Department of Hous. Preserv. & Dev. of City of New York v 2515 LLC
Annotate this CaseDecided on March 18, 2005
Civil Court of the City of New York, New York County
Department of Housing Preservation And Development of the City of New York, Petitioner,
against
2515 LLC, GERALDINE PUENTE, and AGS MANAGEMENT, Respondents.
1187/2004
New York City Department of Housing Preservation and Development (Robert D. Vinokur of counsel).
Calabro & Fleishell, P.C. (Cathy O'Donnel and Gregory Calabro of counsel), New York City, for co-respondent Geraldine Puente.
Gerald Lebovits, J.
Petitioner, Department of Housing Preservation and Development (DHPD), commenced this Housing Part (HP) proceeding against respondents by order to show cause in October 2004. Petitioner sought an order to correct under the Administrative Code of the City of New York (Housing Maintenance Code [HMC]) § 27-2120 and civil penalties under HMC §§ 27-2097 and 27-2107 for respondents' failure properly to register the premises, a multiple dwelling, with DHPD since June 2000. A judgment on default encompassing an order to correct hundreds of violations printed on 81 computer printout pages and $500 in civil penalties was entered against respondents 2515 LLC, Geraldine Puente, and AGS Management on November 9, 2004. [*2]
Co-respondent Geraldine Puente (respondent) now moves to vacate the default judgment and to dismiss the proceeding based on documentary evidence.
Respondent alleges that she did not receive notice of the proceeding until after the default judgment was entered against her. She also states that she sold her interest in 2515 LLC—a co-respondent that owns the subject building—to her partner, Paul Sohayegh, in August 2003. Respondent argues that the court should vacate the default judgment and allow her to defend on the merits. She also argues that her documentary evidence showing her current lack of interest in the building establishes that she should not have to pay the civil penalty or be subjected to the order to correct.
Respondent's motion to vacate and dismiss are denied. Under CPLR 317, she deliberately avoided service at the addresses she gave on a property registration statement she filed with DHPD. Under CPLR 5015, her default cannot be excused, given that she did not update for more than four years the addresses she gave on her registration statement under CPLR 3211 (a) (1). Moreover, her documentary evidence does not entitle her at this phase to elude her obligation to effect repairs.
I. The Motion to Vacate
Respondent contends that the default judgment should be vacated under CPLR 317. (See Respondent's Affirmation in Further Support at ¶¶ 10-12.) In her order to show cause, respondent did not base her motion to dismiss on CPLR 317. She cited only CPLR 5015. Citing only CPLR 5015 in a motion to vacate does not, however, preclude a court from deciding a motion to vacate under the requirements of either CPLR 5015 or CPLR 317. (Di Lorenzo v. A. C. Dutton Lumber Co., 67 NY2d 138, 142 [1986].) The court therefore treats respondent's motion as if she had made it under both CPLR 317 and CPLR 5015.
A. CPLR 317
Under CPLR 317, the court may grant respondent's motion to vacate a default if she (1) was not served personally, (2) did not receive notice of the proceeding in time to defend, and (3) has a meritorious defense. (See e.g. Simon & Schuster, Inc. v Howe Plastics & Chemicals Co., Inc., 105 AD2d 604, 605 [1st Dept 1984, mem].) Under CPLR 317, she need not offer an excusable default. Nevertheless, vacatur is not automatic even if she meets CPLR 317's three criteria. (See Di Lorenzo, 67 NY2d at 143.) Her motion may be denied if she deliberately avoided receiving timely notice. (See id.)
1. Method of Service
According to his affidavit of service, petitioner's process server served respondent with the order to show cause by conspicuous-place service at 4455 Broadway, New York, New York. Petitioner used that address because respondent herself listed it as her business address in her [*3]June 2000 Multiple Dwelling Registration (MDR) statement, which she filed with DHPD. (See MDR attached to Petitioner's Order to Show Cause at Exhibit A.) Respondent listed herself as the owner-LLC's managing agent in that June 2000 MDR statement. (Id.)
Respondent claims that petitioner's process server did not affix copies of petitioner's order to show cause to the door of 4455 Broadway on the date stated in the process server's affidavit of service. Respondent does not allege that she was at 4455 Broadway on the day the process server claims he affixed the order to show cause to the door of 4455 Broadway. Respondent claims, instead, that she still has some contacts at 4455 Broadway and that no one told her that process was posted on the door at 4455 Broadway. (See Respondent's Affirmation in Further Support at ¶ 12.)
According to petitioner's process server, petitioner also served respondent by conspicuous-place service at the subject building, 2514 7th Avenue, New York, New York. Respondent does not refute petitioner's claim.
