| JPMorgan Chase Bank, N.A. v Malarkey |
| 2009 NY Slip Op 06089 [65 AD3d 718] |
| August 6, 2009 |
| Appellate Division, Third Department |
| JPMorgan Chase Bank, N.A., as Trustee for the Registered Holdersof ABFS Mortgage Loan Trust 2001-1, Mortgage Pass-Through Certificates, Series 2001-1,Appellant-Respondent, v Michael P. Malarkey Jr., Also Known as Michael Philip Malarkey Jr.,et al., Respondents-Appellants, et al., Defendants. |
—[*1] McDonough & Artz, P.C., Binghamton (Philip J. Artz of counsel), forrespondents-appellants.
Spain, J. (1) Appeal from an order of the Supreme Court (Tait, J.), entered October 25, 2007in [*2]Broome County, which, among other things, granted amotion by defendants Michael P. Malarkey Jr. and Donna Marie Malarkey for partial summaryjudgment dismissing the complaint against them, and (2) cross appeals from an order of saidcourt, entered September 12, 2008 in Broome County, which, upon reconsideration, adhered toits prior decision.
In 2001, defendants Michael P. Malarkey Jr. and Donna Marie Malarkey (hereinaftercollectively referred to as defendants) borrowed $170,000 from American Business Credit, Inc.(hereinafter ABC) and promised to repay the principal with 16.25% interest over 15 years. Theloan was secured by mortgages on real property located in Broome County. Defendants failed tomake the required payments under the note and mortgages and plaintiff, ABC's assignee,commenced the present mortgage foreclosure action.
Defendants answered and thereafter moved for partial summary judgment dismissing thecomplaint on the ground that the note and mortgages were usurious. Plaintiff opposed the motionand argued, among other things, that New York's usury statute (see General ObligationsLaw § 5-501) is preempted by the federal Depository Institutions Deregulation andMonetary Control Act of 1980 (hereinafter DIDMCA) (see 12 USC § 1735f-7a).Supreme Court granted defendants' motion. Plaintiff moved to renew and reargue the priormotion, pointing to allegedly new facts regarding DIDMCA's applicability and errors inSupreme Court's legal analysis on its initial decision. Supreme Court granted the motion and,upon renewal and reargument, adhered to its original decision. Plaintiff now appeals from bothorders, while defendants cross appeal from the second order, to the extent that it granted renewaland reargument.
Beginning with defendants' challenge to the grant of plaintiff's motion to renew, we agreethat it should not have been granted. A motion seeking leave "to renew must be based uponnewly discovered evidence which existed at the time the prior motion was made, but wasunknown to the party seeking renewal, along with a justifiable excuse as to why the newinformation was not previously submitted" (Wahl v Grippen, 305 AD2d 707, 707[2003]; see CPLR 2221 [e]; Kahn v Levy, 52 AD3d 928, 929 [2008]). Here, the newlydiscovered evidence consisted of property assessment information obtained from variousgovernment Web sites. Plaintiff failed to meet its obligation as the movant seeking leave torenew to proffer a reasonable excuse as to why that information was not submitted in oppositionto the original summary judgment motion (see Matter of Barnes v State of New York,159 AD2d 753, 754 [1990], lv dismissed 76 NY2d 935 [1990]; cf. Bibeau vWard, 193 AD2d 875, 876 [1993]; Segall v Heyer, 161 AD2d 471, 473 [1990]).Further, we reject plaintiff's suggestion that Supreme Court should have taken judicial notice ofthese records inasmuch as plaintiff never requested that notice be taken (see Walton vStafford, 14 App Div 310, 313-314 [1897], affd 162 NY 558 [1900]). We now turnto the merits and consider them based upon the evidence that was before the court at the time ofthe original order granting summary judgment.
