Opinion
Index No. 150245/2023
10-10-2024
Cipriani Club Residences at 55 Wall Condominium, BY ITS BOARD OF MANAGERS, Plaintiff, v. 55 Wall Street HC 905 LLC, NEW YORK CITY DEPARTMENT OF FINANCE, NEW YORK STATE DEPARTMENT OF TAXATION & FINANCE, DYLAN HOWARD, and ANIL BANSAL, Defendants.
Schwartz Sladkus Reich Greenberg Atlas LLP, New York, NY (Solomon A. Frager of counsel), for plaintiff. Sutton Sachs Meyer PLLC, New York, NY (Zachary G. Meyer of counsel), for defendants 55 Wall Street HC 905 LLC and Dylan Howard.
Unpublished Opinion
Schwartz Sladkus Reich Greenberg Atlas LLP, New York, NY (Solomon A. Frager of counsel), for plaintiff.
Sutton Sachs Meyer PLLC, New York, NY (Zachary G. Meyer of counsel), for defendants 55 Wall Street HC 905 LLC and Dylan Howard.
Gerald Lebovits, J.
In this action to foreclose on a common-charges lien, this court previously granted default judgment to plaintiff, Cipriani Club Residences at 55 Wall Condominium (55 Wall), against various defendants, including the condominium-unit-owner, 55 Wall Street HC 905 LLC (HC 905), and the unit's former occupant, Dylan Howard. (See Cipriani Club Residences at 55 Wall Condominium v 55 Wall St. HC 905 LLC, 2023 NY Slip Op 51100[U] [Sup Ct, NY County 2023].) HC 905 and Howard now move under CPLR 5015 to vacate the default judgment and permit them to assert an answer and counterclaims. 55 Wall cross-moves under CPLR 3217 to discontinue the action as against Howard. The motion to vacate is denied. The cross-motion to discontinue is granted without opposition.
55 Wall explains that it had previously named Howard because it believed him to be a necessary party as, in effect, the tenant of unit-owner HC 905. Given Howard's representation on this motion that he had vacated the unit in 2022 (and, indeed, moved to Australia), 55 Wall says, it is clear that he is not a necessary party and need not be named in the action. And Howard/HC 905 consent to the discontinuance of 55 Wall's claims against Howard.
DISCUSSION
1. As an initial matter, HC 905 relies for factual support on this motion on its proposed party-verified answer with counterclaims, asking this court to treat it as an affidavit under CPLR 105 (u). (See NYSCEF No. 37 [proposed answer].) 55 Wall contends that this court should decline to treat the answer as an affidavit because the court has not yet rendered a decision on whether to permit defendants to file it out of time. This contention is unpersuasive. 55 Wall conflates two different questions-whether a signed document that the signatory intends to offer as a pleading if permitted to do so, may properly be treated as an affidavit when it is verified on personal knowledge under penalty of perjury; and whether the signatory should be permitted to offer the document as a legally operative pleading. The latter question in this action, which has not yet been resolved, is addressed below. The court concludes that the answer to the former question should be yes, given the indicia of reliability provided by the sworn verification and defendants' stated intent to offer the proposed answer as their responsive pleading. 55 Wall provides no contrary authority on this point.
The court's conclusion in this respect gains force from (but does not depend on) the Legislature's recent amendments to CPLR 2106, which liberalized the use of affirmations as affidavit-equivalents in New York practice. (See L 2023, ch 559, § 1.)
On the merits of the motion, 55 Wall contends that the motion should be denied because defendants have provided neither a reasonable excuse nor a potentially meritorious defense. This court disagrees with respect to reasonable-excuse.
2. HC 905's proffered reasonable excuse is that (i) service was made through the Secretary of State; (ii) HC 905's service address on file with the Secretary is the unit itself; and, as a result, (iii) HC 905 did not receive service from the Secretary because the unit's occupant (Howard) had moved to Australia and HC 905 had not arranged for mail-forwarding to a different address. 55 Wall argues that this explanation (in essence, failure to maintain an up-to-date address with the Secretary of State) does not constitute a reasonable excuse for purposes of CPLR 5015 (a) (1). (See NYSCEF No. 50 at 4 ¶ 20, citing Gomez v One Sickles St. Co., LP, 169 A.D.3d 597, 597 [1st Dept 2018].) That may be. But CPLR 5015 is not the only available avenue for vacating a defendant's default.
Unlike CPLR 5015 (a) (1), CPLR 317 does not require that movant show that the excuse for defendant's failure was reasonable -only that defendant "did not personally receive notice of the summons in time to defend," following service through means "other than by personal delivery." (CPLR 317; cf. Figueroa v Relgold, LLC, 178 A.D.3d 425, 426 [1st Dept 2019] [holding that this prong of the CPLR 317 analysis is satisfied by a movant's representation that it "did not receive timely notice of the action on account of an outdated business address on file with the Secretary of State"].) True, HC 905 moves only under CPLR 5015, not also CPLR 317. But this court "has the discretion to treat a CPLR 5015(a) motion as having been made as well pursuant to CPLR 317." (Eugene Di Lorenzo, Inc. v A.C. Dutton Lbr. Co., 67 N.Y.2d 138, 143 [1986].) The court concludes it should exercise its discretion here to treat the motion as brought under both provisions.
