State of N.Y. Higher Educ. Services Corp. v. Upshur

• Decision Date: 11 March 1999
• Citation: 686 N.Y.S.2d 233,252 A.D.2d 333
• Parties: 133 Ed. Law Rep. 572, 1999 N.Y. Slip Op. 2172 STATE OF NEW YORK HIGHER EDUCATION SERVICES CORPORATION, Appellant, v. Bernard C. UPSHUR, Respondent.
• Court: New York Supreme Court — Appellate Division

Page 233

686 N.Y.S.2d 233

133 Ed. Law Rep. 572, 1999 N.Y. Slip Op. 2172

STATE OF NEW YORK HIGHER EDUCATION SERVICES CORPORATION, Appellant, v. Bernard C. UPSHUR, Respondent.

Supreme Court, Appellate Division Third Department.

March 11, 1999.

Eliot Spitzer, Attorney-General (Julie M. Sheridan of counsel), Albany, for appellant.

Biscone & Neri (John T. Biscone of counsel), Albany, for respondent.

Before: MERCURE, J.P., CREW III, PETERS, SPAIN and CARPINELLO, JJ.

MERCURE, J.P.

Appeal from an order of the Supreme Court (Teresi, J.), entered December 23, 1997 in Albany County, which granted defendant's motion to vacate a default judgment entered against him and dismissed plaintiff's complaint.

Between 1973 and 1975, defendant obtained four separate student loans from Brooklyn Savings Bank; each of the loans was guaranteed by plaintiff. In August 1976, defendant filed a voluntary bankruptcy petition and scheduled Brooklyn Savings Bank, but not plaintiff, as a creditor. The bankruptcy proceeding resulted in the release of all of defendant's dischargeable debts. Defendant's student loans became due on April 1, 1977. Because defendant made no payments toward repayment of the loans, on June 9, 1977 plaintiff paid Brooklyn Savings Bank $3,951.54 on its guaranty. In August 1977, plaintiff commenced this action against defendant. The summons was served on defendant by affixing it to the door of defendant's residence and mailing an additional copy to him at that address (see, CPLR 308[4] ). Based upon defendant's failure to appear in the action, in March 1979 plaintiff entered a default judgment in the amount of $4,463.46.

In 1997, plaintiff served a restraining notice with respect to a brokerage account held in defendant's name, and defendant thereafter moved to vacate the default judgment upon the ground of alleged nonservice of the summons. Supreme Court granted the motion, vacated the default judgment and dismissed the complaint on the basis of plaintiff's failure to enter its default judgment within the one-year period set forth in CPLR 3215(c) and because of the age of the case, the alleged lack of service and the fact that no effort had been made to collect on the judgment in favor of plaintiff for nearly 20 years. Plaintiff appeals. Plaintiff thereafter moved for reargument, contending, inter alia, that Supreme Court had inadvertently failed to consider the fact that 20 U.S.C. § 1091a ¹ preempts the field of guaranteed student loans and eliminates all state Statutes of Limitations for commencing suit, entering judgment following a default in appearing, pleading or proceeding, or enforcing a judgment in an action seeking damages due to a default in repaying a guaranteed student loan. Supreme Court denied the motion.

As a threshold matter, we conclude that plaintiff did not fail to preserve its contention concerning the preemptive effect of 20 U.S.C. § 1091a. As correctly contended by plaintiff, defendant first raised the issue of plaintiff's failure to timely enter a default judgment in his attorney's October 30, 1997 reply affidavit. Coincidentally, plaintiff asserted the preclusive effect of 20 U.S.C. § 1091a in a letter bearing the same date, reiterated its contention in a December 18, 1997 letter and then fully developed its argument in the January 1998 motion to reargue. Under the circumstances, it is our view that plaintiff raised the issue at the first available opportunity, thereby preserving it for our consideration.

Turning now to the merits, we agree with plaintiff's contention that because of the preemptive operation of 20 U.S.C. § 1091a, plaintiff's failure to enter a default judgment within one year does not provide a basis for vacatur of the judgment subsequently entered in favor of plaintiff. The applicability of 20 U.S.C. § 1091a to the one-year limitation period of CPLR 3215(c) was specifically recognized by this court in the closely parallel case of State of New York v. Shaw, 189 A.D.2d 1057, 592 N.Y.S.2d 878, and cannot be seriously challenged at this point. Rather, it is defendant's contention that, because this action was not pending as of the April 9, 1991 effective date of the subject amendment to 20 U.S.C. § 1091a (Pub. L. 102-26 § 3(c); Pub. L. 102-325, tit. XV, § 1551; see, State of New York Higher Educ. Servs. Corp. v. Starr, 179 A.D.2d 992, 993, 579 N.Y.S.2d 210, lv. denied 80 N.Y.2d 757, 588 N.Y.S.2d 825, 602 N.E.2d 233), 20 U.S.C. § 1091a (a)(1) and (2) have no application here.

While superficially appealing, we conclude that the argument ultimately fails. Although the action was technically terminated when the default judgment was entered in favor of plaintiff, the current motion seeks vacatur of that default judgment and that defendant be permitted to defend the action and ultimately obtain judgment dismissing it based upon his discharge in bankruptcy, a claimed lack of personal jurisdiction or, most relevant here, because of plaintiff's failure to seek entry of the default judgment within the one-year limitations period (see, CPLR 3215[c] ). In our view, neither equity nor logic will permit defendant to currently seek dismissal of the action based upon alleged noncompliance with a State limitations period and at the same...