Opinion
6162/2015
01-04-2019
CHOI YIM CHI, et al., Plaintiffs, v. Harry MILLER, et al., Defendants.
For Plaintiffs: Law Offices of Vincent S. Wong, by Vincent S. Wong, Esq., 39 East Broadway, Suite 306, New York, New York 10002 For Defendant Wu:Law Offices of Xian Feng Zou, by William X. Zou, Esq., 136-20 38th Avenue, Suite 10D, Flushing, New York 11354
For Plaintiffs: Law Offices of Vincent S. Wong, by Vincent S. Wong, Esq., 39 East Broadway, Suite 306, New York, New York 10002
For Defendant Wu:Law Offices of Xian Feng Zou, by William X. Zou, Esq., 136-20 38th Avenue, Suite 10D, Flushing, New York 11354
Salvatore J. Modica, J. Defendant Xi Hui Wu's motion, by order to show cause, is granted to the extent discussed in this order.
This case involves both Index Number 708185/2015 ("Action No.1") and Index Number 6162/2015 (Action No. 2), which is currently pending before this Court. The two attorneys representing plaintiffs, Choi Yim Chi and Xiu Qin Lin, and defendant, Wu, have been retained to represent their respective clients on both cases.
As stated cogently in the reply affidavit of counsel for defendant Wu, both Wu and his legal entity of 9008 Queens Blvd Loft LLXC paid the sum of $420,000 to the attorney representing plaintiffs Chi and Xiu Qin Lin, based on the understanding that these two plaintiffs would share the money with all the plaintiffs herein. Of the sum of $420,000, $210,000 was paid in bank checks and $210,000 was in the form of an assignment of mortgage and note. Thereafter, a stipulation of discontinuance of was filed by the plaintiffs and Wu on December 5, 2016.
It appears that there is a third action related to these two actions. That action, Song v. Sprei [Index Number 703755/2015], involves a different plaintiff.
Contrary to Wu's expectations, Chi subsequently commenced Action No. 2, a lawsuit directly related to the earlier action. Chi next obtained a default judgment against Wu from this Court in a decision and order dated November 29, 2016. Based on that default judgment, Chi was issued a money judgment by the County Clerk of Queens County against defendant Wu in the amount of $431,903.85.
In the present order to show cause, Wu moves for a variety of relief, including dismissing the action based on res judicata, collateral estoppel, improper service, and vacating the default judgment obtained under the current index number.
The Court notes that a great deal of time was devoted in conferences with both attorneys in an unsuccessful effort to get the parties to settle.
The general law on vacating a default judgment is well-settled. A defendant seeking to vacate a judgment entered upon his default in appearing and for leave to serve a late answer must demonstrate both a reasonable excuse for the default and the existence of a potentially meritorious defense to the action. See CPLR 5015 [a] [1]; Dimopoulos v. Caposella , 118 A.D.3d 739, 740, 987 N.Y.S.2d 434 (2d Dept. 2014). The application normally must be "made within one year after service of a copy of the judgment or order with written notice of its entry upon the moving party." ( CPLR 5015 [a] [1]; Chase Home Finance, LLC v. Weinfeld , 159 A.D.3d 867, 70 N.Y.S.3d 72 (2d Dept. 2018). Plaintiffs, however, do not contend that the motion is untimely within the meaning of the law. Instead, they claim that Wu has failed to establish a reasonable excuse for the default and the existence of a meritorious defense to the action.
Wu's principal argument in support of his motion to vacate the default judgment is that he was not properly served in this case. Plaintiffs did not submit any affidavits in opposition to defendant Wu's Order to Show Cause. Instead, their opposition consisted solely of a memorandum of law. The papers and court documents filed in this case reveal that the summons was not actually served on defendant Wu pursuant to section 308(1) of the Civil Practice Law and Rules. Instead, jurisdiction was allegedly obtained over Wu when, on May 26, 2015, the process server left the papers for summary judgment in lieu of complaint with defendant Wu's daughter, T.W., on May 26, 2015. See CPLR 308(2). As revealed by the copy of her passport, which was presented as an exhibit by the defendant, T.W. was born on xx/xx/xxxx. Accordingly, at the time of the alleged service, she was 13 years old. Given that sensitive court documents were served on a 13-year old youth in a case that defendant Wu had a good-faith basis for believing had been resolved by a settlement in the amount of $420,000 — $210,000 of which was paid in bank checks — the Court finds that this defendant had a reasonable excuse for not appearing in this action.
