U.S. Bank v. Georgina Falu Co.

Full title: U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE FOR VELOCITY COMMERCIAL CAPITAL…

Court: Supreme Court, New York County

Date published: Apr 4, 2023

2023 N.Y. Slip Op. 31083 (N.Y. Sup. Ct. 2023)

Opinion

Index No. 850010/2019 Motion Seq. No. 003

04-04-2023

U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE FOR VELOCITY COMMERCIAL CAPITAL LOAN TRUST 2017-2, Plaintiff, v. GEORGINA FALU CO. LLC, GEORGINA FALU, NEW YORK CITY ENVIRONMENTAL CONTROL BOARD, NEW YORK STATE DEPARTMENT OF TAXATION AND FINANCE, COMMISSIONER OF LABOR, NEW YORK STATE DEPARTMENT OF LABOR, LANORA BELTON, HAAJAR JOHNSON, ROQUELLA ORTEGA, RUBY ORTEGA, SYLVINA LEON, MELISSA JUAREZ, YONY ORTEGA, ELOY ORTEGA, Defendant.

FRANCIS A. KAHN, III, A.J.S.C.

Unpublished Opinion

PRESENT: HON. FRANCIS A. KAHN, III, Justice.

DECISION + ORDER ON MOTION

FRANCIS A. KAHN, III, A.J.S.C.

The following e-filed documents, listed by NYSCEF document number (Motion 003) 145, 146, 147, 148, 149, 150, 151, 152, 153, 154, 155, 156, 157, 160, 161, 162, 163, 164, 165, 166, 167, 168, 169, 170, 171, 172, 173 were read on this motion to/for VACATE - DECISION/ORDER/JUDGMENT/AWARD.

Upon the foregoing documents, the motions are determined as follows:

The within action is to foreclose on a mortgage encumbering a parcel of commercial real property located at 329 East 118^th Street, New York, New York. The mortgage secures a loan with an original principal amount of $1,050,000.00 memorialized by an adjustable term note. The note and mortgage, both dated September 13, 2017, were given by Defendant Georgia Falu Co., LLC ("Falu LLC") to non-party Velocity Commercial Capital, LLC ("Velocity") and were executed by Defendant Georgina Falu ("Georgina"), as Managing Member of Falu LLC. All Defendants herein, including Georgina and Falu LLC, defaulted in appearing. Plaintiffs ex parte motion for a default judgment and order of reference was granted by order dated December 13, 2019. A motion on notice for a judgment of foreclosure and sale was granted without opposition by order dated August 22, 2022.

Between issuance of the order of reference and judgment, Defendants Georgina and Falu LLC appeared by multiple different counsel at six [6] status conferences with the Court. Further, Defendants Georgina and Falu LLC sought and received three adjournments of the motion for a judgment of foreclosure and sale which extended the return date nearly three months.

Now, Defendants Defendants Georgina and Falu LLC move to vacate their default pursuant to CPLR §§317, 5015 [a] [ 1 ] and 5015 [a] [4], to compel Plaintiff to accept a late answer pursuant to CPLR §3012[d] and for an order tolling interest. Plaintiff opposes the motion.

Generally, to vacate a default in appearing or answering, a party is required to demonstrate both a reasonable excuse for the default and a potentially meritorious defense to the motion (see CPLR §5015[a][l]; Karimian v Karlin, 173 A.D.3d 614 [1^st Dept 2019]; Needleman v Chaim Tornhein, 106 A.D.3d 707 [2d Dept 2013]). However, a defendant is not required to meet these requisites if there is a lack of jurisdiction (see CPLR §5015 [a] [4]; Avis Rent A Car Sys., LLC v Scaramellino, 161 A.D.3d 572 [1^st Dept 2018]). Thus, a court is required to resolve the jurisdictional issue before considering whether to grant a discretionary vacatur of the default (see eg Caba v Rai, 63 A.D.3d 578, 581, n.l [1^st Dept 2009]; Kondaur Capital Corp. v McAuliffe, 156 A.D.3d 778, 779 [2d Dept 2017]).

