Emigrant Funding Corp. v. Hershey Chan Realty, Inc.

• Decision Date: 16 December 2022
• Docket Number: Index No. 850215/2021,Motion Seq. No. 004
• Citation: 2022 NY Slip Op 34376 (U)
• Parties: EMIGRANT FUNDING CORPORATION, Plaintiff, v. HERSHEY CHAN REALTY, INC..GRACE CHAN, NEW YORK CITY DEPARTMENT OF FINANCE, NEW YORK STATE DEPARTMENT OF TAXATION AND FINANCE, OWEMANCO MORTGAGE NY LIMITED PARTNERSHIP, JOHN DOE #1 THROUGH JOHN DOE #20 Defendant.
• Court: New York Supreme Court

2022 NY Slip Op 34376(U)

EMIGRANT FUNDING CORPORATION, Plaintiff, v. HERSHEY CHAN REALTY, INC..GRACE CHAN, NEW YORK CITY DEPARTMENT OF FINANCE, NEW YORK STATE DEPARTMENT OF TAXATION AND FINANCE, OWEMANCO MORTGAGE NY LIMITED PARTNERSHIP, JOHN DOE #1 THROUGH JOHN DOE #20 Defendant.

Index No. 850215/2021, Motion Seq. No. 004

Supreme Court, New York County

December 16, 2022

Unpublished Opinion

PART 32

DECISION + ORDER ON MOTION

HON FRANCIS A. KAHN, III,, JUDGE

The following e-filed documents, listed by NYSCEF document number (Motion 004) 76, 77, 78, 79, 80, 81, 82, 83, 84, 85, 86, 87 88, 89, 90, 91, 92, 93, 94, 95, 96, 97, 98, 99, 100, 101 103, 104, 105, 106, 107, 108, 109, 110, 111, 112, 113, 114 115, 116 were read on this motion to/for APPOINT-REFEREE.

Upon the foregoing documents, the motion and cross-motion are determined as follows:

This is an action to foreclose on a consolidated and modified mortgage encumbering commercial real property located at 44 Bowery, New York, New York that was given by Defendant Hershey Chan Realty, Inc. ("Hershey"). The mortgage secures an amended and restated note which evidences a loan with an original principal amount of $2,750,000.00. The note and mortgage were executed by Defendant Grace Chan as President of Hershey. Concomitantly with these documents, Chan executed a guaranty of payment of the note. Plaintiff commenced this action wherein it is alleged Defendant Hershey defaulted on its installment payments under the note beginning on October 1, 2019. Defendants Hershey and Chan failed to timely appear, and Plaintiff rejected the answer filed on April 5, 2022.

Now, Plaintiff moves for a default judgment against all Defendants, an order of reference and to amend the caption. Defendants Hershey and Chan oppose the motion and cross-move pursuant to CPLR §§5015[a][4] to vacate their default, or in the alternative, compelling Plaintiff to accept their answer and to dismiss the action "as Plaintiff failed to establish compliance with the notice of default provisions of the mortgage". Plaintiff opposes the cross-motion.

"An applicant for a default judgment against a defendant must submit proof of service of the summons and complaint, proof of the facts constituting the claim, and proof of the defaulting defendant's failure to answer or appear" (Deutsche Bank Natl. Trust Co. v Silverman, 178 A.D.3d 898, 899 [2d Dept 2019]). A plaintiff needs "only [to] allege enough facts to enable a court to determine that a viable cause of action exists" (Woodson v Mendon Leasing Corp., 100 N.Y.2d 62, 71 [2003]).

Plaintiff established prima facie its entitlement to a default judgment against Hershey and Chan and the other Defendants by submitting proof of the mortgage, the unpaid note, proof of service on each Defendant as well as proof of their failure to appear or answer (see CPLR §3215[f]; SRMOF II 2012-1 Trust v Telia, 139 A.D.3d 599, 600 [1^st Dept 2016]; U.S. Bank Natl. Assn. v Wolnerman, 135 A.D.3d 850 [2d Dept 2016]; see also Deutsche Bank Natl. Trust Co. v Silverman, 178 A.D.3d 898 [2d Dept 2019]).

'"To defeat a facially adequate CPLR 3215 motion, a defendant must show either that there was no default, or that it has a reasonable excuse for its delay and a potentially meritorious defense'" (Deutsche Bank Natl. Trust Co. v Silverman, 178 A.D.3d 898, 901 [2d Dept 2020], citing U.S. Bank NA. v Dorestant, 131 A.D.3d 467, 470 [2d Dept 2015]).

Defendants' assertion that Plaintiff failed to proffer sufficient evidence to demonstrate their default is without merit. Unlike a motion for summary judgment which requires a movant to establish, prima facie, an absence of material issues of fact by admissible evidence (see eg Alvarez v Prospect Hospital, 68 N.Y.2d 320, 324 [1986]), a party seeking a default judgment only need demonstrate "evidence of a viable cause of action" (see Redbridge Bedford, LLC v 159 N. 3rd St. Realty Holding Corp., 175 A.D.3d 1569, 1570 [2d Dept 2019]). This lesser burden of proof exists because a defaulting party "admits all traversable allegations in the complaint" (Rokina Optical Co. v Camera King, Inc., 63 N.Y.2d 728, 730 [1984]). Here the affidavit of Maryann Monteserrato, the Assistant Vice President of Plaintiff, was sufficient to satisfy these requirements (see eg Mortgage Elec. Registration Sys., Inc. v Smith, 111 A.D.3d 804, 806 [2d Dept 2013]).

