Opinion
73-04.
Decided June 24, 2008.
Richard G. Greene, of counsel, Attorney General of the State of New York, Attorney for Plaintiff, The Capitol, Albany, New York.
Robinson Brog Leinwand Greene Genovese Gluck, P.C., Attorneys for Mystic Tank Lines Corp. as successor-in-interest to defendant R.J. Guerrera, Inc,. Roger A. Raimond, of counsel, 1345 Avenue of the Americas, New York, New York.,
Plaintiff State of New York ("plaintiff" or "State") renews its application for a default judgment against defendant R.J. Guerrera, Inc. ("Guerrera"). The motion is opposed by Guerrera through its successor-in-interest, Mystic Tank Lines Corp. ("Mystic"). Guerrera also cross-moves for dismissal of the complaint against it, or in the alternative, for a declaratory judgment that its answer was timely served. For the reasons that follow, the State's motion is granted and Guerrera's cross-motion is denied.
BACKGROUND
In late 1997, the State learned of a petroleum discharge on the property of a service station to which Guerrera had delivered fuel for more than a decade (hereinafter "the Spill Site"). The State alleges that the discharge was caused by the overfilling and leaking of underground petroleum storage tanks.
The State commenced this Navigation Law article 12 proceeding in May 2004 against all potential dischargers on the site, including Guerrera, and properly served a Summons with Notice upon Guerrera through the Secretary of State. After the time for Guerrera to serve a Notice of Appearance or Demand for a Complaint had passed, the State notified Guerrera that it was in default. Guerrera did not respond.
In 2003, Mystic Tank Lines Corporation became defendant's successor in interest. However, Mystic is not named as a party to this action in its own right.
In September 2004, Mystic's bankruptcy counsel informed the State of its acquisition of Guerrera and that Mystic had filed a petition for bankruptcy on June 1, 2004. The State advised Mystic of Guerrera's default and provided Mystic with additional copies of the Summons with Notice, affidavit of service and verified complaint. The State also advised Mystic of a pending settlement conference in this action. In response, Mystic's counsel asserted that the action pending in this Court was stayed by the bankruptcy proceeding.
The State's counsel filed a Proof of Claim in Mystic's bankruptcy proceeding in October 2004, based on the clean up and remediation costs that form the basis of this action.
In November 2004, Mystic filed a "Suggestion of Bankruptcy" document with the Albany County Clerk, apparently in an effort to inform the Court and the parties of the pending bankruptcy proceeding and the asserted stay of this action. Notably, this document was not served upon the State.
In June 2005, Mystic moved in the Bankruptcy Court to have the State's claim expunged. Mystic argued that the State's claim was based on "pre-petition litigation wherein the debtor disputed all such liability", but neither Mystic nor Guerrera had ever appeared in this action, much less disputed liability.
Shortly thereafter, the State's counsel served Guerrera with another copy of the Summons with Notice at the address listed for Mystic in the bankruptcy petition. Finally, on June 28, 2005, the State entered judgment against Guerrera with the Albany County Clerk pursuant to CPLR 3215 (a).
By Decision Order dated November 2, 2006, this Court (McCarthy, J.) denied Guerrera's application to vacate the default judgment. The Court first rejected Guerrera's contention that its failure to appear in this action was due to any impropriety on the part of the State. Second, the Court concluded that its subject matter jurisdiction over this action had not been divested by the State having filed a Proof of Claim with the federal Bankruptcy Court. Finally, the Court determined that Guerrera had failed to provide a reasonable excuse for its default or establish a meritorious defense to the allegations of the complaint.
On appeal, the Third Department agreed that Guerrera was in default and that it failed to provide a reasonable excuse for its default ( State of New York v. Williams , 44 AD3d 1149 [3d Dept 2007]). "Notwithstanding multiple warnings about the status of the state court action, defendant declined to appear and answer. Under the circumstances, [Supreme Court] correctly determined that defendant's failure to appear was not excusable" ( id. at 1151).
