Plaintiff, "Centurion Capital Corporation," assignee of Bank of Marin, commenced this action against the defendant, Anna Guarino, alleging that the defendant had failed to make payments on a consumer credit transaction. The defendant failed to appear and answer. A default judgment was entered against the defendant on December 8, 2005.

Currently before the court is an application to accept a Notice of Assignment of the above judgment from "Centurion Capital Corp." to "Palisades Acquisition XVI, LLC," as well as a consent to the substitution of attorney designating new counsel for Palisades as the new plaintiff.

This is another case which is slowly convincing me that I am the judge in the "Sixth Sense" part of the Civil Court where, like characters in that film who only see dead people, I am relegated to seeing cases with "dead corporations" represented by "dead law firms."

LEGAL ISSUES PRESENTED:

A. Was the Underlying Action Properly Brought?

The underlying litigation was commenced by Centurion Capital Corporation with the filing of the summons and complaint by the plaintiff with the clerk of the court. The [*2]complaint alleges that Centurion Capital Corporation is a Maryland Corporation with an office in Rockville, Maryland. No New York business address is recited. Nor is there any recitation as to Centurion Capital Corporation having any legal status in New York.

A check of the Maryland Department of State records shows that Centurion Capital Corporation was formed on March 24, 2005 for the purpose "to engage in the purchase, management and sale of accounts receivables from creditors...." The Maryland records disclose that Centurion Capital Corporation filed articles of dissolution with the Department of State on March 25, 2009 thereby terminating this entity's legal existence.

A check of the New York Department of State-Division of Corporations records reveals that there once was a domestic corporation in New York called Centurion Capital Corporation, however, it was declared "Inactive" and dissolved by proclamation with its authority annulled on June 24, 1992. A dissolution by proclamation is issued when a corporation is delinquent in its tax obligations to New York State for a period of two years [Tax Law §203-a]. Such a corporation is "legally dead" [41 East 1st Street Rehab Corp. v Lopez, 26 Misc 3d 990 (2009)]. Clearly the New York entity was not the plaintiff in this action having been dissolved thirteen years before the Maryland corporation was formed.

There is no indication that the original entity was revived. Nor is there any indication that the Maryland Centurion Capital Corporation has ever registered to do business in the State of New York as a "foreign corporation." There was also a "Centurion Capital Corp." registered in New York, which was created in 1976 and dissolved by proclamation in 1982. But that entity used "Corp." and not "Corporation" like the plaintiff herein. A second entity "Centurion Capital Corp." is currently an active New York domestic corporation.

In order for a foreign corporation doing business in New York to maintain any action or special proceeding in this state it must obtain a certificate of authority to do so and pay all state fees and taxes [Business Corporations Law §1301 & §1312(a)]. The failure of a foreign corporation doing business in New York to so register precludes that entity from "maintaining" an action or special proceeding until such authority is obtained [BCL §1312(a)].

There is case law that holds that there is a difference between "commencing" an action and "maintaining" an action, which permits the unregistered foreign corporation to file the action initially(commence the action), but to be in compliance in order for the action to continue (maintain the action) [Paper Mfrs. Co. v Ris Paper Co., Inc., 86 Misc 2d 95 (1976)]. Utilization of the New York court system as plaintiff requires compliance with the registration requirements of the BCL. There is no evidence that Centurion Capital Corporation was ever in compliance with this statutory mandate.

There is also case law which holds that a single, isolated transaction will not subject [*3]a foreign corporation to the registration requirements of the Business Corporation Law [Highfill, Inc. v Bruce and Iris, Inc., 50 AD3d 742 (2008)].

If this litigation is an isolated transaction, the plaintiff could allege that it is not "doing business" in New York and therefore there would be no requirement to register with the Department of State and it will not be subject, as an out-of-state corporation, to New York's "door-closing" rule in regard to the use of the courts to maintain an action.

Far from being an isolated transaction, it is undisputed that Centurion Capital Corporation was taking seriously its corporate purpose of purchasing accounts receivable and then attempting to collect these receivables by using the court system.

