The proper mecanism to vacate a motion for summary judgment granted on default is through 5015(a)

Two points of law.

First, late answering papers should be accepted if there is a reasonable basis for their untimeliness.  Absent papers being served a week or less before the return date, it seems unfortunate that attorneys wish to play the “late opp we will not accept game.”  I keep a list of people who do this to me, along with a stack of proposed EBT and SJ motions.

Second, a motion to vacate an order granting an award of summary judgment on default should be addressed through a CPLR 5015(a) motion.  Be aware, however, that there is First Department precedent that suggests that the proper mechanism to address this type of default is through a motion to renew.

Friendly Physician, P.C. v GEICO Ins. Co., 2010 NY Slip Op 51772(U)(App. Term 2d Dept. 2010).

Now the highlights of this case..

“In this action by a provider to recover assigned first-party no-fault benefits, plaintiff moved for summary judgment. When defendant attempted to file opposing papers almost a month after their stipulated due date, the Civil Court rejected defendant’s papers and, by order dated October 15, 2007 (Robin D. Garson, J.), granted plaintiff’s motion on default. In November 2007, defendant moved to vacate the October 15, 2007 order pursuant to CPLR 5015 (a) (1). By order entered November 19, 2007 (Peter Paul Sweeney, J.), the Civil Court denied defendant’s motion without prejudice, stating that “[d]efendant is granted leave to submit a motion to reargue or renew before Judge Garson, who initially granted the judgment in dispute.” The instant appeal by defendant ensued.”

“The affirmations of the attorneys employed by the law firm representing defendant satisfied these criteria.”

“We note that, contrary to the Civil Court’s direction, relief from an order granted upon default should be sought by means of a motion pursuant to CPLR 5015, not by a motion to renew or reargue”

Party seeking to vacate a default based upon intrinsic fraud must demonstrate a reasonable excuse

A.M. Med. Servs., P.C. v Liberty Mut. Ins. Co., 2010 NY Slip Op 20416 (App. Term 2d Dept. 2010)

“Defendant argued that the default judgment had been obtained through plaintiff’s fraud, misrepresentation or misconduct since the claim forms plaintiff had annexed to its motions contained handwritten notations which were not on the original claim forms included with the complaint and provided to defendant, and the motions were supported by affidavits containing false statements”

By the way, this “intrinsic fraud” was discussed in:  PDG Psychological, P.C. v. State Farm Ins. Co., 9 Misc.3d 172 (Civ. Ct. Queens Co. 2005).

Here is the rule of law: “CPLR 5015 (a) (3) provides that a judgment may be vacated on the ground of “fraud, misrepresentation, or other misconduct of an adverse party.” When a defendant’s CPLR 5015 (a) [*2](3) motion alleges intrinsic fraud – – i.e., that the plaintiff’s allegations are false – – the defendant must also provide a reasonable excuse for its default (see Bank of NY v Stradford, 55 AD3d 765 [2008]; Bank of NY v Lagakos, 27 AD3d 678 [2006]).

In support of its motion, defendant argued that plaintiff had submitted affidavits which contained false statements and that plaintiff had annexed to its motion papers false documentation. Defendant was, thus, alleging that plaintiff had obtained the default judgment through “intrinsic fraud” (Bank of NY v Lagakos, 27 AD3d at 679). Consequently, defendant was required to show a reasonable excuse for its default (see Bank of NY v Stradford, 55 AD3d at 765-766), which defendant failed to do. The affirmation of defendant’s attorney did not show that counsel had personal knowledge of any facts pertaining to the alleged law office failure and, therefore, the affirmation was insufficient to establish an excuse for the default (see Incorporated Vil. of Hempstead v Jablonsky, 285 AD2d 553, 554 [2001]). Further, since defendant’s attorney’s “supplemental” affirmation was, in fact, a reply affirmation, the factual allegations asserted for the first time therein must be disregarded (see McNair v Lee, 24 AD3d 159 [2005]; Juseinoski v Board of Educ. of City of New York, 15 AD3d 353, 355 [2005]).”

There was a dissent that unearthed certain issues regarding what comprised the law office failure.  The attorneys named in the dissent are competent and good attorneys, having worked with both of them.   As those who practice no-fault or other types of mass collection practices know, the nature and volume of these types of practices sometimes causes things to go awry.

Defaults again

If you remember, the Appellate Term and Appellate Division has been beginning, in no-fault cases, to require the movant of a default judgment to offer proof, somewhat similar to that necessary to prevail on a summary judgment motion, in order to take a default.

