Haverlin v Gottlieb

Nov 30, 2015

2014-821 N C

Versions:

Catherine V. Haverlin, Respondent, against Mark Gottlieb, Appellant.

Appeal from an order of the District Court of Nassau County, First District (Joy M. Watson, J.), dated May 21, 2013. The order, insofar as appealed from, upon, in effect, renewal, adhered to a prior determination denying defendant‘s motion to vacate a default judgment.

ORDERED that the order, insofar as appealed from, is reversed, without costs, and, upon renewal, the branch of defendant‘s motion seeking to vacate the default judgment is granted.

In this small claims action, plaintiff seeks to recover the principal sum of $2,500, for reimbursement of a retainer fee she had paid for accounting services which allegedly were not rendered. Upon defendant‘s failure to appear on an adjourned trial date, an inquest was held, and a default judgment was entered. Defendant, proceeding pro se, moved to vacate the default judgment, asserting that he had been unaware of the adjourned trial date. With respect to a meritorious defense, defendant stated, “Plaintiff is not due this money from defendant.” Plaintiff opposed the motion on procedural grounds. The District Court denied defendant‘s motion on the ground that he had failed to set forth a meritorious defense.

Defendant thereafter made a second motion, in which he requested that the court “reconsider” its initial determination and that it vacate the default judgment. In his supporting affidavit, defendant stated that “Mark S. Gottlieb, CPA, PC,” and not defendant individually, had been appointed to perform an appraisal in connection with plaintiff‘s divorce action against her ex-husband; that the parties to that action had jointly paid the bill for the appraisal; and that plaintiff and her divorce attorney had subsequently paid “us,” indicating defendant‘s professional service corporation, a $2,500 retainer fee, to prepare for, and to serve as plaintiff‘s witness at, the forthcoming trial in the action against her ex-husband. Defendant said that, in preparation for the trial, his professional service corporation had exhausted its retainer fee before it had been advised that plaintiff and her ex-husband had settled their matrimonial case and that the corporation should therefore cease work on that matter.

In her opposition to the motion, plaintiff asserted only that defendant had failed to set forth adequate grounds for the court to reconsider its prior determination.

The court denied defendant‘s motion on the sole ground that he had failed to set forth a meritorious defense. On appeal, defendant argues that his default was inadvertent and that he demonstrated a meritorious defense, which he should be permitted to present at trial. Plaintiff responds that there was no basis for the District Court to reconsider its denial of defendant‘s prior motion to vacate the default judgment.

Defendant‘s motion for “reconsideration,” which set forth new facts that had not been offered on the prior motion, was, we conclude, actually a motion for leave to renew (see CPLR 2221 [e]). While CPLR 2221 (e) requires a movant specifically to identify a motion to renew as such, a motion court may, under appropriate circumstances, construe the motion as one for leave to renew (compare Born to Build, LLC v Saleh, 125 AD3d 709 [2015] [Supreme Court providently construed a motion by a pro se litigant as one for leave to reargue]). A motion for leave to renew, if based upon new facts, must be “based upon new facts not offered on the prior motion that would change the prior determination” (CPLR 2221 [e] [2]), and is required to “contain reasonable justification for the failure to present such facts on the prior motion” (CPLR 2221 [e] [3]). It is within a motion court‘s discretion to determine what constitutes a “reasonable justification” (see Rose v Levine, 98 AD3d 1015, 1016 [2012]; Dervisevic v Dervisevic, 89 AD3d 785 [2011]). In this small claims matter, the litigants were self-represented, and, at the hearing on the second motion, defendant explained that he had not fully set forth the basis of his meritorious defense in his original motion papers because he had understood that his meritorious defense would be the subject of a hearing on the motion. In these circumstances, we find that the small claims court did not improvidently exercise its discretion by implicitly granting the branch of defendant‘s motion seeking, in effect, leave to renew his motion to vacate the default judgment.

A defendant seeking to vacate a default judgment based on excusable default must demonstrate both a reasonable excuse for the default and a meritorious defense to the action (see CPLR 5015 [a] [1]; Eugene Di Lorenzo v A.C. Dutton Lbr. Co., 67 NY2d 138, 141 [1986]). Upon the totality of the circumstances presented, and in light of the fact that the delay occasioned by defendant‘s default was relatively brief, with no showing of prejudice to plaintiff from the delay or of an intent by defendant to abandon any defenses to the action (see Shin v ITCI, Inc., 115 AD3d 736, 737 [2014]), we conclude that the court did not improvidently exercise its discretion in implicitly determining that defendant had a reasonable excuse for his default.

In support of his claim that he had a meritorious defense, defendant indicated that plaintiff had paid for and received services only from his professional service corporation. Absent abuse of the corporate form, corporate shareholders in a professional service corporation are not liable for the corporation‘s debt (see We‘re Assoc. Co. v Cohen, Stracher & Bloom, 65 NY2d 148 [1985]; see also 87 NY Jur 2d, Professional Service Corporations § 10). In any event, the District Court lacks jurisdiction to pierce the corporate veil (see Battle v Smith, 35 Misc 3d 126[A], 2012 NY Slip Op 50566[U] [App Term, 9th & 10th Jud Dists 2012]). Thus, defendant‘s claim that plaintiff‘s relationship was with his professional service corporation only, if established, constitutes a meritorious defense to the action. Moreover, even if defendant were unable to establish this defense, defendant also asserted that the services had been performed in accordance with plaintiff‘s instructions, in preparation for the anticipated trial, thereby properly exhausting the amount plaintiff had paid as a retainer. This claim, if proved, constitutes an alternative meritorious defense (compare Law Off. of Sheldon Eisenberger v Blisko, 106 AD3d 650, 652 [2013]; Markard v Markard, 263 AD2d 470, 471 [1999]). Consequently, we conclude that the denial of the branch of defendant‘s renewal motion seeking to vacate the default judgment failed to render substantial justice between the parties in accordance with the rules and principles of substantive law (see UDCA 1804, 1807).

We reach no other issue.

Accordingly, the order, insofar as appealed from, is reversed, and, upon renewal, the branch of defendant‘s motion seeking to vacate the default judgment is granted.

Tolbert, J.P., Marano and Connolly, JJ., concur.

Decision Date: November 30, 2015