Analysis of the filings in Civil Court Richmond County, discloses that a total of 930 cases were commenced by Centurion Capital Corporation between 2005 and 2007 with 300 cases brought in 2005; 629 in 2006; while in 2007 only one case was filed. If this is not enough to establish that the plaintiff was engaged in a systematic regular course of business in New York, a check of the filings by Centurion Capital Corporation in the other four counties of the New York City Civil Court shows a total of 12,794 cases being filed city-wide during that three-year period. Of that total 17 were in 2007 and one lonely additional case was filed in 2008. A review of Civil Court Richmond County's records discloses that none of the 930 cases went to trial.

Another way to look at the number of filings is that between March 24, 2005 and December 31, 2006, a period of twenty-one months, Centurion Capital Corporation filed over 650 cases a month in the Civil Court.

Case law has held that the failure of a foreign corporation to properly register is a defense which must be raised either by answer or motion or in any case prior to the entry of a judgment or else it is waived as a defense [CPLR §3211(e)] as the issue is one of "lack of capacity to sue" as set forth in CPLR §3211(a)(3) [Household Bank (SB), NA v Mitchell, 12 AD3d 568 (2004)].

Adherence to this rule would make sense if the court were to look at this case on an isolated basis. However, when the totality of Centurion Capital Corporation's activities in New York City is analyzed, it becomes apparent that the plaintiff adopted as a business plan to use the New York State court system as an arm of its collection activities without making any effort to comply with the filing requirements for a foreign corporation.

Further, such a defense is often one raised by a defendant represented by counsel and is not of the nature to be advocated by unsophisticated, unrepresented defendants. Approximately 93.3% of defendants in consumer debt cases never appear in court, and about 80% of consumer debt claims filed in Civil Court result in default judgments [Report of the Committee on Consumer Affairs, in favor of approving and adopting, Local Law No. [*4]15 (2009)]. Therefore, the odds that a self-represented defendant would even think to raise such a defense become astronomical. Statistics such as this require the court to look beyond pro forma movement of these cases through the system without anyone checking the ability of the plaintiff to even bring the action, let alone when plaintiffs seek to enforce consumer credit judgments. It is imperative that the court insures due process has been rendered and that justice is being done.

Centurion Capital Corporation by its own admission in its corporate purposes and its pleading in this and other actions, was a third-party debt buyer and engaged in the business of attempting to collect such debt in New York City. Debt collectors are required to be licensed in order to engage in that activity in the City of New York [New York City Administrative Code §20-488 et seq]. A search of Department of Consumer Affairs records discloses that it was never so licensed as required by the NYC regulations. Additionally, neither was its attorney of record at that time, Wolpoff & Abramson. CPLR §3015(e) requires that a plaintiff "as part of the cause of action" allege "that it is duly licensed" and recite the license number. The pleadings in this action lack any such information, because like the requirement to be registered with the Secretary of State, plaintiff concluded that it did not have to comply with the law.

It has previously been determined that Centurion Capital Corporation was required to be licensed as a debt collector [Centurion Capital Corporation v. Druce 14Misc 3d564 (2006)] The court in that case found the failure of plaintiff to be registered required that the complaint be dismissed pursuant to CPLR §3211 (a) (7), the failure to state a cause of action.

Based on these facts and case law, due process requires that this judgment should be vacated and the case dismissed. The plaintiff filed more than 13,700 cases in New York City Civil Court and in all of them, as this one, lacked the legal capacity to bring and maintain any of those actions. The fact that the plaintiff corporation is neither an authorized domestic corporation nor an authorized foreign corporation makes this underlying action defective. The fact the CPLR §3211 makes lack of capacity a waivable defense, contemplates its use on an individual case basis and not in a situation like this where a plaintiff is engaged in a business which requires the use of the court system to enforce its claim as part of that business model and finds no need to comply with the minimum requirements to conduct business in New York.

This failure to properly register with the Secretary of State when coupled with its failure to register as a licensed debt collector creates a fraud on both the public and the court. The statute was not designed to allow a foreign corporation to thumb its nose at New York law and then as part of its business practice rely in New York courts to collect consumer debt.

B. Is the Consent to Change Attorneys Proper? [*5]

Submitted with the Notice of Assignment in this action is a "Consent to Substitution of Attorney" form signed by someone from Palisades Acquisition XVI, LLC the assignee of the judgment, who presumably has the authority to do so, and by the retiring attorney of record, Mann Bracken, LLP. The intent is for Fulton, Friedman & Gullace, LLP to replace Mann Bracken, LLP as attorney of record for the plaintiff.

