Orix Fin. Services, Inc. v. Baker

• Decision Date: 29 August 2003
• Citation: 1 Misc.3d 288,768 N.Y.S.2d 780
• Parties: ORIX FINANCIAL SERVICES, INC., Formerly Known as ORIX CREDIT ALLIANCE, INC., Plaintiff,<BR>v.<BR>BRACK F. BAKER et al., Defendants.
• Court: New York Supreme Court

1 Misc.3d 288

768 N.Y.S.2d 780

ORIX FINANCIAL SERVICES, INC., Formerly Known as ORIX CREDIT ALLIANCE, INC., Plaintiff,

v.BRACK F. BAKER et al., Defendants.

August 29, 2003.

Lewis M. Smoley,New York City, for plaintiff.

OPINION OF THE COURT

JANE S. SOLOMON, J.

PlaintiffOrix Financial Services, Inc. moves to reargue the decision and order which denied its motion, submitted on default, for summary judgment in lieu of complaint.For the reasons below, the motion to reargue is granted, and upon reargument, the original decision and order is vacated, and the motion for summary judgment in lieu of complaint is denied, and the action dismissed.

The prior decision, dated February 10, 2003, denied plaintiff's motion and dismissed the action.As relevant here, Orix is a creditor pursuant to a note of a corporation, which defaulted on loan payments, and the defendants are individuals who guaranteed the loan.It appears that Orix is a successor holder of a conditional sales contract for a dump trailer sold by a Kentucky vendor to the corporate obligor Hannco Energy Corporation of Post Office Box 1005, Highway 80, Hindman, Kentucky 41822.It further appears that defendants reside in Kentucky, and have no significant contacts with New York.The loan guarantees provide that Edwin M. Baum, Esq. and C-A Credit Corp., both of New York, are defendants' attorneys-in-fact and agents to accept service of any process.Orix claims that it served the summons and motion upon C-A Credit Corp. on December 16, 2002, and copies were mailed to defendants at their last known addresses.In the case of defendantBrack F. Baker, the last known address is a Hazard, Kentucky, post-office box used in 1999.DefendantTimothy Fugate also gave a post-office box as his address, although Orix also mailed papers to him at "Highway 80, Hindman[,] Kentucky 41822."

Discussion

In the February 10 decision, I found that Orix's proof of service was deficient because the designation of C-A Credit Corp. as defendants' agent did not comply with the CPLR, and simply mailing the papers to defendants' last known address is not sufficient.

CPLR 308 provides how service upon a natural person is accomplished.At CPLR 308 (3), service is permitted "by delivering the summons within the state to the agent for service of the person to be served as designated under rule 318, except in matrimonial actions."CPLR 308 (5) permits service upon a natural person in such manner as the court directs if service is impracticable under section 308 (1), (2) or (4)(which describe permissible methods of service other than upon an agent).CPLR 318 provides as follows:

"A person may be designated by a natural person. . . as an agent for service in a writing, executed and acknowledged in the same manner as a deed, with the consent of the agent endorsed thereon.The writing shall be filed in the office of the clerk of the county in which the principal to be served resides or has its principal office.The designation shall remain in effect for three years from such filing unless it has been revoked."

Orix concedes that no defendant designated C-A Credit Corp. as his agent in accordance with CPLR 318.It does not contend that it served the summons and motion by any method under CPLR 308, except to the extent that service upon an agent is authorized under CPLR 308 (3).It argues, however, that the language in CPLR 308 (3) regarding CPLR 318 should be ignored because long-standing legal precedent has, in effect, rendered the nonmatrimonial portion of CPLR 308 (3) a nullity.

Orix primarily relies upon the decision of the United States Supreme Court in National Equip. Rental, Ltd. v Szukhent(375 US 311[1964]).In that case, the plaintiff brought suit for breach of a lease agreement in the United States District Court for the Eastern District of New York against father and son farmers who lived in Michigan.The lease provided that defendants designated Florence Weinberg, of Long Island City, New York, as their agent to accept service of any process within the State of New York.Defendants were unacquainted with Weinberg, who apparently had a relationship with the plaintiff.The plaintiff caused the summons and complaint to be served upon Weinberg, in accordance with the agreement, and she promptly mailed the papers to defendants.Defendants obtained New York counsel, who moved to dismiss the action for want of proper service under Federal Rules of Civil Procedure rule 4(former [d][1])(authorizing service of process upon an agent).The District Court granted the motion, and the United States Court of Appeals for the Second Circuit affirmed.

The Supreme Court reversed, finding that proper service was made under Federal Rules of Civil Procedure rule 4(former [d][1]), and that such service was not contrary to the policies of New York or Michigan.The Court observed that

"A different case would be presented if Florence Weinberg had not given prompt notice to the respondents, for then the claim might well be made that her failure to do so had operated to invalidate the agency.We hold only that, prompt notice to the respondents having been given, Florence Weinberg was their `agent authorized by appointment' to receive process within the meaning of Federal Rule of Civil Procedure 4(d)(1)."(375 US at 318.)

New York courts have applied the National Rental case in holding that parties to a contract may agree to service upon a third person with respect to litigation arising from the contract, even where that person is not an agent authorized under the Business Corporation Law (such as the Secretary of State) or CPLR 318.(Matter of Board of Educ. of Half Hollow Hills Cent. School Dist. of Huntington[Half Hollow Hills Teachers Assn.], 79 Misc 2d 223, 227[Sup Ct, Suffolk County1974].)"Under such circumstances, the requirements of due process are deemed met when the `agent' promptly accepts the summons or process, and promptly transmits it or notice thereof to the principal."(Id.)

To the extent that the prior decision failed to recognize that service of process upon an agent is permitted under the circumstances described in the above decisions, it was in error, and therefore reargument must be granted.The result in the prior decision nevertheless was correct for the following reasons.

Orix claims that it successfully...