Opinion
40436/07.
Decided February 24, 2011.
Kirschenbaum Philips for plaintiff.
Peter Porri — pro se.
This application raises troubling issues regarding the settlement of the Matter of Pfau v. Forster Garbus, et. al., the jurisdiction of this court and the entry clerk's default judgments.
BACKGROUND
Plaintiff has submitted a proposed ex parte order based upon the consent order entered in Matter of Pfau v. Forster and Garbus, et. al. ("Pfau Action") providing for the vacating of the default judgment entered against Peter Porri ("Porri") on May 21, 2008, permitting plaintiff to re-serve the summons and complaint upon Porri by certified mail, return receipt requested and first class mail or any other manner permitted by law within 120 days of the order and granting Porri 45 days from the date of the mailing of the summons and complaint to Porri to serve and file an answer. If Porri does not serve and file an answer within the permitted time, plaintiff can re-apply for the entry of a clerk's judgment.
According to papers contained in the court file, North Fork Bank ("North Fork") issued a commercial line of credit to Holbro Associates, LLC ("Holbro"). Holbro used the line of credit and defaulted in payment in April 2007.
On October 31, 2007, North Fork commenced this action against Holbro and Porri seeking to recover the amount due on the line of credit and legal fees as provided for in the line of credit agreement.
Porri was a member of Holbro. The line of credit agreement contains a provision whereby the signatories to the agreement personally guaranteed Holbro's obligations to North Fork. The complaint alleges Porri personally guaranteed Holbro's obligations to North Fork and seeks to recover from Porri on his guaranty.
This action was commenced on October 30, 2007. Uniform District Court Act § 400(a). Service was made upon Holbro on November 20, 2007 by serving the Secretary of State as statutory agent of the limited liability company. Limited Liability Company Law § 303(a).
There are no issues regarding service upon Holbro. The records of the Secretary of State indicate Holbro is an active, domestic limited liability company.
Service was allegedly made upon Porri pursuant to CPLR 308(4) by a process server from American Legal Process ("ALP"). Attempts to serve Porri were supposedly made at an address in Lynbrook on the evening of November 5, 2007 and at about noon on November 7, 2007. A third attempt to serve Porri was allegedly made at the Lynbrook address on November 17, 2007 at the 7:10 a.m. The affidavit of service avers that neither Porri nor a person of suitable age and discretion could not be found at the Lynbrook location on any of the these occasions. So on November 17, 2007 at 7:10 a.m., the process server claims to have affixed a copy of the summons and complaint to the door of the Lynbrook location. The affidavit of service states a copy of the summons and complaint was mailed to Porri at the Lynbrook address at which the affixing was performed on November 20, 2008.
Neither Holbro nor Porri appeared in the action. On May 21, 2008, a clerk's default judgment was entered against Porri and Holbro for the amount demanded in the complaint.
As best the court can determine, a copy of the judgment has never been served upon Holbro or Porri. No attempts appear to have been made to enforce the judgment. The judgment appears to remain wholly unsatisfied.
In 2010, Ann Pfau, as chief administrative judge of the courts of New York State Unified Court System commenced a special proceeding in Supreme Court, Erie County against numerous debt collection attorneys including the attorneys who represent plaintiff in this action seeking to vacate default judgments that had been entered in tens of thousands of cases. ("Pfau Action"). The Pfau Action was based upon allegations process servers from ALP were not making service upon defendants and were swearing to false affidavits of service. In most cases, the affidavits of service were for service made upon the defendant pursuant to CPLR 308(4). When the defendants failed to appear, plaintiff would enter a clerk's default judgment. In this case, such a judgment was entered against Porri.
William Singler the owner of ALP has pled guilty to notarizing affidavits of service even though he knew the process servers had not made service in the manner described in the affidavits of service. NYLJ 1/19/10, p. 1 col. 3
Part of the relief requested in the Pfau Action was to vacate all default judgments entered in cases in which service had been made by ALP unless service could be proven without reference to the ALP affidavit of service.
The Pfau Action was settled by consent order. The consent order provided for the attorneys for the creditors to send a "Stipulation and Affidavit" to all defendants against whom a default judgment had been entered based upon service made pursuant to CPLR 308(4) by a process server from ALP. The Affidavit and Stipulation provides as follows:
1. I am the defendant (person being sued) in the following lawsuit: [Caption of the action].
2. The Index Number is [Index Number of the Action].
3. I reside at (fill in you street address, apartment number, city, state and zip code)
[There are then two lines on which the defendant is to provide this information].
4. I have been informed that an affidavit of service states that the summons and complaint in this law suit was attached to my door [address at which the affidavit of services indicates the affixing was performed] on [date of affixing in the affidavit of service].
5. The summons and complaint was not attached to my door at this address on this date and the affidavit of service is either incorrect or false.
