Opinion
Index No. 653800/2015 Motion Seq. Nos. 018 019
11-13-2023
NORA ARTHUR, Plaintiff, v. 1809-15 7TH AVENUE HOUSING DEVELOPMENT FUND CORPORATION, MICHAEL MASCHCIO, CARVER FEDERAL SAVINGS BANK, WATERFALL VICTORIA MASTER FUND LTD., WATERFALL VICTORIA REO 2013- OL LLC,JOHN DOE, JANE DOE, XYZ CORPORATION I, XYZ CORPORATION II, Defendants.
Unpublished Opinion
MOTION DATE 07/27/2023, 08/21/2023
DECISION+ ORDER ON MOTION
HON. PAULA. GOETZ Justice
The following e-filed documents, listed by NYSCEF document number (Motion 018) 557, 558, 559, 560, 561, 562, 563, 564, 565, 566, 567, 568, 569, 570, 571, 582 were read on this motion to/for PARTIES - ADD/SUBSTITUTE/INTERVENE
The following e-filed documents, listed by NYSCEF document number (Motion 019) 572, 573, 574, 575, 576, 577, 578, 579, 580, 583, 584, 585, 586, 587 were read on this motion to/for REARGUMENT/RECONSIDERATION.
Plaintiff Nora Arthur, commenced this action to obtain redress for allegedly unlawful eviction proceedings brought by defendants 1809-15 7th Avenue Housing Development Fund Corporation (the HDFC) and Michael Maschcio (collectively the Co-op Defendants) based on non-payment of maintenance fees and against defendants Carver Federal Savings Bank, Waterfall Victoria Master Fund Ltd., Waterfall Victoria REO 2013-01, Statebridge Company, LLC (Statebridge) (collectively the Lender Defendants) for an allegedly invalid June 4, 2014 foreclosure and sale.
Plaintiffs counsel moves to substitute Bronx Community Guardianship Network, Inc. ("BCGN") as guardian pursuant to Article 81 of the Mental Hygiene Law in place and stead of plaintiff Ms. Arthur (MS # 18). The Lender Defendants oppose the motion and cross move to dismiss the action pursuant to CPLR § 1021. The Lender Defendants separately move to reargue BCGN's motion (MS # 17) to vacate the judgment dismissing the action and related orders and upon granting re-argument denying BCGN's motion to vacate (MS # 19). Counsel for Ms. Arthur opposes the motion. The motions are consolidated for disposition.
PARTIAL PROCEDURAL HISTORY
On or about January 18, 2022, the court became aware of a pending Article 81 Guardianship proceeding for Ms. Arthur and entered an order requiring Ms. Arthur's counsel to advise by affirmation the status of the Article 81 proceeding by a date certain and set the case down for trial on February 14, 2022. (NYSCEF Doc No 464) . The Lender Defendants' February 10, 2023 request for an adjournment was granted and the trial was adjourned to May 9, 2022 (NYSCEF Doc No 494). On February 25, 2022, counsel for Ms. Arthur filed a letter and a copy of the Order and Judgment dated January 6, 2022 and entered on February 8, 2022 from the Supreme Court, Bronx County proceeding, Index No 91267-2019 ("Guardianship Proceeding"), appointing BCGN as Guardian over Ms. Arthur's property pursuant to Article 81 ("Guardianship Judgment" NYSCEF Doc No 496). Counsel's letter stated, among other things, "Pursuant to C.P.L.R. § 1016, the court must order substitution if a "[guardian] has been appointed" for that party. As a result of the order and judgment, Bronx Community Guardianship Network, Inc. ("BCGN") is now appointed guardian. We are not aware of whether BCGN has legal counsel" (id.). The Guardianship Judgment further provided that BCGN's authority extends to all of the property of [Ms. Arthur], both real and personal. The powers granted to BCGN expressly included the authority to retain counsel and "to initiate, defend or maintain any administrative or civil judicial proceeding ..." (id.).