For privacy concerns, the name of Wu's daughter and her date of birth is being omitted.
Equally important, the Court finds that Wu has demonstrated the existence of a potentially meritorious defense to this action. He tendered $420,000 — an obviously significant sum — in the obvious expectation that this amount would be distributed to settle the case and extinguish all claims. Contrary to Wu's reasonably based belief that the legal dispute between the plaintiffs and him had finally ended, he was subjected to further litigations by the plaintiffs, all in an effort to procure further sums based on the same transaction. Wu, through ample evidence, including cancelled checks, demonstrated that he made all the payments required of him of the $420,000 amount. In opposition, neither plaintiff presented any statement, in affidavit form or otherwise, to dispute Wu's well-organized and amply documented factual account. Based on the Court's finding that the defendant established both a reasonable excuse for the default and the existence of a potentially meritorious defense to the action, the default judgment under Index Number 6162/2015 is, accordingly, vacated. See CPLR 5015 [a] [1].
The Court notes that Wu further contends that the doctrines of res judicata or collateral estoppel should bar the instant action. The defendant's reliance on these doctrines can be debated and argued, but the legal rule mandates generally an identity of parties and issues and a full opportunity to litigate before these well-established doctrines can be invoked and maintained. Under the circumstances of this case, the Court is reluctant, on this motion, to apply the principles of res judicata and collateral estoppel. The defendant is, however, not foreclosed from raising these issues at a later date.
Nevertheless, the Court will not sit passively to permit an injustice and inequitable conduct, especially where the parties traded, reviewed, signed, and exchanged stipulations of discontinuance. The Appellate Division, Second Judicial Department, in Mahon v. New York City Health & Hosps. Corp. , 303 A.D.2d 725, 756 N.Y.S.2d 875 (2003), articulated:
In order to vacate the stipulation of settlement on the ground of mutual mistake, the plaintiff was required to demonstrate that the mistake existed at the time the stipulation was entered into and that it was so substantial that the stipulation failed to represent a true meeting of the parties' minds (see Matter of Gould v. Board of Educ. of Sewanhaka Cent. High School Dist., 81 N.Y.2d 446, 453, 599 N.Y.S.2d 787, 616 N.E.2d 142 ; Matter of Janet L., 287 A.D.2d 865, 731 N.Y.S.2d 299 ; see also Hallock v. State of New York, 64 N.Y.2d 224, 230, 485 N.Y.S.2d 510, 474 N.E.2d 1178 ). The plaintiff met this burden, as she
established that none of the parties considered the impact of a potential Medicaid lien in negotiating the settlement and that therefore there was no true meeting of the parties' minds with respect to the amount of damages. Moreover, under these circumstances, enforcement of the stipulation would be unjust (see Weitz v. Murphy, 241 A.D.2d 547, 661 N.Y.S.2d 646 ; Goldstein v. Goldsmith, 243 App.Div. 268, 272, 276 N.Y.S. 861 ). Accordingly, the Supreme Court properly vacated the stipulation of settlement.
Mahon , 303 A.D.2d at 725, 756 N.Y.S.2d 875 ; accord , Lakshmi Grocery & Gas, Inc. v. GRJH, Inc ., 138 A.D.3d 1290, 30 N.Y.S.3d 743 (3rd Dept. 2016) (a contract may be rescinded when it is shown by clear and convincing proof that a mutual mistake existed when the contract was executed that was so substantial that there was no true meeting of the parties' minds).
In this case, an argument can be genuinely made that there was no true meeting of the minds on the prior settlement. The defendant, however, has not requested that the Court set aside the stipulation executed in this case. Thus, the Court will not, sua sponte , vacate that prior settlement. Nevertheless, given that " Article VI, § 7 of the NY Constitution establishes the Supreme Court as a court of ‘general and original jurisdiction in law and equity,’ " ( NY Const., art VI § 7 [a] ), this Court finds it appropriate to invoke its equitable powers in this case. See, Sohn v. Calderon, 78 N.Y.2d 755, 766, 579 N.Y.S.2d 940, 587 N.E.2d 807 (1991). Accordingly, the Court orders that all sums given by Wu to the plaintiffs are to be delivered to defendant's attorney, who is directed to hold such funds in escrow pending further litigation in this case.
