| Emigrant Mtge. Co., Inc. v Fitzpatrick |
| 2012 NY Slip Op 03980 [95 AD3d 1169] |
| May 23, 2012 |
| Appellate Division, Second Department |
| Emigrant Mortgage Company, Inc., Appellant, v LindaFitzpatrick, Also Known as Linda J. Fitzpatrick, Respondent, et al.,Defendants. |
—[*1] Jeffrey Seigel, Hempstead, N.Y. (Michael Wigutow of counsel), for respondent.
In an action to foreclose a mortgage, the plaintiff appeals, as limited by its brief, from somuch of an order of the Supreme Court, Suffolk County (Spinner, J.), dated August 11, 2010, asdenied that branch of its motion which was for summary judgment dismissing the affirmativedefenses of the defendant Linda Fitzpatrick, also known as Linda J. Fitzpatrick.
Ordered that the order is reversed insofar as appealed from, on the law, with costs, and thatbranch of the plaintiff's motion which was for summary judgment dismissing the affirmativedefenses of the defendant Linda Fitzpatrick, also known as Linda J. Fitzpatrick, is granted.
The defendant Linda Fitzpatrick, also known as Linda J. Fitzpatrick (hereinafter Fitzpatrick),received an asset-based loan from the plaintiff, based upon the equity in her home. The plaintiffcommenced this action after Fitzpatrick defaulted on her monthly repayments for the subjectloan. In her verified answer, Fitzpatrick asserted, as a first affirmative defense, that the subjectloan was unconscionable and, as a second affirmative defense, that the plaintiff engaged indeceptive business practices in violation of General Business Law § 349 when it issued thesubject loan. The plaintiff moved, inter alia, for summary judgment dismissing these affirmativedefenses, and the Supreme Court denied its motion. The plaintiff appeals, and we reverse theorder insofar as appealed from.
"In general, an unconscionable contract has been defined as one which is so grosslyunreasonable as to be unenforcible because of an absence of meaningful choice on the part of oneof the parties together with contract terms which are unreasonably favorable to the other party"(King v Fox, 7 NY3d 181, 191[2006]; see Gillman v Chase Manhattan Bank, 73 NY2d 1, 10 [1988]; Simar Holding Corp. v GSC, 87 AD3d688, 689 [2011]; FGH Contr. Co. v Weiss, 185 AD2d 969, 970-971 [1992]). Thisdefinition has been broken down into two elements: procedural and substantiveunconscionability (see Gillman v Chase Manhattan Bank, 73 NY2d at 10; SimarHolding Corp. v GSC, 87 AD3d at 689; Gendot Assoc., Inc. v Kaufold, 56 AD3d 421, 423 [2008];Matter of Friedman, 64 AD2d 70, 84-85 [1978]).
"Substantive elements of unconscionability appear in the content of the contract per se;procedural elements must be identified by resort to evidence of the contract formation process"[*2]and meaningfulness of the choice (Matter ofFriedman, 64 AD2d at 85; see Gillman v Chase Manhattan Bank, 73 NY2d at 10-11;Simar Holding Corp. v GSC, 87 AD3d at 689). " 'Examples of unreasonably favorablecontractual provisions are virtually limitless but include inflated prices, unfair terminationclauses, unfair limitations on consequential damages and improper disclaimers of warranty' "(Simar Holding Corp. v GSC, 87 AD3d at 690, quoting State of New York vWolowitz, 96 AD2d 47, 67-68 [1983]; see Matter of Friedman, 64 AD2d at 85).With respect to procedural unconscionability, examples include, but are not limited to, " 'highpressure commercial tactics, inequality of bargaining power, deceptive practices and language inthe contract, and an imbalance in the understanding and acumen of the parties' " (SimarHolding Corp. v GSC, 87 AD3d at 689-690, quoting State of New York v Wolowitz,96 AD2d at 67; see Gillman v Chase Manhattan Bank, 73 NY2d at 10-11; Matter ofFriedman, 64 AD2d at 85). "[I]n general, it can be said that procedural and substantiveunconscionability operate on a 'sliding scale'; the more questionable the meaningfulness ofchoice, the less imbalance in a contract's terms should be tolerated and vice versa" (State ofNew York v Wolowitz, 96 AD2d at 68, quoting Eddy, On the "Essential" Purposes ofLimited Remedies: The Metaphysics of UCC Section 2-719[2], 65 Cal L Rev 28, 41-42, n 56[1977]; see Simar Holding Corp. v GSC, 87 AD3d at 690).