Further, Plaintiff was not required demonstrate compliance with the contract notice provisions in the mortgage prior to issuance of a default judgment (see One W. Bank, FSB v Rosenberg, 189 A.D.3d 1600, 1602 [2d Dept 2020]; see also Flagstar Bank, FSB v Jambelli, 140 A.D.3d 829, 830 [2d Dept 2016]). Failure to satisfy a condition precedent to suit is a waivable affirmative defense Plaintiff (see Wells Fargo Bank, N.A. v Campbell, 196 A.D.3d 726, 727 [2d Dept 2021]) and Defendants were required to show they should be relieved of their default before this non-jurisdictional defense is considered (see Deutsche Bank Natl. Trust Co. v Hall, 185 A.D.3d 1006, 1011 [2d Dept 2020]).

Defendants' notice of cross-motion states that vacatur of their default is sought pursuant to CPLR §5015 [a] [4] which related to a claim of lack of personal jurisdiction. However, Defendants offered no legal argument on this basis. Rather, their motion is founded in CPLR §5015[a][1], excusable default, and CPLR §317, vacatur where a party is not personally served. Generally, to vacate a default in appearing or answering, a party is required to demonstrate both a reasonable excuse for the default and a potentially meritorious defense to the motion (see CPLR §5015[a][1]; Karimian v Karlin, 173 A.D.3d 614 [1^st Dept 2019]; Needleman v Chaim Tornhein, 106 A.D.3d 707 [2d Dept 2013]).

Absent from Chan's affidavit is a cognizable excuse for not appearing or moving to vacate Defendants' default for four months after service of their late answer. Moreover, while it is within the Court's discretion to credit a claim of law office failure, '"it was not the Legislature's intent to routinely excuse such defaults'" (see OneWest Bank, FSB v Singer, 153 A.D.3d 714, 716, quoting Inc. Vill. of Hempstead v Jablonsky, 283 A.D.2d 553, 554 [2d Dept 2001]). Therefore, such a claim may be sustained where there is a detailed and credible explanation for the default (see Hudson City Sav. Bank v Augustin, 191 A.D.3d 774, 775 [2d Dept 2021]). Movant's proof in this regard was insufficient. The affidavit of Chan was conclusory and based upon hearsay statements attributed to Movants' prior attorney which ultimately constituted nothing more than bare allegations of incompetence by former counsel (see Vizelter v Strogov, 170 A.D.3d 917 [2^nd Dept 2019]; Edwards v Feliz, 28 A.D.3d 512 [2^nd Dept 2006]; Achampong v Weigh, 240 A.D.2d 247 [1^st Dept 1997]). Also, they failed to demonstrate that this attorney was engaged before their time to appear expired (cf. Nahar v Awan, 33 A.D.3d 680 [2nd Dept 2006]). In the end, Chan's affidavit demonstrates nothing more than "mere neglect" which is not a reasonable excuse (OneWest Bank, FSB v Singer, 153 A.D.3d 714, 716 [2d Dept 2017]).

Defendants also seek to vacate their default under CPLR §317 which provides that if the non-appearing Defendant was not personally served, it may still defend the action within one year after it learns of the default judgment upon the Court finding that it "did not personally receive notice of the summons in time to defend and has a meritorious defense" (see CPLR §317; Wilson v Kore Method on Gansevoort LLC, 180 A.D.3d 486 [1st Dept 2020]; Arabesque Recs. LLC v Capacity LLC, 45 A.D.3d 404 [1st Dept 2007]; Simon & Schuster v Howe, 105 A.D.2d 604, 605 [1st Dept 1984]).

In the present case, the summons and complaint were not personally delivered to either Defendant within the meaning of CPLR §317 (see eg Figueroa v Relgold, 178 A.D.3d 425, 426 [1 st Dept 2019] Taron Partners, LLC v McCormick, 173 A.D.3d 927 [2d Dept 2019]). However, Defendants were required, but failed, to prove they "did not receive actual notice of the summons and complaint in time to defend the action" (see Jean v Csencsits, 171 A.D.3d 1149, 1150 [2d Dept 2019]; HSBC Bank USA v Desrouilleres, 128 A.D.3d 1013, 1015 [2d Dept 2015]). At most, Chan's affidavit is a "mere denial of receipt of the summons and complaint [which] is insufficient to establish lack of actual notice for the purpose of CPLR 317" (see Wassertheil v Elburg, LLC, 94 A.D.3d 753, 754 [2d Dept 2012]). Additionally, Defendants offered no explanation to rebut the presumption of receipt of the summons and complaint which arose with the mailings associated with the service on each (see Youngstown Tube Co. v Russo, 120 A.D.3d 1409, 1410 [2d Dept 2014]).

Absent a reasonable excuse or proof the Defendants did not have notice in time to defend, the existence of a cognizable meritorious defense is of no moment (see Taron Partners, LLC v McCormick, supra at 930; Buro Happold Consulting Engrs., PC. v RMJM, 107 A.D.3d 602, 602 [1^st Dept 2013]; Pina vJobar U.S.A. LLC, 104 A.D.3d 544, 545 [1^st Dept 2013]).

The branch of Plaintiffs motion for a default judgment against the non-appearing parties is granted (see CPLR §3215; SRMOFII2012-1 Trust v Telia, 139 A.D.3d 599, 600 [1^st Dept 2016]).

The branch of Plaintiff s motion to amend the caption is granted (see generally CPLR §3025; JP Morgan Chase Bank, N.A. v Laszio, 169 A.D.3d 885, 887 [2d Dept 2019]).

Accordingly, the Defendants' cross-motion is denied, the Plaintiffs motion is granted, and it is

ORDERED that Plaintiff is awarded a default judgment against the non-appearing Defendants; and it is further

ORDERED that that Scott H. Siller, Esq., 706 Equestrian Way Westbury, NY 11590 -- 516-644-6769 is hereby appointed Referee in accordance with ...