Gustavia Home, LLC v. Hickson, 1:16-cv-03098

Gustavia Home obtained a default judgment of foreclosure against property owned by Cassandra Hickson; judgment entered March 21, 2017.
56 Somers St. LLC (a New York LLC asserting interest) moved repeatedly to stay the foreclosure and to vacate the default judgment; court denied interim stays in May 2017 after addressing anticipated vacatur arguments on the record.
Service: Gustavia served the summons/complaint and subsequent notices on the New York Secretary of State as agent for 56 Somers; affidavits of service were filed.
56 Somers later filed for bankruptcy the day before a scheduled foreclosure sale; bankruptcy court dismissed the petition for not being filed in good faith.
56 Somers renewed a motion to vacate the default judgment (July 3, 2017) raising (a) improper service under 28 U.S.C. § 1655, (b) alleged statute-of-limitations/acceleration defenses, and (c) other previously rejected or unasserted defenses.
District court denied the motion to vacate, finding service proper, no meritorious defense shown, willful default, and prejudice to Gustavia from delay.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Validity of service of process	Service on Secretary of State and by mail satisfied federal and NY law	Service improper under 28 U.S.C. § 1655 and LLC did not receive proper notice	Service was valid under Fed. R. Civ. P. 4(h)(1)(A)/4(e) and N.Y. LLC law; § 1655 inapplicable
Vacatur of default judgment for excusable neglect	Default justified; vacatur would prejudice plaintiff and delay relief	Default should be vacated based on lack of notice or other defenses	Vacatur denied: 56 Somers willfully failed to defend; no adequate showing of meritorious defense and vacatur would prejudice Gustavia
Effect of bankruptcy filing/stay	Bankruptcy filing stayed proceedings and justified relief	Filing was in bad faith and timed to delay foreclosure	Bankruptcy petition dismissed as not filed in good faith; stay did not excuse prior defaults
Statute-of-limitations / acceleration defense	Prior acceleration (2007) by original mortgagee may bar foreclosure	Gustavia’s pleadings and evidence do not show earlier acceleration; creditor’s 2016 letter does not prove 2007 acceleration	Defense rejected: Itah declaration and collection letter do not prove acceleration in 2007 and do not defeat foreclosure claim

H. F. Livermore Corp. v. Aktiengesellschaft Gebruder Loepfe, 432 F.2d 689 (D.C. Cir. 1970) (holding undue delay in seeking relief can prejudice the opposing party and justify denial of relief)