Defendants' assertion that Falu LLC was not properly served is without merit. "A process server's affidavit of service constitutes prima facie evidence of proper service and, therefore, gives rise to a presumption of proper service" (Bethpage Fed. Credit Union v Grant, 178 A.D.3d 997, 997 [2d Dept 2019]). Plaintiff filed two affidavits of service attesting to service of the summons and complaint on Falu LLC. In an affidavit dated February 8, 2019, the process server, Stef Marie, avers that on February 7, 2019, he served, among other things, a summons and verified complaint, by delivering it to an authorized agent of the New York State Secretary of State. This affidavit is sufficient on its face to establish a presumption of proper service on Falu LLC pursuant to BCL §306 (see eg Residential Bd. of Managers v Rockrose Dev. Corp., 17 A.D.3d 194 [1^st Dept 2005]). Plaintiff also filed an affidavit of service from Michael Mangual, dated March 19, 2019, wherein he avers that on March 8, 2019, he personally delivered, among other things, a summons and verified complaint to Georgina at 175 West 95^th Street, Apt 25B, New York, New York. This affidavit is also sufficient on its face to establish a presumption of proper service on Falu LLC pursuant to CPLR §311 (see Hayden v Southern Wine &Spirits of Upstate N.Y., Inc., 126 A.D.3d 673 [2d Dept 2015]).

To rebut this presumption and be entitled to a hearing, an affidavit of the person served containing a nonconclusory denial of service which specifically contradicts the process server's version of events must be proffered (see Bank of Am., N.A. v Diaz, 160 A.D.3d 457, 458 [1st Dept 2018]; NYCTL 1998-1 Trust & Bank of N.Y. v Rabinowitz, 7 A.D.3d 459, 460 [1st Dept 2004]). As to the service under BCL §306, Defendants assertion that Falu LLC's address on file with the Secretary of State is incorrect does not defeat service as it was Falu LLC's obligation to update its address with the Secretary of State (see Salish Lodge LLC v Gift Mgt. Inc., 192 A.D.3d 410, 411 [1^st Dept 2021]; Fisher v Lewis Constr. NYC Inc., 179 A.D.3d 407 [1^st Dept 2020]).

Concerning the service on March 8, 2019, Georgina submitted an affidavit wherein she claimed she "was never served with a copy of the papers . . . [n]or was I personally served with any papers for my company". Georgina also claimed the process server's description of the recipient was distinct from her appearance. She also denied receipt of the certified mailing. Georgina's denial of in hand receipt of the pleadings is entirely conclusory and insufficient to defeat the process server's affidavit (see Wells Fargo Bank, N.A. v Tricarico, 139 A.D.3d 722, 723 [2d Dept 2016] cf. American Home Mtge. Servicing, Inc. v Gbede, 127 A.D.3d 1004, 1005 [2d Dept 2015]). The claimed discrepancies in the appearance of the recipient and Georgina are both too minor and entirely unsubstantiated (see PNC Bank, N.A. v Bannister, 161 A.D.3d 1114, 1116 [2d Dept 2018]; cf. Emigrant Mtge. Co., Inc. v Westervelt, 105 A.D.3d 896, 897 [2d Dept 2013]). Moreover, the naked denial of receipt of the mailing is insufficient to rebut the presumption of regularity of the mails (see City of New Yorkv Melamed (In Rem Tax Foreclosure Action No. 47), 19 A.D.3d 547, 548 [2d Dept 2005]).

As to service on Georgina, Plaintiff filed an affidavit, dated March 19, 2019, wherein Mangual attested that service of the summons and complaint, and other documents, was also made on Georgina by personal delivery at the same address and at the time as the service on Falu LLC. Georgina's arguments in rebuttal fail for the reasons stated supra.

