Debt buyer, KMT Enterprises, fails to prove ownership of valid Chase credit card debt

Yesterday's New York Law Journal printed the Honorable J. Bluth's decision[1] denying KMT's motion for summary judgment because it failed to prove ownership of the particular account, and substantively, it failed to produce an enforceable contract and further failed to prove its theory of "account stated."

Judge Bluth held that KMT "has failed to even come close to proving that it has the right to collect any money which may be owed to Chase."

KMT's support for its claim of debt ownership came in the form of an affidavit by KMT – not Chase – stating in a conclusory matter that Chase was the assignor. Yet, KMT did not write a "single word" or "annex a single document" to prove a valid assignment.

Judge Bluth's memorable quote in the decision:

"Just as someone should not part with his money to buy the Brooklyn Bridge without proof that the seller has a right to sell it, someone should not repay a debt to anyone other than the original creditor without sufficient proof that the third party has the right to collect it."

KMT, represented by Kirschenbaum & Phillips, buried in its papers a "Bill of Sale" created by a different debt buyer, Turtle Creek, that referenced "352 accounts" (not identified or supported) that actually contradicted its own affidavit claiming that KMT received the particular account at issue directly from Chase.

For more on this assignment topic, see our blog: "Why debt buyers have difficulty enforcing collection lawsuits."

Judge Bluth further found that an undated, unidentified "credit agreement" lacked any indication that the defendant agreed to its terms, so she therefore dismissed KMT's breach of contract claim.

KMT's second claim of account stated (when a plaintiff alleges that account statements were mailed to a debtor who then failed to timely object) also failed for its lack of evidence to meet either element of that law. "Just because she [KMT's affiant] has copies of the statements does not mean that they were mailed to defendant or that defendant failed to promptly object thereto," Judge Bluth observed.

While the defendant cross-moved to dismiss the lawsuit for improper service, he failed to rebut the affidavit of service "with specificity," which would have had the effect of shifting the burden to KMT to prove proper service. The lesson here is to do everything you can to obtain a copy of the affidavit of service (ask opposing counsel, if necessary) and rebut its allegations by making specific showings why its alleged fact(s) are false.