The procedure to change attorneys is set forth in CPLR §321(b)(1). It provides:

(A)n attorney of record may be changed by filing with the clerk a consent to change signed by the retiring attorney and signed and acknowledged by the party. Notice of such change of attorney shall be given to the attorneys for all parties in the action, or if a party appears without an attorney, to the party.

On its face, the consent submitted appears to have been properly done. The court wants to thank counsel for actually trying to comply with the statute, because on numerous occasions involving third-party debt buyers, counsel is changed and no notice is given to the clerk of the court or the defendant. This creates the interesting situation that when a defendant files an order to show cause to vacate a judgment; notice is sent to the attorney of record, the matter appears on the motion calendar and the application becomes unopposed because no one shows up to represent the plaintiff as counsel has been changed without the court being notified. If no one appears when the case appears on the trial calendar, the case is dismissed by the court for no appearance by the plaintiff.

Although this in the end may benefit a defendant-debtor because the case is dismissed for the failure of the plaintiff to appear, there is something that is just not right with a system where plaintiffs in consumer credit litigation on a regular basis can walk away from what the plaintiff claimed was allegedly a debt legitimately owed by the defendant. In fact, the defendant often acknowledges that they owe the debt when they bring these orders to show cause and are seeking to enter into a payment plan. If the debt was so inconsequential in the third-party debt business model that it is unnecessary to comply with the law in regard to changing counsel, then perhaps the case should not have been brought in the first place.

Unfortunately, Fulton, Friedman & Gullace, LLP's application to be named new counsel, although apparently done in "proper form"according to the statute, does not eliminate this problem from the file and is fatally defective.

First, there is nothing in the consent form disclosing an address at which to contact either Fulton, Friedman & Gullace, LLP as counsel or for Palisades Acquisition XVI, LLC. I checked with the clerk and found out that one, the psychic was let go in the last round of layoffs; two, when Johnny Carson died, he did not leave the clerk Carnac the Magnificent's Crystal Ball; and three, learning an address by examining the entrails of sacrificed animals is not part of traditional haruspex training making that an unusable source as well. The fact that plaintiff's counsel's address is not included in the form, makes [*6]the consent form basically useless for the purpose of giving notification to the plaintiff or its counsel.

Second, the original attorney in 2005 for Centurion Capital Corporation was Wolpoff & Abramson, LLP with an office at 300 Canal View Blvd., 3rd Floor, Rochester, New York. Wolpoff & Abramson was the attorney of record when the default judgment was entered in December 2005. There is no consent to change attorney form filed nor was a motion made in that regard as permitted by CPLR §321(b)(2) when Wolpoff & Abramson was replaced by Mann Bracken, allegedly the current outgoing attorney. Based on the examination of the court file, Wolpoff & Abramson is still the attorney of record and not Mann Bracken as alleged in the current application. This too affects the validity of the current consent to change counsel.

Third, the history of who has been counsel of record in this matter is interesting. Wolpoff & Abramson LLP is registered with the Department of State as of January 20, 2005 as "Foreign Registered Limited Liability Partnership" with the jurisdiction of its registration being the District of Columbia. Its principal office is designated as 702 King Farm Blvd., Rockville, Maryland. The New York office is not disclosed in the filing with the Department of State, but according to all of the pleadings it is at the Rochester, New York address. It is still listed as an "Active" entity with the Department of State.

The Department of State records go on to show that in regard to Wolpoff & Abramson, the "Registered Agent Resigned." New York's Limited Liability Company Law [LLCL], and the Registered Limited Liability Partnership Law [LLPL] which covers limited liability partnerships both domestic and foreign, requires that every entity designate the Secretary of State as an agent for service of process, but also that the entity provide the Secretary of State with the name and address of a registered agent to which the Secretary of State can forward any process it receives [LLCL §301 & §302; LLPL§121-1500 & §121-1502]. The LLCL goes on to provide a procedure for the resignation of a registered agent [LLCL §301-A]. This section states that in the event an agent resigns and no new one is designated the "authority" of the LLC "to do business in this state shall be suspended" [ LLCL§301-A(b)] or in the case of an LLP its status is deemed "revoked" [LLPL§121-1500 (g) & §121-1502(f)]. Owing to the fact that Wolpoff & Abramson is suspended from doing business in New York or its authority to conduct business has been "revoked" because of its failure to designate a registered agent, the court must conclude that it therefore could no longer appear as attorney of record on any litigation while suspended or revoked [LLCL §1306(d)(4) & LLPL§121-1500(m) & §121-1502(m)].

