Corporate Defendant's Mail Delivery Problems Not Basis for Vacating Default Judgment

On June 17, 2019, Justice Borrok of the New York County Commercial Division issued a decision in Fisher v. Lewis Constr. NYC, Inc., 2019 NY Slip Op. 31775(U), holding that a corporate defendant's mail delivery problems were not a basis for vacating a default judgment, explaining:

Under CPLR 5015(a)(1), a court may relieve a party from a judgment or order where there is an excusable default provided that a motion to set aside or vacate is made within one year after service of the judgment or order on the moving party. A party seeking relief from a default judgment pursuant to CPLR § 5015(a)(1) must establish both a reasonable excuse for the default and a meritorious claim or defense to the action. Relief is not appropriate where there is evidence of dilatory or otherwise intentional behavior suggesting that the default was willful or contumacious.

Here, Ms. Fisher has submitted affidavits of service of the summons and complaint, the notice of motion for default judgment, the decision and order, and the notice of entry. An affidavit of service in accordance with CPLR § 302 is prima facie evidence of proper service. A conclusory denial of service is insufficient to rebut the presumption of proper service to which an affidavit of service is entitled. Although Lewis Construction denies receiving service of the summons and complaint, it does not deny receiving all of the other notices served by Ms. Fisher in this action, and in any event, its denials are bare and conclusory.

Lewis Construction acknowledges that it was aware of the pending action but denies that it had any obligation to file an answer or appear because it alleges that it never received a copy of the summons and complaint from the Secretary of State. This argument is misguided, however, because service of process on a corporation is deemed complete when the Secretary of State is served, regardless of whether service is subsequently received by the corporate defendant. Ms. Fisher has submitted an affidavit of service of process on the Secretary of State pursuant to CPLR § 306 demonstrating that Lewis Construction was properly served. Therefore, service was proper in this case and Lewis Construction, with knowledge that the action had been commenced, intentionally failed to file an answer or appear.

Lewis Construction argues that its neglect in failing to file an answer or otherwise appear in this matter is excusable because it does not have a great system for receiving mail at its business address. This argument is unavailing. Lewis Construction acknowledges that it has been aware for several years that it could not reliably receive mail at the address that it maintains for its general contractor's license and that it holds out to the public as its business address. But it also states that the building has a doorman and a porter, and that any mail received is either given directly to Lewis Construction's President and CEO's mother, who lives in the building and maintains a medical office on the first floor, is left at the door of the apartment or the medical office, or is placed on top of the building's mailboxes. Under these circumstances, Lewis Construction's failure to occasionally check for mail falls short of excusable neglect. Therefore, Lewis Construction is not entitled to vacatur of the default judgment under CPLR § 5015(a)(1).

Lewis Construction also seeks to vacate the default judgment pursuant to CPLR § 317. To establish entitlement to relief under CPLR § 317, a defendant must show that (i) the defendant was served by a method other than personal delivery, (ii) the movant did not have actual notice of the action in time to defend, (iii) there is a meritorious defense, and (iv) the motion is made within one year of the receipt of knowledge of the entry of judgment, and not more than five years from the entry of judgment.

Where a party's attorneys are aware that an action has been commenced and engage in active negotiations prior to the filing of a motion for default judgment, the party has actual notice and is not entitled to relief from the default judgment under CPLR § 317. In this case, Lewis Construction acknowledges that it had actual notice of the action as early as October 23, 2018, when its counsel, with whom Ms. Fisher had been actively engaged in negotiations regarding this matter, received a copy of the summons and complaint. Lewis Construction also does not deny that it received the numerous subsequent notices served on it by Ms. Fisher, which would have apprised it of the pendency of this action. As Lewis Construction had actual notice of the action in time to defend and failed to answer or otherwise appear, Lewis Construction is not entitled to relief under CPLR § 317.

(Internal quotations and citations omitted).

The rules regarding how you start a lawsuit and bring the defendants into it can sometimes be esoteric. As shown here, if a process server claims in a sworn affidavit that you were served, you have to overcome that presumption with more than bare denials or claims of mistakes in dealing with mail delivery. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have a question regarding the proper way to serve a defendant, bringing them into a lawsuit.