6. I request that the default judgment be vacated (annulled) and hereby consent to
a stipulation vacating the default judgment being filed by the plaintiff (the company suing me) pursuant to CPLR § 5015(b). I agree that this affidavit will be attached to a stipulation to vacate and shall constitute my signature on the stipulation to vacate.
7. I agree that if the default judgment is vacated, the plaintiff may serve me again with the summons and complaint by certified mail, return receipt requested and first class mail. I agree to the following:
a. I agree to accept service by certified and first class mail at the address I set forth in Paragraph 3 and to claim the certified mail.
b. In the event I am served again, I will have 45 days from the post marked date on the envelope in which I receive the summons and complaint to submit an answer. I understand that, in the event that I do not answer within
45 days, I may again be in default and may again have a judgment entered against me on the basis of my failure to respond.
c. I agree that in the event that I move after submitting this Affidavit and Stipulation I will file, and keep current, a valid change of address form with the United States Postal Service.
d. I agree that if the judgment is vacated, I will not receive back any money I have paid on the default judgment until a court orders the plaintiff to do so following a final decision of the lawsuit, or the plaintiff does not timely serve me again with the complaint, whichever comes first.
8. I agree that, for purposes of the statute of limitations (the time period within which the plaintiff was required by law to sue me), the lawsuit will be considered to have been brought on the date on which it was originally filed with the court. I also agree that the fact that I am being re-served more than 120 days after the plaintiff filed the lawsuit shall not serve as a basis for dismissing the lawsuit.
9. In exchange for having the default judgment vacated, I agree not to sue for any and all claims I have against (Plaintiff) and the firm of (Plaintiff's attorneys) due to the conduct or activities of the process server, ZMOD Process Corp. doing business as American Legal Process.
10. I understand that I may not cross out any parts of paragraphs 5, 6, 7, 8 or 9 of this Affidavit and Stipulation. I understand that I must provide my full and complete address. I understand that if I cross out any provisions, or fail to provide my full and complete address, the Affidavit and Stipulation will not be considered valid and the default judgment will stand.
11. I understand that by signing this Affidavit and Stipulation before a notary public, I am swearing to the truthfulness of my statement that the summons and complaint was not attached to my door on the date contained in paragraph 4 and the truthfulness of all other statements contain in this affidavit. I understand that if I submit this Affidavit and Stipulation without having my signature notarized, it will not be considered and the default judgment will stand."
The Affidavit and Stipulation has a line for the defendant's signature and a jurat to be signed and dated by a notary.
Porri completed Paragraph 3 by providing an address in South Carolina.
Although Porri signed the Affidavit and Stipulation and did not cross out any portions of paragraphs 5, 6, 7, 8 or 9, he added to the following to Paragraph 5, "We no longer lived in the house Nov. 17, 2007."The court takes this to mean Porri no longer resided at the Lynbrook address when service was purportedl of Paragraph 7 to read "I do not agree that if the default judgment is vacated, the plaintiff may y made.
Porri also modified the first sentence serve me again with the summons and complaint by certified mail, return receipt requested and first class mail." He also added at the end of the first portion of Paragraph 7 the following, "I was one of 3 partners and am not solely responsible."
Even though Porri made several changes and modifications to the Affidavit and Stipulation, plaintiff has submitted the proposed ex parte order discussed above.
DISCUSSION
A. Pfau Action — Affidavit and Stipulation
A stipulation is a contract that will be enforced in accordance with its terms. McKenzie v. Vintage Hallmark PLC, 302 AD2d 504 (2nd Dept. 2003) and Charter Realty Development Corp. v. New Roc Assocs., L.P., 293 AD2d 438 (2nd Dept. 2002). In order to have a binding contract, the party seeking to enforce the agreement must establish an offer, acceptance of the offer, consideration, mutual assent and an intent to be bound. 22 NY Jur2d Contracts § 9.
The Affidavit and Stipulation is an offer made by plaintiff to defendant to enter into a contract under the terms set forth in the stipulation. 22 NY Jur2d Contracts § 33. Paragraph 10 of the Affidavit and Stipulation make clear the terms of the offer may not be changed or modified by the defendant. Paragraph 10 makes clear the substantive provisions contained in Paragraphs 5, 6, 7,8 or 9 may not be modified in any way. If the defendant is willing to agree to the limited the relief proposed by the Affidavit and Stipulation, the defendant must insert his or her current residence address in Paragraph 3, accept the remaining terms "as is" and return the Affidavit and Stipulation signed and notarized.
By modifying the Affidavit and Stipulation, Porri was rejecting the offer and making a counteroffer. Jericho Group. Ltd. v. Midtown Development, L.P. , 32 AD3d 294 (1st Dept. 2006); and 22 NY Jur2d Contracts § 41. Since Porri modified the Affidavit and Stipulation, there was never a meeting of the minds regarding the terms of the agreement. Brands v. Urban, 182 AD2d 287 (2nd Dept. 1992). Therefore, the court cannot sign the order presented by the plaintiff.
