Opinion
Index No. 452507/2021 Motion Seq. No. 001
12-14-2023
TEACHERS' RETIREMENT SYSTEM OF THE CITY OF NEW YORK Plaintiff, v. DAVID DUBNER, Defendant.
Unpublished Opinion
MOTION DATE 08/25/2023
DECISION + ORDER ON MOTION
J. MACHELLE SWEETING, JUSTICE
The following e-filed documents, listed by NYSCEF document number (Motion 001) 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 16, 17, 18, 19, 20, 21,22, 23 were read on this motion to/for JUDGMENT - DEFAULT.
In the underlying action, plaintiff Teachers' Retirement System Of The City Of New York ("TRS") claims that defendant David Dubner ("defendant") received and retained an overpayment in the sum of $123,560 from TRS, which rightfully belongs to TRS.
Now pending before the court is a motion where plaintiff seeks a default judgment against defendant in the sum of $123,560, together with costs and disbursements of the action, for failing to timely answer or move with respect to the complaint, or in the alternative, an inquest and assessment of damages or a reference for a determination of damages.
Also pending before the court is a cross-motion where defendant seeks an order, pursuant to Civil Practice Law and Rules ("CPLR") 3215(c), directing the clerk to dismiss the Complaint for plaintiffs failure to timely move for a default judgment within one year after service of the Complaint of this action.
Defendant did not file a reply to the cross-motion, and on September 29, 2023, counsel for defendant confirmed in writing that no reply was intended.
Counsel for both parties appeared before the court on December 14, 2023 and oral arguments on the motion, which were made on the record, are incorporated herein.
Arguments Made by the Parties
TRS argues that Philip H. Hanan ("Hanan"), who received pension payments from TRS, passed away on June 16, 2014. Hanan's pension was a lifetime benefit and was supposed to cease when Hanan died, but because TRS was never notified of the death, TRS continued to pay pension benefits to Hanan's account, maintained at JPMorgan Chase bank ("JPMorgan"), until October 31, 2016, when TRS finally learned that Hanan had passed. Defendant, who was the domestic partner/husband of Hanan, is in receipt of the overpayment, which amounts to $123,560. TRS argues that defendant did not timely appear, move or answer with respect to the Complaint, and the court should now issue a default judgment in TRS's favor. In support of these arguments, plaintiff submits a sworn affidavit (NYSCEF Doc. No. 9) from George Guz, who is the manager of the Death Benefits Unit for TRS.
TRS' motion was filed on August 25, 2023. Defendant first appeared in this action 11 days later, on September 5, 3023, by his counsel, Joseph Giaramita, Esq., who filed a Notice of Appearance on the same date. Defendant has not filed an Answer. In the cross-motion, defendant does not dispute that he is in receipt of an overpayment in the amount of $123,560, nor does he dispute that he did not timely appear, move or answer the Complaint. However, defendant argues that the time for the plaintiff to move for a default judgment with respect to the Complaint had long expired, as the Complaint in this action was filed on July 21, 2021, but plaintiffs instant motion was not filed until over two years later, on August 24, 2023. Defendant argues that CPLR 3215(c) directs the court to dismiss this action as abandoned because plaintiff failed to timely seek a default judgment within one year.
In Reply, TRS argues, first, that defendant "fails to provide a reasonable excuse or meritorious defense to vacate their default in appearing," and that defendant "must provide a reasonable excuse for the default and demonstrate a meritorious defense to the action." TRS argues, second, that the court cannot entertain defendant's cross-motion because defendant has not yet filed an Answer.
TRS argues, third, that it is not necessary for a plaintiff to actually obtain a default judgment within one year of the default as long as plaintiff "manifests an intent not to abandon the case but to seek a judgment." Here, plaintiff argues, they did not intend to abandon the action, but instead delayed seeking a default judgment because they were waiting for JPMorgan to provide information responsive to TRS's subpoenas (discussed in detail below). TRS argues that JPMorgan was unresponsive to TRS's first and second subpoenas, and it was not until TRS served a third subpoena that JPMorgan finally responded. In support of these arguments, TRS attached a copy of three different ex-parte orders they had obtained against JPMorgan (NYSCEF Doc. No. 22). Accordingly, TRS argues, the delay in seeking a default judgment was caused by JPMorgan, and TRS's motion for a default judgment should be granted even though it was filed late.
Conclusions of Law
Vacating a default judgment
The court first notes that the arguments made by TRS in its reply regarding vacating a default judgment are inapplicable, as no default judgment has been issued in this case.