On March 4, 2022, Ms. Arthur's counsel wrote to the court again and submitted a copy of BCGN's commission, stating in part that "[p]ursuant to C.P.L.R. § 1016, 'the court shall order substitution' for a party if a '[guardian] has been appointed.' The C.P.L.R. allows for a court to sua sponte order substitution." (NYSCEF Doc No 497). Counsel further stated that, "[a]s a result of their appointment, BCGN now has guardianship of the present litigation and the subject property" (id.) Counsel requested that the court substitute BCGN as a plaintiff or schedule a conference to discuss the Article 81 appointment and substitution in light of the tr ial then scheduled for May 9, 2022 (id.) On March 8, 2022 counsel for all parties appeared for a conference including Mobilization For Justice (MFJ) attorneys Yolande Nicholson and Mackenzie Lew for Ms. Arthur, Marjorie Vamchio for BCGN (who had yet not filed a Notice of Appearance), Alan Kaufman for the Lender Defendants, and Michael Stevens for the Co-Op Defendants. Shortly after the conference the court issued an order that substituted BCGN as plaintiff in the action in place and stead of Ms. Arthur without prejudice to any prior proceedings in the case (NYSCEF Doc No 498). Ms. Vamchio concedes that, on March 8, 2022, she knew of the May 2022 trial date and that her request for an adjournment on BCGN's behalf was denied (Vamchio affm, ¶ 3, NYSCEF Doc No 567). However, the trial was subsequently administratively adjourned to July 11, 2022 (NYSCEF Doc No 504).
On July 11, 2022, counsel for the Lender Defendants and Co-Op Defendants appeared for trial but BCGN failed to appear. Ms. Nicholson (counsel for Ms. Arthur) emailed the Court and all parties, representing that BCGN had "not been able to follow through with retaining the undersigned or other counsel" and sought an adjournment/stay on behalf of BCGN. (Kaufman affm, Ex. C, NYSCEF Doc No 568). Upon BCGN's failure to appear for trial and noting that BCGN had appeared for the March 8, 2022 conference, the court again ordered substitution, entered judgment in favor of defendants dismissing the action. On October 5, 2022, a judgment was entered dismissing with prejudice all claims asserted by Ms. Arthur and awarding Co-Op Defendants $10,385.25 in attorneys' fees (NYSCEF Doc No 516). On October 17, 2022, Notice of Entry of the judgment was filed and served (NYSCEF Doc No 517).
On April 7, 2023, BCGN moved to, inter alia, vacate the March 8, 2022 substitution order and the judgment, alleging that it did not receive written notice of the substitution. The motion was granted and the March 8, 2022 substitution order and the October 5, 2022 judgment were vacated and the case was restored to the trial calendar on the grounds that a motion to substitute was never filed pursuant to CPLR § 1021 and because BCGN was not personally served with process, thereby depriving the court of personal jurisdiction over BCGN.
DISCUSSION
The Parties Arguments
In support of the motion to substitute BCGN as plaintiff for Ms. Arthur, Ms. Arthur's counsel merely cites to CPLR § 1016 which provides that "[i]f a party is adjudicated incompetent or a conservator has been appointed, the court shall order substitution of [her] committee or conservator." The Lender Defendants argue that re-argument of BCGN's motion to vacate should be granted because there is no requirement that BCGN be served with separate process and that the case cited in support of that proposition in the court's decision to vacate, Horseman Antiques, Inc. vHuch, 50 A.D.3d 963 (2nd Dept 2008), is distinguishable since it involved the death of a party during the litigation and no case law requires a newly appointed Article 81 guardian being substituted as a party to be served with separate process to obtain personal jurisdiction over the guardian. In such instances, the Lender Defendants argue, the guardian "steps into the shoes" of the incapacitated party over whom the court has already obtained personal jurisdiction. The Lender Defendants alternatively argue that the motion to substitute BCGN has not been made within a reasonable amount of time given that it was appointed as Ms. Arthur's Article 81 guardian in January 2022 and it knew about this case at least by March 8, 2022 and did nothing for nine months thereafter.
In fact, it was not until over a year later on April 7, 2023 that BCGN moved to vacate the default judgment dismissing Ms. Arthur's complaint and the related order(s).
The Lender Defendants motion to re-argue BCGN's motion to vacate the substitution order and default judgment dismissing the case will be addressed first.
CPLR § 2221 (d)"A motion for leave to reargue . . . shall be based upon matters of fact or law allegedly overlooked or misapprehended by the court in determining the prior motion" (CPLR § 2221[d] [3]).
