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Gecaj v. Gjonaj Realty & Management Corp.

Supreme Court of New York, First Department

April 25, 2017

Viktor Gecaj, Plaintiff-Appellant,
v.
Gjonaj Realty & Management Corp., et al., Defendants-Respondents.

          Alexander J. Wulwick, New York, for appellant.

          Ronald P. Berman, New York, for respondents.

          Friedman, J.P., Richter, Moskowitz, Kapnick, JJ.

         Order, Supreme Court, Bronx County (Julia I. Rodriguez, J.), entered November 18, 2015, which granted defendants' motion to vacate a default judgment entered against them and set aside the assessment of damages after inquest, modified, on the law, the facts, and in the exercise of discretion, to the extent of denying the motion to vacate the default judgment, and remanding the matter for a new inquest to determine plaintiff's damages, and otherwise affirmed, without costs.

         The motion to vacate the default judgment should not have been granted since defendants failed to demonstrate a reasonable excuse for their delay in appearing. The record shows that plaintiff commenced this action by verified complaint dated December 27, 2010. An affidavit of service for defendant 28-47 Webb Realty Associates, LLC (Webb), dated January 19, 2011, indicates that service was made on January 18, 2011 upon the Secretary of State. An affidavit of service for defendant Gjonaj Realty & Management Corp. (Gjonaj), dated January 21, 2011, indicates that service was made on January 20, 2011 upon Maria Gjonaj, the managing agent for defendant Gjonaj. A second affidavit of service for Gjonaj dated June 10, 2011 indicates that service was personally made upon "Jane Smith, " a managing agent who refused to give her name, on June 2, 2011.

         In his complaint, plaintiff alleges that defendants retained plaintiff's employer to install cameras at the premises located at 28-47 Webb Avenue in the Bronx. Plaintiff further alleges that he was injured on May 7, 2010 when he fell from a defective ladder while performing work for his employer. Plaintiff contends that defendants violated Labor Law sections 200, 240, 241(6) and 241-a, and sections of the Industrial Code, and that by reason of such violations and defendants' negligence, he was severely injured.

         After receiving no answer from either party, plaintiff moved by notice of motion dated December 26, 2011 for a default judgment, pursuant to CPLR 3215, which was denied on March 26, 2012, without prejudice, for plaintiff's failure to submit an affidavit of merit in support of the motion and to demonstrate that it complied with the follow-up mailing requirement of CPLR 3215(g) for defendant Webb. An affidavit of service, dated July 16, 2013, indicates that the order denying plaintiff's motion for a default judgment, along with notice of entry, were served on defendants pro se, via mail, on July 16, 2013. Thereafter, on or about October 8, 2013, plaintiff renewed his motion for a default judgment, which was granted on November 22, 2013, and an inquest was directed. On December 11, 2013, plaintiff pro se served the notice of entry of the default judgment on defendants. On February 12, 2014, defendants received a letter from the court in connection with the case [1]. On September 23, 2014, the court conducted the inquest and granted plaintiff an award of $900, 000. Notice of entry of the award was served on defendants on or about October 20, 2014.

         It was not until December 10, 2014, over 4½ years after the accident occurred, and almost four years since the action was commenced, that defendants finally moved, pursuant to CPLR 5015, to vacate the default judgment and to serve and file a late answer. The motion was supported by an affidavit from defendants' principal, Viktor Gjonaj (Mr. Gjonaj), an affirmation from Y. Albert Dauti, defendants' attorney, and an affidavit from David Sarasky, an insurance broker with ARM-Capacity of New York, LLC (ARM), who was ARM's designated representative to handle liability insurance coverage matters for defendants.

         The motion court vacated the default judgment and granted defendants leave to serve and file the proposed verified answer with affirmative defenses, finding that defendants had presented a reasonable excuse for their default, that their default was not intentional, and that they had a meritorious defense to plaintiff's claims. Further, the motion court noted that it is "the preferred policy of the First Department to dispose of cases on their merits."