Gerdes v Canales, 2010 NY Slip Op 05358 (2d Dept. 2010)

In this personal injury case, the Supreme Court allowed entry of a default based upon the Plaintiff driver rear-ending the Defendant.  For those of you who read this and are unfamiliar with certain aspects of automobile negligence litigation, the rule is simple.  An unexplained rear-end collision raises a presumption of negligence on the part of the rear-ending vehicle.  Thus, under the new rules where the proof in support of a default has to be somewhat similar to that of a summary judgment motion, the Supreme Court should not have granted leave to enter a default judgment.

The Appellate Division reversed.  But, here is where the rub is.  They reversed – not on the ground that the proof presented was insufficient, in the first instance to allow leave to enter a default judgment. Rather, they reversed on the typical 5015(a)(1) grounds.

This is troubling, but nothing surprises me anymore in the world of litigation.  I think this may be DG’s next foray into a law journal article.

Another doozy of a default decision

Balance Chiropractic, P.C. v Property & Cas. Ins. Co. of Hartford, 2010 NY Slip Op 50889(U)(App. Term 2d Dept. 2010)

“The motion was unopposed. The Civil Court denied the motion, and this appeal by plaintiff ensued.

In support of its motion, plaintiff proffered neither an affidavit nor a verified complaint by a party with personal knowledge setting forth the factual basis for the claim, as is required by CPLR 3215 (f). Rather, plaintiff submitted a complaint verified by counsel, who did not demonstrate personal knowledge of the facts, and an affidavit of the president of a third-party billing company, which affidavit did not establish that the documents annexed to plaintiff’s motion were admissible pursuant to CPLR 4518 (see Art of Healing Medicine, P.C. v Travelers [*2]Home & Mar. Ins. Co., 55 AD3d 644 [2008]; Andrew Carothers, M.D., P.C. v Geico Indem. Co., 24 Misc 3d 19 [App Term, 2d, 11th & 13th Jud Dists 2009]; Dan Med., P.C. v New York Cent. Mut. Fire Ins. Co., 14 Misc 3d 44 [App Term, 2d & 11th Jud Dists 2006]).”

It is a motion to enter a default.  The non-answering party admits all traversable allegations.  A bill was sent, it is overdue.  Assuming that a business record foundation is necessary to establish a prima facie case, the failure to object to this “defect” renders it waived.  A default renders the defect waived.

Yet, even if a business record foundation is non-waivable, this “defect” is conceded through the failure to timely answer, appear or otherwise move.

So the court is way off on this one, similar to the decision in New South Insurance, where we (the defense bar) were told that it is easier for us to obtain a jury verdict on a contested staged accident case, then it is to obtain a default judgment in the same case.

Here is the real question, and I asked this one after New South Insurance was decided:  why the heck was this appealed?  Actually, this question is better: how come Plaintiff did not enter a clerk’s judgment, and sought to enter a default on notice?

Default vacated on CPLR 317 grounds

Nursing Personnel Homecare v New York Cent. Mut. Fire Ins. Co., 2010 NY Slip Op 50450(U)(App. Term 2d Dept. 2010)

“In support of defendant’s motion to vacate the default judgment, there was more than a “mere denial” of [*2]receipt of the summons and complaint (see Montefiore Med. Ctr. v Auto One Ins. Co., 57 AD3d 958, 959 [2008]). Defendant submitted an affidavit from one of its no-fault litigation examiners, who had personal knowledge regarding defendant’s practices and procedures in retrieving, opening and filing its mail and in maintaining its files on existing claims. In said affidavit, the no-fault litigation examiner stated that defendant had never received the summons, the complaint or the motion for a default judgment (cf. Westchester Med. Ctr. v Philadelphia Indem. Ins. Co., 69 AD3d 613 [2010]). Accordingly, pursuant to CPLR 317, defendant met its burden of showing that it did not receive actual notice of the summons in time to defend the action.
Furthermore, defendant established the existence of a meritorious defense to the action. Defendant submitted an affidavit from its litigation examiner in which he stated that the assignor had cancelled her insurance policy with defendant prior to the date of the accident and had not subsequently taken out another insurance policy with defendant.”

As many people know, vacating a default in the Second Department based upon the allegation of the “non-receipt” of a summons and complaint is a daunting task.  The resolution is either a traverse hearing or an ordering denying the opening of the default.

NYCM used CPLR 317, together with a well written affidavit of non receipt, to allow the court to exercise its discretion to open the default.  As us New York procedural nerds know, this is not an easy task.  So, I tip my hat to the attorney who represented NYCM on this case.

Default Judgment seeking a declaration of non-coverage is denied based upon the failure to adduce any non-hearsay evidence

This is a most interesting case.  I will discuss my thoughts in some detail because this case seems to possibly support the inference that a default judgment in a declaratory judgment involving a staged or non-loss may never be viable.  I do not think that is the case at all.  I also am not sure this case is consistent with the cases to which it cited.