B. Jurisdiction of the District Court — Service of Process
The court has inherent authority to review and vacate judgments. See, Woodson v. Mendon Leasing Corp., 100 NY2d 62 (2003). Based upon the application presently before this Court, the court believes it appropriate to fully review the matter and determine whether the judgment should have been entered in the first instance.
The District Court is a court of limited personal and subject matter jurisdiction. Siegel, New York Practice 4th § 20. Since this an action for money damages in which the amount sought is less than $15,000, the court has subject matter jurisdiction over this action. Uniform District Court Act § 202.
However, there are significant questions as to whether this court has personal jurisdiction over Porri. If Porri resided in South Carolina when this action was commenced, this court would have jurisdiction over Porri only if he transacted business in the county and the cause of action arose out of that transaction. Coffman v. National Union Fire Ins. Co. Of Pittsburgh, Pa., 60 Misc 2d 81 (Nassau Dist. Ct. 1969); and Uniform District Court Act § 404(a)(1).
The other provisions of the District Court's long arm statute, Uniform District Court Act § 404(a)(2)(3) are not relevant to this action.
If plaintiff is seeking to invoke the "long arm" jurisdiction of this court, plaintiff must plead facts in the complaint or state facts in the affidavit submitted in support of the motion or application for leave to enter a default judgment that establishes the court has personal jurisdiction over the non-resident. Young v. American Office Furniture, Inc., 15 Misc 3d 144(A) (App. Term 9th 10th Jud. Dists. 2007); and Manfre v. Abrams, 196 Misc 2d 631 (App. Term 9th 10th Jud. Dists. 2003).
The "affidavit of merit" used in support of the application for leave to enter the default judgment was the verified complaint. CPLR 105(u). The complaint does not contain any allegations that would support personal jurisdiction over Porri if he resided in South Carolina when the action was commenced.
CPLR 308(4) requires the summons and complaint to be affixed to the door of defendant's ". . . actual place of business, dwelling place or usual place fo abode within the state." If Porri did not reside at the address at in Lynbrook where the affixing was done, service was not properly made.
CPLR 308, the statute that establishes the methods for service upon a natural person, is strictly construed. Service must be made in the precise manner prescribed by statute. The defendant's subsequently obtaining notice of the pendency of the action does not cure defective or improper service. Feinstein v. Bergner, 48 NY2d 234 (1979); Krisilas v. Mount Sinai Hosp. , 63 AD3d 887 (2nd Dept. 2009); McMullen v. Arnone, 79 AD2d 496 (2nd Dept. 1981).
The burden of establishing jurisdiction has been obtained rests with the plaintiff. Washington Mutual Bank v. Holt , 71 AD3d 670 (2nd Dept. 2010).
Before service can be made upon a defendant pursuant to CPLR 308(4), plaintiff must establish it used due diligence in attempting to serve defendant pursuant to CPLR 308(1) or (2). Gureje v. Richardson , 59 AD3d 494 (2nd Dept 2009); and Crystal v. Lisnow , 56 AD3d 713 (2nd Dept. 2008). The due diligence requirement of CPLR 308(4) is strictly observed because of the reduced likelihood a summons and complaint served in this manner will actually be received. County of Nassau v. Letosky, 34 AD2d 314 (2nd Dept. 2006); Gurevitch v. Goodman, 269 AD2d 355 (2nd Dept. 2000); and Scott v. Knoblock, 204 AD2d 409 (2nd Dept. 1994).
The due diligence requirement of CPLR 308(4) requires the process server to make an effort to ascertain if the defendant is employed and the location of defendant's place of employment and if the defendant is employed, to attempt to effectuate service upon the defendant at defendant's place of employment pursuant to CPLR 308(1) or (2). Estate of Waterman v. Jones , 46 AD3d 63 (2nd Dept. 2007); County of Nassau v. Yohannan , 34 AD3d 620 (2nd Dept. 2006); Earle v. Valente, 302 AD2d 353 (2nd Dept. 2003); and Moran v. Harting, 212 AD2d 517 (2nd Dept. 1995. Before service can be made pursuant to CPLR 308(4), the process server must make a genuine inquiry regarding the defendant's whereabouts and place of employment. McSorely v. Spear, 50 AD3d 652 (2nd Dept. 2008).
If the defendant fails to exercise due diligence before the making service pursuant to CPLR 308(4), service is defective as a matter of law. Schwarz v. Margie , 62 AD3d 780 (2nd Dept. 2009); and Levinton, v. Unger, 56 AD3d 731 (2nd Dept. 2008).
