Opinion
2011-02-2
VELOCITY INVESTMENTS, LLC, Plaintiff, v. Brian McCAFFREY, Defendant.
Kirschenbaum & Phillips, P.C., for plaintiff. Brian McCaffrey, defendant pro se.
Kirschenbaum & Phillips, P.C., for plaintiff. Brian McCaffrey, defendant pro se.
FRED J. HIRSH, J.
Plaintiff submits an order based upon an “Affidavit and Stipulation” that would vacate of a default judgment entered against defendant on May 1, 2007, permit the plaintiff to re-serve the summons and complaint upon the defendant by certified mail, return receipt requested and first class mail within 120 days of the order, deem the action commenced on the date the summons and complaint were filed with the clerk, grant defendant 45 days from the dated of service in which to serve and file and answer and grant plaintiff leave to re-enter the default judgment should defendant fail to serve and file an answer.
In reality, this application raises questions about the basic integrity of the judicial process.
BACKGROUND
A. Velocity Investments, LLC. v. Brian McCaffrey
The complaint alleges Discover Card (“Discover”) issued a credit card to Brian McCaffrey (“McCaffrey”). McCaffrey used the card and defaulted in payment as of August 31, 2002.
The complaint further alleges Discover assigned is right, title and interest in McCaffrey's account to Velocity Investments, LLC (“Velocity”).
Velocity sued to recover the amount due on the credit card as of McCaffrey's default in breach of contract and account stated.
Velocity commenced this action on January 11, 2007 by filing the summons and complaint with the clerk of the court. Uniform District Court Act § 400(1).
Service was made upon McCaffrey pursuant to CPLR 308(4) by a process server from American Legal Process (“ALP”). The affidavit of service states after attempts were made to serve McCaffrey on February 2, 2007 at 7:42 p.m and February 3, 2007 at 7:20 a.m. a copy of the summons and complaint was affixed to the entrance door of premises described as McCaffrey's place of residence on February 7, 2007 at 1:02 p.m. A copy of the summons and complaint was mailed to McCaffrey at the address at which the affixing was done on March 5, 2007. The affidavit of service was filed with the clerk on March 13, 2007.
McCaffrey still resides at the address at which service was purportedly made.
The process server avers he confirmed McCaffrey resided at which service was made and was not in military service by speaking with a neighbor.
McCaffrey did not appear in the action. As a result, Velocity entered a default judgment against McCaffrey for the amount sued for in the complaint on May 1, 2007.
The proof establishing the claim against McCaffrey was the complaint verified by an officer of Velocity. Velocity did not provide the court with any documentary proof establishing Discover had assigned the debt to Velocity, McCaffrey had been advised the debt had been assigned by Discover to Velocity and/or proof establishing the underlying debt.
Even though the judgment was entered on May 1, 2007, Velocity does not appear to have served a copy of the judgment on McCaffrey. Velocity does not appear to have taken any action to enforce the judgment. The judgment appears to be wholly unsatisfied. B. Matter of Pfau v. Forster & Garbus, et al.
Matter of Pfau v. Forster & Garbus, et al. (“Pfau Action”) was a special proceeding commenced in Supreme Court, Erie County by Ann Pfau, as Administrative Judge of the New York State Unified Court System against several law firms involved in debt collection that used ALP to make service of process. The Pfau Action was the court system's response to the debt collection sewer service scandal of 2007 and 2008. The Pfau Action was based upon allegations process servers used by ALP were making sewer service and preparing and executing false affidavits of service. When the defendants who had not been properly served did not appear, default judgments were entered.
The petition in the Pfau action alleged William Singler (“Singler”), the owner ALP notarized in excess of 73,000 affidavits of service between January 1, 2007 and October 8, 2008. Many if not most the affidavits of service were for service was made upon the defendants pursuant to CPLR 308(4) even the process server had not affixed a copy of the summons and complaint to the door of the defendant's “... actual place of business, dwelling place or usual place of abode ...” or mailed a copy of the summons and complaint to the defendant at the defendant's “... last known residence ... or actual place of business ...” as required by CPLR 308(4). The petition in the Pfau Action further alleged the process servers used by ALP never made any effort to ascertain if the place to which service was being made was any of the statutorily permitted locations or the defendant's military status.
