Marinoff v. Natty Realty Corp.

• Decision Date: 11 April 2005
• Docket Number: 2004-00749.
• Citation: 2005 NY Slip Op 02807,17 A.D.3d 412,792 N.Y.S.2d 491
• Parties: MARC MARINOFF, Appellant, v. NATTY REALTY CORP., Respondent.
• Court: New York Supreme Court — Appellate Division

17 A.D.3d 412

792 N.Y.S.2d 491

2005 NY Slip Op 02807

MARC MARINOFF, Appellant, v. NATTY REALTY CORP., Respondent.

2004-00749.

Appellate Division of the Supreme Court of the State of New York, Second Department.

April 11, 2005.

In an action for specific performance of a contract to purchase real property, the plaintiff appeals from an order of the Supreme Court, Queens County (Price, J.), dated December 10, 2003, which denied his motion for leave to enter a default judgment against the defendant upon its failure to appear or answer the complaint, and granted the defendant's cross motion to vacate its default in answering the complaint and for leave to serve a late answer.

Ordered that the order is affirmed, with costs.

The plaintiff commenced this action on April 9, 2003, and served the defendant under Business Corporation Law § 306 by delivering copies of the summons, verified complaint, and notice of pendency to the Department of State in Albany on May 5, 2003. Since the defendant was not personally served within the State of New York, it had until June 4, 2003, to answer (see CPLR 3012 [c]). By October 2003 the defendant had not done so. By notice dated October 2, 2003, the plaintiff moved for leave to enter a default judgment against the defendant under CPLR 3215, upon its failure to appear or answer the complaint. The defendant cross-moved to vacate its default and for leave to serve a late answer.

The defendant's cross motion was premised, at least in part, on CPLR 317, which does not require the movant to establish a reasonable excuse for the delay in moving for vacatur (see Eugene Di Lorenzo, Inc. v Dutton Lbr. Co., 67 NY2d 138 [1986]; Rifelli v Fireside Homes Corp., 152 AD2d 629 [1989]). Even if the defendant was required to make that showing, under the circumstances, the Supreme Court correctly concluded that the defendant established a reasonable excuse for its delay. Moreover, the time between the defendant's answering deadline and its cross motion for vacatur of its default (approximately five months), was relatively modest. Indeed, CPLR 317 allows a defaulting party who otherwise meets the statute's requirements to defend the action within one year after obtaining knowledge of entry of the judgment, "but in no event more than five years after such entry" (CPLR 317). Here, no judgment has been rendered. In addition, there is no indication that the defendant was deliberately attempting to avoid notice of this action (see Eugene Di Lorenzo, Inc. v Dutton Lbr. Co., supra at 143; Samet v Bedford Flushing Holding Corp., 299 AD2d 404, 405 [2002]).

It was not necessary for the defendant to establish the validity of its defense as a matter of law in order to obtain vacatur of its default in answering. The defendant carried the burden of demonstrating a potentially meritorious defense (see Eugene Di Lorenzo, Inc. v Dutton Lbr. Co., supra; Carnazza v Shoprite of Staten Is., 12 AD3d 393 [2004]; Becker v University Physicians of Brooklyn, 307 AD2d 243 [2003]). The Supreme Court providently exercised its discretion in concluding that the defendant carried its burden.

Accordingly, the Supreme Court correctly denied the plaintiff's motion for leave to enter a default judgment against the defendant upon its failure to appear or answer the complaint, and correctly granted the defendant's cross motion to vacate its default and for leave to serve a late answer. concur.

