 applies only to service on natural persons; it may not be used to effect service on a corporation like Noble Publishing. Absent valid service, this court lacks personal jurisdiction over that defendant.
With respect to defendant Ellis, plaintiff has established valid leave-and-mail service on her (see NYSCEF No. 4 [affidavit of service]), and she has not appeared. But plaintiff has not established that it is entitled to default judgment against her. The credit-card agreement on which plaintiff relies provides that any balance outstanding each month shall accrue interest. (See NYSCEF No. 13 at 2.) The applicable interest rate is 0% for the first year, but thereafter a rate consisting of the prime rate (as published in the Wall Street Journal) plus 14.99%-a total rate that the agreement provides is 18.99% at the time of execution. (See id. at 2, 7.) This 18.99% interest rate exceeds on its face the 16% maximum annual rate permitted by New York's usury laws. (See General Obligations Law (GOL) § 5-501 [1]; Banking Law § 14-1 [1].)
Thus, if New York law defines the maximum permissible interest rate that could be assessed as against Ellis, the agreement between plaintiff and Ellis would be void as usurious-thereby ousting Ellis's liability for unpaid principal, as well as interest. (See Borowski v Falleder, 296 A.D.2d 301, 301 [1st Dept 2002].) That the initial interest rate of 0% is legal under GOL § 5-501 would not save the agreement, given the contemplated increase to rates that exceed New York's 16% cap. (See Fremont Inv. & Loan v Haley, 2009 NY Slip Op 51186[U], at *7 [Sup Ct, Queens County 2009]; accord Norstar Bank v Pickard & Anderson, 140 A.D.2d 1002, 1002-1003 [4th Dept 1988] [holding that "in the case of a loan at a variable rate of interest, the interest charged should not be averaged over the term of the loan in determining whether a usurious rate has been charged"].)
Nor is it material that the agreement provides that Ellis could avoid the assessment of any interest were she to "pay [her] entire balance by the due date each month." (NYSCEF No. 13 at 2; see Simsbury Fund, Inc. v New St. Louis Assocs., 204 A.D.2d 182, 182 [1st Dept 1994] ["[T]he possibility of a nonusurious rate of interest in the event of defendant's full performance under the agreements... do[es] not make the subject agreements nonusurious."].)
A question exists, though, whether the interest rate in this agreement is regulated by New York law or by the law of another jurisdiction. Plaintiff is a national bank; and national banks located in a particular state and transacting business with a customer in a different state may assess interest at rates permitted in the bank's home state, even if those rates would be prohibited as usurious in the customer's home state. (See Marquette Natl. Bank of Minneapolis v First of Omaha Serv. Corp., 439 U.S. 299, 313 [1978].) But the record on this motion does not reflect whether (i) plaintiff is located in a state other than New York for purposes of this inquiry; and (ii) if so, what interest rate plaintiff may legally charge under the laws of the state in which it is located.
Plaintiff's unverified complaint alleges, without elaboration, that its office is located in Utah. (NYSCEF No. 1 at ¶ 1.) But plaintiff may not rely on an unverified complaint on a motion for default judgment. (See CPLR 3215 [f].) In any event, Marquette National Bank makes clear that the question of where a bank is "located" for these purposes depends heavily on the factual circumstances under which the bank operates- including with respect to the credit-card transactions at issue. (See 439 U.S. at 309-313; accord Citibank (SD) N.A. v Hansen, 28 Misc.3d 195, 198-201 [Dist Ct, Nassau County 2010] [discussing this point].) Neither plaintiff's complaint nor its papers on this motion set out a factual basis to believe that plaintiff should be considered to be "located" in a state other than New York for purposes of determining what interest rates plaintiff may charge.
Given these legal and factual questions, the court concludes that it would be inappropriate at this time to dismiss plaintiff's claim against Ellis as barred by New York's usury statutes. Instead, plaintiff will be given the opportunity to demonstrate that the interest rates set by the underlying credit card agreement are legally permissible with respect to Ellis.
Accordingly, it is
ORDERED that the branch of plaintiff's motion seeking default judgment against defendant Noble Publishing is denied, and the action is dismissed as against Noble Publishing, no costs; and it is further
ORDERED that plaintiff's claim against defendant Ellis is severed and shall continue; and it is further
ORDERED that the branch of plaintiff's motion seeking default judgment against Ellis is denied; and it is further
ORDERED that unless plaintiff files a renewed default-judgment motion against Ellis (supported with appropriate documentation) by February 2, 2024, the action will be dismissed; and it is further
ORDERED that plaintiff shall serve a copy of this order with notice of its entry on defendants by certified mail, return receipt requested, directed to their respective last-known addresses; and on the office of the County Clerk (by the means set out in this court's e-filing protocol, https://www.nycourts.gov/LegacyPDFS/courts/1jd/supctmanh/Efil-protocol.pdf), which shall enter judgment accordingly.