Respondent does not move to dismiss this proceeding for lack of personal jurisdiction or ask for a traverse hearing. Respondent could not now so move. Respondent's conclusory statement that petitioner did not affix the order to show cause to the door at 4455 Broadway is insufficient to rebut the presumption of proper service. (See e.g. Truscello v Olympia Constr., Inc., 294 AD2d 350, 351 [2d Dept 2002, per curiam].) And respondent does not refute that she was served by conspicuous-place service at 2514 7th Avenue. Petitioner therefore properly served respondent.
2. Notice in Time to Defend
Respondent claims that she learned about this proceeding on December 13, 2004, from a tenant who saw legal papers addressed to her and posted above the mailboxes in the subject premises, 2514 7th Avenue. In his affidavit of service, petitioner's process server claims that a copy of petitioner's order to show cause was left at the subject premises on August 31, 2004. For this decision, the court accepts respondent's allegation that she did not receive notice of the proceeding until after the default judgment was entered against her. Respondent therefore meets the first two criteria for relief under CPLR 317—that she was not served personally and that she did not receive notice of the proceeding in time to defend. The court must therefore determine whether she has a meritorious defense.
3. Deliberately Avoiding Service
Before deciding whether respondent has a meritorious defense to this proceeding, the court must resolve a threshold issue: whether respondent deliberately avoided timely service. Respondent admits that the address on file with DHPD—4455 Broadway—is her "former-office address." (Respondent's Affidavit in Support at ¶ 7.) She alleges that because she is no longer the building's managing agent and because she sold her interest in co-respondent 2515 LLC, she [*4]assumed that the current owner would register the correct addresses with DHPD and that she personally would not have to update the registration. Petitioner argues, on the other hand, that respondent deliberately frustrated its attempts to effect proper service by failing to keep an accurate address on file with DHPD.
Respondent violated several HMC sections because she failed to update the annual MDR statement. Respondent filed an MDR statement only in June 2000 averring that she is the subject building's managing agent. HMC § 27-2004 (45) and MDL § 4 (44) define the term "owner" to include an "agent, or any other person, firm or corporation, directly or indirectly in control of a dwelling." A registered managing agent is therefore an "owner" for the purpose of imposing liability for HMC violations. (See e.g. DHPD v Livingston, 169 Misc 2d 660, 661 [App Term 2d Dept 1996, mem] ["It is clear a [registered managing agent] is an owner . . . ."].) She is considered an owner under the HMC and is liable for an owner's failure to file an MDR statement with DHPD. (See HMC § 27-2097 [c] [providing that owner must file annual MDR statement]; § 27-2107 [a] [providing for civil penalties against owner for failing to register].) It is not disputed that the premises' owner has not registered with DHPD since respondent did so in June 2000. Respondent also violated her affirmative duty to update the MDR statement to end her designation as the managing agent. (See HMC § 27-2101 [b] [providing that agency relationship ends eight days after former managing agent or owner notifies DHPD].)
The issue is whether respondent's failure to comply with the HMC's MDR statement requirements since June 2000—more than four years ago—allows the court to infer that she was deliberately attempting to avoid service. Respondent and petitioner both draw analogies to cases involving the duty that some corporations have to maintain an accurate address and designated agent with the Secretary of State for service of process under BCL § 306. These cases involve defendant corporations moving to vacate defaults under CPLR 317. Invariably, the defendant corporations in these cases failed to update their addresses with the Secretary of State, the plaintiffs served the defendants under BCL § 306, and consequently the defendants did not receive notice of the action in time to defend.
Respondent argues that her failure to register does not mean she deliberately avoided service in this proceeding. Courts readily grant motions to vacate when a plaintiff serves corporations under BCL § 306 unless the court finds that the defendant corporation deliberately avoided timely notice. (See e.g. Raiola v 1944 Holding Ltd., 1 AD3d 296, 296 [1st Dept 2003, mem] [vacating default despite defendant's failure to designate agent for service for 20 years]; Samet v Bedford Flushing Holding Corp., 299 AD2d 404, 405 [2d Dept 2002, per curiam] [upholding vacatur and finding that defendant's failure to register with Secretary of State was not deliberate].) Courts look to the undisputed facts in the record to determine, even without a hearing with testimony, whether a defendant acted deliberately to avoid timely notice. (See e.g. Paul Conte Cadillac, Inc. v A.R.S. Purchasing Service, Inc., 126 AD2d 621, 622 [2d Dept 1987, mem] [upholding denial of defendant's motion to vacate default despite defendant's meeting CPLR 317's requirements because facts in record supported finding of deliberateness].) [*5]
Motions to vacate in cases involving DHPD's serving parties listed in MDR statements for HMC violations should not be granted as freely as motions to vacate in cases involving defaulting corporations under BCL § 306. Cases involving defaulting owners subject to responsibility for HMC regulations are different from cases involving corporations that default because of incorrect addresses on file with the Secretary of State. One major difference between corporations registered with the Secretary of State and MDR statements filed with DHPD is that a managing agent registered with DHPD can be held liable as an owner for violations and to pay money judgments. (E.g. DHPD v Johan Realty Co., 93 Misc 2d 698, 701 [App Term 1st Dept 1978, per curiam] [holding registered managing agent liable as owner for money owed to city for Emergency Repair Program].) Registering the corporation's address with the Secretary of State does not, however, extend liability to include an agent not otherwise liable. Registering the corporation's address with the Secretary of State only allows a plaintiff to effect service by serving the Secretary of State. Another difference between cases involving DHPD MDR statements and those involving corporations registered with the Secretary of State is that a corporation's failure to register will not subject it to liability for that failure. An owner or managing agent who fails to update an MDR statement with DHPD is subject to civil penalties for failing to register with DHPD.