Unfortunately the Department of State records does not indicate the effective date of the suspension/revocation. The question next which has to be asked is that because Wolpoff & Abramson is still an active entity practicing law in New York, what is the effect of the suspension/revocation of its ability to do business on its status as attorneys? Professional [*7]limited liability companies, domestic and foreign, such as attorneys, are also subject to compliance with any professional codes of conduct [LLCL §1203(e) & §1215 & LLPL §121-1500(n) & §121-1502(n)].

It should also be pointed out that the address for "Centurion Capital Corp." as it is improperly designated on the pleadings and "Corporation" as registered in Maryland, was 700 King Farm Blvd., Suite 507, Rockville, Maryland while that of Wolpoff & Abramson is at 702 King Farm Blvd. Is it that Wolpoff & Abramson was merely a convenient law firm to use or is there some other closer business relationship between the two entities?

Fourth, sometime after December 2005, when the judgment was entered and February 2012 when this assignment was filed, Wolpoff & Abramson, vanished as attorneys of record. No consent to change attorney was ever filed nor was a motion made in that regard.

The court can posit several possibilities for this; such as they moved their law office to Brigadoon, Scotland and they will reappear in a hundred years; or the entire firm went on a cruise in the Bermuda Triangle; or perhaps they stowed away on Amelia Earhart's plane.

In any case, at some point Mann Bracken LLP allegedly became counsel for plaintiff but not counsel of record.

Actually, it cannot be determined if Mann Bracken LLP ever was counsel for the named plaintiff, Centurion Capital Corporation, because the consent to change attorney says that Mann Bracken LLP is attorney for Palisades Acquisition XVI, LLC, the assignee. It also indicates that Palisades is assignee of the plaintiff as of the date of the consent, which is February 2, 2012, which is also the date of the Notice of Assignment. The Notice of Assignment does not include a copy of the actual assignment nor does it specify when the assignment was made. It would be interesting to see such a document considering Centurion Capital Corporation ceased to exist over 3 years ago, on March 25, 2009.

Does this mean that Mann Bracken was original counsel for Palisade Acquisition and is now being replaced by Fulton, Friedman & Gullace? If the assignment is the same date as the consent to change attorney, then why is Mann Bracken involved at all because it was never counsel for Centurion Capital. If Mann Bracken really means it was counsel for Centurion Capital, then when did that happen? The file still shows Wolpoff & Abramson as attorney of record as of the date of the application.

Mann Bracken also has an interesting history. A search of Department of State records show that Mann Bracken LLC was filed as a "Foreign Limited Liability Company" with the Secretary of State on March 2, 2002. The state of its home jurisdiction is listed as Georgia. No actual New York address is disclosed in the filing. This entity was [*8]marked "Inactive" with a surrender of authority on November 5, 2008. Coincidentally, on that same date, November 5, 2008, Mann Bracken LLP registered with the Secretary of State as a "Foreign Registered Limited Liability Partnership" with its home jurisdiction as Delaware. The principal executive office on Mann Bracken LLP in New York is 300 Canal View Blvd., Suite 330, Rochester, New York. The current status with the Department of State is "Active." But wait, is not 300 Canal View Blvd. 3rd Floor, the office of Wolpoff & Abramson on the original pleadings? It is.

Mann Bracken, however, has a problem similar to that of Wolpoff & Abramson in that the address for process service upon the Secretary of State is marked "process addressee resigned." Likewise, the registered agent is also marked "registered agent resigned." There is no date indicated for these resignations. However, as noted above in regard to Wolpoff & Abramson, under the New York Limited Liability Company Law, and the Registered Limited Liability Partnership Law, the failure to provide this information to the Department of State, acts as a suspension/revocation of that entity's ability to do business in New York.

The above being the case, then how does an entity suspended/revoked from doing business in New York consent to change attorneys?

Fifth, the consent is signed on behalf of Mann Bracken LLP by Maria J. Reed, Esq., "Authorized Representative, by Power of Attorney Exiting Attorneys." No copy of the Power of Attorney has been attached. It is impossible to determine who issued the Power of Attorney, the extent of it and if the Power of Attorney is still in force and effect or if it is even valid. There is also the question whether an entity which is a creature of statute such as a foreign LLP can even issue "power of attorney." Generally, the members of the LLP or in New York the LLC manage the affairs of the business [LLCL§401 & §408] and although individuals may act through a power of attorney, a statutory entity cannot. The usual procedure is to act through a corporate resolution or the equivalent.