As to the branch of Defendants' motion to vacate their default in appearing pursuant to CPLR §5015 [a][l ], the sole excuse offered by Defendants is law office failure. It is within the court's discretion to credit a claim of law office failure but only where there is a detailed and credible explanation for the default (see Hudson City Sav. Bank v Augustin, 191 A.D.3d 774 [2d Dept 2021]). However, "mere neglect is not a reasonable excuse" (OneWest Bank, FSB v Singer, 153 A.D.3d 714 [2d Dept 2017]). Movant's proof in this regard was insufficient as the affidavit of Georgina was conclusory and based upon hearsay statements attributed to Movants' prior attorneys which ultimately constituted nothing more than bare allegations of incompetence by former counsel (see Vizelter v Strogov, 170 A.D.3d 917 [2^nd Dept 2019]; Edwards v Feliz, 28 A.D.3d 512 [2^nd Dept 2006]; Achampong v Weiglt, 240 A.D.2d 247 [1^st Dept 1997]).

Absent a reasonable excuse, the Court need not determine whether Defendants have presented a meritorious defense to the action (see Pina v Jobar U.S.A. LLC, 104 A.D.3d 544, 545 [1st Dept 2013]). In any event, Movants failed to establish the existence of a meritorious defense as the affidavit of Georgina is silent on the issue (see Peacock v Kalikow, 239 A.D.2d 188, 190 [1^st Dept 1997]) and the proposed answer annexed to the motion is insufficient as it is not verified by a person with knowledge of the facts (see Karalis v New Dimensions HR, Inc., 105 A.D.3d 707, 708 [2d Dept 2013]). For the same reasons, the branch of the motion to compel Plaintiff to accept a late answer from Defendants pursuant to CPLR §3012[d] fails (see Bank of N.Y. Mellon v Tedesco, 174 A.D.3d 490, 491 [2d Dept 2019]["To extend the time to answer the complaint and to compel the plaintiff to accept an untimely answer as timely, a defendant must provide a reasonable excuse for the delay and demonstrate a potentially meritorious defense to the action"]).

Defendants also seek to vacate their default under CPLR §317 which provides that if a nonappearing defendant was not personally served, it may still defend the action within one year after it leams of the default judgment upon the Court finding that it "did not personally receive notice of the summons in time to defend and has a meritorious defense" (see CPLR §317; Wilson v Kore Method on Gansevoort LLC, 180 A.D.3d 486 [1st Dept 2020]; Simon &Schuster v Howe, 105 A.D.2d 604, 605 [1st Dept 1984]).

Although service on Falu LLC pursuant to BCL §306 did not constitute personal delivery within the meaning of CPLR §317 (see eg Figueroa v Relgold, 178 A.D.3d 425, 426 [1st Dept 2019]), the unrebutted service of the pleadings on Georgina, the sole corporate officer, was personal delivery to Falu LLC and Georgina (see Fernandez v Morales Bros. Realty, Inc. 110 A.D.3d 676 [2d Dept 2013]). This unrebutted service likewise demonstrates Falu LLC, and Georgina did receive notice in time to defend the action as did Defendants' six appearances at conferences with this Court. Also unrefuted was an affidavit dated March 26, 2019, attesting to an additional mailing of the summons to Georgina pursuant to CPLR §3215[g].

Since Defendants have not established a basis to vacate the judgment, the branch of the motion requesting an interest toll fails. Even if the Court were to consider this application on its merits it would still deny same. "In 'an action of an equitable nature, the recovery of interest is within the court's discretion. The exercise of that discretion will be governed by particular facts in each case,' including wrongful conduct by either party" (U.S. Bank N.A. v Beymer, 190 A.D.3d 445 [1^st Dept 2021], citing South Shore Fed. Sav. &Loan Assn, v Shore Club Holding Corp., 54 A.D.2d 978, [2d Dept 1976]). Here, the delays incurred during this litigation where predominantly due to Defendants' filing of a hardship declaration under the COVID-19 Emergency Protect Our Small Business Act of 2021 (L. 2021, c. 73). Any other delays in the litigation do not smack of having been the result of bad faith.

Accordingly, it is

ORDERED that Defendants' motion is denied in its entirety and the foreclosure sale in this matter may proceed as scheduled.