The above being said – I was taught an early age that if you can do something to avoid a trip to the Appellate Division, despite what the correct view of the law is, then you should do what is necessary to avoid appellate intervention.

Consequently, how come Plaintiff never procured the affidavit of the adverse driver?  This would have allowed a default to be entered.  It also would have made complete sense since the investigator had contact with the adverse driver!  This seems like a bout of doing the least to get the most – and getting burnt.

On to the case:

New S. Ins. Co. v Dobbins, 2010 NY Slip Op 01773 (2d Dept. 2010)

“The Supreme Court properly, upon renewal and reargument, adhered to so much of its original determination as denied the plaintiff leave to enter judgment against the defendants James Dobbins, Jr., and Felita Dobbins, upon their default in answering the complaint. In support of its motion, the plaintiff offered the complaint, which was verified by plaintiff’s counsel, and an affidavit of the plaintiff’s investigator, neither of whom possessed personal knowledge of the facts constituting the claim (see CPLR 3215; Woodson v Mendon Leasing Corp., 100 NY2d 62, 70-71; Hosten v Oladapo, 44 AD3d 1006; Finnegan v Sheahan, 269 AD2d 491). The statements from the driver of the other vehicle that the plaintiff’s investigator relied upon in his affidavit constituted inadmissible hearsay (see CPLR 4518[a]; Hochhauser v Electric Ins. Co., 46 AD3d 174, 179-183; Metropolitan Cas. Ins. Co. v Shaid, 23 Misc 3d 1140[A]).”

The issue of “personal knowledge” as set forth in 3215(f) has confused me for years.  What is sufficient personal knowledge?  In a breach of contract for goods sold and delivered, this would be satisfied through the affidavit or verification of the plaintiff who is the victim of the breach.  In a negligence case, this would be the plaintiff’s affidavit or verification stating that he was in a motor vehicle accident.  The conclusion of negligence would flow from the act of the accident.  For no-fault benefits (in the second department as of now), this would be the affidavit or verification of a billing manager or the president of the corporation.

So what is necessary in a staged accident or “not in the car” case to satisfy the 3215(f) threshold?  It would seem that some affidavit, which presupposes an inference that the event is intentional or did not exist, would be what is required.  The Court of Appeals matter the Appellate Division cited to (Woodson v Mendon Leasing Corp., 100 NY2d 62) is interesting, because it does not really support the Dobbins court’s reasoning, as seen below:

“Having concluded that Supreme Court abused its discretion in vacating the default judgment, we also reject ATIC’s argument that, as an initial matter, plaintiff’s submissions in support of her motion for a default judgment were insufficient. CPLR 3215 (f) requires that an applicant for a default judgment file “proof by affidavit made by the party of the facts constituting the claim.” A verified complaint may be submitted instead of the affidavit when the complaint has been properly served (see CPLR 3215 [f]). 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 (see 7 Weinstein-Korn-Miller, NY Civ Prac ¶ 3215.24, at 32-326). Indeed, defaulters are deemed to have admitted all factual allegations contained in the complaint and all reasonable inferences that flow from them.”

To me, I believe that Plaintiff’s presenting conflicting certified EUO transcripts in its motion for leave to enter a default should be enough to raise an issue of fact as to whether a viable cause of action exists.

And in light of the default, the defaulter would be”deemed to have admitted all factual allegations contained in the complaint and all reasonable inferences that flow from them.”  Id.

So, the Appellate Division may very well have been incorrect, in my opinion, for not reversing Supreme Court.

One last thing, and I say this because I was upset when I read this case, and am really annoyed that the Appellate Division cites to it.  The Appellate Division cites for support of its “hearsay” arguments, besides its Hochhauser case Metropolitan Cas. Ins. Co. v Shaid, 23 Misc 3d 1140[A]”.

Read Shaid carefully.  I would just note that in Shaid, the declaratory judgment action was against the insured and the vehicle operator, both individually, as aiders abettors and as co-conspirators.  The statements that were made to the investigator in that case should have come in as admissions, admissions in furtherance of a conspiracy or declarations against penal interest.

In Dobbins, the statements was of a completely non-interested witness to an investigator.  This could only be admitted through the business record rule, which is now foreclosed because of Hochhauser.

The affidavits of non-receipt just did not cut it

In Westchester Med. Ctr. v Philadelphia Indem. Ins. Co., 2010 NY Slip Op 00138 (2d Dept. 2010), the Appellate Division held that an entered clerk’s judgment should not have been vacated.  Here is the breakdown of that case – it fits a good story line.

1) Defendant failed to demonstrate the existence of a reasonable excuse for being in default.