What makes this more problematic is that both Maria J. Reed, Esq. and a Patricia A. Blair, Esq., are listed in the New York attorney registration records as conducting business with Fulton, Friedman, Gullace, LLP, 28 East Main Street, Suite 500, Rochester, New York. Fulton, Friedman & Gullace is the incoming law firm. How can a "Power of Attorney" from Mann Bracken the outgoing law firm be given to a member of the incoming law firm to be used for the purpose to consent to the transfer of the file from the outgoing law firm to the incoming law firm? This does seem to be a "tad" self-serving.

It should also be noted that Ms. Reed & Ms. Blair along with some other attorneys are named on the "Affirmation of Regularity and Default Judgment" form submitted during the litigation as being members of Wolpoff & Abramson the original attorneys. Ms. Reed also appears on the summons and complaint as a member of the Wolpoff firm. [*9]

Fulton, Friedman & Gullace, LLP, is registered with the Department of State as of May 30, 2008, as a "Domestic Registered Limited Liability Partnership." Its filing lists 500 First Federal Plaza, Rochester, New York as both the agent for service of process and as its principal executive office. No registered agent is listed. The court wonders whether 500 First Federal Plaza and 28 East Main Street, are actually the same location? A check of Google Maps seems to confirm that they are.

Apparently somewhere in an office building in Rochester, New York there is a bookcase. And like a 1940's mystery movie, if you turn a wall sconce or move the correct book, the bookcase opens to a passage way and one law firm can quickly disappear and reappear as another. There actually may be at least two buildings in Rochester, New York that may have this architectural anomaly. Wolpoff and Abramson listed 300 Canal View Blvd., 3rd Floor, as their address on the pleadings the same address that Mann Bracken LLP designated as its Principal Executive Office in New York.

Just so that this is even more interesting than the "Cap Game" at Yankee Stadium, in addition to its New Jersey address, Palisade Acquisition XVI, just happens to have an office at, "drum roll," 702 King Farm Blvd, Suite 500, Rockville, Maryland, the same address for Wolpoff & Abramson and just one rotating bookcase and a secret passage from where Centurion Capital Corporation conducted its business.

To summarize, at least two attorneys from Wolpoff & Abramson, moved over to Mann Bracken and are now at Fulton, Friedman & Gullace. While currently attorneys at Fulton, Friedman, they signed a consent to change attorneys to Fulton, Friedman on behalf of Mann Bracken purportedly pursuant to a not-produced Power of Attorney given to them by Mann Bracken, when Mann Bracken was never attorney of record in the case. Oh, and by the way, Mann Bracken is in default of its filing obligations with the Secretary of State suspending their ability to do business in New York. Did I mention that neither Wolpoff & Abramson, nor Mann Bracken LLC, nor Mann Bracken LLP nor Centurion Capital Corporation bothered registering as debt collectors as required by the NYC Department of Consumer Affairs?

As there is neither an explanation nor a chain of documentation to verify how the attorney of record was changed and what notice, if any was given to the court and the debtor, the questions raised as to the validity of the power of attorney being utilized, and the ability of the law firms to conduct business in New York, the court must reject the current filed consent to change attorney.

C. Is There A Proper Assignment?

Palisades has submitted to the court a document entitled "Notice of Assignment" purporting to be giving both the court and the defendant notice that the judgment obtained by "Centurion Capital Corp." has been assigned to Palisades Acquisition XVI, LLC. The [*10]Notice of Assignment is undated, but the acknowledgment is dated February 2, 2012.

There is an immediate problem with this. The plaintiff in this action and the judgment creditor is Centurion Capital Corporation and not Centurion Capital Corp. Normally, something like this should not matter. However, a search of the New York Department of State records lists two entities Centurion Capital Corp. The first was formed in 1976 and was dissolved by proclamation in 1982. The second was formed on November 30, 1994 and remains an "Active Domestic Business Corporation" with an office at 99-D Ridgeland Road, Rochester, New York. This cannot be the same entity as the plaintiff "Centurion Capital Corporation" from Rockville. Maryland because the complaint indicates that Centurion Capital Corporation is a "Maryland Corporation."

