HSBC Bank USA, Nat'l Ass'n v. Rothbeind

• Decision Date: 05 January 2023
• Docket Number: 534282
• Citation: 212 A.D.3d 912,182 N.Y.S.3d 762
• Parties: HSBC BANK USA, NATIONAL ASSOCIATION, as Trustee, Respondent, v. Samuel ROTHBEIND et al., Defendants, and Prince Home LLC, Appellant.
• Court: New York Supreme Court — Appellate Division

212 A.D.3d 912

182 N.Y.S.3d 762

HSBC BANK USA, NATIONAL ASSOCIATION, as Trustee, Respondent,

v. Samuel ROTHBEIND et al., Defendants,andPrince Home LLC, Appellant.

534282

Supreme Court, Appellate Division, Third Department, New York.

Calendar Date: November 15, 2022

Decided and Entered: January 5, 2023

Zimmerman Law, PC, Huntington Station (Michael Zimmerman of counsel), for appellant.

Hinshaw & Culbertson LLP, New York City (Brent M. Reitter of counsel), for respondent.

Before: Aarons, J.P., Pritzker, Reynolds Fitzgerald, Ceresia and Fisher, JJ.

MEMORANDUM AND ORDER

Reynolds Fitzgerald, J. Appeals (1) from an order of the Supreme Court (Julian D. Schreibman, J.), entered June 23, 2021 in Ulster County, which, among other things, granted plaintiff's motion for a default judgment, and (2) from the judgment entered thereon.

In 1998, defendant Samuel Rothbeind, as attorney-in-fact for his mother, executed a note and mortgage with M & T Mortgage Corporation securing property located in the Village of New Paltz, Ulster County. In 2005, he transferred this property to himself and his mother as joint tenants with the right of survivorship. In 2009, a foreclosure action was commenced against, among others, Rothbeind and his mother for failure to make the requisite payments due under the note and mortgage. The note and mortgage were subsequently assigned to plaintiff. In 2012, plaintiff commenced a second foreclosure action against, among others, Rothbeind and his mother. During the pendency of the second action, the first action was voluntarily discontinued. In 2014, Rothbeind, individually and as attorney-in-fact for his mother, transferred the property to defendant Prince Home LLC, subject to the mortgage.¹ Rothbeind's mother subsequently passed away and, in 2015, the second foreclosure action was dismissed pursuant to CPLR 3215(c) for plaintiff's failure to take a default judgment within a year of the default. In 2015, a third foreclosure action was commenced against Rothbeind and others, resulting in a default judgment against Rothbeind. Rothbeind appealed and this Court dismissed the third foreclosure action for failure to take a default judgment within one year ( HSBC Bank USA N.A. v. Rothbeind, 179 A.D.3d 1323, 116 N.Y.S.3d 785 [3d Dept. 2020] ).

Plaintiff then commenced this fourth foreclosure action pursuant to the six-month grace period provided by CPLR 205(a) and the tolling of the statute due to the COVID–19 pandemic. In August 2020, plaintiff served Prince Home through the Secretary of State and Rothbeind by personal service. Neither of those defendants appeared in the action or served an answer. On December 16, 2020, plaintiff moved for an order of reference and default judgment against them.² Prince Home then cross-moved to, among other things, extend its time to answer pursuant to CPLR 317, 3012(d) and 2004. Supreme Court granted plaintiff's motion and denied Prince Home's cross motion, finding that as Prince Home willfully avoided service by failing to correct its address on file with the Secretary of State for five years – after being advised that the address was undeliverable— CPLR 317 did not apply. Additionally, the court found that CPLR 3012(d) and 2004 were inapplicable as Prince Home could not provide a reasonable excuse for its delay or default based on the same reasoning. Prince Home appeals from the order and the default judgment issued thereon.