“The affidavit of a senior claims examiner employed in the defendant’s Texas office averred that there was no record of the summons and complaint in the defendant’s computer system, but failed to demonstrate any knowledge of the office procedures employed in the handling of a summons and complaint received at the defendant’s Pennsylvania office. Thus, that affidavit was insufficient to show that the failure to timely appear and answer was due to a clerical error which caused the summons and complaint to be overlooked”

2) Defendant failed to offer a meritorious defense to the action, i.e., lack of receipt prior to commencement of the action.

“In response, the defendant offered only the same aforementioned affidavit, which also averred that there was no record of the bill in question in the defendant’s computer system. This was insufficient for a similar reason; that is, the affiant failed to show any knowledge of the office procedures employed in the handling of billing forms received at the defendant’s Pennsylvania office”

3) “[t]he order is reversed insofar as appealed from, on the law, on the facts, and in the exercise of discretion, with costs[.]”

What we see here is that in order to demonstrate lack of receipt, whether it be a summons and complaint or a bill, the insurance carrier needs to set forth a detailed procedure as to the incoming mail, which would be sufficient to raise the inference that the incoming item was not received.  This is the opposite of the usual issue, i.e., proving that outgoing mail reached the post office within the prescribed time limits.

Also, why didn’t Defendant move to vacate in accordance with CPLR 317?  I am just curious.  The result would have been the same since a meritorious defense was not found to have existed.

Unsubstantiated averments of law office failure will not open a default in the Second Department

In Chechen v Spencer, 2009 NY Slip Op 09177 (2d Dept. 2009), law office failure (again) was discussed:

“After the plaintiff failed to appear at a scheduled status conference on November 7, 2007, the court scheduled another status conference to be held on December 11, 2007. The action was dismissed when the plaintiff failed to appear at the December 11, 2007, status conference (see 22 NYCRR 202.27[b]). To be relieved of the default in appearing at that conference, the plaintiff was required to show both a reasonable excuse for the default and the existence of a meritorious cause of action (see CPLR 5015[a][1]; Barnave v United Ambulette, Inc., 66 AD3d 620; Brownfield v Ferris, 49 AD3d 790, 791; Zeltser v Sacerdote, 24 AD3d 541, 542). The plaintiff’s counsel’s excuse of law office failure was vague and unsubstantiated and, thus, did not constitute a reasonable excuse for the default.”

Compare this to the First Department’s view on what is sufficient to demonstrate law office failure in order to show a reasonable excuse to open a default.  See, Lamar v City of New York, 2009 NY Slip Op 08974 (1st Dept. 2009)

Generalized averment of law office failure is sufficient to open a default

The Appellate Division, First Department, in Lamar v City of New York, 2009 NY Slip Op 08974 (1st Dept. 2009), said this in a four sentence opinion:

“While the City’s generalized assertion of law office failure as the excuse for its delay is not particularly compelling, it constitutes “good cause” for the delay (see Spira v New York City Tr. Auth., 49 AD3d 478 [2008]).”

What do you think would be the outcome of this case if this were adjudicated in the Second Department?

There is no need to grant an adjournment should the opposing party not have answering papers on the second motion return date.

The Fourth Department, in Counsel Fin. Servs., LLC v David Mcquade Leibowitz, P.C., 2009 NY Slip Op 08663 (4th Dept. 2009), observed the following:

We note at the outset that the contentions of defendants are properly before us despite the fact that the order and judgment was entered upon their default. Although defendants did not move to vacate the order and judgment, they appeared in court on the adjourned return date of the motion and contested the entry of a default judgment (see Spano v Kline, 50 AD3d 1499, lv denied 11 NY3d 702, 12 NY3d 704; Jann v Cassidy, 265 AD2d 873, 874; Spatz v Bajramoski, 214 AD2d 436). Nevertheless, we conclude that the court properly granted the motion.”

“The record establishes that only plaintiff’s counsel appeared in court on the initial return date of the motion but that the court thereafter granted defendants additional time in which to submit papers in opposition to the motion and adjourned the matter to a date subsequent thereto. The court stated that, in the event that defendant failed to appear on the adjourned return date, “the matter will be deemed submitted.” Defendants failed to submit any opposing papers by the date specified by the court and, although defendant appeared in court on the adjourned return date, he requested a second adjournment at that time, in which to prepare opposing papers. The court determined that defendants already were in default at that time, inasmuch as they had failed to submit opposing papers.”

A few things are noteworthy here.  First, it seems that Defendant should have probably moved on notice to vacate the default as opposed to attempting to vacate the default through appealing the order that resulted from the hearing.  Second, it seems that the Fourth Department really has taken, at least in this case, a really tough line on parties who are not ready on motion return dates.