Coney Is. Payroll Servs., Inc. v First Cent. Sav. Bank

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Coney Is. Payroll Servs., Inc. v First Cent. Sav. Bank 2012 NY Slip Op 32163(U) June 4, 2012 Supreme Court, New York County Docket Number: 112189/2011 Judge: Lucy Billings Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. lNED ON 811712012 [* 1] SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY p ,Jj ; y spm; [!!SA2.s PRESENT: - PART A : Justlce Index Number : 112189/2011 CONEY ISLAND PAYROLL vs . FIRST CENTRAL SAVINGS SEQUENCE NUMBER : 002 INDEX NO. MOTION DATE MOTION SEQ. NO. DEFAULT JUDGMENT The followlng papers, numbered I to k , were Mad on thli motlonfilfor w A INO(@). INoh). INds). Notlce of MatlonlOrder to Show Cause - Affldavlts - Exhlblta Anrwerlng Affldavlta ReplylngAffldavlts - Exhlblts 1-2 3-L 1-g FILED AUG 1 6 2012 NEW YORK COUNTY CLERKS OFFICE ..................................................................... 0 CASE DISPOSED DENIED CHECK AS APPROPRIATE: ........................... MOTION IS: 0GRANTED CHECK IF APPROPRIATE: ................................................ 0SElTLE ORDER 1. CHECK ONE: 2. 3. 0DO NOT POST 0GRANTED IN PART 0OTHER 0SUBMIT ORDER FIDUCIARY APPOINTMENT REFERENCE [* 2] SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: PART 46 CONEY ISLAND PAYROLL SERVICES, INC., Index No. 112189/2011 Plaintiff - against - DECISION AND ORDER FIRST CENTRAL SAVINGS BANK, M&T BANK, AKAM ASSOCIATES, INC., and XINOS CONSTRUCTION CORP., FILED Defendants _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - - - - - _ _ -X - - - _ _ _ _ - -- AUG 1 6 2012 LUCY BILLINGS, J.S.C. : Plaintiff claims entitlement to the proceeds of ~ C L ENEW 'YORKF F , C E RK SO issued by defendant Akam Associates, Inc., to defendant Xinos Construction C o r p . ; cashed by plaintiff, despite forged endorsements; and deposited by it in defendants First C e n t r a l Savings Bank and M&T Bank. Plaintiff seeks a declaratory judgment regarding its entitlement to t h e checks' proceeds and an injunction prohibiting defendant banks from debiting i t a accounts for the amounts of the forged checks. Plaintiff moves for a default judgment against Akam Associates and Xinos Construction. 5 3215.(d). Akam C.P.L.R. Associates' insurer, Zurich American Insurance Company, moves to intervene as a counterclaimant. C.P.L.R. I. § 1013 PLAINTIFF'S MOTION FOR A DEFAULT J l D G MENT A. DefendantP' Excue(?@ for Defaultinq In opposing plaintiff's motion for a default judgment, Akam Associates and Xinos Construction each explain t h e reasons f o r coneyis. 13 8 1 [* 3] their failure to answer timely. Upon receiving the summons and complaint, Akam Associates responded promptly by forwarding the pleadings to Akam Associates' insurer for it to defend and indemnify its insured. Through no fault of Akam Associates, the insurer delayed in retaining an attorney to represent the insured corporation. C.P.L.R. 5 321(a). Immediately upon retention, however, the attorney responded promptly by contacting plaintiff's attorney, requesting an extension, and, when denied the request, promptly serving an answer less than two months a f t e r the original service of the summons and complaint on the insured client. When Xinos Construction received the summon8 and complaint, an employee mistakenly misfiled the pleadings rather than forwarding them to Xinos Construction's attorney as directed by the corporation's office manager, who then did not discover the error until he received plaintiff's motion for a default judgment. Upon his realizing the inadvertence, Xinos Construction promptly forwarded the pleadings to its attorney, who promptly contacted plaintiff's attorney, requested an extension, and, when plaintiff denied this request