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Orix Financial Services v. Phipps

January 6, 2009


The opinion of the court was delivered by: Robert P. Patterson, Jr., Usdj


On August 26, 2008, Defendant Barbara Phipps filed a motion for "Relief from Judgment" under Rule 60(b)(4), requesting that the Court vacate the default judgment entered against her on September 3, 1991. Oral argument on Defendant's motion was heard by this Court on December 5, 2008. For the following reasons, Defendant's motion is denied.

1. Summary of the Proceedings

This action commenced on April 9, 1991, when Plaintiff filed its Complaint ("Compl.") against the moving Defendant to recover the balance due under notes issued to Plaintiff and Guaranteed by Defendant. The Complaint alleged that on December 10, 1988, Defendant's husband (Clarence Wayne Phipps), and Stanley Fleming, his business partner (together, the "Obligors"), contracted with General GMC-Kenworth ("Kenworth") to purchase on credit a tractor worth approximately $85,000. (Compl. ¶ 4; Compl. Ex. A [sales contract].) Kenworth assigned this debt to Plaintiff. (Compl. ¶ 6; Compl. Ex. C [assignment]). That same day, Defendant allegedly executed a Guaranty for all of the obligations of her husband to Plaintiff, both those then existing and those thereafter incurred. (Compl. ¶ 7; Compl. Ex. D [Guaranty]).

The Guaranty appointed C-A Credit as Defendant's agent for any service of process, and Defendant's address, which was typed underneath her alleged signature, was listed as "337 Marla Drive, Cohutta, GA 30710." (Compl. ¶ 7; Compl. Ex. D.) In April and June of 1989, the Obligors purchased two more tractors from Kenworth on credit for approximately $45,000, and again, this debt was assigned to Plaintiff. (Compl. ¶¶ 14, 21; Compl. Exs. F, I [sales contracts].) In June 1990, the Obligors defaulted on their debt, and on August 23, 1990, the Obligors filed for bankruptcy in the Northern District of Georgia. (Compl. ¶¶ 9-10, 17, 24.)

On April 9, 1991, Plaintiff filed a Complaint in this Court against Defendant to recover the unpaid balance due (approximately $166,000) under the terms of the Guaranty. (Compl. ¶¶ 12, 19, 26.) Defendant did not file a response to the Complaint, and on July 11, 1991, Plaintiff moved for a default judgment ("Default Judgment") against Defendant. (Compl. Ex H [notice of motion for default judgment]). On September 3, 1991, this Court granted Plaintiff's motion, and a Default Judgment was entered by this Court for the liquidated amount of $134,396.45 plus interest of $4,838.44 and attorney's fees of $26,879.29, for a total $166,114.18. (Compl. Ex. L [default judgment]). Plaintiff registered the judgment with the United States District Courts for the Middle and Northern Districts of Georgia, and Writs of Execution were issued by both Courts on December 30, 1991 and filed with the Dougherty County Clerk of the Superior Court of Georgia on October 13, 1992, September 28, 1998, and September 19, 2005, and the Whitfield County Clerk of Court on October 15, 1992, October 13, 1998, and October 10, 2005. (Affidavit of Barbara Phipps, dated August 22, 2008 ("Phipps Aff."), Ex. B [Middle District of Georgia Writ of Execution], Ex. C [Northern District of Georgia Writ of Execution].)

2. Defendant's Motion for Relief Under Rule 60(b)(4)

On August 29, 2008, nearly seventeen years to the day after the default judgment was entered against her, Defendant brought a motion under Fed. R. Civ. Pro. 60(b)(4) to set aside the Default Judgment. Defendant argues that the judgment entered against her must be vacated because this Court lacked personal jurisdiction over her at the time the judgment was entered. (Def. Br. at 7-17.)*fn1 Specifically, Defendant claims that she never signed the Guaranty, and therefore never agreed to appoint C-A Credit as her agent for service of process. (Id. at 10-12.) In the alternative, Defendant argues that even if she signed the Guaranty, the notice provided to her in 1991 of the pending action was insufficient to comply both with the terms of the Guaranty and her constitutional right to due process of law. (Id. at 12-17.) Each of Defendant's arguments will be considered in turn.

A. Legal Standard -- Rule 60(b)(4)

A court lacks in personam jurisdiction where a judgment has been "obtained by defective service." Polygram Merch., Inc. v. N.Y. Wholesale Co., 2000 U.S. Dist. LEXIS 166, at *3-4 (S.D.N.Y. 2000). Where a judgment is "obtained in the absence of in personam jurisdiction," it is void, and therefore must be vacated. China Mariners' Assur. Corp. v. M.T. W.M. Vacy Ash, 1999 U.S. Dist. LEXIS 2674, at *3 (S.D.N.Y. 1999); Kao Hwa Shipping v. China Steel Corp., 816 F. Supp. 910, 913 (S.D.N.Y. 1993); see also Triad Energy Corp. v. McNell, 110 F.R.D. 382, 385 (S.D.N.Y. 1986) (judgment obtained via defective service of process is void and must be vacated.) This is because Federal Rule of Civil Procedure 60(b)(4) provides that judgments that are void must be set aside. Am. Inst. of Certified Pub. Accountants v. Affinity Card Inc., 8 F. Supp. 2d 372, 375 (S.D.N.Y. 1998) ("a motion predicated on subsection four [of Rule 60(b)] is unique . . . in that relief is not discretionary.")