However, the Third Department nonetheless vacated the default judgment based on the State's failure to include within its application proof establishing the facts of its claim. "An applicant for a default judgment must submit either an affidavit asserting the facts comprising the claim or a verified complaint, so the court has nonhearsay confirmation of the factual basis constituting a prima facie case" ( id. at 1151-1152, citing CPLR 3215 [f]). "Having failed to meet the statutory requirements for proof to support an application for a default judgment, the default judgment is a nullity and must be vacated, without prejudice to plaintiff renewing its application" ( id. at 1152 [internal citation omitted]).
The decretal paragraph of the Appellate Division's decision reads as follows: "ORDERED that the order is reversed, on the law, without costs, motion granted and default judgment vacated, without prejudice to plaintiff renewing its application for a default judgment."
By this motion, the State renews its application for a default judgment on an expanded factual record. To obtain a default judgment, the State is required to establish four elements: (1) service of the Summons with Notice; (2) Guerrera's default; (3) the amount due; and (4) the facts constituting the claim (CPLR 3215 [f]).
With respect to service of process, the State submits proof that a Summons with Notice was filed on May 19, 2004 and served upon Guerrera through the Secretary of State on May 27, 2004. This Court previously found that Guerrera had been properly served through the Secretary of State, and that determination was affirmed by the Appellate Division.
Second, to establish default, the State relies upon Guerrera's failure to serve a Notice of Appearance or Demand for a Complaint in response to the Summons with Notice. This Court previously determined, and the Third Department agreed, that Guerrera's failure to appear in this action on or before June 28, 2004 constituted a default.
With respect to the amount due, the Summons with Notice sought recovery of $778,794.90 in cleanup and removal costs incurred by the State as of May 19, 2004, the date on which it was filed, along with interest on said cleanup and removal costs. As on the prior application for default, plaintiff submits an affidavit from Anne Hohenstein, the Executive Director of the New York Environmental Protection and Spill Compensation Fund, establishing the amount of such cleanup and removal costs. The Third Department held that this submission constituted sufficient proof of the amount due. In addition, Assistant Attorney General John V. Cremo submits an affidavit ("Cremo Affidavit") establishing that statutory interest on such cleanup and removal costs at the CPLR rate of nine percent per annum totals $500,130.23, as of December 7, 2007.
Where the State of New York is the plaintiff, proof may take the form of an "affidavit made by an attorney from the office of the attorney general who has or obtains knowledge of such facts through review of state records" (CPLR 3215 [f]).
Finally, the instant motion includes proof of facts constituting the claim under the Navigation Law. "Given that in default proceedings the defendant has failed to appear and the plaintiff does not have the benefit of discovery, the affidavit or verified complaint need only allege enough facts to enable a court to determine that a viable cause of action exists" ( Woodson v. Mendon Leasing Corp., 100 NY2d 62, 70-71).
In order to meet its burden of providing "nonhearsay confirmation of the factual basis constituting a prima facie case" ( Williams, supra, 44 AD3d at 1152), the State relies upon the Cremo Affidavit, which establishes that Guerrera delivered petroleum to the Spill Site at relevant times. The State also relies upon the Affidavit of Peter J. DeCicco, an engineering geologist employed by the State Department of Environmental Conservation ("DEC"), who opines that gasoline was discharged during the filling of the underground storage tanks at the Spill Site. This opinion is based on, inter alia: (a) petroleum contaminated soil above both 4,000 gallon tanks; (b) the discovery of petroleum contaminated soil in the vicinity of the pipes used to fill both tanks; and (c) gasoline stains on the outside wall of the 2,000 gallon tank.
The State also directs the Court's attention to the provisions of the Navigation Law that hold a supplier or transporter of petroleum liable for discharges that occur during the delivery of petroleum where such supplier or transporter has responsibility for the manner and means of delivery ( see e.g. State of New York v. Avery-Hall Corp., 279 AD2d 199 [3d Dept 2001]). In addition, the State relies upon well settled law establishing that liability under the Navigation Law is joint and several, and, therefore, joint contributors to a petroleum discharge each are fully liable for all of the remediation costs incurred by the State ( see e.g. State of New York v. Arthur L. Moon, Inc., 228 AD2d 826 [3d Dept 1996], leave denied 84 NY2d 861).
In opposition to the State's renewed motion for a default judgment, Guerrera raises two principal arguments. First, Guerrera argues that the motion for a default judgment must be denied because the prior default judgment was vacated and Guerrera subsequently cured its default. In the alternative, Guerrera contends that the State's application for a default judgment is untimely. The court will consider each of these arguments in turn.