Singler 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
A review of the affidavits of service prepared by several process servers used by ALP and notarized by Singler established that several of the process servers had signed affidavits of service averring they had been at two different locations at the same time on the same day. The petition in the Pfau action alleges of the process server who made service in this action had signed affidavits of service swearing he had been in two different locations on the same date at the same time on at least 10 different occasions.
Part of the relief requested in the Pfau Action was an order vacating all default judgments entered in cases where service had been made by ALP process servers unless service could be validated without reference to the ALP affidavit of service.
The Pfau Action has been settled by consent order. As part of consent order entered in the Pfau action, the attorneys for the debt collectors were to send a letter to the defendants in actions where service was made pursuant to CPLR 308(4) and where the judgment has not be satisfied advising the defendant a default judgment had been entered. The letter was to further advised the defendant service may not have been properly made. The letter requests the defendant sign the enclosed “Affidavit and Stipulation” have their signature notarized and return it to the attorney for the creditor.
The “Affidavit and Stipulation” contains a statement that a copy of the summons and complaint was not affixed to the door of defendant's residence on the date stated in the affidavit of service.
The “Affidavit and Stipulation” then provides for the vacating of the default judgment, permits plaintiff to re-serve the defendant by certified mail, return receipt requested and first class mail and grants defendant 45 days from the date the postmark date on the envelope mailing summons and complaint to the defendant to serve an answer.
If the defendant does not serve and file and answer within the 45 day period, the creditor can again make application for a default judgment.
Paragraph 8 of the “Stipulation and Affidavit” provides the action was commenced for statute of limitations purposes on the date on which the summons and complaint was filed with the court. The defendant agrees service more than 120 days from the filing of the summons and complaint shall not serve as a basis for dismissal of the action.
McCaffrey has signed the “Affidavit and Stipulation”. Velocity has submitted an order by which the judgment against McCaffrey would be vacated. McCaffrey would consent to service of the summons and complaint by certified and regular mail, within 120 days of the date of the order, would be required to appear and answer within 45 days of the date of the mailing of the summons and complaint and would consent to permit Velocity to reapply for a default judgment if he did not answer.
DISCUSSION
A Stipulation is a contract which will be enforced in accordance with its terms. McKenzie v. Vintage Hallmark PLC, 302 A.D.2d 503, 504, 755 N.Y.S.2d 288 (2nd Dept.2003) and Charter Realty & Development Corp. v. New Roc Assocs., L.P., 293 A.D.2d 438, 739 N.Y.S.2d 456 (2nd Dept.2002). Ordinarily, this court would enforce the stipulation in accordance with its terms.
However, in consumer debt cases, especially those involving assigned debt, where the defendant is not represented by counsel, significantly different issues arise. Velocity offers no evidence McCaffrey was aware an action had been commenced or a judgment had been entered against him until he received the “Affidavit and Stipulation” provided for by the consent order entered in the Pfau Action. The defendant also was not advised of the rights he had and procedures available for vacating the judgment if he did not sign the “Affidavit and Stipulation”, the rights he was waiving by signing the “Affidavit and Stipulation” and the consequences of his waiving these rights. See, LR Credit 21 LLC v. Paryshkura, 30 Misc.3d 805, 914 N.Y.S.2d 614 (District Ct. Nassau Co.2010).
Before a default judgment can be entered, the plaintiff must establish proof of service, proof of the claim and proof of default. Siegel, New York Practice 4th § 295.
Based upon a review of the documents contained in the court file, the court questions whether the judgment should have been entered.
The affidavit of service is insufficient to establish service as a matter of law.
In order to obtain personal jurisdiction over the defendant, service must be made in a statutorily prescribed manner. Feinstein v. Bergner, 48 N.Y.2d 234, 422 N.Y.S.2d 356, 397 N.E.2d 1161 (1979); Krisilas v. Mount Sinai Hosp., 63 A.D.3d 887, 882 N.Y.S.2d 186 (2nd Dept.2009); McMullen v. Arnone, 79 A.D.2d 496, 437 N.Y.S.2d 373 (2nd Dept.1981).
CPLR 308(4) requires the affixing and the mailing to be done within 20 days of each other. Failure to mail the summons and complaint to the defendant within 20 days of affixing is a jurisdictional defect mandating dismissal. New York State Higher Education Services Corp. v. Palmeri, 167 A.D.2d 797, 563 N.Y.S.2d 358 (3rd Dept.1990); and Stanley Agency, Inc. v. Behind The Bench, Inc., 23 Misc.3d 1107(A), 885 N.Y.S.2d 713 (Sup.Ct. Kings Co.2009).
The affidavit of service states the affixing was done on February 7, 2007 and the mailing was done on March 5, 2007 which is 26 days after the affixing. Therefore, the affidavit of service is facial defective and insufficient to give this court jurisdiction over McCaffrey.
The court also questions whether service pursuant to CPLR 308(4) was proper.
Before service can be made pursuant to CPLR 308(4), the plaintiff must exercise due diligence in attempting to serve the defendant pursuant to CPLR 308(1) or (2). Gureje v. Richardson, 59 A.D.3d 494, 873 N.Y.S.2d 190 (2nd Dept 2009); and Crystal v. Lisnow, 56 A.D.3d 713, 868 N.Y.S.2d 269 (2nd Dept.2008).
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 A.D.3d 63, 843 N.Y.S.2d 462 (2nd Dept.2007); County of Nassau v. Yohannan, 34 A.D.3d 620, 824 N.Y.S.2d 431 (2nd Dept.2006); Earle v. Valente, 302 A.D.2d 353, 754 N.Y.S.2d 364 (2nd Dept.2003); and Moran v. Harting, 212 A.D.2d 517, 622 N.Y.S.2d 121 (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. McSorley v. Spear, 50 A.D.3d 652, 854 N.Y.S.2d 759 (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 A.D.3d 780, 878 N.Y.S.2d 459 (2nd Dept.2009): Leviton, v. Unger, 56 A.D.3d 731, 868 N.Y.S.2d 126 (2nd Dept.2008); and Gurevitch v. Goodman, 269 A.D.2d 355, 702 N.Y.S.2d 634 (2nd Dept.2000).
The affidavit of service does not indicate if the process server made any effort to ascertain if McCaffrey was employed or to serve him at his place of employment pursuant to CPLR 308(1) or (2) before resorting to service pursuant to CPLR 308(4).
CPLR 5015(a)(4) requires the dismissal of an action where the court lacks personal jurisdiction over the defendant. McKinney's CPLR Practice Commentaries C5015:9. A motion to vacate a judgment for lack of personal jurisdiction may be made at any time. Siegel, New York Practice 4th § 430.
If the court lacked jurisdiction over the defendant, 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 A.D.3d 525, 865 N.Y.S.2d 287 (2nd Dept.2008); Ananda Capital Partners, Inc. v. Stav Electric Systems, Ltd., 301 A.D.2d 430, 753 N.Y.S.2d 488 (1st Dept.2003); European American Bank & Trust Co. v. Serota, 242 A.D.2d 363, 661 N.Y.S.2d 282 (2nd Dept.1997); Brent–Grand v. Megavolt, Corp., 97 A.D.2d 783, 468 N.Y.S.2d 412 (2nd Dept.1983); and Mayers v. Cadman Towers, Inc., 89 A.D.2d 844, 453 N.Y.S.2d 25 (2nd Dept.1982).
The complaint alleges causes of action for breach of contract and account stated.
The statute of limitations on a cause of action for breach of contract is six years. CPLR 213(2). A cause of action for breach of contract accrues and the statute of limitations begins to run when the breach occurs or when a party to the agreement fails to perform an obligation. Ely–Cruikshank Co., Inc. v. Bank of Montreal, 81 N.Y.2d 399, 599 N.Y.S.2d 501, 615 N.E.2d 985 (1993); and Carranza v. Prinz, 240 A.D.2d 405, 658 N.Y.S.2d 1011 (2nd Dept.1997). The complaint alleges the breach occurred on August 31, 2002.
The statute of limitations on an action for account stated is six years. Erdheim v. Gelfman, 303 A.D.2d 714, 757 N.Y.S.2d 320 (2nd Dept.2003); and Hertzberg & Sanchez, P.C. v. Friendship Dairies Inc., 14 Misc.3d 136(A), 2007 WL 488141 (App.Term 9th & 10th Jud. Dists.2007); and CPLR 213(2). The cause of action accrues at the time of the last transaction on the account. 75 N.Y. Jur2d Limitations and Laches § 90. Although the exact date McCaffrey last made a charge on the account or last made a payment on the account is not alleged and no charge card statements have ever been provided to the court, the court can infer from the complaint the last charge and last payment was before August 31, 2002.
More than six years has elapsed since McCaffrey defaulted in payment on this credit card. If this action were to be dismissed on the grounds that the court lacked jurisdiction because McCaffrey had not been properly served, the causes of action alleged in the complaint would now be time barred by the statute of limitations. Plaintiff could not recommence the action within 6 months of the dismissal because the dismissal is for failure to obtain personal jurisdiction over the defendant. CPLR 205(a).
In this action, the default judgment was a “clerk's judgment” premised upon the assertion the amount due was a sum certain. Siegel, New York Practice 4th § 293; CPLR 3215(a). The proof submitted in support of the application for a clerk's judgment was clearly and unquestionably inadequate to obtain the judgment. Collins Financial Services v. Vigilante, 30 Misc.3d 908, 915 N.Y.S.2d 912 (Civil Ct. Richmond Co.2011).
The proof Velocity submitted in support of its application to enter a default judgment failed to establish the existence of prima facie cause of action against the defendant. New South Ins. Co. v. Dobbins, 71 A.D.3d 652, 894 N.Y.S.2d 912 (2nd Dept.2010): Hosten v. Oladapo, 44 A.D.3d 1006, 844 N.Y.S.2d 417 (2nd Dept.2007); Francisco v. Soto, 286 A.D.2d 573, 729 N.Y.S.2d 889 (1st Dept.2001); and Joosten v. Gale, 129 A.D.2d 531, 514 N.Y.S.2d 729 (1st Dept.1987).
In order to obtain a default judgment, plaintiff must establish on a non-hearsay basis the facts constituting plaintiff's prima facie case. State v. Williams, 44 A.D.3d 1149, 843 N.Y.S.2d 722 (3rd Dept.2007); and Feffer v. Malpeso, 210 A.D.2d 60, 619 N.Y.S.2d 46 (1st Dept.1994).
As part of its prima facie proof, Velocity had to prove Discover assigned McCaffrey's account to Velocity. 6A N.Y. Jur2d Assignments § 87. No such proof has been provided.
As part of its prima facie proof, Velocity had to establish it provided McCaffrey with notice of the assignment of the debt. TPZ Corp. v. Dabbs, 25 A.D.3d 787, 808 N.Y.S.2d 746 (2nd Dept.2006); Caprara v. Charles Court Assocs., 216 A.D.2d 722, 627 N.Y.S.2d 836 (3rd Dept.1995); and 6A N.Y. Jur2d Assignments § 56. No such proof has been offered.
To establish its breach of contract action, Velocity was required to establish the issuance of a credit card by Discover to McCaffrey, McCaffrey's use of the card and McCaffrey's default in payment. Feder v. Fortunoff, Inc., 114 A.D.2d 399, 494 N.Y.S.2d 42 (2nd Dept.1985); and Empire National Bank v. Monahan, 82 Misc.2d 808, 370 N.Y.S.2d 840 (Co.Ct. Rockland Co.1975). Velocity has not presented any evidence establishing Discover had issued a credit card to McCaffrey, the balance due on the credit card or McCaffrey's default in payment. Velocity has failed to provide the court with a copy of the credit card agreement or a statement issued by Discover to McCaffrey. Citibank (South Dakota) N.A. v. Sablic, 55 A.D.3d 651, 865 N.Y.S.2d 649 (2nd Dept 2008); and Brower v. Gateway 2000, Inc., 246 A.D.2d 246, 676 N.Y.S.2d 569 (1st Dept.1998).
To establish its account stated action, Velocity was required to prove statements had been sent to McCaffrey which McCaffrey failed to pay or object. Velocity Investments, LLC v. Cocina, 77 A.D.3d 1306, 909 N.Y.S.2d 853 (4th Dept.2010); Nebraskaland, Inc. v. Best Selections, Inc., 303 A.D.2d 662, 757 N.Y.S.2d 94 (2nd Dept.2003); and Herrick Feinstein LLP v. Stamm, 297 A.D.2d 477, 746 N.Y.S.2d 712 (1st Dept.2002). To meet this requirement, Velocity was required to establish the statements were business records. Id. Velocity has failed to produce any statements issued to McCaffrey let alone establish those statements were business records. CPLR 4518(a).