Ms. Arthur's counsel argues that the Lender Defendants are making new arguments in support of their motion to re-argue which is inappropriate. The Lender Defendants respond that BCGN did not raise the personal jurisdiction issue in its motion to vacate, so they did not have the opportunity to address the issue in the underlying motion. Since the court's decision granting BCGN's motion to vacate was based upon the determination that it did not have personal jurisdiction over BCGN, an issue not raised by BCGN in its moving papers, the Lender Defendants' are entitled to renewal (cfNRZ Pass-Through Trust IV v Rouge, 199 A.D.3d 466, 467 [1st Dept 2021] [observing that "given that the court had not previously ruled on defendant's motion for attorneys' fees ... its grant of defendant's motion for leave to reargue her motion was proper"] Dorador v Trump Palace Condominium, 190 A.D.3d 479, 481 [1st Dept 2021] [holding re-argument proper where court misapprehended the substance of a cause of action]).
Accordingly, the Lender Defendant's motion (MS # 19) to reargue BCGN's motion to vacate will be granted.
Whether BCGN's motion to vacate the substitution order and default judgment judgement dismissing the case should have been granted will now be revisited.
Substitution of BCGN
There is some support for the proposition that substitution pursuant to CPLR § 1016 should be effectuated by motion and not sua sponte by the court. Siegel New York Practice advises that "[w]hatever the event mandating or suggesting substitution, the procedure for it comes from CPLR 1021. The procedure is a motion, which should be on notice to all parties" (David D. Siegel NY Practice § 186 at 357 [6th ed 2018]). CPLR § 1021 entitled, in part "Substitution procedure . . ." provides that "[a] motion for substitution may be made by the successors or representatives of a party or by any party. . ." However, an Article 81 guardian is not a "successor[] or representative[]" for the protected party, here Ms. Arthur. Rather BCGN, Ms. Arthur's Article 81 guardian, is an agent of the court (In re Aho, 39 N.Y.2d 241, 246 [1976] ["the [guardian's] responsibility is only to function as agent of the court in the exercise of the latter's jurisdiction over the incompetent and his property"]). Pursuant to Mental Hygiene Law § 81.21(20) and the Guardianship Judgement BCGN was authorized and required to "initiate, defend or maintain any administrative or civil judicial proceeding" on behalf of Ms. Arthur (Guardianship Judgment at 6, NYSCEF Doc No 496 [emphasis provided]).
Ms. Arthur's counsel, taking a position contrary to their February 25, 2022 and March 4, 2022 letters to the court, argue that even though Horseman Antiques (the case cited in the July 5, 2023 vacate order) addressed substitution following the death of a party, CPLR § 1021 is the only mechanism for substitution. However, unlike when a party is appointed an Article 81 guardian thereby triggering CPLR § 1016, when a party to a case dies, the court is divested of jurisdiction and the case is stayed pending a proper substitution (Thomas v. Rubin, 197 A.D.3d 1061 [1st Dept 2021]). The death of party is treated differently from other instances requiring substitution because when a party dies the decedent's claim (or defense) inures to the estate of the deceased (see NY EPTL § 11-3-2 [b]). Conversely, when a party becomes incapacitated during the pendency of a case necessitating the appointment of an Article 81 guardian, the claim (or defense) remains with the party and the guardian steps in as a proxy for the incapacitated party; in other words, the guardian as an agent of the court steps in to maintain the incapacitated party's claim [or defense] (In re Aho, 39 N.Y.2d at 241; MHL § 81.21 [20]). Consequently, service of process on BCGN was not necessary and sua sponte substitution is and was permitted and appropriate (accord Paul v Ascher, 106 A.D.2d 619, 621 [2nd Dept 1984] [holding sua sponte substitution should have been ordered by the trial court pursuant to CPLR § 1015(a)]; Two 2elve Pugs Corp. v Kolody, 2019 Slip Op 30278[U], 2019 NY Mise LEXIS 473 *3 [NY Co S.C. 2019] [appointing a guardian sua sponte and amending the caption accordingly]). Therefore, the basis for vacating the default judgment dismissing the complaint was incorrect.
