Opinion
30317/2010
08-15-2011
Mike Zevgolis v. Walter Pericic
For the Plaintiff: Acquista & Associates, P.C., by Salvatore J. Acquista, Esq. For the Defendant: Deutsch & Schneider, by Joshua Deutsch & William J. Fielding, Esqs.
For the Plaintiff: Acquista & Associates, P.C., by Salvatore J. Acquista, Esq.
For the Defendant: Deutsch & Schneider, by Joshua Deutsch & William J. Fielding, Esqs.
Charles J. Markey, J.
This action, commenced pursuant to CPLR 3213, for summary judgment in lieu of complaint raises interesting issues on a process server's alleged lack of diligence in serving the defendant. The issues raised in the cross motion, also permit the Court to make certain observations regarding the enforcement of the arbitration clause in the contract, especially under recent law by the Supreme Court of the United States.
Plaintiff commenced the instant action, pursuant to CPLR 3213, to recover on an instrument for the payment of money by motion for summary judgment in lieu of complaint. Plaintiff alleges that the defendant defaulted in the payment of a promissory note in the amount of $45,000.00. According to plaintiff, the original $55,000.00 principal amount increased to $60,000.00 when payment was not made in full on March 1, 2009, as per the terms of the note. Plaintiff also alleges that a balance of $45,000.00 remains, after a partial payment by defendant of $15,000.00 in March of 2010. The note was given in connection with the purchase of plaintiff's restaurant located at 35-15 36th Street, Astoria, in Queens County, New York.
In his answering/cross motion papers, the defendant, among other things, denies the Court's jurisdiction over him, alleging that he was not properly served with the summons and accompanying motion for summary judgment in lieu of a complaint. The plaintiff failed to include a copy of an affidavit of service of same with his moving papers, but did include a copy with his reply/opposition to cross motion papers. According to the process server, he attempted to personally deliver the summons and notice of motion for summary judgment in lieu of complaint, with supporting papers, to defendant at "premises sought to be recovered" at 26-39 213th Street, Bayside, in Queens County, New York 11360, on: Thursday, December 9, 2010, at 7:50 P.M.; Monday, December 13, 2010, at 3:30 P.M.; and Thursday, December 16, 2010, at 12:40 P.M., before affixing a copy of the aforesaid documents to the door and thereafter mailing a copy of same to defendant's place of residence (CPLR 308[4]).
Service of process, pursuant to CPLR 308, must be made in strict compliance with the statutory methods for effecting personal service upon a natural person (see, Dorfman v Leidner, 76 NY2d 956 [1990]; see also, Macchia v Russo, 67 NY2d 592 [1986]; Estate of Waterman v Jones, 46 AD3d 63 [2nd Dept. 2007] [a leading opinion]).
As stated by the Appellate Division, Second Judicial Department, in McSorley v Spear, (50 AD3d 652 [2008], lv. to appeal denied, 10 NY3d 715 [2008]):
Under the Civil Practice Law and Rules, the preferred methods of personal service on an individual are by delivering the summons to the defendant (see, CPLR 308 [1]), or by delivering the summons to a person of suitable age and discretion and mailing another copy of the summons to the defendant's last known residence or actual place of business (see, CPLR 308 [2]). If service cannot be effected by those methods "with due diligence," CPLR 308 (4) permits so-called "nail and mail" service, which entails affixing the summons to the door of the defendant's "actual place of business, dwelling place or usual place of abode," and by mailing the summons either to the defendant's last known residence or actual place of business (CPLR 308 [4]).(McSorley v Spear, 50 AD3d at 653; see, e.g., JP Morgan Chase Bank, N.A. v Iancu Pizza, Ltd., 78 AD3d 902 [2nd Dept. 2010]).
The "due diligence" requirement of CPLR 308(4) must be strictly observed, in light of the risk that a summons served pursuant to that section may not or will not be received (see, McSorley v Spear, 50 AD3d 652, supra; see also, Estate of Waterman v Jones, 46 AD3d 63, supra; O'Connell v Post, 27 AD3d 630 [2nd Dept. 2006]). What constitutes due diligence is determined on a case-by-case basis, focusing not on the quantity of the attempts at personal delivery, but on their quality (see, McSorley v Spear, 50 AD3d 652, supra.)
In this case, upon the foregoing papers, the purported nail and mail service was ineffective since plaintiff did not meet the due diligence requirement for substituted service pursuant to CPLR 308(4) (see, O'Connell v Post, 27 AD3d 630, supra; see also, Earle v Valente, 302 AD2d 353 [2nd Dept. 2003]; Gurevitch v Goodman, 269 AD2d 355 [2nd Dept. 2000]). The process server failed to sufficiently attempt personal service upon defendant pursuant to CPLR 308(1) or 308(2), before resorting to nail and mail service.
The papers in the instant motion for summary judgment in lieu of a complaint indicate that the defendant purchased plaintiff's restaurant. Presumably, the defendant is operating the restaurant. The process server's affidavit, however, makes no reference to any attempt to serve defendant or a person of suitable age at the restaurant, or otherwise locate defendant's actual place of business (see, Gurevitch v Goodman, 269 AD2d 355, supra; see also, Pizzolo v Monaco, 186 AD2d 727 [2nd Dept. 1992]).
In addition, the three attempts to serve defendant at his home were made on days and at times when it reasonably could have been expected that defendant was at work or, given the nature of the restaurant business, in transit to or from work (see, County of Nassau v Long, 35 AD3d 787 [2nd Dept. 2006]; see also, County of Nassau v Letosky, 34 AD3d 414 [2nd Dept. 2006]; Earle v Valente,302 AD2d 353, supra).