H. Miller, J.P., Schmidt, Ritter and Skelos, JJ., concur.

Crane, J., dissents and votes to reverse the order, grant the motion, and deny the cross motion in the following memorandum:

On December 24, 2002, the plaintiff, Marc Marinoff as nominee for 38TS Realty, LLC, entered into a contract to purchase certain commercial premises from the defendant for the sum of $588,000. The plaintiff made a down payment of $30,000. The premises had previously been damaged by fire and a rider to the contract recited that the plaintiff was aware that the premises were "seriously fire damaged," that municipal violations had been issued, and that there was no valid certificate of occupancy. The plaintiff agreed to accept the premises "AS IS" and to take title subject to all violations and to bear the expense of remedying those violations. The defendant agreed to be responsible for all civil penalties that prevented the plaintiff from obtaining a building permit or dismissal of the violations. In a second rider, the defendant acknowledged that the plaintiff would be required to perform repairs and renovations to the premises and agreed to cooperate with the plaintiff and allow him to prepare and file a building permit application to restore the building. Finally, the contract provided that the defendant would not be required to spend any money to cure the violations.

The contract called for a closing date of February 15. By mutual agreement, the closing date was rescheduled to April 7, 2003. The plaintiff appeared on April 7th ready, willing and able to close; the defendant failed to appear. The closing was rescheduled for April 21st, time being of the essence, and again was rescheduled, on consent of both parties, for April 28, 2003. The defendant notified the plaintiff that it would not appear at the April 28 closing and requested yet another closing date. The closing was rescheduled twice in May. The plaintiff asserts that he was ready, willing, and able to close on both occasions in May, and that the defendant cancelled both closing dates.

The plaintiff filed a notice of pendency and commenced this action for specific performance on April 9, 2003. A copy of the summons and complaint was served on the defendant via the Secretary of State on May 5, 2003.

On July 25, 2003, the plaintiff forwarded a copy of the summons and complaint to Lester & Fontanetta, P.C., the attorneys for the defendant as listed in the contract of sale. On September 17, 2003, the plaintiff's counsel received a telephone call from Ira Cooper, Esq., the defendant's counsel. Cooper advised that the defendant was aware of the lawsuit and had asked the Cooper firm to become involved in the matter.

In October 2003 still having received no answer to the complaint, the plaintiff moved to enter judgment pursuant to CPLR 3215 upon the defendant's failure to appear or answer the complaint. The defendant cross-moved to vacate its default in answering the complaint and for leave to serve an answer. In an affidavit in support of the motion, the defendant's president stated that there existed a reasonable excuse for the default and a meritorious defense to the action.

CPLR 5015 (a) provides that a party may be relieved from a judgment on the ground of "excusable default" (CPLR 5015 [a] [1]). A defendant seeking to vacate a default under this provision must demonstrate a reasonable excuse for its delay in appearing and answering the complaint and a meritorious defense to the action (see Eugene Di Lorenzo, Inc. v Dutton Lbr. Co., 67 NY2d 138, 141 [1986]).

A second provision for obtaining relief from a default judgment is found in CPLR 317. That section states, in part, that "[a] person served with a summons other than by personal delivery to him or to his agent for service designated under [CPLR] 318 . . . may be allowed to defend the action within one year after he obtains knowledge of entry of the judgment . . . upon a finding of the court that he did not personally receive notice of the summons in time to defend and has a meritorious defense." (CPLR 317.) A defendant is not required to show a "reasonable excuse" for its delay under CPLR 317 (see Eugene Di Lorenzo, Inc. v Dutton Lbr. Co., supra).

The defendant admitted that it did not receive the summons and complaint from the Secretary of State because its president relocated to Georgia "several years ago" and did not advise the Secretary of State of the new address for service of process. There is no per se rule that a corporation served through the Secretary of State, and which failed to update its address on file there, cannot demonstrate an "excusable default" under CPLR 5015 (see Eugene Di Lorenzo, Inc. v Dutton Lbr. Co., supra at 143). Courts should consider, among other factors, the length of time for which the address had not been kept current. I find that the defendant's admitted failure to notify the Secretary of State for "several years" of the change in its address for service of process to be unreasonable and insufficient to excuse its default under CPLR 5015 (see Kramer, Levin, Nessen, Kamin & Frankel v International 800 Telecom Corp., 190 AD2d 538 [1993]).

The defendant also failed to establish a meritorious defense. The defendant's president asserted that between the date originally set for the closing and the commencement of the plaintiff's action, the City of New York directed the plaintiff to either demolish the premises or make the needed repairs. The City advised the...