Defendant's cross-motion
Contrary to TRS's argument that the court cannot hear defendant's cross-motion because defendant has not yet filed an Answer. The opposite is true. Had defendant filed an Answer, he would have waived his right to seek dismissal of the Complaint under CPLR 3215(c). See, e,g., Myers v Slutsky, 139 A.D.2d 709 (2d Dept 1988):
It is the plaintiffs contention that the defendant's belated service of an answer, along with discovery demands, constituted a waiver of the defendant Foster's right to seek dismissal of the complaint pursuant to CPLR 3215(c). We agree. [...] the filing of a notice of appearance and answer would generally be an appearance in the action and therefore make the provisions of CPLR 3215(c) inapplicable [...]. CPLR3215(c) prevents a plaintiff from taking advantage of a defendant's default where the plaintiff has also been guilty of inaction. The service of an answer and demand by a defendant, without taking advantage of the provisions of CPLR 3215(c), constitutes a waiver of the benefits of that section [...].See also Hodson v Vinnie's Farm Mkt., 103 A.D.3d 549 (1st Dept 2013) ("The court properly declined to dismiss plaintiffs complaint as "abandoned" under CPLR 3215(c) [because] That subdivision does not apply where, as here, the defendants served answers, albeit unverified ones"). Accordingly, the court considers both plaintiffs motion and defendant's cross-motion on the merits. CPLR 3215(c)
It is undisputed on this record that defendant did not timely answer the Complaint. CPLR 3215(c) provides, in relevant part:
If 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].
"This statute is strictly construed, as the language of CPLR 3215(c) is not, in the first instance, discretionary, but mandatory inasmuch as courts 'shall' dismiss claims for which default judgments are not sought within the requisite one year period, as those claims are then deemed abandoned" [emphasis added] (Sunrise Acupuncture PC v Travelers Home and Mar. Ins. Co., 63 Misc.3d 1211(A) [NY Civ Ct 2019]). "Pursuant to CPLR 3215(c), where a plaintiff fails to move for a default judgment within a year of the defendant's default in answering or appearing, dismissal of the action is required, either upon motion or sua sponte, except where sufficient cause is shown why the complaint should not be dismissed. Sufficient cause requires a reasonable excuse for the delay in timely moving for a default judgment and to demonstrate that the cause of action is potentially meritorious" (U.S. Bank N.A. as Tr. for Greenpoint Mtge. Funding Tr. Mtge. Pass-Through Certificates, Series 2007-AR1 v Nunez, 190 A.D.3d 660 [1st Dept 2021]).
Here, it is undisputed that plaintiff TRS failed to move for a default judgment within a year of the defendant's default in answering or appearing. The question now becomes whether TRS has shown sufficient cause why the complaint should not be dismissed, by showing a reasonable excuse for the delay, and demonstrating that the cause of action is potentially meritorious.
With respect to whether the cause of action is potentially meritorious, the court finds that it is, as there is no dispute on this record that defendant was unjustly enriched by $123,560.
Reasonable excuse by TRS
As to whether TRS had a reasonable excuse for the delay in filing, the undisputed timeline of the filings on the New York State Court System's Electronic Filing ("NYSCEF"), shows:
On June 4, 2021, TRS filed a petition against JPMorgan in Kings County Supreme Court under Index Number 513394/2021. In this petition (NYSCEF Doc. No. 1), TRS argued:
10. Hanan's account received pension payments from TRS until October 31, 2016. Payments received after June 16, 2014, were improperly negotiated and withdrawn from the respondent, JPMCB N.A, account # ending 5611. This matter arises out of the overpayments for pension payments made to Hanan after death from June 17, 2014 through and including October 30, 2016 in the net amount of $123,650.70, plus interest (the "Overpayments").
11. TRS maintains a computers system for storing pension account information including the pension for Hanan which reflects the net amounts disbursed from his pension after his death and the calculation of the amounts owed TRS due to overpayments.
12. Causes of action exist for the recovery of the Overpayments that were made, because the beneficiary recipient, Hanan, was deceased at the time of the aforesaid Overpayments, and no pension benefit payments were due after his death. Yet, the pension funds that were deposited in Hanan's bank account at JPMCB N.A., were transferred, withdrawn or disbursed after death by unknown person(s) and the funds are no longer in the account. TRS seeks information to identify this person or persons.
13. The overpayment balance due to TRS is in the net sum of $123,650.70.
14. The unknown person(s) who improperly negotiated the pension payments of the deceased, Hanan, and withdrew, wrote checks against and/or transferred the pension funds out of the subject bank account after death, utilizing pension funds that belong to TRS, have been unjustly enriched, improperly negotiated financial instruments without proper authority, and converted the same for their own benefit and use.
