Foxen Co. v Irish Pub, Inc.
Annotate this CaseDecided on September 14, 2006
Supreme Court, Nassau County
Foxen Company, Plaintiff,
against
Irish Pub, Inc. and John Bermingham, Defendants.
13362-04
COUNSEL FOR PLAINTIFF
Michael T. Lamberti, Esq.
6800 Jericho Turnpike - Suite 120 W
Syosset, New York 11791
COUNSEL FOR DEFENDANT
Michael Konopka, Esq.
277 Broadway - Suite 810
New York, New York 10007
Leonard B. Austin, J.
Defendants John Bermingham ("Bermingham") and Irish Pub Ltd. ("Pub") move for an order pursuant to CPLR 5015(a)(1) vacating the order of this court dated January 4, 2006 which granted a default judgment against Bermingham and set the matter down [*2]for an inquest before Special Referee Thomas V. Dana.
BACKGROUND
By lease dated May 28, 1997, Plaintiff Foxen Co. ("Foxen") entered into a lease for the first floor and basement of premises 29 Jericho Turnpike, New Hyde Park. The lease provided to the Court by Foxen indicated the tenants were Pub and Bermingham. (collectively "Tenants")
Bermingham is the sole director and officer of Pub. Pub is a domestic corporation whose certificate of incorporation was filed with the Department of State on June 3, 1997.
Tenants defaulted in the payment of rent. In August 2005, Foxen commenced a summary proceeding against Tenants in District Court, Nassau County seeking to obtain a judgment of possession, a warrant of eviction and a money judgment for the rent. Tenants defaulted. On October 7, 2005, a judgment was entered in the District Court awarding Foxen possession of the premises, the issuance of a warrant of eviction and a money judgment for unpaid rent in the sum of $94,437.96 together with interest from August 21, 2005.
Execution of the warrant of eviction was scheduled for December 23, 2005. Rather than be evicted, Tenants voluntarily surrendered possession of the premises to Foxen and entered into a Stipulation with the Foxen and purchasers of Pub. Under the terms of the Stipulation, Foxen reserved all rights and legal claims it had against Bermingham and/or Pub arising from their tenancy at 29 Jericho Turnpike. The Stipulation was signed by Bermingham as tenant. Bermingham did not indicate that he was executing the Stipulation in his capacity as an officer of Pub or in any other representative capacity.
This action was commenced on September 28, 2004 by filing a summons with notice with the County Clerk. Service was purportedly made upon Bermingham on October 18, 2004 by delivering a copy of the summons with notice to "Jane Doe" at 29 Jericho Turnpike, New Hyde Park, New York. "Jane Doe" is described in the affidavit of service as a white female who was approximately 40 years old, 5' 3" weighing approximately 200 pounds. The affidavit of service indicates that, on October 23, 2004, a copy of the summons with notice was mailed to Bermingham at 29 Jericho Turnpike, New Hyde Park, New York in an envelop bearing the legend "personal & confidential" and not indicating on the outside thereof that it was a communication form an attorney or involved an action. Service was completed by filing the affidavit of service with the County Clerk on November 12, 2004.
Service was made upon Pub on October 23, 2004 by serving a copy of the summons with notice upon "Jane Doe" who is described as the managing agent of Pub. The description of "Jane Doe" is identical to the description contained in the affidavit of service indicating service upon Bermingham.
Defendants did not appear in this action. By motion returnable on October 19, 2005, Foxen moved for leave to enter a default judgment against Bermingham and Pub. Neither Bermingham nor Pub appeared or opposed the motion.
By order dated January 4, 2006, this Court granted Foxen's motion on the issue [*3]of liability against Bermingham and set the matter down for a hearing before Special Referee Thomas V. Dana on February 23, 2006 at 10:00 a.m on all issues relating to liability of Pub and damages against Tenants.
At some point, Tenants learned of these proceedings. Bermingham appeared before Special Referee Dana on February 23, 2006 to request an adjournment of the hearing. Special Referee Dana adjourned the hearing to April 7, 2006. Bermingham again appeared before Special Referee Dana on April 7, 2006 to request an adjournment of the hearing. Special Referee Dana adjourned the hearing to June 7, 2006. On June 2, 2006, Tenants moved to vacate this Court's January 4, 2006 order. The order to show cause stayed Special Referee Dana from conducting the hearing as directed by this Court in its January 4, 2006 order pending the hearing and determination of this motion.
Bermingham also appealed to the Appellate Division, Second Department from the January 4, 2006 order. By order dated May 15, 2006, the Appellate Division dismissed the appeal on the grounds that an appeal may not be taken from an order entered on default.