as well, requested and was granted an adjournment of plaintiff's motion from t h e court. This defendant, like Akam Aesociates, timely opposed plaintiff's motion and simultaneously served an answer. As Xinos Construction had secured the extension, this defendant served its answer approximately two and a half months after the original service of the summons and complaint on the corporation. coneyie.138 2 [* 4] These explanations by Akam Associates and Xinos Construction furnish a reasonable excuse f o r their short delay in answering the complaint. C . P . L . R . 5 3012(d); C i r i l l o v. M w Y ' s , I n c , , 61 A.D.3d 538, 540 (1st Dep't 2009); Jonas v. 414 Equities LLC, 57 A.D.3d 65, 81 (1st Dep't 2008); Oberpaier v. Fix, 25 A.D.3d 327 (1st Dep't 2006); Wileon v. Sherman Terrace CROP., I n c . , 14 A.D.3d 367 (1st Dep't 2 0 0 5 ) . The failure by Akam Associates' insurer to communicate with an attorney to represent the insured and Xinos Construction's inadvertent filing of the s u m m o m and complaint without forwarding them to its defense attorney, in particular, demonstrate both a reasonable excuse for defendants' late anawers and the absence of a willful default on their p a r t . unnico v. Royal Caribbean Intl., 79 A.D.3d 484 (1st Dep't 2010); H e & i k l .' 8 W. 38th St. Corp. v. Gotham Constr. Ca . LLC, 14 A.D.3d 306, 307 (1st Dep't 2005); Palmieri v. Aliberti, 281 A.D.2d 156 (1at Dep't 2001); Parker v. 1.E.S .I. N . Y . Corp., 279 A.D.2d 395 (1st Dep't 2001). Nor does plaintiff show or the court discern any willfulness on either defendant's part or any prejudice to plaintiff from either defendant's short delay in answering. B. Extendinq t h p Defaultins Defendants' Time Answer Although Akam Associates and Xinos Construction do not expressly move to extend their time to answer, particularly in the context of a motion for a default judgment, the court may extend the time to answer absent a cross-motion for that relief. C.P.L.R. § 3012 (d); Hissins v. Bellet Constr. Co., 2 8 7 A . D . 2 d 377 ( 1 a t Dep't 2001); Vines coneyis.138 v. Manhattgn 3 & Bronx Surface Tr. [* 5] Operatinq Auth., 162 A.D.2d 229 (1st Dep't 1990); Willis v , City of New York, 154 A.D.2d 289, 2 9 0 (1st Dep't 1989); Shure v. Vi1Lgse of Weathampton Beach, 121 A.D.2d 887, 8 8 8 (1st Dep't 1986). See Tanpic9 v. Royal Caribbean Intl., 79 A.D.3d 484; S p i r a v, New York City Tr . Auth., 49 A.D.3d 478 (1st Dep't 2008) ; TulLev v. Straus, 265 A.D.2d 399, 401 (2d Dep't 1999). C.P.L.R. 5 3012(d) allows a late answer upon a "reasonable excuse for delay or default" and "such terms as may be just.ll Although the latter provision may include a showing of a meritorious defense against plaintiff's claims, 5 3012 (d) doeB not specifically require a meritorious defense, and such a showing is unnecessary to support acceptance of a late answer. Verizon N.Y. case Inc, V. Constr. C o . Inc,, 63 A.D.3d 521 (1st Dep't 2 0 0 9 ) ; CirillQ V. Maw's, Inc., 61 A.D.3d at 540; f ities L , 57 A.D.3d at 8 1 ; S p i r a v. New York Citv Tr. Auth., 49 A . D . 3 d 478. While defendants' explanations recounted above, absent any discernible prejudice to plaintiff, late answers, G a v e v. Bennett satisfactorily excuse their 70 A.D.3d 579 ( 1 s t Dep't 2 0 1 0 ) ; w i z o n N.Y. Inc. v. Case Conscr. Co. I w , , 6 3 A.D.3d 521; Cirillo v. ~ a c ' v , a u, 57 Inc., 61 A.D.3d at 540; Jones v. 414 Equities A.D.3d at 81, in opposing a default judgment, these defendants cite deficiencies in the admissible evidence supporting plaintiff's claim and also present defenses. C. The Merits of plaintiff'@ Claim and the Defaultinq DefPndan t s ' Defenaes In supporting a default declaratory judgment, plaintiff presents no admissible evidence attesting on personal knowledge