The affidavit of service does not indicate whether the process server made any attempt to ascertain Porri's place of employment or actual whereabouts.
Plaintiff is suing to recover on Porri's personal guaranty of the business line of credit issued to Holbro. The application submitted to North Fork to obtain the line of credit states Porri is an owner of Holbro. Due diligence required the process server to, at a bare minimum, to attempt to serve Porri at Holbro's place of business.
If service is not properly made, the court lacked jurisdiction to enter the judgment, the judgment must be vacated and the action dismissed even if the defendant does not have a meritorious defense to the action. Commissioners of the State Ins. Fund v. Khondoker , 55 AD3d 525 (2nd Dept. 2008); Ananda Capital Partners, Inc. v. Stav Electric Systems, Ltd., 301 AD2d 430 (1st Dept. 2003); European American Bank Trust Co. v. Serota, 242 AD2d 363 (2nd Dept. 1997); Brent-Grand v. Megavolt, Corp., 97 AD2d 783 (2nd Dept. 1983); and Mayers v. Cadman Towers, Inc., 89 AD2d 844 (2nd Dept. 1982); and CPLR 5015(a)(4).
Since service was defective as a matter of law, the court never obtained jurisdiction over Porri.
C. Clerk's Default Judgment
The Pfau Action sought to vacate judgments solely on the grounds defendants had not been properly served. The Pfau Action did not addressed the issues regarding the substantive proof required to obtain a clerk's default judgment and the deficiencies in proof in many of the cases and specifically in this case.
A clerk's default judgment can be entered if the claim is for a sum certain, a sum that can be calculated arithmetically. Siegel, New York Practice 4th § 293: and CPLR 3215(a).
The entry of a default judgment is not a ministerial duty upon defendant's default. McGee v. Dunn , 75 AD3d 624 (2nd Dept. 2010); Resnick v. Lebovitz , 28 AD3d 533 (2nd Dept. 2006); and Gagen v. Kipany Productions, Ltd., 289 AD2d 844 (3rd Dept. 2001). Plaintiff must establish through proof in admissible form facts sufficient to establish a viable cause of action exists against defendant. Woodson v. Mendon Leasing Corp., supra; New South Ins. Co. v. Dobbins , 71 AD3d 652 (2nd Dept. 2010): Hosten v. Olapado, 44 AD3d 1006 (2nd Dept. 2007); and Feffer v. Malpeso, 210 AD2d 60 (1st Dept. 1994).
North Fork sues Porri on his personal guaranty of Holbro's obligations on a line of credit.
To establish a prima facie cause of action on a guaranty, plaintiff must prove the underlying obligation, the guaranty and the prime obligor's default in payment on the underlying obligation. Superior Fidelity Assurance, Ltd. V. Schwartz, 69 AD3d 924 (2nd Dept. 2010); and .E.D.S. Security Systems, Inc. v. Allyn, 262 AD2d 351 (2nd Dept., 1999). A guaranty must be in writing executed by the person to be charged. Schulman v. Westchester Mechanical Contractors, Inc., 56 AD2d 625 (2nd Dept. 1977); 63 NY Jur2d Guaranty and Suretyship § 48; and General Obligations Law § 5-701(a)(2).
The papers submitted in support of the default judgment establish the underlying obligation and Holbro's default in payment. The copy of the"Elite Credit Account Agreement" submitted to the court also contains a provision that the signatories to the agreement were personally guarantying Holbro's obligation on the agreement.
The copy of the "Elite Credit Account Agreement" submitted to the court in support of the application to enter a default judgment does not contain Porri's signature. Therefore, North Fork failed to establish the existence of a necessary element its prima facie cause of action on the guaranty. The proof submitted was insufficient to permit the entry of a clerk's default judgment against Porri on the guarantee.
This court has before it a sworn statement from defendant Porri in which he denies the address at which the affixing portion of service pursuant to CPLR 308(4) was his "actual place of business, dwelling place or usual place of abode within the state" on the date the affixing was done. Porri has specifically rejected the terms by which the judgment could be vacated by the Affidavit and Stipulation.
The affidavit of service is insufficient as a matter of law to establish service pursuant to CPLR 308(4) because it does not indicate any attempt was made to ascertain defendant's place of employment or to serve him at that location.
Finally, the proof presented in connection with the application to obtain the entry of a clerk's judgment was insufficient to establish the existence of the cause of action against Porri.
Therefore, the application for an order vacating the judgment entered on May 21, 2008, granting plaintiff leave to re-serve defendant by certified mail, return receipt requested and regular mail and granting defendant 45 days from the date of service to serve and file an answer is denied.
Since service was defective as a matter of law and plaintiff failed to establish its entitlement to enter a default judgment against Porri, the judgment against Porri must be vacated and the action against him dismissed without prejudice with leave to recommence.
SO ORDERED: