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Yuan-Leung v. Orsyn Land Services, Inc.

United States District Court, S.D. New York

January 7, 2020

CAROL YUAN-LEUNG, Plaintiff,
v.
ORSYN LAND SERVICES, INC., IN BUM CHUNG, and MIN CHONG LEE, Defendants.

          MEMORANDUM & ORDER

          LOUIS L. STANTON U.S.D.J.

         Plaintiff Carol Yuan-Leung brought this action alleging fraudulent filing of a federal tax information return in violation of 26 U.S.C. § 7434 and mail fraud in violation of 18 U.S.C. § 1341. Default judgment was entered against the defendants. They now move to vacate the default judgment. For the reasons that follow, defendants' motion is denied.

         BACKGROUND

         Plaintiff Carol Yuan-Leung, defendant In Bum Chung, and defendant Min Chong Lee were partners of a title insurance company called Orsyn Abstracts LLC ("Orsyn Abstracts"). Mr. Chung and Ms. Lee were also officers of another entity called Orsyn Land Services, Inc. ("Orsyn Land").

         On July 31, 2015, Ms. Leung left Orsyn Abstracts, which owed her $100, 395.28 at the time. That day, Mr. Chung wrote to Ms. Leung's company, SSYL Corp., a check in the amount of $50, 395.28, and Mr. Chung and Ms. Lee executed a promissory note promising to pay Ms. Leung the remaining $50, 000 balance.

         On December 19, 2016, Ms. Leung commenced a New York state court action against defendants to recover the promissory note's unpaid balance. The parties reached a settlement, which disposed of the issue of the remaining $50, 000 balance.

         On March 19, 2018, Ms. Leung received from Orsyn Land a Form 1099 for the 2015 tax year, which identified the original $50, 595.28 payment to her as "non-employee compensation."

         Ms. Leung brought this action on July 10, 2018, alleging that the Form 1099 had been fraudulently filed because that payment was not "compensation" (i.e., earnings taxable to her, and a deduction for Orsyn Land) but rather a partial repayment of contributions she made to Orsyn Abstracts between 2013 and 2015 to finance its operating expenses. Defendants were served in July of 2018.

         Defendants retained Michael-Hyun Lee, Esq. as their counsel. Mr. Lee informed defendants that he would represent them in this case, but he did not file a notice of appearance, did not file an answer, nor take any other action on defendants' behalf, due to claimed but unspecified "serious health issues." Michael-Hyun Lee Decl. ¶ 9. He states that as his health issues worsened, he was not able to assist defendants or "even to communicate with them regarding this matter." Id. ¶ 10. No affidavit of any treating or other physician has been submitted.

         On October 1, 2018, the Clerk issued a certificate of default as to all defendants. On October 5, 2018, plaintiff moved for default judgment, which was served upon each of the three defendants via U.S. Mail (Dkt. No. 25). Default judgment was entered on November 2, 2018 against defendants requiring them to immediately issue a corrected Form 1099, and awarding Ms. Leung the amount of $33, 276.43, representing primarily her costs and attorneys' fees incurred in obtaining correction of the Form 1099, as well as $5, 000 statutory damages.

         On December 13, 2018, the Clerk issued a writ of execution against defendants in the amount of $33, 276.43, which was served upon defendants' banks on December 31, 2018 and January 2, 2019.

         On January 10, 2019, defendants' previous counsel, Mr. Lee, sent an email to plaintiff s counsel stating, "I would appreciate a call from you and if you can send a notice to the bank lifting the writ of execution as soon as possible to limit any irreparable damage to my client." O'Brien Decl. Ex. 1.

         New counsel for defendants, Robert James Basil, Esq. of the Basil Law Group, PC, appeared on February 26, 2019, and filed this motion ...


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