coneyis.130 4 [* 6] or otherwise demonstrating that the endorsements' on the checks in question are genuine, as alleged in the complaint and claimed by plaintiff's attorney in support of i t s motion. Defendants respond that plaintiff, as the first party in the collection of t h e checks' proceeds, was best positioned to identify their transferor, determine the genuineness of their endorsements and whether the transferor was a wrongdoer, discover a forgery, prevent the fraud, and thug protect plaintiff's interests. N.Y.U.C.C. (UCC) 3-404 (1), 3-406, 4-401, 4 - 4 0 6 ( 3 ) ; Guardiaq L i f e Ins. Co. of Am. v. Chemical Ba nk, 94 N.Y.2d 418, 420 (2000); Getty Petrol e u m C o r p . v, American E y ~ r e s sTravel Related Servs. CO., 90 N.Y.2d 322, 3'27 (1997); Royal Ins. CO. of Am. v. Citibank, 306 A . D . 2 d 158, 1 5 9 (1st Dep't 2003); Robinson Motor & D ~ ~ B R Inc. , 2006). v. HSBC Bank, USA, 37 A.D.3d 117, 119 (2d Dep't See UCC 5 5 3-417(1), 4 - 2 0 7 ( 1 ) ; CNA ¬iQldinss, Inc, v. Citibank, N . A . , 10 A.D.3d 517, 518 (1st Dep't 2004); Manufactyrexa Traders Tru s t co. v. N o r t h Fork Bank, 1 6 A.D.3d & In that position, and in moving for a 467, 468 (2d Dep't 2 0 0 5 ) . default judgment, plaintiff bears the burden to establish that a burden plaintiff's motion the endorsements are authentic: fails to meet. C.P.L.R. § 3215(f); U t a k v. Commerce Bank, 88 A . D . 3 d 522, 5 2 3 (1st Dep't 2011); Manhattan Telecom. C arp. v. H & A Locksmith, Inc., 82 A.D.3d 674 (1st Dep't 2011); Mejia-Ortiz v. Inoa, 71 A.D.3d 517 (1st Dep't 2010); Beltre 722, 723 (1st Dep't 2006). 32 A . D . 3 d Wilson v. Galicia Contr. Restoration CarDL, 1.0 N.Y.3d 827, coneyi~1.138 v, Babu, 5 830 & (2008); Woodson v. Mendon [* 7] Leasinq Corp, , 100 N.Y.2d 62, 70-71 ( 2 0 0 3 ) ; A1 Faved v. Barak, 39 A.D.3d 371, 372 (1st Dep t 2007). 11. THE MOTION TO INTERVENE Only in response to a motion by Zurich American Insurance Company, A k a m Associates insurer, to intervene as a counterclaimant, does plaintiff set f o r t h the basis f o r plaintiff s claim, gleaned from Akam Associates answer. Akam Associates o w n employee, Han Bae, created false invoices from Xinos Construction to Akam Aesociatee, for which it issued checks that Bae intercepted. He forged Xinos Construction s endorsements and cashed the checks at plaintiff s check cashing service. In pointing o u t that Zurich American Insurance, having reimbursed Akam Associates for its losses from i t s employee s wrongdoing, may maintain only the insured s defenses and counterclaims, Blue Cross & Blue Shieldgf N.J. I Inc. v. Philip MorriR U$A Inc., 3 N.Y.3d 200, 206 (2004); Costello v. Geiaer, 8 5 N.Y.2d 103, 109 (1995); Federa1 Ins, Co . v. Andem en & CoL, N.Y.2d 366, 372 (1990); NYP R Q L inqs, I n c , v. McClie r r ~ 75 A.D.3d 65 186, 189 (1st Dep t 2009), plaintiff, for the first time, propounds its claim that, because Akam Associates employee caused the l o s s , Akam Associates bears responsibility for the 1 0 s ~ . UCC § 3-405(1) ( C ); FLla rdian J,ife Ins. Co, of Am. v . Chemical Bank, 94 N.Y.2d at 422, 4 2 4 ; Getty Petroleum Corp, v. American ExpreBg Travel Related Serve. Co., 90 N.Y.2d at 327-28; Andre Romanelli, I n c . v, Citibank, N . A . , 60 A.D.3d coneyis.13G 428, 429-30 6 _ _. ... .... .. .. . .. . . .. . - . . -. --. - .