DHPD and the public must be able to rely on the information in a MDR statement to serve those who hold themselves out as a building's or apartment's owner or managing agent. HMC § 27-2095 (a), New York City Civil Court Act § 110 (m), and CPLR 308 create a comprehensive system to serve process in HP proceedings. CPLR 308 provides that DHPD or a tenant may serve an owner or managing agent (1) by personally delivering process to the owner or managing agent, (2) by delivering process to a person of suitable age and discretion at the owner's or managing agent's actual workplace or home and then by mailing process to that address, or (3) if service cannot be effectuated by either of the two previous methods after two attempts, by affixing process to the owner's or managing agent's door and mailing to that address. Under the HMC and the Civil Court Act, DHPD or a tenant may also serve the owner or managing agent by relying on the information in the MDR statements filed with DHPD. Civil Court Act § 110 (m) (1) allows for service to be effected by complying with CPLR 308 or by complying with any service method provided for in the HMC. Civil Court Act § 110 (m) (3) also allows for service to be effected by affixing the process in the subject premises. HMC § 27-2095 (a) (3) allows for service on an owner or managing agent by mailing process to the addresses listed in the MDR statement filed with DHPD.
Respondent does not refute that petitioner complied with the service requirements under the CPLR, the HMC, and the Civil Court Act. Respondent does not specifically refute that petitioner served her by conspicuous-place service under CPLR 308 at the addresses listed in the MDR statement and by mailing process to those addresses. Respondent does not refute at all that petitioner also served her by conspicuous-place service at the subject premises under Civil Court Act § 110 (m) (3). Respondent also does not refute that petitioner further effected service on her by mailing process under HMC § 27-2085 (a) (3) to the addresses in the MDR statement. In light of that, it would discourage proper registration and frustrate the Legislature's HMC enforcement [*6]scheme if respondent were not held responsible for the addresses she gave in her MDR statement.
Respondent does not offer the court an excuse for her failure to file an MDR statement or to update her status as the managing agent sufficient to rebut the inference of deliberateness. In appropriate cases, respondents can submit affidavits stating that they were was unable to update their MDR statements because they were out of the country or because they were ill, or that they did update the information but that DHPD's records are faulty. Respondent here has simply offered as an explanation for her failure to update the MDR statement that she expected someone else to update the MDR statement. Respondent does not even submit an affidavit from Paul Sohayegh—the party she believes should have updated the MDR statement—stating that he would update the MDR statement. And although she learned about this proceeding and the defaults in December 2004, she still has yet to update the MDR statement or give DHPD or this court an address where she can be served process in the future.
Respondent's motion to vacate under CPLR 317 is denied. The court infers that she acted deliberately to avoid notice of this proceeding by failing to update the MDR statement and by failing to terminate her agency relationship with the premises. No hearing is necessary to resolve respondent's motion to vacate. If facts in the record enable a court to determine the merits of a motion to vacate, no hearing is needed. (See e.g. Zombek v Williams, 124 AD2d 524, 526 [1st Dept 1986, mem] [deciding motion based on "full and adequate record" rather than remanding for hearing].) The facts in the record are sufficient to decide respondent's motion to vacate. Neither side disputes that respondent did not notify DHPD to update her addresses or her status as managing agent for more than four years before this proceeding began. Respondent deliberately frustrated the HMC enforcement scheme by failing to update her MDR statement. Given that respondent's failure to update her MDR statement violated the HMC and that those violations caused her to default, the court may not grant her motion to vacate the default judgment.