         We agree that "[w]hat constitutes a reasonable excuse for a default generally lies within the sound discretion of the motion court" (Rodgers v 66 E. Tremont Hgts. Hous. Dev. Fund Corp., 69 A.D.3d 510, 510 [1st Dept 2010]). We also agree that "there exists a strong public policy in favor of disposing of cases on their merits" (Johnson-Roberts v Ira Judelson Bail Bonds, 140 A.D.3d 509, 509 [1st Dept 2016]). However, the Appellate Division has the ability and authority to substitute its own discretion for that of the motion court, even in the absence of a finding of abuse of discretion (Alliance Property Mgmt. & Dev. v Andrews Ave. Equities, 70 N.Y.2d 831, 833 [1987] [finding that the "Appellate Division is, of course, vested with the same power and discretion as Special Term, and can review a determination for abuse of discretion or substitute its own discretion"]). Here, under all the circumstances of this case, we disagree with the motion court and find that defendants failed to present a reasonable excuse for their default (see CPLR 5015[a][1]). "Whether there is a reasonable excuse for a default is a discretionary, sui generis determination to be made by the court based on all relevant factors" (Harcztark v Drive Variety, Inc., 21 A.D.3d 876, 876-877 [2d Dept 2005]). We respectfully do not believe that the motion court correctly considered all the "relevant factors" in this particular case, and thus we reach the opposite conclusion.

         Defendants' principal, a successful business person, owning over 15 multiple-dwelling properties, affirmed that he was served with "numerous legal papers on this matter, " copies of which he would forward to his insurance broker. Specifically, defendants' principal affirmed that he received the summons and complaint, both motions for a default judgment, a letter from the court, and a decision from the court containing a reference to a $900, 000 judgment against his companies. Each time, he allegedly provided a copy of the respective document to his insurance broker, upon whom he relied to send the document to the appropriate insurance carrier. And each time, the insurance broker assured Mr. Gjonaj that "everything in this matter was under control, " and the "claim was being handled by the proper insurance company." However, defendants did not take any further action to determine if the insurance carrier was in fact responding to plaintiff's claims, notwithstanding Mr. Gjonaj's receipt of numerous documents directly from plaintiff's counsel over the course of more than three years. It was not until October 2014, when Mr. Gjonaj received the decision granting plaintiff a monetary award, that he finally became "alarmed and reached out to an attorney, " and even then, despite being "alarmed, " it took an additional two months for defendants to file their motion to vacate the default. [2]

         Sarasky affirmed that his practice was to provide the documents to the claims department, to then be sent to the insurance carrier for defendants. However, as it turns out, the documents were mistakenly being sent to the wrong insurance carrier (who apparently never notified the broker or the defendants of the mistake), and thus, no one was ever appointed to appear for defendants in this action.

         While we concede that, generally, when a defendant provides the summons and complaint to its insurance broker, and the insurer, thereafter, fails to appoint counsel to appear in the action on behalf of defendant, this is considered to be a reasonable excuse (see generally Rodgers, 69 A.D.3d at 510-511) However, on the facts presented here, defendants did not establish a reasonable excuse for their default. An assertion by a defendant that it believed its insurer "was providing a defense is unsubstantiated and unreasonable in light of [the defendant's] conceded receipt of the plaintiff's motion for leave to enter a default judgment, " as receipt of such a motion puts the defendant on notice that the insurer has, in fact, not answered the complaint since the commencement of the action (Trepel v Greenman-Pedersen, Inc., 99 A.D.3d 789, 791 [2d Dept 2012]; see also Spitzer v Landau, 104 A.D.3d 936');">104 A.D.3d 936, 937 [2d Dept 2013] [finding that the defendant's belief that the insurer was providing a defense was "unreasonable given that the defendant was served with the plaintiff's motion for leave to enter a default judgment"]).

         As in Trepel v Greenman-Pedersen, Inc., Mr. Gjonaj's assertion in this case that he believed his broker was forwarding the paperwork to the appropriate insurance carrier was unreasonable in light of his conceded receipt of the summons and complaint, two motions for a default judgment, a letter from the court and a court decision reflecting a $900, 000 judgment against him. Surely Mr. Gjonaj knew that if his insurance company had retained a lawyer to appear for defendants, he and his corporations would not have continued to receive legal documents directly from plaintiff's attorney and the court for over three years. The fact that Sarasky kept assuring Mr. Gjonaj "that everything in this matter was under control and that the claim was being handled by the proper insurance company, " does not help to establish reasonableness, objective or otherwise, on the part of Mr. Gjonaj, who should have known that everything was not under control after years of receiving so many legal documents from plaintiff's counsel relating to the same lawsuit.

