Case brought Against consumer by Midland Funding, LLC legally deficient

In a new case from Richmond County (NY) Civil Court, Midland Funding, LLC v Loreto, 2012 NY Slip Op 50338(U) [Civil Court, Richmond County, 2012], debt buyer Midland and its counsel Pressler & Pressler were unable to prevail on their summary judgment motion against a self-represented consumer. Writing in his signature style, with cultural references running the gamut from Japanese horror films to Broadway shows, Judge Straniere set out in seriatim form the failures in Midland's case, and those failures were many.

Defective Assignment Documentation

The court first pointed out that the plaintiff's name as set out in the caption of the case was "Midland Funding, LLC d/b/a in New York as Midland Funding of Delaware" yet the alleged assignment documents referred to an assignment of the debt from Citibank to "Midland Funding, LLC," not necessarily the same business entity. The court also noted that the only two account statements submitted by Midland were for Sears credit cards. Since Midland provided no copy of the application or original agreement, it was impossible for the court to tell whether the assignment documents were adequate.

Those were not the only deficiencies in the assignment documents. Midland had redacted (edited out) key information from the Bill of Sale and the Asset Schedule, such as the date, the numbers of the transferred accounts (presumably including the consumer's account number), and their value. The Bill of Sale also made reference to "terms and conditions" that had not been supplied to the court, and which the court thought might set forth rights and defenses available to the consumer. The court was concerned by Midland's decision to omit this information. The assignment documents were also unsupported by an affidavit by a person with personal knowledge to verify their accuracy.

Defective Affidavit in Support of Motion for Summary Judgment

A motion for summary judgment must be supported by an affidavit in proper form. The court found the form of Midland's affidavit in support of its motion severely lacking. It did not bear the case caption, or state the location (state and county) of the court. It was not a sworn statement – the affiant merely "certified" the truth of her statements, which New York law does not recognize. The affidavit was submitted with a certificate of conformity, a document required by New York law to verify statements sworn outside the state of New York, but that document also was not in proper form.

Moreover, the affiant (the person who made out and signed the affidavit) did not work for Midland Funding, but rather for Midland Credit Management (MCM), a different entity. She claimed to make her affidavit upon personal knowledge, but if her knowledge was based on records from Citibank, or a Midland entity other than MCM, she did not have the personal knowledge she alleged. The affiant stated that she was "advised of" the amount owed by the consumer, and other allegations were based "upon information and belief." By definition, such statements cannot be based on personal knowledge.

Judge Straniere also took issue with the documents the affiant reviewed to make her affidavit, querying to which Midland entity the documents belonged, and whether the proper Midland entity brought the action. He also observed that the affiant did not attach the documents she reviewed, and she did not make any affirmative statement to show that Midland had observed New York rules that allow for the admissibility of documents maintained in electronic form.

The Judge also expressed some concern, particularly in light of the Brent v Midland Funding "robo-signing case," which we have written about here, that the affidavit submitted in support of the summary judgment motion was a robo-signed affidavit. Judge Straniere pointed out numerous factors about the affidavit that raised questions and would require further inquiry at trial.

Notice to Admit used Improperly against Unrepresented Consumer

Midland and Pressler had also served upon the unrepresented consumer a document called a Notice to Admit, which asked the consumer to admit certain purported "factual allegations." The court expressed concern that Notices to Admit could be abused in debt buyer cases in which debt buyers purchase debt for pennies on a dollar and often, the less the debt buyer pays, the less underlying documentation they get. Based on that business decision, the debt buyer often chooses not to purchase documents such as the application, original agreement, monthly account statements, assignment documents, etc. The court found it an abuse of civil practice rules, and a way to circumvent due process, to allow a debt buyer plaintiff to use a Notice to Admit to prove its case against a defendant when the plaintiff lacks the proof in its own files. "It is not fair to require a defendant to admit the truth of an allegation which plaintiff's counsel cannot independently verify from an admissible business record of the client (debt buyer)."

The court then addressed the timeliness of the plaintiff's notice to admit and its summary judgment motion, and specifically, what is the triggering event for each when the defendant is self-represented.

Lastly, the court noted that Midland Funding, LLC abandoned its d/b/a status and became registered to do business in New York State on October 14, 2011, so questions about its ability to maintain actions in New York have been corrected.

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