This of course makes, the purported Notice of Assignment defective as it is not from the same entity that brought the litigation.

As noted previously how is it possible for Centurion Capital Corporation which ceased to exist as of March 25, 2009, to have execute an assignment of judgment three years later? One explanation might be an undelivered sack of mail was found in an abandoned Baltimore & Ohio Railroad box car, being used as a hot dog stand at Camden Yards. Another would be that Centurion Capital Corporation is a charter member of the "Procrastinators Society." perhaps they had to wait until "the moon was in the seventh house and Jupiter aligned with Mars." Some how none of these are satisfactory, especially because Centurion Capital Corporation alleged in an Alabama case in May 2009 that under Maryland law it no longer exists as a corporation [Meredith v. Unifund CCR Partners 2009 WL 151 3361 (M.D. Ala2009)].

Added to this is the problem that there is no copy of the actual assignment submitted, and no proof that the defendant's account was included in the assignment of debts if it was a bulk assignment.

There is also no indication of the details of the assignment of the original debt from the Bank of Marin to Centurion Capital Corporation, such as when it occurred, only the bald, unsubstantiated allegation that there was one. The Bank of Marin appears to be a California bank with no branches in Maryland. There is no proof of the assignment of the original debt nor was there a notice of the assignment given to the debtor. There is even a question as to whether Bank of Marin was the owner of the credit card account. Their website clearly states that all Bank of Marin credit cards are issued by Elan Financial Services and that Elan Financial Services is the credit card provider. It cannot be determined if that was the situation in 2005 when this litigation was commenced. If Bank of Marin did not issue the credit card, then how could it be the assignor?

Without the proper original assignment and the alleged new assignment, the court cannot conclude that Palisades has validly acquired this judgment so as to have the right to [*11]enforce it. Palisades has not established that it is a proper assignee with the standing to enforce this judgment.

D. Are the Notarizations Proper?

A review of the court file show that the out-of-state notarizations submitted in 2005 in support of the default judgment lack a certificate of conformity as required by CPLR §2309( c) & Real Property Law §299-a. Also there is no acknowledgment as required by CPLR §5019 ( c).

E. Is There a Proper Affidavit of Facts?

The Affidavit of Facts in support of the default judgment is from an employee of Centurion Capital Corporation and not from someone at the Bank of Marin, or the entity which actually issued and managed the card. Although he claims he has personal knowledge of the facts [CPLR §3215], that cannot be the case as his employer did not issue the credit card or maintain the account. His affidavit is based on either books and records of a third party, the card issuer of which he has no personal knowledge and is not his employer, or if it is based on Centurion Capital's records, they are not the actual records of the defendant's account because Centurion Capital never issues the card or maintained the account. The affidavit of facts is defective as submitted.

F. Other Defects

The complaint fails to set forth what state law governed the underlying credit card agreement. There is no statement as to what is the applicable statute of limitations and whether this action was timely commenced. There is no indication as to when the agreement was entered into, when the credit card issued or the date of the last payment. There is no indication as to how that amount due was calculated. There is no indication that Wolpoff & Abramson was licensed as a debt collector as required by the New York City Administrative Code §20-490. And as previously mentioned there was never any allegation that Centurion Capital Corporation was authorized to do business in New York or licensed as a debt collector.

G. What Role Do the Attorneys Have in This Litigation?

One of the recurring problem with consumer credit litigation brought by third-party debt buyers such as Centurion Capital and Palisades is that not only is the debt sold on a regular basis to another third-party debt collector, resulting in suits being maintained by more than one creditor against a debtor on the same original debt, but the attorney of record is also often changed and no substitution of attorney form filed with the court or notification being given to the debtor. [*12]

This lawsuit takes that problem beyond that issue. The law firms involved in this case appear not only to have been substituted for as counsel, with or without notifying the court of the change, but also appear to have gone out of business as viable law firms. The court must question whether they are in fact just attorneys representing a client or clients in debt collection or do in fact have an ownership stake in the litigation. The close physical proximity of the offices of these law firms and the third party debt buyer client, raises suspicion as to what is the real relationship between them.

The reason for this concern is also supported by the fact that a number of the attorneys appear to remain "on-site" while the name of the law firm on the door and letterhead changes. Are Wolpoff & Abramson, Mann Bracken and Fulton, Friedman & Gullace, providing only legal services to debt buyer clients or do they have a stake in the litigation which may be in violation of the Judiciary Law?

Judiciary Law §§488, 489 & 490 prohibit certain practices whereby attorneys and corporations purchase debt solely for the purpose of bringing litigation in regard to that debt. This practice is referred to a "champerty" and case law does not label that activity illegal where the litigation is the end result of the debt buyer trying to collect on the debt by other legal, commercially acceptable means and then only using litigation as the last resort [Bluebird Partners, LP v First Fidelity Bank, NA, 94 NY2d 726 (2000)]. Were that the case almost all third party debt purchasers of consumer credit debt would be "illegal."

The above being said, this case may actually fit into the definition of champerty because nowhere in the complaint does Centurion Capital Corporation allege that demand for payment of the underlying credit card debt was made and that the defendant refused payment. When coupled with plaintiff's failure to attach a copy of the initial assignment of the debt to Centurion Capital, it becomes impossible to determine how long after the debt was purchased did Centurion Capital wait before bringing this litigation. If there is no reasonable amount of time between the date of assignment of the debt and the commencement of this litigation, then there may be a presumption that the debt was purchased solely for litigation purposes and not primarily for collection. It is impossible for the court to make any determination in that regard because of the failure of the plaintiff to properly set forth the basis of its claim in the complaint and to produce "requisite proof" sufficient to have sustained entry of a default judgment.

The court presumes that when an attorney brings an action on behalf of a client, there has been some investigation by counsel to determine that the client has a good faith basis for bringing the suit. Based on the current history of consumer credit debt collection litigation where plaintiffs lack the ability to prove a case at trial, or by summary judgment, or present enough requisite proof to get a default, it must be concluded that certain attorneys are not making a good faith investigating into the client's claim.

A constant issue in the area of consumer credit litigation is to what extent does [*13]counsel for the creditor have responsibility to have reviewed the documentation of its client to determine whether it has sufficient proof to prove its case, before the litigation begins. This court has seen too many cases where creditor plaintiffs, especially third party debt buyers, have little or no documentation to warrant commencement of an action let alone entry of a judgment. At what point do attorneys have an obligation to tell the client that they will not bring the lawsuit absent some showing of the ability to prevail on the underlying claim. Generation of a summons and complaint based on a computer printout of a debtor's account from a third-party debt buyer who had no contact with the debtor has in practice become dangerously close to a violation of the Rules of Professional Conduct [Rule 1.16 & 3.1]. How much verification of their client's ability to prove its case was done by the attorneys in this case considering that during a twenty-one month period in the New York City Civil Court counsel was filing on the average 650 cases a month. And that was just for this third-party debt buyer. The firms involved in this case represent many different third-party debt buyer plaintiffs.

H. Has the Plaintiff Engaged in a Deceptive Business Practice?

General Business Law §349 provides:

Deceptive acts and practices unlawful

(a) Deceptive acts and practices in the conduct of any business, trade or commerce

or in the furnishing of any service in this state are hereby declared unlawful.

The statute provides for the attorney general to investigate and enjoin any such actions [GBL §349(b)] and for a private right of action [GBL §349(h)].

The failure of the plaintiff, Centurion Capital Corporation to be properly authorized to do business in New York State or licensed as a debt collector and to commence this lawsuit and in excess of 13,700 in the City of New York is a deceptive business practice. The court is referring this matter to the attorney general for further investigation. Because the defendant failed to appear, answer or otherwise file a counterclaim prevents the court from enforcing the statutory minimum penalty of $50.00 against the plaintiff.

Similarly, the fact that both Wolpoff & Abramson and Mann Bracken are listed as "active" entities with the Secretary of State, but lack registered agents making them not in compliance with the statutes authorizing their presence in New York also is a deceptive business practice. The court will ask the attorney general to investigate their activities as well. Because there is no response from the defendant, no monetary penalty will be assessed against the law firms.

CONCLUSION:

Although there are ample grounds to vacate the judgment and dismiss this case on [*14]its merits, on the possibility the court has failed to properly apprehend some facts, the court will not take that tact. Instead, the clerk is directed to reject this filing to assign the judgment entered herein until all of the above defects are corrected.

In view of the fact that Centurion Capital Corporation was never authorized to do business in New York and that it should have been barred from utilizing the court system for the collection of consumer debts, the clerk is directed to stay any enforcement of judgment activities on this account.