         The dissent, however, would have us find that defendants presented a reasonable excuse for their delay because they forwarded all documents upon receipt to their insurance broker, and thus, were entitled to blindly rely on their belief that the insurer would take appropriate action. The cases cited by the dissent and the motion court in support of this proposition are readily distinguishable and do not dictate vacatur of the default judgment here. In Romero v Alezeb Deli Grocery Inc. (115 A.D.3d 496');">115 A.D.3d 496 [1st Dept 2014] ), cited by the motion court, the defendant received the summons and complaint, which was then forwarded to its insurance broker, who delayed in forwarding the pleadings to the carrier; there is no indication that the defendant ever received any papers from the plaintiff other than the initial pleadings. In Rodgers, also cited by the Supreme Court, the defendant denied ever being served with process, and upon receiving a letter from the plaintiff's counsel containing a copy of the pleadings, immediately forwarded the correspondence and pleadings to its insurer (69 A.D.3d at 510-511). In the third case cited by the motion court, Price v Boston Rd. Dev. Corp. (56 A.D.3d 336');">56 A.D.3d 336');">56 A.D.3d 336');">56 A.D.3d 336 [1st Dept 2008), the court found that the defendant demonstrated that it did not receive notice of the action until its former managing agent was personally served with the plaintiff's motion for a default judgment, and that the prompt action the defendant took after receiving notice of the plaintiff's motion suggested that it lacked actual notice of the summons and complaint. These facts, where the defendants reacted promptly to their defaults, are very different from the facts in this case, where defendants continued to receive documents from plaintiff's counsel and the court for over three years after the pleadings were served, clearly rendering any reliance on the mere act of forwarding the documents to the broker or insurance carrier unreasonable (see also Lirit Corp. v Laufer Vision World, 84 A.D.2d 704, 704 [1st Dept 1981] [the defendant's default was reasonable where an "employee who received the summons mailed it to the insurance broker and it somehow was never heard of again, " and thereafter, at the "first indication defendant had that there was a default... defendant promptly moved to vacate it "] (emphasis added); Heskel's W. 38th St. Corp. v Gotham Constr. Co. LLC, 14 A.D.3d 306');">14 A.D.3d 306 [1st Dept 2005] [finding that the defendant forwarded the summons and complaint to its insurer, who inadvertently failed to forward it to counsel, but once the plaintiff's counsel spoke to the adjuster and the error was discovered, the defendants served their answer, only 4½ months later]).

         The remaining cases relied upon by the dissent are also distinguishable because the facts are so different from the present case (see Mendoza v Bi-County Paving, 227 A.D.2d 302, 303 [1st Dept 1996] [finding that the defendant offered a reasonable excuse for its default, when its broker misdirected the complaint to the wrong insurer who misplaced it, that settlement negotiations made it prudent to delay service of the answer, and then the defendants never received notice of the motions for a default judgment or of the ensuing orders]; Price v Polisner, 172 A.D.2d 422, 423 [1st Dept 1990] [finding that neither the defendant nor the insurance carrier received notice of the motion for a default judgment until the order after inquest was served, and upon receipt of same, both the defendant and the insurance carrier took prompt action to seek relief]; Wehringer v Kessler, 56 A.D.2d 547, 548 [1st Dept 1977] [finding that the defendant denied "that he was served with a notice of default or any other papers before he received a copy of the default judgment, " which was caused by the clerical oversight and inadvertence of his broker and/or his insurer, thus providing a reasonable excuse for the default]. Here, as already noted, Mr. Gjonaj confirmed that he received the summons and complaint, both motions for a default judgment, as well as a letter from the court and the decision after inquest, and thus, defendants did not and cannot allege that they failed to receive notice of any of the pleadings, motions, or orders filed in this action. [3]

         To the extent the dissent, which criticizes our occasional citation of Second Department cases, relies so heavily on the Second Department case of Fire Is. Pines v Colonial Dormer Corp. (109 A.D.2d 815');">109 A.D.2d 815');">109 A.D.2d 815');">109 A.D.2d 815 [2d Dept 1985]), contending that it presents facts so similar to the case before us that it dictates affirming the motion court's decision to vacate the default judgment, the case is, in fact, distinguishable, in that the Second

         Department there found that "[u]nder the totality of the circumstances...presented" the motion court's refusal to vacate the default judgment entered against the defendant was an improvident exercise of discretion because, inter alia, the insured defendant had acted promptly to protect itself as soon as the insurer or broker forwarded a letter to the defendant disclaiming coverage for the loss sued upon, which was less than 11 months after the action was commenced. Here, there was no issue raised by the insurer or the broker as to coverage being disclaimed, and defendant did not act at all promptly to protect himself throughout the proceedings, waiting almost two months after receiving notice of entry of the $900, 000 award to move to vacate the default judgment, which was also almost three years after receiving the first motion for a default judgment (cf. Price v Polisner, 172 A.D.2d at 173 [where the court also found, as in Fire Is. Pines, that the defendant had acted promptly to protect himself]). Moreover, the Fire Is. Pines Court did not mention or make reference to a claim of prejudice by the plaintiff. The same ...


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