DEFAULT
Guerrera's fundamental contention is that it no longer is in default. In making this argument, Guerrera first observes that the Appellate Division vacated the prior default judgment as a nullity. It goes on to argue that in order to obtain a new default judgment, the State was required to comply with CPLR 3215 (g) (4), which requires service of an additional copy of the summons at least twenty days prior to entry of a default judgment. Guerrera contends that it was entitled to cure its prior default by answering the additional complaint served pursuant to CPLR 3215 (g) (4) and that it did in fact do so.
As Guerrera correctly observes, CPLR 3215 (g) (4) "provides an additional notice requirement prior to a party's moving for a default judgment." The statute provides, in pertinent part: When a default judgment based upon non-appearance is sought against a domestic or authorized foreign corporation which has been served pursuant to paragraph (b) of section three hundred six of the business corporation law, an affidavit shall be submitted that an additional service of the summons by first class mail has been made upon the defendant corporation at its last known address at least twenty days before the entry of judgment.
As an initial matter, the State observes that Guerrera did not actually serve an answer in response to the additional complaint served on November 29, 2007 pursuant to CPLR 3215 (g) (4). Rather, Guerrera relies upon an answer that it served on October 19, 2007, the day following the Appellate Division's vacatur of the prior default judgment, which the State rejected on October 23, 2007. Guerrera apparently contends that its opportunity to respond to the additional notice summons served pursuant to CPLR 3215 (g) (4) validated service of an answer that the State properly rejected as untimely. Thus, the State argues that even if a defendant in default were permitted to cure its default by answering the additional summons served pursuant to CPLR 3215 (g) (4), Guerrera failed to do so here.
In its reply memorandum of law, Guerrera appears to suggest that the Appellate Division's vacatur of the default judgment provided a basis for it to cure its prior default, independent of its asserted right to answer the additional summons served pursuant to CPLR 3215 (g) (4). To the extent that Guerrera so argues, it fundamentally misconstrues the distinction between a default and a default judgment. Notwithstanding vacatur of the default judgment, Guerrera remained in default based on its failure to respond to service of the Summons with Notice on or before June 28, 2004. In order to cure such default prior to entry of a default judgment, Guerrera would have been required to move for an order pursuant to CPLR 3012 (d) extending its "time to appear or plead, or compel the acceptance of a pleading untimely served." However, such provision requires, inter alia, a "showing of reasonable excuse for delay or default." The prior determination that Guerrera's default was not excusable, which was affirmed on appeal by the Third Department, would foreclose such relief.
It is unnecessary to address this point, because the Court concludes that Guerrera was not entitled to cure its prior default by answering the additional summons served pursuant to CPLR 3215 (g) (4). "The purpose of CPLR 3215 (g) is to give a defaulting defendant additional notice of the action before a judgment can be entered. That added notice affords a defaulting defendant an opportunity to assert a good excuse and meritorious defense or valid jurisdictional objection in order to have a default vacated and avoid entry of judgment" ( 342 Madison Ave. Assoc. Ltd. Partnership v. Suzuki Assoc., 187 Misc 2d 488 [Sup Ct 2001]; see CPLR 3215 [g] ["Notice"]). As noted supra, the prior rulings in this case foreclose the argument that Guerrera's default is excusable.
A close examination of other relevant statutory provisions confirms the conclusion that a corporate defendant is not entitled to cure a default by answering the additional summons served pursuant to CPLR 3215 (g) (4). Where, as here, service on a corporation is made on the Secretary of State, "service of an answer shall be made within thirty days after service is complete" (CPLR 3012 [c]). Pursuant to Business Corporation Law § 306 (b) (1), service of process "shall be complete when the secretary of state is so served." Thus, the time to interpose an answer is measured solely from service upon the Secretary of State. Further, while Business Corporation Law § 306 (b) (2) expressly recognizes plaintiff's obligation to serve an additional summons prior to taking a default judgment, nothing in that statute or the CPLR authorizes or permits an answer to be served in response to the additional notice summons.