No dispute exists that the 16.25% interest rate on ABC's loan to defendants is usurious underNew York law (see General Obligations Law § 5-501 [1]; § 5-511 [2];see also Banking Law § 14-a [1]). Instead, plaintiff argues that Supreme Courterred in granting defendants [*3]partial summary judgmentbecause questions of fact existed as to whether DIDMCA preempted New York usury law withregard to that loan. State usury laws are preempted by DIDMCA with regard to any loan which:(1) was secured by a first lien on residential real property; (2) was made after March 31, 1980;and (3) meets the definition, with certain qualifications, of a federally related mortgage loan(see 12 USC § 1735f-5 [b]; § 1735f-7a [a] [1]; see also BankingLaw § 14-a [7]). No dispute exists as to the applicability of the first two elements. Asrelevant here, to satisfy the third element, the loan at issue must have been "made in whole or inpart by any 'creditor', . . . who makes or invests in residential real estate loansaggregating more than $1,000,000 per year" (12 USC § 1735f-5 [b] [2] [D]; see 12USC § 1735f-7a [a] [1] [C]).
At issue, therefore, is whether plaintiff demonstrated that it made or invested more than$1,000,000 in residential real estate loans in 2001. Plaintiff submitted proof of six notesdemonstrating loans made by ABC totaling in excess of $1,000,000 but, in opposition todefendants' motion, it provided no evidence that these loans were secured by mortgages onresidential real estate. None of the mortgages expressly states that the mortgaged property isresidential in nature. Further, three of the six loans were to corporate entities, one of whichexpressly states that it is a "commercial loan." This is consistent with the financial records ofABC's parent company, American Business Financial Services, Inc. (hereinafter ABFS), whichstate that ABC "offers business purpose loans secured by real estate."
Plaintiff also relies on ABFS's 2001 and 2002 earnings reports which demonstrate that ABCitself had three subsidiaries, two of which originated over $1,000,000,000 in home equity loansin the fiscal years ending June 30, 2001 and June 30, 2002. Even assuming that ABC canproperly be considered a creditor with regard to investments it made in loans actually made byits subsidiaries, we find no reason to depart from "the general rule in this [s]tate that in no legalsense can . . . the business of a subsidiary corporation be said to be that of a parent"(Connecticut Gen. Life Ins. Co. v Superintendent of Ins. of State of N.Y., 10 NY2d 42,50 [1961]). As the two are distinct entities, "[a] corporate parent which owns the shares of asubsidiary does not . . . own or have legal title to the assets of the subsidiary"(Dole Food Co. v Patrickson, 538 US 468, 475 [2003]). Moreover, "a corporation cannotpierce its own corporate veil to benefit either the parent or a subsidiary" and there is no obviousreason to allow plaintiff to do so on ABC's behalf (Matter of Disston Co. [Aktiebolag],187 AD2d 283 [1992], lv dismissed 81 NY2d 835 [1993]). Given the lack of any proofthat ABC specifically invested in the mortgage assets of its subsidiaries or otherwise had someright to claim them as its own, we hold that plaintiff failed to raise a question of fact as towhether federal preemption applies in this case.
Finally, although we find that Supreme Court acted within its sound discretion in grantingplaintiff's motion to reargue (see Peak v Northway Travel Trailers, 260 AD2d 840, 842[1999]), we reject plaintiff's contention that the court should have departed from its originaldisposition. Indeed, the court initially applied the wrong standard to determine DIDMCApreemption; specifically, the court indicated that the $1,000,000 aggregate loan amount be ofloans that are first liens on residential real property where, in fact, only the loan at issue needs tobe, as here, a first lien (see 12 USC § 1735f-5 [b] [2] [D]; § 1735f-7a [a] [1][A]). However, [*4]upon reargument and applying the correctstandard, the court properly adhered to its decision. Given that plaintiff only demonstrated thatreargument, and not renewal, was appropriate, the court had no power to consider additionalfacts (see Phillips v Village of Oriskany, 57 AD2d 110, 113 [1977]; see alsoCPLR 2221 [f]). Accordingly, the new information provided by plaintiff with regard to loansmade by ABC cannot be considered and, as discussed above, we find that plaintiff did not raise aquestion of fact as to whether ABC made or invested in over $1,000,000 of residential real estateloans per year, first liens or otherwise.
Cardona, P.J., Rose, Kane and Garry, JJ., concur. Ordered that the order entered October 25,2007 is affirmed, with costs to defendants Michael P. Malarkey Jr. and Donna Marie Malarkey.Ordered that the order entered September 12, 2008 is modified, on the law, by reversing so muchthereof as granted plaintiff's motion for renewal; motion denied; and, as so modified, affirmed.