Bermingham asserts that he has an excusable default since he was not served with the summons with notice. He also claims he has a meritorious defense. He asserts Pub was the tenant. He asserts that he signed the lease in his capacity as the president of Pub. He did not personally guarantee Pub's obligations on the lease.
Therefore, he cannot be held personally liable for the amount allegedly due and owning as unpaid rent.
DISCUSSION
A motion to vacate a default is one addressed to the sound discretion of the court. Abrams v. City of New York, 13 AD3d 566, (2nd Dept. 2004); Giordano v. Patel, 177 AD2d 468 (2nd Dept. 1991); and I.J. Handa, P.C. v. Imperato, 159 AD2d 356 (2nd Dept. 1990).
In order to vacate a judgment or order pursuant to CPLR 5015(a)(1), the defendant must demonstrate an excusable default and a meritorious defense. Kurtz v. Mitchell, 27 AD3d 697 (2nd Dept. 2006); and Harkless v. Reid, 23 AD3d 622 (2nd Dept. 2005).
In this case Defendants have demonstrated neither.
A.Excusable Default
Defendants assert they have an excusable default since they were not properly served.
CPLR 308(2) provides for service upon an individual by leaving a copy of the summons with notice with a person of suitable age and discretion at the defendant's actual place of business and by mailing a copy of the summons with notice to him at his actual place of business in an envelop bearing the legend "personal and confidential" and not indicating on the outside that it is from an attorney or that it involves an action.
The affidavit of service indicates service was effectuated upon Bermingham in this manner.
A corporation may be served by serving a copy of the summons with notice upon the corporation's managing agent. CPLR 311(a)(1). The affidavit of service indicates [*4]service was made upon Pub in this manner.
Plaintiff bears the burden of establishing by a preponderance of the evidence that the defendant has been served in such a way so as to confer the court with jurisdiction over the Defendant. Kanner v. Gerber, 197 AD2d 673 (2nd Dept. 1993) and Frankel v. Schilling, 149 AD2d 657 (2nd Dept. 1989). An affidavit of service which sets forth the papers served, the person served, the date, time and place at which service was made and that person who made service was authorized to serve process constitutes prima facie proof of service. Remington Investments, Inc., v. Seiden, 240 AD2d 647 (2nd Dept. 1997) and Maldonado v. County of Suffolk, 229 AD2d 376 (2nd Dept. 1996).
An affidavit of service is no longer conclusive proof of service once defendant denies service in a sworn statement. Friedman v. Ramlal, 282 AD2d 499 (2nd Dept. 2001) and OCI Mortgage Corp. v. Omar, 232 AD2d 462 (2nd Dept. 1996). Once service has been properly controverted, the court must direct a hearing on the factual issued raised. Friedman v. Ramlal, supra and OCI Mortgage Corp. v. Omar, supra.
The party contesting service must place before the court facts sufficient to rebut
the presumption of service. See, Kopman v. Blue Ridge Ins. Co., 296 AD2d 479 (2nd Dept. 2002); and Frankel v. Schilling, 149 AD2d 657 (2nd Dept. 1989).
The mere denial of receipt of copy of the summons and complaint is insufficient to rebut the presumption of mailing. Electric Insurance Company v. Grajower, 256 AD2d 833 (3rd Dept. 1998), Spangenberg v. Chaloupka, 229 AD2d 482 (2nd Dept. 1996).
Bermingham's denial of service is contained in one sentence which reads, "I was never served with a copy of the summons with notice in this action." (Bermingham Aff. ¶12). Bermingham does not contest that 29 Jericho Turnpike was his regular place of business. He does not deny that someone fitting the description of "Jane Doe" is a person of suitable age and discretion or that a person fitting her description was present and working at Pub on the date and time that service was made. Nor does he specifically deny receipt of a copy of the summons with notice that was mailed to him at 29 Jericho Turnpike.
Pub does not contest that "Jane Doe" was its managing agent and a person authorized to accept service on its behalf. The Department of State filing receipt reflects that process is to be served on the corporation at its address, 29 Jericho Turnpike, New Hyde Park, New York.
Conclusory denials of service are insufficient to raise questions of fact rebutting the prima facie evidence of proper service contained in the affidavits of service. 96 Pierrepont, LLC v. Mauro, 304 AD2d 631 (2nd Dept. 2003); and Simmons First National Bank v. Mandracchia, 248 AD2d 375 (2nd Dept. 1998).
The Court also questions Bermingham's diligence in moving to vacate his default.
Portions of the landlord-tenant matter were resolved by a Stipulation dated December 23, 2005. That Stipulation references the pendency of this action. At that point, the underlying motion for a default had not yet been decided.