The court, moreover, finds that respondent deliberately avoided timely notice under the more generous analysis courts use in BCL § 306 cases. Under BCL § 306 caselaw, a motion to vacate must be denied if the court finds that the defendant was on notice for some time that litigation was possible and if the defendant still did not update the registration to ensure timely notice. (See Lawrence v Esplanade Gardens, Inc., 213 AD2d 216, 216 [1st Dept 1995, mem] [reversing Supreme Court's granting defendant's vacatur motion].) The First Department held in Lawrence v Esplanade Gardens that the defendant deliberately avoided service because it did not update its registration with the Secretary of State for over two years after it became aware of the plaintiff's cause of action against it. (See id.) The Court decided the issue of deliberateness on the undisputed facts in the record and did not require a hearing to resolve the matter. (See id.)
It is undisputed that respondent filed the June 2000 MDR statement but has failed to update it since then. As the managing agent, respondent is responsible for knowing about her regulatory obligations to update the premises' MDR statement. (See e.g. Gaudio v City of New [*7]York, 235 AD2d 228, 228 [1st Dept 1997, mem] [noting that ignorance of law is unacceptable defense].) Respondent was aware that she was violating the HMC by failing to update the MDR statement and that DHPD might seek civil penalties for her failure. (See HMC 27-2107 [a] [providing for civil penalties against party that fails to register].) Respondent deliberately did not update the MDR statement to ensure timely notice.
B. CPLR 5015
1. Elements of Vacatur
Respondent also moves to vacate the default judgment under CPLR 5015. To vacate a default under CPLR 5015, a movant must establish both an excusable default and a meritorious defense. (CPLR 5015 [a] [1]; e.g. Dash Realty Corp. v Barbosa, 198 AD2d 89, 89 [1st Dept 1993, mem] [finding that tenant failed to establish either excusable default or meritorious defense].) Granting a motion to vacate a default is discretionary. (E.g. Peterson v Brook, 307 AD2d 259, 260 [2d Dept 2003, per curiam] [affirming Supreme Court's exercise of discretion in granting defendant's motion to vacate default].)
2. Reasonable Excuse
Respondent must offer the court a reasonable excuse for her default and a meritorious defense to the proceeding. (See Goldman v Cotter, 10 AD3d 289, 291 [1st Dept 2004, mem].) Respondent's excuse for her default was unreasonable under CPLR 5015. Respondent argues that she failed to appear because petitioner served her at 4455 Broadway, where she does not work. Petitioner argues it served respondent there because she failed to give DHPD her correct address or tell it that she is no longer the building's managing agent. Had respondent given DHPD a correct address at some point in the last four years, she would have had notice of the proceeding. DHPD in that event would have known where to serve her. Instead of updating her address, respondent requests that this court vacate the default judgment because DHPD served her at her business and premises addresses—addresses she herself gave but never corrected. Respondent's failure to update the MDR statement since June 2000 is unreasonable. The court need not, therefore, reach whether respondent has a meritorious defense.
II. The Motion to Dismiss
Respondent's motion to dismiss the proceeding is denied. The court did not consider respondent's alleged meritorious defense for her motion to vacate, but she asserts the same defense—that she is no longer a managing agent—in her motion to dismiss. Therefore, although the court will not determine whether respondent offered a meritorious defense for her motion to vacate, the court, in deciding her motion to dismiss, must now reach whether her documentary evidence offers a meritorious defense to this proceeding. Under CPLR 3211 (a) (1), the court may grant a motion to dismiss if only respondent's documentary evidence refutes all of petitioner's factual allegations and establishes that respondent is entitled to win as a matter of [*8]law. (See Goshen v. Mut. Life Ins. Co., 98 NY2d 314, 326 [2002].)
In support of her motion to dismiss, respondent submits a buy-out agreement. The agreement is a handwritten document signed by respondent and Sohayegh, her partner in 2515 LLC. Dated July 10, 2003, it explains how the two planned to split the proceeds from a sale of some companies they owned together. Respondent further attaches a one-page printed document also dated July 10, 2003, that purports to transfer her interest in 2515 LLC to Sohayegh for $10.00 and the consideration contained in the handwritten document. Only respondent Puente signed the one-page printed document. This buy-out agreement represents an alleged sale of her interest in the entity that owns the premises. The agreement does not provide for selling the land itself. She offered no public record to corroborate the transfer of her membership in the LLC.
Even if the court were to accept that the agreement validly transferred respondent's membership interest in the LLC that owns the subject building, the alleged transfer of ownership is no defense to civil penalties for failing to file a proper MDR statement with DHPD in June 2001, June 2002, or June 2003. Respondent was admittedly the registered managing agent and an owner of co-respondent 2515 LLC until July 2003.
The court will determine whether the agreement is a defense to the order to correct if petitioner moves to hold respondent in contempt for any failure to correct. At this point, the buy-out agreement does not entitle her to avoid the civil penalties or the obligation to correct the 81 pages of violations placed on the subject building.
This opinion is the court's decision and order.
Dated: March 18, 2005
J.H.C.
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