" 'The determination of unconscionability is a matter of law for the court to decide' "(Simar Holding Corp. v GSC, 87 AD3d at 690, quoting Industralease Automated &Scientific Equip. Corp. v R. M. E. Enters., 58 AD2d 482, 488 [1977]; see LaidlawTransp. v Helena Chem. Co., 255 AD2d 869, 870 [1998]; State of New York vWolowitz, 96 AD2d at 68). "Where the significant facts germane to the unconscionabilityissue are essentially undisputed, the court may determine the issue without a hearing" (Scott vPalermo, 233 AD2d 869, 870 [1996]; see Simar Holding Corp. v GSC, 87 AD3d at690).
Here, the plaintiff lender proffered documentary evidence establishing that Fitzpatrick, thedefendant borrower, was fully informed as to the terms of the subject asset-based loan, and, inparticular, was aware of the fact that the plaintiff would not be independently verifying herincome before issuing the subject loan. Specifically, the plaintiff submitted copies of themortgage and note, as well as a resource letter and high-equity loan certificate, which informedFitzpatrick that the subject loan was being issued based primarily upon the equity in her home,her annual income would not be verified by the plaintiff, and the plaintiff was relying uponFitzpatrick's representations as to her ability to repay the subject loan. Fitzpatrick signed eachdocument. In opposition, Fitzpatrick set forth no evidence regarding her education, financialstatus, or access to legal or financial counsel, the availability of other types of loans or loans of alesser amount, or any deception or high pressure tactics utilized by the plaintiff. Moreover, shedid not offer evidence relating to the industry standards for residential loans at the time thesubject loan was issued. In addition, the plaintiff correctly notes that, contrary to the SupremeCourt's determination that the plaintiff's possible violations of the restrictions and limitationsplaced on subprime and high-cost loans by the Banking Law create a triable issue of fact on theissue of unconscionability, the subject loan, issued on April 9, 2008, does not fall under thepurview of Banking Law § 6-m (4), which applies only to subprime and high-cost loansissued on or after September 1, 2008 (see Banking Law § 6-m [4], as added by L2008, ch 472). Accordingly, Fitzpatrick failed to raise a triable issue of fact regarding theunconscionability of the subject loan, and the Supreme Court should have granted that branch ofthe plaintiff's motion which was for summary judgment dismissing the first affirmative defense(see Gillman v Chase Manhattan Bank, 73 NY2d at 10; Simar Holding Corp. vGSC, 87 AD3d at 689; Gendot Assoc., Inc. v Kaufold, 56 AD3d at 423; Hayes v County Bank, 26 AD3d465, 466-467 [2006]; State of New York v Wolowitz, 96 AD2d at 67-68; Matterof Friedman, 64 AD2d at 84-85).
Section 349 (a) of the General Business Law declares as unlawful "[d]eceptive acts orpractices in the conduct of any business, trade or commerce or in the furnishing of any service inthis state" (General Business Law § 349 [a]). Although the statute is "directed at wrongsagainst the consuming public" (Oswego Laborers' Local 214 Pension Fund v Marine MidlandBank, 85 NY2d 20, 24 [1995]), it allows a private right of action by any person who hasbeen injured by a violation of the section (see General Business Law § 349 [h])."To assert a viable claim under General Business Law § 349 (a), a plaintiff must plead that(1) the challenged conduct was consumer-oriented, (2) the conduct or statement was materiallymisleading, and (3) [he or she sustained] damages" (Lum v New Century Mtge. Corp., 19 AD3d 558, 559 [2005]; see Blue Cross & Blue Shield of N.J., Inc. vPhilip Morris USA Inc., 3 NY3d 200, 205-206 [2004]; Stutman v ChemicalBank, 95 NY2d 24, 29 [2000]; Gaidon v Guardian [*3]Life Ins. Co. of Am., 94 NY2d 330, 344 [1999]).
Here, the plaintiff's evidence established that Fitzpatrick was presented with clearly writtendocuments describing the terms of the subject loan and alerting her to the fact the plaintiff wouldnot independently verify her income. Such evidence established its prima facie entitlement tojudgment as a matter of law dismissing the second affirmative defense. In opposition, Fitzpatrickfailed to proffer any evidence sufficient to raise a triable issue of fact as to whether the plaintiffmade any materially misleading statements or committed any misconduct with respect to thesubject loan (see Ladino v Bank ofAm., 52 AD3d 571, 574 [2008]; cf. Shovak v Long Is. Commercial Bank, 50 AD3d 1118, 1120[2008]; Lum v New Century Mtge. Corp., 19 AD3d at 559). Accordingly, the SupremeCourt should have granted that branch of the plaintiff's motion which was for summary judgmentdismissing the second affirmative defense. Angiolillo, J.P., Lott, Roman and Miller, JJ., concur.[Prior Case History: 29 Misc 3d 746.]