In addition, based on the affirmation of Wu's attorney and Wu's affidavit, the Court orders a traverse hearing in this case. The Court stresses that it has a great deal of difficulty finding that a 13-year old is a person of suitable age and discretion upon whom a summons may be served. See CPLR 308(2) ; see also Wells Fargo Bank Minnesota v. Roman, 2006 WL 176959 (Sup. Ct. Richmond Co. 2006). In that respect, the Court notes that the Court of Appeals has apparently never addressed the issue of service upon a young teenager. When confronted with a case in which service of process was disputed, the Court of Appeals noted that "no question has been raised concerning the fact that the youngsters, one 14 and the other 15, were of ‘suitable age and discretion.’ " Bossuk v. Steinberg , 58 N.Y.2d 916, 918, 460 N.Y.S.2d 509, 447 N.E.2d 56 (1983). The Appellate Division, however, has addressed this issue. For instance, in Marathon Structured Asset Solutions Trust v. Fennell , the Second Department held that defendant's 15-year old daughter was a person of suitable age and discretion and that service upon her was sufficient to obtain personal jurisdiction. See Marathon Structured Asset Solutions Trust v. Fennell , 153 A.D.3d 511, 61 N.Y.S.3d 232 (2nd Dept. 2017).
Of course, at the time of service in this case, T.W. was 13 years of age. In that respect, there is some legislative support for the proposition that a person under the age of 14 is not old enough to be served with process. For example, in suits against individuals under the age of 18, the Legislature has mandated that a person 14 years or older must be personally served with process. Even in that context, however, the Legislature, obviously concerned that a person under the age of 18 would not be able to appreciate the significance of being served with a court document, mandated that an adult must also be served on behalf of an infant. As noted in the practice commentary:
CPLR 309(a) specifies the procedure for service of process on an infant, i.e., a person under the age of 18 ( CPLR 105(j) ). To help ensure protection of the infant's interests, an adult must be personally served on behalf of the infant. If the infant is of the age of 14 years or over, personal service must also be made on the infant. The failure to make dual service when the infant is 14 or older is a jurisdictional defect. Randall v. Randall, 1958, 12 Misc.2d 468, 172 N.Y.S.2d 985 (Sup. Ct. Bronx Co.). In suits against infants, that is, individuals under the age of 18 ( CPLR 105(j) ), service must be made on an adult and on the infant.
Alexander, 2012 Practice Commentaries, McKinney's Cons Law of NY, CPLR 309, at C309:1.
The Court acknowledges that "[t]here appears to be no "bright-line" age below which a child is not a suitable person for service of process, even though ‘at some point a person should be deemed by the court, as a matter of law, to be too young to have a valid status as deliveree.’ " Wells Fargo Bank Minnesota v. Roman, supra ,quoting in part from Room Additions, Inc. v. Howard , 124 Misc.2d 19, 475 N.Y.S.2d 310 (Civil Ct. City of New York, Bronx County 1984). For this reason, the Court declines to find that, as matter of law, T.W. was too young to accept service on behalf of her father. Nevertheless, based on T.W.'s age alone, a traverse hearing is ordered to determine whether or not, on the date in question, she was "objectively ... of sufficient maturity, understanding and responsibility under the circumstances so as to be reasonably likely to convey the summons to the defendant." Roldan v. Thorpe , 117 A.D.2d 790, 791, 499 N.Y.S.2d 114 (2nd Dept. 1986) ; Marathon Structured Asset Solutions Trust v. Fennell, supra. 153 A.D.3d at 512, 61 N.Y.S.3d 232.
The traverse hearing will be held on a date to be determined. The Court notes that, at that hearing, "the plaintiff bears the ultimate burden of proving by a preponderance of the evidence that jurisdiction over the defendant was obtained by proper service of process." Bankers Trust Co. of Cal. v. Tsoukas , 303 A.D.2d 343, 756 N.Y.S.2d 92 (2nd Dept. 2003) ; see also Roberts v. Anka , 45 A.D.3d 752, 846 N.Y.S.2d 280 (2nd Dept. 2007). If the plaintiffs fail to meet their burden of proof, this action will be dismissed.
In closing, the Court notes that the defendant has not waived his right to raise the jurisdictional question in this case. With certain exceptions — none of which exist in this case — a claim of lack of personal jurisdiction is not waived by a defaulting defendant. See Cadlerock Joint Venture, L.P. v. Kierstedt , 119 A.D.3d 627, 990 N.Y.S.2d 522 (2nd Dept. 2014). In addition, a motion to vacate a default judgment under 5015(a)(4) of the Civil Practice Law and Rules, predicated on a "lack of jurisdiction to render the judgment or order" may be made at any time." See Siegel 2009 Practice Commentaries, McKinney's Cons Law of NY, CPLR 5015(a)(4), at C5015:3 It is well-settled that a defendant's actual knowledge that the instant action had been commenced against him is irrelevant on the issue of personal jurisdiction. "[N]otice received by means other than those authorized by statute cannot serve to bring a defendant within the jurisdiction of the court" Feinstein v. Bergner , 48 N.Y.2d 234, 241, 422 N.Y.S.2d 356, 397 N.E.2d 1161 (1979) ; see also Markoff v. South Nassau Community Hospital , 61 N.Y.2d 283, 473 N.Y.S.2d 766, 461 N.E.2d 1253 (1984) ; McDonald v. Ames Supply Co. , 22 N.Y.2d 111, 291 N.Y.S.2d 328, 238 N.E.2d 726 (1968) ; Washington Mut. Bank v. Murphy , 127 A.D.3d 1167, 1174, 10 N.Y.S.3d 95 (2nd Dept. 2015).
The Court further notes that, "[a]lthough a party moving to vacate a default must normally demonstrate a reasonable excuse and a meritorious defense, ... the movant is relieved of that obligation when lack of personal jurisdiction is asserted as the ground for vacatur." Velez v. Forcelli , 125 A.D.3d 643, 3 N.Y.S.3d 84 (2nd Dept. 2015) ; see also Harkless v. Reid , 23 A.D.3d 622, 622-623, 806 N.Y.S.2d 214 (2nd Dept. 2005) ; Deutsche Bank Natl. Trust Co. v. Pestano , 71 A.D.3d 1074, 899 N.Y.S.2d 269 (2nd Dept. 2010). In that respect, the Court is aware that when a defendant seeks to vacate a default judgment based on a jurisdictional objection pursuant to CPLR 5015 (a) (4), the jurisdictional question must first be resolved before determining whether it is appropriate to grant a discretionary vacatur of the default under CPLR 5015 (a) (1). See Marable v. Williams , 278 A.D.2d 459, 718 N.Y.S.2d 400 (2nd Dept. 2000) ; see also Taylor v. Jones , 172 A.D.2d 745, 746, 569 N.Y.S.2d 131 (2nd Dept. 1991). Given the Court's finding, however, that, in this case, the defendant has established the two prerequisites for a default judgment, there is no need to first decide the jurisdictional question.
Finally, although not requested, the Court grants defendant Wu leave to file an answer in this case. Such answer must be verified and served upon the plaintiffs no later than 20 business days following the County Clerk's date-stamped notice of entry of the Court's decision and order on the traverse hearing.
For reasons stated in this decision and order, it is hereby:
ORDERED that the default judgment taken against defendant Xi Hui Wu under the current index number 6162/2015 is vacated; and it is further
ORDERED that the proceeds of the settlement of the earlier action under Index Number 708185/2015 are to be delivered to Mr. Zou, who is to hold such funds in escrow. The funds must be delivered within thirty (30) days of the County Clerk's date-stamped notice of entry of this decision and order; and it is further
ORDERED that Wu's attorney is directed by the Court to hold the proceeds of that settlement that will be returned to him by defendant's attorney in an escrow account, subject to the Court's determination and future direction; and it is further
ORDERED that the parties are directed to appear before this Court on March 1, 2019, at 10:00 am to conference this case and to set a date for the traverse hearing; and it is further
ORDERED that if Wu's attorney does not receive the proceeds of the earlier settlement of $420,000, as directed herein, the Court will entertain further motions that will accord proper relief; and it is further
ORDERED that defendant Wu has leave to file a verified answer in this case, to be served upon the plaintiffs no later than 20 business days following the County Clerk's date-stamped notice of entry of the Court's decision and order on the traverse hearing.
The defendant's motion is granted in accordance with this decision and order.
The foregoing constitutes the decision and order of the Court.