Indeed, under Guerrera's interpretation of CPLR 3215 (g) (4), a corporate litigant served through the Secretary of State could ignore such service with impunity pending receipt of the additional notice summons. The same conclusion presumably would follow where "a default judgment based upon nonappearance is sought against a natural person in an action based upon nonpayment of a contractual obligation" ( id. [g] [3]).
Based on the foregoing, the Court concludes that Guerrera's service of an answer on October 19, 2007 did not operate to cure its prior default. Accordingly, the State has established that Guerrera remains in default.
TIMELINESS OF APPLICATION
In the alternative, Guerrera contends that the pending application for a default judgment must be dismissed as untimely because the State failed to move for judgment within one year of the original default. CPLR 3215 (c) provides that "[i]f the plaintiff fails to take proceedings for the entry of judgment within one year after the default, the court shall not enter judgment but shall dismiss the complaint as abandoned, without costs, upon its own initiative or on motion, unless sufficient cause is shown why the complaint should not be dismissed" (emphasis added).
Guerrera contends that the State's application for a default judgment was required to have been filed on or before June 29, 2005 in order to be timely. Guerrera further contends the instant motion is a new application, rather than a "renewal" of the prior application for a default judgment submitted to the County Clerk, thus arguing that this application cannot be deemed to relate back to the State's original application. The same contentions form the basis of Guerrera's cross-motion for dismissal of the complaint.
The Court rejects Guerrera's arguments and concludes that the instant application for a default judgment is timely. "It has been recognized that [a]s long as "proceedings" are being taken, and these proceedings manifest an intent not to abandon the case but to seek a judgment, the case should not be subject to dismissal'" ( Brown v. Rosedale Nurseries, 259 AD2d 256 [1st Dept 1999], quoting 7 Weinstein-Korn-Miller, NY Civ Prac P 3215.14; Giordano v. Berisha , 45 AD3d 416 , 417 [1st Dept 2007] ["where plaintiff has actively pursued a resolution to the matter"]; see also NC Venture I, L.P. v. Complete Analysis, Inc., 22 AD3d 540, 543 [2d Dept 2005]).
Here, the default judgment issued by the Clerk was in effect from June 28, 2004 until vacated by the Appellate Division on October 18, 2007. Certainly, the State could not have been expected to undertake any further proceedings against Guerrera during this period. On December 7, 2007, less than two months following the adverse decision from the Appellate Division, the State filed the instant motion to renew its application for a default judgment. Under these circumstances, the State's conduct manifests an unmistakable intent not to abandon the case and to seek a judgment against Guerrea and, therefore, is not subject to dismissal under CPLR 3215 (c).
Even if the State's application were held to be untimely under CPLR 3215 (c), the Court may nonetheless excuse the delay for good cause shown. This standard has been held to be satisfied where plaintiff offers a reasonable excuse for its delay and demonstrates a meritorious claim ( see Kay Waterproofing Corp. v. Ray Realty Fulton, Inc. , 23 AD3d 624 [2d Dept 2005]). As noted supra, given that the State secured a default judgment in a timely manner, there was no need for any further action on its part until the Appellate Division vacated the prior judgment. As expressly contemplated in the Third Department's decision, the State then moved to renew its application for a default judgment promptly thereafter. Under these circumstances, the Court would find any delay on the State's part to be excusable. Further, the State has demonstrated a meritorious claim through the Cremo, DeCicco and Hohenstein affidavits, also discussed supra.
CONCLUSION
Based on the foregoing, the Court concludes that the State has established an entitlement to a default judgment under CPLR 3215 (f). Accordingly, it is
ORDERED that plaintiff's motion for a default judgment against R.J. Guerrera, Inc. is granted; and it is further
ORDERED that plaintiff shall submit to the Court, on notice to R.J. Guerrera, Inc. and the other parties, a proposed judgment consistent with this Decision Order; and it is further
ORDERED that the cross-motion of R.J. Guerrera, Inc. is denied in all respects.
This constitutes the Decision and Order of the Court. All papers including this Decision and Order are returned to plaintiffs' counsel. The signing of this Decision and Order shall not constitute entry or filing under CPLR Rule 2220. Counsel is not relieved from the applicable provisions of that Rule respecting filing, entry and Notice of Entry.