CPLR 317 allows a defendant an opportunity to be heard, despite its default in appearance, if the entity was not personally served and moves within the specified time frames (see Qiang Tu v. Li Shen, 190 A.D.3d 1125, 1127, 139 N.Y.S.3d 711 [3d Dept. 2021] ). Service upon the Secretary of State is not considered personal service (see Leader v. Steinway, Inc., 186 A.D.3d 1209, 1210–1211, 130 N.Y.S.3d 70 [2d Dept. 2020] ; Brightly v. Florida N., Inc., 54 A.D.3d 1127, 1128, 863 N.Y.S.2d 842 [3d Dept. 2008] ). "Although that statute does not require establishing a reasonable excuse for the default, it does require a showing that the defendant did not personally receive notice of the summons in time to defend and has a meritorious defense" ( McCord v. Larsen, 132 A.D.3d 1115, 1116, 18 N.Y.S.3d 458 [3d Dept. 2015] [internal quotation marks and citations omitted]). In contrast, CPLR 3012(d) and 2004 permit a court to extend the time for a defendant to appear or plead, or permit late service of an answer "upon a showing of a reasonable excuse for the delay and a meritorious defense to the complaint" ( Anthony DeMarco & Sons Nursery, LLC v. Maxim Constr. Serv. Corp., 126 A.D.3d 1105, 1105, 4 N.Y.S.3d 732 [3d Dept. 2015] [internal quotation marks and citation omitted]; see Walker v. GlaxoSmithKline, LLC, 201 A.D.3d 1272, 1273, 163 N.Y.S.3d 260 [3d Dept. 2022] ). Supreme Court has discretion to allow service of a late answer and/or to extend the time to answer the complaint (see Kegelman v. Town of Otsego, 203 A.D.3d 82, 85, 161 N.Y.S.3d 436 [3d Dept. 2021], lv dismissed 38 N.Y.3d 1124, 172 N.Y.S.3d 675, 192 N.E.3d 1154 [2022] ; Scott v. County of Albany, 170 A.D.3d 1475, 1476, 97 N.Y.S.3d 328 [3d Dept. 2019], lv denied 34 N.Y.3d 904, 2019 WL 6271481 [2019] ).

Prince Home contends that Supreme Court erred in denying its motion pursuant to CPLR 317 because it did not deliberately avoid service of process. We disagree. Although this Court has held that a failure to maintain a correct address with the Secretary of State will not preclude relief pursuant to CPLR 317 (see Pabone v. Jon–Bar Enters. Corp., 140 A.D.2d 872, 873, 528 N.Y.S.2d 912 [3d Dept. 1988] ; Marquette Co. v. Norcem, Inc., 114 A.D.2d 738, 739, 494 N.Y.S.2d 511 [3d Dept. 1985] ), that relief is not automatic and may be denied "where, for example, a defendant's failure to personally receive notice of the summons was a result of a deliberate attempt to avoid such notice" ( Eugene Di Lorenzo, Inc. v. A.C. Dutton Lbr. Co., 67 N.Y.2d 138, 143, 501 N.Y.S.2d 8, 492 N.E.2d 116 [1986] ; accord Stevens v. Stepanski, 164 A.D.3d 935, 937, 84 N.Y.S.3d 1 [2d Dept. 2018], lv dismissed 33 N.Y.3d 1014, 101 N.Y.S.3d 738, 125 N.E.3d 155 [2019] ). Here, Prince Home was on notice that its service address listed with the Secretary of State was undeliverable. Notwithstanding this notice, Prince Home failed to notify the Secretary of State of its purported change of address for a period of five years (cf. Epstein v. Abalene Pest Control Serv., Inc., 98 A.D.2d 832, 832, 470 N.Y.S.2d 497 [3d Dept. 1983] ). "Under these circumstances, it can be inferred that the defendant's failure to personally receive notice of the summons was a result of a deliberate attempt to avoid such notice" ( Paul Conte Cadillac, Inc. v. C.A.R.S. Purch. Serv., Inc. , 126 A.D.2d 621, 622, 511 N.Y.S.2d 58 [2d Dept. 1987] ; see Bookman v. 816 Belmont Realty, LLC, 180 A.D.3d 986, 987, 121 N.Y.S.3d 134 [2d Dept. 2020] ; Santiago v. Sansue Realty Corp., 243 A.D.2d 622, 623, 663 N.Y.S.2d 235 [2d Dept. 1997] ). Prince Home failed to rebut this inference. The conclusory and unsubtantiated employee affidavits proffered by Prince Home as to how it learned of the foreclosure action, and that it "inadvertently" failed to notify the Secretary of State, do not contitute a detailed and credible explanation for its five-year failure to correct its...