3. Whether considered under CPLR 317 or 5015, HC 905 still must also show a potentially meritorious defense. This court agrees with 55 Wall that HC 905 has not done so. As 55 Wall argues, Appellate Division precedent makes clear that HC 905's complaints about the condition of the unit, and its arguments that 55 Wall was failing in its responsibility to maintain the building properly and conduct necessary repairs, do not constitute a valid basis to withhold common charges-whether or not those arguments could support damages claims by HC 905 against 55 Wall. (See Board of Mgrs. of 200 W. 109 Condominium v Baker, 244 A.D.2d 229, 229 [1st Dept 1997]; Matter of Abbady (Mailman), 216 A.D.2d 115, 115-116 [1st Dept 1995].) HC 905 does not provide contrary authority that might support its right to withhold common charges in these circumstances. And HC 905 does not contest the common charges themselves, or dispute that a condominium-unit-owner's failure to pay valid common charges will support a lien-foreclosure action by the condominium. HC 905 does not have a potentially meritorious defense to 55 Wall's claim that it has a right to foreclose on its common-charges lien.
HC 905 argues on reply that it has potentially meritorious notice-based defenses to the lien foreclosure. (See NYSCEF No. 49 at 9-10 ¶ 28 [reply mem. of law]; NYSCEF No. 37 at 12 [28th affirmative defense in proposed answer].) This court disagrees. HC 905 relies on two sets of notice provisions: UCC 9-611 and 9-612, and Real Property Law Actions and Proceedings Law (RPAPL) 1304 and 1306. Neither set of provisions bound 55 Wall here.
UCC article 9 does not apply to "the creation of [a]... lien on real property" (UCC 9-109 [d] [11].) And a residential condominium unit is real property. (Real Property Law § 339-g.) RPAPL 1304 (1) imposes specified notice obligations on "a lender, an assignee or a mortgage loan servicer" that intends to commence legal action "with regard to a home loan" against the "borrower, or borrowers" on that loan. 55 Wall is not one of the specified plaintiffs; and this is not an action on a home loan. RPAPL 1306 (1) requires that a "lender, assignee, or mortgage loan servicer" provide enumerated categories of information to the superintendent of financial services upon mailing an RPAPL 1304 (1) notice. Because no § 1304 notice was required here, § 1306 is irrelevant.
UCC 9-109 (d) (11)'s limitation on the scope of article 9 is subject to a few narrow exceptions; but a common-charges lien on a condominium unit is not one of them. (See UCC 9-109 [d] [11] [A]-[E] [enumerating exceptions].).
RPAPL 1306 (1) also requires notice to the superintendent upon mailing of a notice required by UCC 9-611 (f). That subsection's scope is expressly limited to foreclosure of shares in residential cooperative apartments-not foreclosure of common-charges liens on residential condominium apartments.
HC 905 thus has not established that it has a potentially meritorious defense to 55 Wall's lien-foreclosure claims.
HC 905 suggests in passing that its proposed answer contains other potentially meritorious defenses beyond those discussed above. (See NYSCEF No. 6 ¶ 16.) But HC 905 does not provide evidence or legal argument that might support other defenses. Nor did this court's own independent review of HC 905's proposed answer identify any additional defenses of even arguable merit.
4. HC 905 also contends that the grant of default judgment on 55 Wall's lien-foreclosure claim should be vacated because HC 905 has potentially meritorious counterclaims, as set forth in its proposed answer-with-counterclaims. This court is not persuaded that HC 905's proposed counterclaims warrant vacating judgment on 55 Wall's main claim.
New York's "permissive counterclaim rule allows counterclaims to be raised through separate litigation even if interposed as a defense in prior litigation." (Classic Autos. v Oxford Resources Corp., 204 A.D.2d 609, 609 [1st Dept 1994].) In other words, HC 905 may maintain its various damages counterclaims in a new action, whether or not this court vacates the lien foreclosure. Conversely, as discussed above, the availability of those damages counterclaims does not affect the legal obligation of HC 905 to pay common charges that underlies 55 Wall's lien foreclosure claim. It would make little sense to vacate an otherwise-valid order granting lien foreclosure to permit the assertion of damages claims that are effectively independent of that foreclosure.
Because awarding HC 905 damages against 55 Wall for damage to its condominium unit would not call into question 55 Wall's right to have foreclosed on its lien on that unit, this case does not come within the scope of the exception to New York's permissive-counterclaim rule. That exception bars a defendant from "remain[ing] silent in one action, then bring[ing] a second suit on the basis of a pre-existing claim for relief that would impair the rights or interests established in the first action." (Classic Autos., 204 A.D.2d at 209.) For the reasons given above, the exception does not apply here.
Given the (lack of) legal relationship between the claim and the (proposed) counterclaims in this action, the court concludes that the existence of those potential counterclaims does not warrant vacatur of the default judgment, whether or not they might have merit.
Accordingly, it is
ORDERED that HC 905's motion to vacate this court's decision entered October 12, 2023, is denied; and it is further
ORDERED that 55 Wall's cross-motion to discontinue the action as against defendant Dylan Howard is granted without opposition, and 55 Wall's claims as against Dylan Howard are dismissed, no costs; and it is further
ORDERED that 55 Wall shall, within 14 days of service of a copy of this order with notice of its entry, submit an updated order on motion sequence 001 for settlement (and shall do so by e-filing on NYSCEF and email to SFC-Part7-Clerk@nycourts.gov); and it is further
ORDERED that within 14 days of 55 Wall's submission of an updated order for settlement, HC 905 shall notify the court (by e-filing and email to the address given above) whether it consents to 55 Wall's updated proposed order, or, if not, shall file a proposed counter-order; and it is further
ORDERED that 55 Wall shall serve notice of entry on defendants Howard and HC 905 by efiling, and on all other parties to this action by certified mail, return receipt requested, directed to their respective last-known addresses.