Additionally, Bermingham appeared before Special Referee Dana on two occasions to adjourn the inquest and never raised issues of service. He obviously knew of the pendency of this action when he appeared before Special Referee Dana. [*5]
Bermingham appealed from this Court's January 4, 2006 order. Bermingham or his attorney had to file a Notice of Appeal within thirty days of service of a copy of this Court's January 4, 2006 order. CPLR 5513(a). As part of his appeal, Bermingham was required to file with his Request for Appellate Division Intervention a copy of the order from which the appeal was taken. See, 22 NYCRR 670.3(a). Neither party indicates when the Notice of Appeal was filed. However, by order to show cause dated March 15, 2006, the Appellate Division, Second Department directed the parties to show cause why the appeal should not be dismissed.
Bermingham clearly knew of the pendency of this action. Yet, he did not move to vacate his default for nearly six months after he allegedly learned of the pendency of this action and 3 ½ months after he first appeared before Special Referee Dana to request an adjournment of the inquest.
Since Bermingham and Pub have not placed before the court facts controverting service, they have not established an excusable default.
B.Meritorious Defense
Bermingham has also failed to establish a meritorious defense. Bermingham asserts he signed the lease in his capacity as the president of Pub. A corporate officer who signs in that capacity is not personally liable for the corporate obligation unless he signs the agreement individually or personally guarantees the corporate obligation. See, Metropolitan Switch Board Co., Inc. v. Amici Assocs., Inc., 20 AD3d 455 (2nd Dept. 2005); and Maranga v. McDonald & T. Corp., 8 AD2d 351 (2nd Dept. 2004).
In this case, the lease is dated May 28, 1997. The filing receipt issued by the Department of State indicates that Pub's certificate of incorporation was filed on June 3, 1997. Thus, Pub did not exist when Bermingham signed the lease.
A person who signs an agreement on behalf of a corporation that has neither de jure or de facto existence is personally liable for those obligations. Brandes Meat Corp. v. Cromer, 146 AD2d 666 (2nd Dept. 1989). Additionally, Bermingham did not sign the lease in a corporate or representative capacity. He signed it as tenant. Thus, he appears to have bound himself personally under the terms of the lease.
A corporation's existence begins when its certificate of incorporation is filed by the Department of State. Business Corporation Law §403. A corporation that does not exist cannot enter into a contract. See, Kiamesha Development Corp. v. Guild Properties, Inc., 4 NY2d 378 (1958); and 183 Holding Corp. v. 183 Lorraine Street Assocs., 251 AD2d 386 (2nd Dept. 1998).
Pub did not exist when Bermingham executed the lease. Bermingham does not argue that Pub had either de facto or de jure status as of the date the lease was executed. Since Bermingham executed a lease on behalf of a corporation that did not exist, he is personally liable for Pub's obligations on the lease.
The prior judgment entered in District Court and the Stipulation pursuant to which Bermingham and Pub surrendered possession do not provide Bermingham with a defense to this action.
A stipulation is a contract which is subject to the rules of contract interpretation.
Ross v. Ross, 16 AD3d 713 (3rd Dept. 2005); McKenzie v. Vintage Hallmark, PLC, 302 AD2d 503 (2nd Dept. 2003); and Charter Realty & Development Corp. V. New Roc [*6]Assocs., L.P., 293 AD2d 438 (2nd Dept. 2002).
A stipulation will be enforced in accordance with its terms unless there is proof of fraud, duress, overreaching or unconscionability. Shuler v. Dupree, 14 AD3d 548 (2nd Dept. 2005); and Maury v. Maury, 7 AD3d 585 (2nd Dept. 2004).
The Stipulation specifically acknowledges that pendency of this action. In the Stipulation, Foxen specifically reserved all legal rights and claims it had against Bermingham and Pub. One of those rights was to sue to recover unpaid rent.The Court, however, questions why Foxen does not simply seek to enforce the money judgment entered in the District Court landlord-tenant proceeding wherein an award for rent arrears was granted.
This Court's January 4, 2006 order referred all issues relating to Pub's liability on the lease to the Special Referee. Neither party contests that portion of the decision. In fact, Bermingham's entire argument on liability is that only Pub is liable for the unpaid rent.
Accordingly, it is,
ORDERED, that Defendants' motion to vacate the order of this Court dated January 4, 2006 is denied; and it is further,
ORDERED, that the matter is set down for a hearing before Special Referee Thomas V. Dana for a hearing in accordance with this Court's January 4, 2006 on October 17, 2006 at 10:00 a.m.
This constitutes the decision and Order of the Court.
Dated:Mineola, NY_____________________________
September 14, 2006Hon. LEONARD B. AUSTIN, J.S.C.
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