[emphasis added]
Three days later, on June 7, 2021, the Hon. Lillian Wan signed the proposed ex-parte order (NYSCEF Doc. No. 6), that stated, in part: "ORDERED that the Applicant may serve a subpoena duces tecum in the form attached to the application on the Respondent who shall respond in the time set forth in said subpoena." The proposed subpoena itself (NYSCEF Doc. No. 2) provided, in part, that JPMorgan was to produce:
Copies of all bank statements, withdrawal slips, wires, ACHs, transfers out of the account, and copies of checks (front and back) deposited into the account and copies of checks (front and back) drawn on the account and any other records and information regarding the identity cf the party or parties who had access to the account and who withdrew or tramferred funds front said account, and produce all the foregoing for accounts where funds were transferred to (from June 17, 2014 through to Present), all documents evidencing power of attorney, court order, and executor of the estate effective between, as well as images of checks drawing on the account June 16, 2014 through the present and a Certification of the Business Records [...] [emphasis added]
Approximately six weeks later, on July 21, 2021, TRS filed the Summons and Complaint in the instant action (NYSCEF Doc. No. 1). The Summons and Complaint named "David Dubner" as the defendant. The Complaint stated, in part:
9. Due to a delay between Phillip H. Hanan's date of death, on or about June 16, 2014, and TRS's learning of his passing on or around October 31, 2016, TRS overpaid Phillip H. Hanan's pension benefits in the sum of $123,560.70 (the "Overpayment").
10. The overpayment funds were directly deposited into a JP Morgan Chase bank account held by the pensioner ending in 5611.
11. Upon information and belief, David Dubner received, retained, and expended the Overpayment by issuing checks in the name of the pensioner Phillip H. Hanan to himself.
Eight days later, on July 29, 2021, the Summons and Complaint were served on defendant David Dubner (Affidavit of Service at NYSCEF Doc. No. 3).
Approximately four months later, on November 22, 2021, plaintiff TRS filed a second petition against JPMorgan in Kings County Supreme Court, this time under Index Number 529889/2021. This second petition (NYSCEF Doc. No. 1), which was virtually identical to the first petition, resulted in the issuance of a second ex-parte order (NYSCEF Doc. No. 6) signed by the Hon. Kenneth Sherman on November 24, 2021. This second ex-parte order and corresponding subpoena (NYSCEF Doc. 2) were identical to the one described above that was signed in connection with the first petition filed by TRS.
Approximately four months later, on February 18, 2022, TRS filed a third petition against JPMorgan in Kings County Supreme Court, this time under Index Number 505136/2022. This petition (NYSCEF Doc. No. 1) was virtually identical to the first two petitions, and paragraphs 10-14 were again duplicated word for word. This third petition resulted in the issuance of a third ex-parte order (NYSCEF Doc. No. 6) signed by the Hon. Cenceria Edwards on February 22, 2022. This third ex-parte order and corresponding subpoena (NYSCEF Doc. No. 2) were identical to the ones described above that were signed in connection with the first and second petitions filed by TRS.
TRS filed the Affidavit of Service in the instant action on August 6, 2021 (NYSCEF Doc. No. 3), but made no other filings whatsoever for over two years, until it filed the instant motion on August 25, 2023. As detailed above, TRS obtained its first ex-parte order on June 7, 2021 and was thereafter able to identify defendant David Dubner by name, before the Summons and Complaint were even filed. This is evidenced by the fact that the month after TRS obtained the first ex-parte order, TRS filed the instant Summons and Complaint, both of which clearly and properly name the defendant. It is unclear on this record why TRS found it necessary to obtain two additional ex-parte orders when TRS already had the name of the defendant, yet TRS waited for two years to seek a default judgment. See MTGLQ Inv'rs, L.P, v Shay, 190 A.D.3d 527 (1st Dept 2021) ("Because plaintiff did not move for a default judgment until well after one year after Eaton's default in responding to the original complaint, [...] dismissal was appropriate under CPLR 3215(c) - notwithstanding plaintiffs inability to bring a new action due to expiration of the statute of limitations"); NYCTL 2017-A Tr. v Ghiselli, 215 A.D.3d 427 (1st Dept 2023) ("This amounts to a total of at least 17 months, substantially exceeding the one-year period plaintiffs were afforded by CPLR 3215(c) in which to seek entry of a default judgment. We have considered and rejected plaintiffs' arguments that, notwithstanding the untimeliness of their motion, they have shown sufficient cause why the complaint should not be dismissed. In particular, plaintiffs are not entitled to benefit from a so-called "self-imposed stay" on their own conduct of this litigation [...]") [internal citations omitted].
Conclusion
For the reasons cited above, it is hereby: ORDERED that TRS's motion for a default judgement is DENIED; and it is further
ORDERED that defendant's cross-motion to dismiss is GRANTED, without prejudice, with leave for plaintiff to re-file.