Further, while a Fed R. Civ. P. Rule 60(b)(4) motion must be made "within a reasonable time" after entry of the judgment, "courts have been exceedingly lenient in defining the term 'reasonable time,' with regard to voidness challenges." Beller & Keller v. Tyler, 120 F.3d 21, 24 (2d Cir. 1997). In fact, it has been oft-stated that, for all intents and purposes, a motion to vacate a default judgment as void may be made at any time." Id.; see also Crosby v. The Bradstreet Co., 312 F.2d 483, 485 (2d Cir. 1963) (judgment vacated as void thirty years after entry). Accordingly, even though this motion to vacate the default judgment was made approximately seventeen years after entry of the judgment, the motion is deemed timely.

B. Designation of C-A Credit As Defendant's Agent.

Defendant first argues that the Default Judgment entered against her is void because she never signed the Guaranty appointing C-A Credit of New York as her agent for service of process, and therefore, the Court lacked in personam jurisdiction over her at the time the judgment was entered. (Def. Br. at 10-12.) Defendant acknowledges that her signature appears to be on the Guaranty appointing C-A Credit as her agent, but she contends that this signature was forged. Relatedly, Defendant argues that the designation in the Guaranty of C-A Credit as her agent was improper because Plaintiff failed to execute the Guaranty in compliance with N.Y. Civil Practice Law and Rules ("CPLR") Section 318.

1. Factual Allegations

In her affidavit in support of her motion, Defendant claims that at "no time has [she] ever signed or been asked to sign a Guaranty of any loan obligation on behalf of [her] husband or his business interest." (Phipps Aff. ¶ 5.) Moreover, she alleges that she never signed the Guaranty attached to Plaintiff's Complaint which made her the Guarantor of her husband's debts to Plaintiff and which appointed C-A Credit as her agent for service of process. (Id. ¶ 6.) Rather, Defedant asserts, her signature on that Guaranty was "forged." (Id. ¶ 6.) To buttress this claim, Defendant points out that the first name of the signature on the Guaranty is spelled "Barbra," instead of the correct spelling of "Barbara." (Id. ¶ 7; Phipps Aff. Ex. A [Guaranty containing signature, "Barbra Phipps"].)

In response to Defendant's averments, Jean DeGrave, who serves as a Vice-President for Plaintiff, alleges that while Defendant's name is spelled incorrectly on the Guaranty she provided to the Court (Phipps Aff. Ex. A), Plaintiff's files contain a duplicate copy of the Guaranty that was executed on the same day the first Guaranty was signed. (Affidavit of Jean DeGrave, dated September 24, 2008 ("DeGrave Aff."), ¶ 3; DeGrave Aff. Ex. 1 [Guaranty containing signature, "Barbara Phipps"].) The signature on the duplicate Guaranty appears to be identical to that of the first Guaranty, except that it has Defendant's name correctly spelled. (Id.) Under both Guaranties, the Signatory agreed to "designate and appoint Stuart B. Glover, Esq., New York, New York, and C-A Credit Corp., New York, New York, or either of them, as [her] true and lawful attorney-in-fact and agent for each of us and in our name, place and stead to accept service of any process within the State of New York." (DeGrave Aff. ¶ 5; DeGrave Aff. Ex. 1.) On April 12, 1991, service was effected here when Plaintiff personally served an officer of C-A Credit with a copy of the Summons and Complaint. (DeGrave Aff. ¶ 7.)

In a reply-affidavit, Defendant denied signing the Guaranty that had her name spelled correctly and which had been produced by Plaintiff. (Affidavit of Barbara Phipps ("Phipps Reply Aff."), dated November 21, 2008, ¶ 2.) Defendant also produced an affidavit signed by Denise Dickson, the woman who had notarized both Guaranties and who was an employee of Dalton Truck Sales. (Affidavit of Denise Dickson ("Dickson Aff."), dated November 24, 2008, ¶¶ 2, 4.) There is no evidence submitted that Dalton Truck Sales was affiliated with Defendant or her husband, or that Dickson knew Defendant. Dickson averred that during her employment at Dalton Truck Sales, she "notarized numerous documents at the request" of her employer, and that "many times these documents already bore the signing parties signature" when she notarized them. (Id. ¶3.) Hence, Dickson averred, she "did not always witness the execution of the documents by the signing party prior to notarizing the ...

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