In its underlying motion to vacate (MS #17), BCGN argues it did not receive a copy of the March 8, 2022 substitution order, notwithstanding that Marjorie Varrichio appeared at the conference that day for BCGN, and that it did not know about the July 11, 2022 trial date. BCGN further asserts in the motion to vacate that it did know that MFJ would unilaterally decide to stop appearing on Ms. Arthur's behalf. BCGN's assertion it did know it was substituted in as plaintiff in this action is not credible in light of Ms. Varrichio's appearance on its behalf at the March 8, 2022 conference when the court indicated that BCGN would be substituted for Ms. Arthur. Nevertheless in light of the complicated issue as to who would move forward on Ms. Arthur's claims, her current counsel or BCGN, and the timing of the entry of the judgment and order appointing BCGN as Ms. Arthur's guardian, plaintiff/BCGN has established excusable default and the merits of Ms. Arthur's claims are established by the decision and order on the summary judgment motions (NYSCEF Doc Nos 452, 453 &454).
Nor does BCGN explain why as Ms. Arthur's guardian pursuant to MHL § 81.21 (entitled "property management") it did not query Ms. Arthur about where she was living prior to entering the hospital and then the nursing home. Indeed, the Guardianship court's September 10, 2020 decision and order provides the address of the apartment at issue in this case. Even a cursory inquiry of Ms. Arthur about the topic would likely have disclosed this case in light of the Guardianship court's determination that Ms. Arthur was agreeing to a guardian of her property freely, voluntarily and knowingly.
Accordingly, upon granting the Lender Defendants' motion (MS #19) to reargue BCGN's motion (MS #17) to vacate the default judgment entered dismissing plaintiff5 s complaint and related orders, the court adheres to its original determination as to vacating the default albeit for the different reasons set forth above.
As to whether BCGN should have been substituted as plaintiff pursuant to the March 8, 2022 order or should be substituted as a result of Ms. Arthur's counsel's pending motion (MS #18) there are additional considerations to address beyond the service of process arguments raised by BCGN in its underlying motion to vacate (MS #17). BCGN was appointed Ms. Arthur's guardian pursuant to MHL § 81.21 authorizing it to exercise those powers necessary to manage Ms. Arthur's property and financial affairs (NYSCEF Doc No 532). BCGN was not given powers "necessary and sufficient to provide for the personal needs" of Ms. Arthur pursuant to MHL § 81.22. BCGN was appointed to be Ms. Arthur's guardian after a hearing and determination by the Guardianship Court that that she clearly, freely and knowingly consented to the appointment of a guardian of her property and a finding that Ms. Arthur is a Person in Need of a Guardian because "she requires some assistance with her property management" (NYSCEF Doc No 531). The Guardianship Court's determination and findings suggest that Ms. Arthur is not completely incapable of understanding the nature of this action which she initiated eight years ago. In light of this and BCGN's failure to address whether it should be substituted in as plaintiff either in its underlying motion to vacate (MS #17) or on Ms. Arthur's counsel's motion to substitute BCGN as plaintiff (MS #18), BCGN should be afforded an opportunity to weigh in on Ms. Arthur's counsel's motion to substitute it as plaintiff in this case and should address in its papers whether some other option may be more appropriate such as joining it as a party or neither option because it determines that it need only assist in the prosecution of plaintiff s claims.
Accordingly, Ms. Arthur's counsel's motion to substitute BCGN as plaintiff (MS #18) will be re-calendared to afford BCGN an opportunity to weigh in on the issue of substitution.
CONCLUSION
Based on the foregoing, it is
ORDERED that the Lender Defendants' motion (MS # 19) pursuant to CPLR § 2221 (d) to re-argue BCGN's motion to vacate the judgment is granted; and it is further
ORDERED that upon re-argument the court adheres to its original determination to vacate the March 8, 2022 order and all subsequent orders and the judgment entered on October 5, 2022; and it is further
ORDERED that Ms. Arthur's counsel's motion (MS # 18) to substitute BCGN as plaintiff is re-calendared for January 11, 2024, for submission only, no appearance; with BCGN's papers due December 14, 2023 and responses to BCGN's papers due December 28, 2023 and BCGN's reply to any responsive papers due January 9, 2024.