Finally, although defendant did not deny receipt of the summons and complaint by mail to his residence, "[w]hen the requirements for service of process have not been met, it is irrelevant that defendant may have actually received the documents." (Raschel v Rish, 69 NY2d 694, 697 [1986]; see, County of Nassau v Letosky,34 AD3d 414, supra; Hillary v Grace, 213 AD2d 450 [2nd Dept. 1995]).
Under these circumstances, the attempted service of the summons and accompanying motion, allegedly made pursuant to CPLR 308(4), is defective as a matter of law, and no personal jurisdiction was obtained over defendant (see, Sanders v Elie, 29 AD3d 773 [2nd Dept. 2006]; see also, Earle v Valente,302 AD2d 353, supra; Fattarusso v Levco American Improvement Corp., 144 AD2d 626 [2nd Dept. 1988], appeal dismissed, 73 NY2d 994 & appeal denied, 74 NY2d 604 [1989]).
The defendant's cross motion also permits the Court to make certain observations regarding the enforcement of the arbitration provision in the contract. Defendant contends that the plaintiff brought the instant action prematurely without first resorting to arbitration, pursuant to the arbitration agreement contained in the contract between the parties. The plaintiff, however, correctly counters that the arbitration clause, by its wording, was not mandatory, but may be invoked by the parties, in their discretion. Presiding Justice Bernard Botein, a highly respected jurist in New York's history of jurisprudence, stated with eloquence that agreements to arbitrate are "solemn, written promises" that courts should not hesitate to enforce. H.M. Hamilton & Co., Inc. v American Home Assurance Co., 21 AD2d 500 [1st Dept.] [Botein, P.J.] [3-2 opinion], aff'd, 15 NY2d 595 [1964].
There have been exceptions to the solemnity of the arbitration clause. One holding, during World War II, held that an agreement to arbitrate is not enforceable where the contract's performance was rendered unenforceable by government decree. Gunze Silk Corp. v Charles Rudolph Corp. of New York, 266 App Div 541 [1st Dept. 1943]. Courts, subsequently, to protect consumers from giant corporations with presumably greater resources held that arbitration clauses are not enforceable in Small Claims Court as violating the Small Claims Act. Licitra v Gateway, Inc., 189 Misc 2d 721 [Sup Ct Richmond County 2001], aff'd as modified [2002] [exact citation of appellate history unavailable on Westlaw]; accord, Scarcella v American Online, 11 Misc 3d 19 [App T 1st Dept. 2005], aff'g 4 Misc 3d 1024(A), 2004 WL 20934291, 2004 NY Slip Op 51021(U) [NYC Civ Ct New York County 2004]. Yet, despite the pro-consumer cases declining to enforce arbitration clauses against a small claims court litigant or a consumer, in "common, garden variety" litigation disputes, courts were loathe to let parties to frustrate an arbitration clause (see, e.g., Coenen v R.W. Presspich & Co., 453 F.2d 1209 [2nd Cir. 1972]), especially if it was not deemed to be "onerous or unfair" (Scarcella v American Online, 11 Misc 3d at 20, supra).
This year, the Supreme Court of the United States, in AT & T Mobility, LLC v Concepcion, ___ U.S.___, 131 S. Ct. 1740 [2011] [5-4 opinion], abrogating Discover Bank v Superior Court, 36 Cal. 4th 148 [2005], held that the Federal Arbitration Act preempts California's judicial rule regarding the unconscionability of class arbitration waivers in consumer contracts. The High Court's majority opinion insisted that courts enforce arbitration agreements and place them "on an equal footing with other contracts." 131 S. Ct. at 1745-1746. The ruling discussed the "liberal federal policy favoring arbitration" and the "fundamental principle that arbitration is a matter of contract." The Supreme Court's opinion in AT & T Mobility v Concepcion (_U.S.__, 131 S. Ct. 1740, supra) puts into serious question the continued viability of the aforementioned New York cases of Licitra v Gateway, Inc., 189 Misc 2d 721, aff'd as modified, supra, and Scarcella v American Online, 11 Misc 3d 19, supra.
The plaintiff, in this case, did not breach a mandatory arbitration clause. As stated, the choice of proceeding to arbitration, under the wording of the contract, was permissive, at the parties' discretion, if so advised. Had the parties elected to go to arbitration or in the event of a mandatory arbitration clause, this Court would look severely at a party who chose to frustrate the "solemn, written promise" of arbitration (H.M. Hamilton & Co., Inc. v American Home Assurance Co., 21 AD2d 500, aff'd, 15 NY2d 595, supra) by resort to a variety of stratagems. For example, once the parties proceeded to arbitration to comply with a contractual arbitration provision, it would be unconscionable for one of the parties to frustrate the agreement by refusing to pay its pro rata or fair share of the expense and cost of the arbitrators or the company supervising the arbitration process. In such a case, for example, courts would have a wide degree of powers, including the weapon of summary judgment, the imposition of attorneys fees, and sanctions, to assess against a party and its counsel that chose to frustrate intentionally the written promise of arbitration. That conclusion is fortified by the recent decision of the Supreme Court in AT & T Mobility, LLC v Concepcion, ___ U.S.___, 131 S. Ct. 1740, supra.
Accordingly, plaintiff's motion for summary judgment in lieu of a complaint is denied, and the action is dismissed, without prejudice. Defendant's cross motion is denied as moot.
The foregoing constitutes the Court's decision and order. Any party may file notice of entry of a copy of a decision and order that attaches a copy of it bearing the dated stamp of entry by the County Clerk.
J.S.C.