Since Velocity failed to offer any non-hearsay proof establishing either a cause of action for breach of contract or account stated, the judgment should not have been entered.
“Waiver is the voluntary abandonment or relinquishment of a known right, which, except for such waiver, the party would have enjoyed.” P & D Cards and Gifts, Inc. v. Matejka, 150 A.D.2d 660, 662, 541 N.Y.S.2d 533 (2nd Dept.1989). Waiver may be evidenced by an express agreement or by conduct of the parties which indicates an intent not to exercise or enforce a right. Bono v. Cucinella, 298 A.D.2d 483, 748 N.Y.S.2d 610 (2nd Dept.2002) and Dice v. Inwood Hills Condominium, 237 A.D.2d 403, 655 N.Y.S.2d 562 (2nd Dept.1997).
Velocity fails to present any proof that McCaffrey knowingly and voluntarily waived his right to be properly served in the first instance or that the failure to make service in a statutorily permitted manner provides McCaffrey with a basis to vacate the judgment and have the action dismissed. There is no evidence McCaffrey was advised if he made an application to vacate the judgment on the grounds he was not properly served and the action was dismissed on the basis, the action could not be recommenced because the action would be barred by the Statute of Limitations.
Due process requires that before a person's property interest be adjudicated the party be provided with notice through means reasonably calculated to provide the party with notice of the pendency of the proceeding and the opportunity to be heard. Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865 (1950); and Beckman v. Greentree Securities, Inc., 87 N.Y.2d 566, 640 N.Y.S.2d 845, 663 N.E.2d 886 (1996); Temple B'nai Shalom of Great Neck v. Village of Great Neck Estates, 32 A.D.3d 391, 820 N.Y.S.2d 104 (2nd Dept.2006); lv. dnd.8 N.Y.3d 813, 836 N.Y.S.2d 552, 868 N.E.2d 235 (2007); cert. dnd.552 U.S. 1183, 128 S.Ct. 1241, 170 L.Ed.2d 65 (2008). McCaffrey was denied that right and opportunity. The “Affidavit and Stipulation” gives McCaffrey the right to heard on the merits only if he waives available defenses that might result in the dismissal of this action.
To one who is unsophisticated or lacks knowledge of the law, the “Affidavit and Stipulation” appears to be manna from heaven. The judgment is vacated and the party is being given the opportunity to contest the matter on the merits.
In this situation, the “Affidavit and Stipulation” is ice in winter. It is giving plaintiff the opportunity to avoid the consequences of having used an unscrupulous and unethical process server who regularly made sewer service by having the defendant waive his right to be properly served, waive valid defenses that would result in the dismissal of the action and proceed on an action in which Velocity has never produced the evidence necessary for establishing a prima facie case. Vacating the judgment and permitting this action to proceed if the plaintiff lacks the proof necessary to establish its prima facie case would waste of the court's limited resources.
This application demonstrates the dangers of treating tens of thousands of different cases identically. Each case is sui generis. Only the judge to whom each case is assigned can determine issues regarding the propriety of service, the available defenses and the merits of the action and whether the relief requested should be granted. See, Woodson v. Mendon Leasing, 100 N.Y.2d 62, 760 N.Y.S.2d 727, 790 N.E.2d 1156 (2003).
This court will not simply rubber stamp ever order placed before it. Before the court signs an order, the court must determine if the there is a factual and legal basis for the relief that will be granted in the order.
Therefore, the action is set down for a hearing in Civil Part 3, District Court, Nassau County, 99 Main Street, Courtroom 259, Hempstead, New York on March 18, 2011 at 9:30 a.m. at which Velocity shall produce a copy of the assignment establishing the assignment of the McCaffrey account from Discover to Velocity, a copy of the credit card agreement in effect as of the date of McCaffrey's alleged default and copies of the credit card statements establishing the existence of the debt.
The application to vacate the judgment is held in abeyance pending the hearing.
All proceedings to efforts to enforce the judgment are hereby stayed pending the hearing.
SO ORDERED.