- . -. [* 8] (1st Dep't 2009); Sybedon Corp. v. Bank Leumi Trust Co. of N.Y,, 224 A.D.2d 320 (1st Dep't 1996). Any negligence on the part of plaintiff, the check cashing service, is irrelevant. Getty petroleum Corp. v , Americgn Expreas Travei Related $ervs. Co., 90 N.Y.2d at 330-31; Prudential-Bache S e ~ u r . ,I n c . v. Citibank, 73 N.Y.2d 263, 273, 2 7 6 (1989); Tour0 Coll. v. Bank Leumi Trust Co. of N.Y., 1 8 6 A.D.2d 4 2 5 , 427 (1st Dep't 1992); James Miller Mar. S e n . , I n c . v . MTFJ Check Cashinq C Q ~ . , 1 6 A.D.3d 3 7 8 , 379 ( 2 d Dep't 2005). UCC § 3-405(1), on which plaintiff relies, provides that: An indorsement by any person in the name of t h e named payee is effective if . . . (c) an agent or employee of the maker or drawer has supplied him with the name of the payee intending the latter to have no such interest. Here, Bae, an employee of the checks' maker, Akam Associates, supplied it with invoices for payment to Xinos Construction as payee, knowing and intending that Xinos Construction had no interest in payment of the invoices and would have no interest in the checks drawn for that purpose. While these facts may have placed Akam Associates in the best position to inquire into the checks' purpose and prevent the loss, this rule of loss allocation applies only if t h e checkB' endorsement was "in t h e name of the named payee." 405(1). UCC § 3- In the record set forth by the current motions, the endorsements on the checks in question do not make clear whose name Bae signed. coneyis.138 In fact, the endorsements bear no resemblance 7 [* 9] to the name "Andon Iksino,ll the only person who appears throughout plaintiff's records with authority f o r the named payee Xinos Construction. Reply Aff. of Richard S. Naidich Ex. A ( J a n . 1 , 1 Svbedos Carp. v, Bank Leumi Trust CQ, of N . Y , , 2012). 224 A.D.2d 320. Although plaintiff's negligence may not constitute a defense assuming UCC § 3-405(1)(c) applies, its actual knowledge of a fraudulent scheme, its own dishonesty, or its complicity in Bae's dishonest conduct would raiee a viable defense. G e t t y Petroleum ,Corn. v. American Expreslg Travel Related S e w s . Co., 90 N.Y.2d at 331; Prudential-Bache Secur,, I n c . v , Citibanh, 73 N.Y.2d at 274- 75; Peck v. Chace Manhattan Bank, 190 A . 0 . 2 d 5 4 7 , 548-49 (1st Dep't 1993); Tpurg Coll. v. Bank Leumi T r : y s t Co. of N . Y . , 186 A.D.2d at 427. Again, however, the current record, particularly since defendants had no opportunity to confront plaintiff's claim as it has evolved after their opposition to the motion for a default judgment, does not permit an assessment of any such potential defense or counterclaim on behalf of Akam Associates or Zurich American Insurance standing in its insured's shoes. Prudential-Bache Secur., Inc. v. Citibank, 73 N.Y.2d at 275, 277; Peck v. Chace Manhattan Bank, 190 A.D.2d at 549. Heskel's W. 38th $t. Corp. v. Got ham Constr. (70, LLC, 1 4 A . D . 3 d at 307; Manufacturers & T r a d e r s T r U R t C0 . v , North Fork Bank, 16 A . D . 3 d at 4 6 8 . Plaintiff's current claim does, nevertheless, show that Xinos Construction's defenses parallel plaintiff's claim and coneyis.138 8 [* 10] defenses to counterclaims. Like plaintiff, Xinos Construction may maintain that, because Akam Associates' employee caused the l o s s , Akam Associates was best positioned to prevent the loss, and Akam Associates or its insurer bears responsibility for the loss. Finally, the scant record and the parties' inconsistent claims raise questions regarding the identity and amounts of the checks, the proceeds of which the parties claim entitlement to. Plaintiff claims the checks total $136,955.59. Akam Associates counterclaims for a total of $300,000.00. Zurich American Insurance claims it reimbursed Akam Associates $255,239.04. The record does not reconcile these discrepant claims, raising questions whether the same fact pattern regarding Bae's dishonest conduct pertains to a l l the proceeds plaintiff claims and whether defendants may offset plaintiff's claims with counterclaims for losses arising from different f a c t s . No party opposes Zurich American Insurance's substitution f o r Akam Associates as a defendant