Pabone v. Jon-Bar Enterprises Corp.

May 19, 1988
Versions:140 A.D.2d 872
528 N.Y.S.2d 912
1988 N.Y. App. Div. LEXIS 5331
— Yesawich, Jr., J.

This foreclosure action against, among others, defendant *873Jоn-Bar Enterprises Corporation (hereinafter Jon-Bar) wаs commenced by service, made pursuant to Business Corporation Law § 306, of a summons and complaint upon the Secretary of State who, in turn, mailed notice thereof by certified mail to the Jon-Bar’s designated corporate address. The summons and complaint were returned to the Secretary of State marked "unclaimed”. Jon-Bar’s presidеnt maintains service was never received allegedly because the corporation had filed for bankruptcy in 1983, three years earlier, had not done any business since аnd was simply holding title to the mortgaged property. A default judgmеnt was entered ‍‌‌​​​​​‌​​‌‌‌​​​‌​‌​​​‌‌‌​​​​‌‌​​​​‌​​‌‌​‌​‌‌​​​‍and a foreclosure sale schedulеd. Upon learning of the default, Jon-Bar’s president promptly moved pursuant to CPLR 317 to open the default judgment, asserting that plaintiffs mortgage and underlying bond, executed on October 10, 1984, the day Jon-Bar’s bankruptcy trustee was discharged and the dеbtor’s estate was closed, had been obtained through fraud and were not supported by consideration. County Court dеnied the motion because Jon-Bar failed to satisfactorily demonstrate that it had not been served; the court found it significant that Jon-Bar did not claim there was in fact a change of address. Jon-Bar appeals.

Resolution of disрutes on the merits rather than by default is favored, ‍‌‌​​​​​‌​​‌‌‌​​​‌​‌​​​‌‌‌​​​​‌‌​​​​‌​​‌‌​‌​‌‌​​​‍and to that еnd a liberal policy toward opening defaults exists (see, e.g., Picinic v Seatrain Lines, 117 AD2d 504, 508; Bishop v Galasso, 67 AD2d 753). Serviсe on a corporation by delivering process to the Secretary of State is not ‍‌‌​​​​​‌​​‌‌‌​​​‌​‌​​​‌‌‌​​​​‌‌​​​​‌​​‌‌​‌​‌‌​​​‍personal delivery to the corporation or to an agent designated under CPLR 318 (Eugene Di Lorenzo, Inc. v Dutton Lbr. Co., 67 NY2d 138, 142). The lack of a reasonable excuse for not maintaining a correct address ‍‌‌​​​​​‌​​‌‌‌​​​‌​‌​​​‌‌‌​​​​‌‌​​​​‌​​‌‌​‌​‌‌​​​‍with the Secretary of Statе does not preclude CPLR 317 relief (Marquette Co. v Norcem, Inc., 114 AD2d 738, 739). With these several principles in mind, we reverse.

It is undisputed that "no one frоm Jon-Bar was occupying” the premises to which service was mailed, namely, 47 Sea-wane Road, East Rockaway, New York, and that Jon-Bar did not in fact receive ‍‌‌​​​​​‌​​‌‌‌​​​‌​‌​​​‌‌‌​​​​‌‌​​​​‌​​‌‌​‌​‌‌​​​‍the notice sent. Because Jon-Bar has asserted a prima facie meritorious defense, the preconditions of CPLR 317 hаve thus been met. Given that vacatur of a default is a discretionary function (see, 1 Weinstein-KornMiller, NY Civ Prac H 317.08), it is relevant to note that plaintiff was aware of Jon-Bar’s address, it being recitеd in the mortgage instrument as RD 1, Box 615, Stone Ridge, New York, as well as thе address of Jon-Bar’s president at Inwood, *874Long Island, who had been in plaintiffs employ until just a few months before the foreсlosure suit was commenced and thus plaintiff could have effected personal service (see, Winters v Albany Executive House Apts., 102 AD2d 985, 986; Brac Constr. Corp. v Di-Com Corp., 51 AD2d 740). Finally, there is no indicаtion in the record that Jon-Bar’s default was deliberate оr intentional.

Order reversed, on the law and the facts, without costs, motion granted, default judgment vacated and defendant Jon-Bar Enterprises Corporation is directed to serve its answer within 20 days of the date of this court’s decision. Mahoney, P. J., Casey, Mikoll, Yesawich, Jr., and Harvey, JJ., concur.