Because of the defects regarding Centurion Capital Corporation's authority to do business in New York, the clerk is directed to stay any enforcement of judgment proceedings or attempts to assign the judgment on any of the 930 cases filed by Centurion Capital Corporation in Richmond County until September 1, 2012.

Centurion Capital Corporation, its successors or assigns has until September 1, 2012 to establish that Centurion Capital Corporation had the legal standing to bring any of the 930 actions filed in Richmond County. If no such proof is provided by September 1, 2012, the clerk is directed to dismiss all 930 actions and vacate any judgments and restraining notices issued in their regard.

What makes this decision so difficult is that based on past history with consumer credit debt, the vast majority of the defendants did in fact have the credit card and did incur the original debt. However, the current system puts a premium on the creditor not resolving the defaulted debt quickly because of the ability to charge interest rates far in excess of New York's usury rate, late fees and penalties. In doing so, it makes settlement of the claim that much more difficult,

The fact remains, however, that once the creditor elects not to settle these accounts on terms which the debtor can pay and then resorts to the court system to enforce its rights, the creditor has to be in compliance with New York statutes to permit it to use the courts and has to be able to prove a prima facie case. These defects exist in far too many cases leading to the conclusion that the business model is not to comply the New York statutes because the economics makes it more profitable to operate that way. This case is a prime example of how a plaintiff can obtain a judgment without complying with the minimum standards required to conduct business in New York.

The foregoing constitutes the decision and order of the court.

Dated:

Staten Island, NYHon. Philip S. Straniere

Judge, Civil Court

ASN byon

RECOMMENDATIONS:

Most of the problems which have arisen in this lawsuit and in thousands of others could be eliminated by the legislature taking some action in regard to consumer credit.

1. The statute of limitations should be reduced to one year. Creditors know after six months whether an unpaid account is collectible. This will force creditors to commence litigation while their records are current, while the debtor recognizes the name of the creditor, and will reduce the need to sell the debt to third-party debt collectors.

2. Because it is unlikely that all third party debt collector suits could be banned, requiring the caption of all litigation to recite the name of the original creditor, would alert the debtor as to on which credit card they are being sued. A copy of each assignment must be attached to the complaint as well as proof of serving a notice of assignment on the debtor. The assignment history must be pleaded in the complaint.

3. Requiring the complaint to contain the name of the original creditor as well as the credit card number.

4. Requiring the complaint to state the date the account was opened, the date of the last payment and the amount claimed due.

5. Requiring the plaintiff to state whether it is a domestic or foreign entity and pursuant to which New York statute they are authorized to do business and to plead it is a licensed debt collector.

6. Requiring the plaintiff to state what state's law governs the agreement with the debtor, what the statute of limitations for consumer credit debt is in that state and that the statute of limitations has not passed because the date the last payment was made is also pled.

7. To specify what is "requisite" proof in order for a plaintiff to obtain a judgment or default.

OBSERVATION:

I often wonder what the conversation is between the third party debt collector client and the law firm considering representing the creditor, such as the world famous Dewey, Cheatem & Howe, when they initially meet. It probably would go something like this. [*15]

Client:I need a lawyer to represent me on debt collection litigation.

Lawyer:Before I agree let me ask some questions.

Lawyer:Do you know the person you want to sue and have you ever met them?

Client:Well no.

Lawyer;Do you have a written agreement with the person whom you claim owes you the money?

Client:No again.

Lawyer:Do you have anything signed by the debtor showing they owe the debt?

Client:No.

Lawyer:Do you have a bill showing the debtor owes money?

Client:No.

Lawyer:Do you have something that shows the debtor made any payments on the obligation?

Client:No.

Lawyer:Do you have any relationship with the debtor?

Client:No.

Lawyer:Well how do you know the debtor owes you any money?

Client:I bought the debt by assignment from the original creditor and he gave me a computer print-out saying the debtor owes him money.

Lawyer:Do you have a copy of the assignment of the claim?

Client:No.

Lawyer:Do you know if the statute of limitations has run on the debt and what state's law applies to the agreement?

Client:No.

Lawyer:So let me get this straight. You've never had any contact with the debtor, have no copy of an agreement or any documents to verify charges were made, have no personal knowledge of any thing regarding the account, no proof that you own the account and don't know whether the statute of limitation has run.

Sounds good to me. I'll take the case.