and counterclaimant, to stand in its insured's shoes and seek indemnification from any other party responsible for the forged checks. Cross & C.P.L.R. § 1018; Blue Blue Shield of N.J., IPC. v. Philip Morris UTSA I n c . , 3 N.Y.3d a t 2 0 6 ; J e f f e rson Ins. Co. of N.Y. v. Travelera Indem. CO., 92 N.Y.2d 363, 373 (1998); Costello v , Geiser, 8 5 N.Y.2d at 1 0 9 ; NYP HQadinqp, c. v. McClier, 65 A.D.3d at 189. This relief provides the insurer the opportunity now to propound I claims that Akam Associates was foreclosed from fleshing out 9 [* 11] based only on the complaint and motion for a default judgment, before plaintiff's response to the motion to intervene. 111. CONCLUSION Since Akam Associates and Xinos Construction adequately excuse their short delays in answering and need not establish a meritorious defense for the c o u r t to allow their late answers, C.P.L.R. § 3012(d), and plaintiff does not articulate, nor does the court discern, h o w their delay has changed plaintiff's position to its prejudice, e.q., QaimlerChwsler Is. v. Seck, CQ, 82 A.D.3d 581, 582 (1st Dep't 2011), the court extends these defendants' time to anawer. I . Tanpico v. Pova 1 d; I n t l . , 79 A.D.3d 484; Paqan 0. Four 265 (1st Dep't 2008). Tkir t v Realty Caribbean LLC, 50 A.D.3d See Nut . Mar. O f f . , Inc. v. Joy Conetr. Cnrp,, 39 A.D.3d 417, 419 (1st Dep't 2007); Heskel'e W. 38th St. Corp. v. Gotham C o n a t r . Co, LLC, 14 A.D.3d at 3 0 7 - 3 0 8 . The articulated defenses on Xinos Construction's behalf and the opportunity for the substitute defendant to articulate its defenses, however, as well aa the defaulting defendants' excuses for their delay and the absence of prejudice, provide just terms on which to allow the proposed answers by both Xinos Construction and the defendant substituting for Akam Associates. C.P.L.R. § 3012 (d); Gazes v. Bennett , 70 A.D.3d 579; Forastieri v. Hasset, 167 A.D.2d 125, 126 (1st Dep't 1990); Shure v. Villaqe Qf Westhampton Beach, 121 A.D.2d at 888. See Aloizos v. Trinity Realty Corn, , 171 A.D.2d 426, 427 (1st Dep't 1991). Their answers are considered served and filed when served and filed in coneyie.138 10 [* 12] connection with the motion f o r a default judgment. The lack of admissible evidence supporting plaintiff's claim as set forth in its motion for a default judgment conetitutes grounds to deny its motion, but t h e defaulting defendants' excuses for failing to answer timely, which provide grounds to allow their l a t e answers, constitute further grounds to deny a default judgment. SKIr a v, N e w York C i t y Tr. Auth,, 49 A.D.3d i 478; Guzetti v. City of New York, 32 A.D.3d 234 (1st Dep't 2006); Jtodriquez v. Dixie N,Y.C.,IIJC.,26 A.D.3d 199, 200 (1st Dep't 2006); Terronee v. PIQrera, 295 A.D.2d 254, 255 (1st Dep't 2003). See Wgve rson Stutman, LLP v . MOR^, 30 A.D.3d 261 (1st Dep't 2006); Tulley v , S t r a w , 265 A.D.2d a t 401. Therefore the tourt denies plaintiff's motion for a default judgment, extends defendants' time to serve and file their answers as set forth above, and grants Zurich American Insurance Company's motion to intervene to t h e extent of substituting Zurich American Insurance Company for defendant Akam Associates, Inc. 1018, 3012(d), 3215(f). C.P.L.R. §§ 1013, Within 20 daye after service of this order with notice of entry, Zurich American Insurance may serve and file an amended answer combining Akam Associates' prior defenses and counterclaims that Zurich American Inaurance adopts with its own claims in ita proposed pleading that supports its motion to intervene. This decision constitutes the court's order. DATED: F L9MJ I L E D June 4, 2012 coneyis.138 11 * 6 r NEW YORK COUNTY CLERKS OFFICE

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