Property Damage Liability Litigation: Affirming Success on Appeal

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We recovered a substantial sum for a commercial tenant from its negligent landlord who caused complete destruction of our client’s business inventory in a retail store. We vigorously defended our success in an appeals court and won, affirming legal principles regarding parties who default in promptly responding to a lawsuit.

Our firm vigorously pursued and obtained a default judgment against a commercial landlord for extensive property damage to our client’s business premises.  Since the client’s insurance policy was rescinded, we needed to find another way to obtain a result for the client.  The court awarded our client a judgment after an inquest hearing on a default by the landlord.  The landlord appealed, but the appeals court upheld the judgment against the landlord and our client was paid in full for all of his damages.  The full text of the Court’s decision appears below:

Majestic Clothing Inc. v East Coast Stor., LLC

18 A.D.3d 516, 795 N.Y.S.2d 289, 2005 N.Y. Slip Op. 03821

Supreme Court, Appellate Division, Second Department, New York.

May 9, 2005.

Majestic Clothing Inc., Doing Business as Big N Tall King, Appellant,

v

East Coast Storage, LLC, Respondent, et al., Defendant.

—[*1]

In an action, inter alia, to recover for property damage, the plaintiff appeals from an order of the Supreme Court, Nassau County (Lally, J.), dated April 23, 2004, which granted the motion of the defendant East Coast Storage, LLC, to vacate an order of the same court (Roberto, J.), entered September 17, 2003, granting its motion for leave to enter judgment against the defendant East Coast Storage, LLC, upon that defendant’s default in answering, and to vacate a judgment of the same court entered November 5, 2003, upon the order and upon a decision of the same court (Shifrin, R.), dated October 29, 2003.

Ordered that the order is reversed, on the law and as a matter of discretion, with costs, the motion is denied, and the order dated September 17, 2003, and the judgment are reinstated.

The plaintiff served the summons and complaint in this action on the defendant East Coast Storage, LLC (hereinafter East Coast Storage), pursuant to Limited Liability Company Law § 303, by service upon the Secretary of State, on June 12, 2003. Apparently, the summons and complaint were not actually received by East Coast Storage until July 22, 2003, because the address which the Secretary of State had on file for it had not been updated. East Coast Storage claims that after receiving the summons and complaint, it immediately forwarded it to its insurance broker, who in turn, forwarded it to the insurance carrier, who through “mistake, oversight or inadvertence,” did not forward it to defense counsel until September 12, 2003. [*2]

By order entered September 17, 2003, the Supreme Court granted the plaintiff’s motion for leave to enter judgment against East Coast Storage upon its default in answering and set the matter down for an inquest on damages. By decision dated October 29, 2003, the Referee found that “a preponderance of the credible evidence support[ed] an award in favor of plaintiff and against [East Coast Storage] in the sum of $220,741.43,” and directed the clerk to enter judgment accordingly. Judgment was entered on November 5, 2003.

East Coast Storage moved to vacate the order entered September 17, 2003, and the default judgment, pursuant to CPLR 317, or alternatively, pursuant to CPLR 5015 (a) (1). The Supreme Court granted the motion upon finding that East Coast Storage established the existence of a reasonable excuse for the default and a meritorious defense to the action. We reverse.

East Coast Storage failed to establish that it did not receive the summons in time to defend, as required to obtain relief from a default judgment pursuant to CPLR 317 (see Fleetwood Park Corp. v Jerrick Waterproofing Co., 203 AD2d 238 [1994]). By its own admission, East Coast Storage received the summons and complaint on July 22, 2003, well before judgment was entered against it upon its default.

Nor did East Coast Storage establish entitlement to relief pursuant to CPLR 5015 (a) (1), which requires a showing of both a reasonable excuse for the default and the existence of a meritorious defense (see Kaplinsky v Mazor, 307 AD2d 916 [2003]). Arguably, the initial default, due to the failure to keep the Secretary of State apprised of its change of address, was excusable (see Eugene Di Lorenzo, Inc. v Dutton Lbr. Co., 67 NY2d 138 [1986]). However, the continued default, blamed on insurance carrier delay and settlement negotiations, was inexcusable (see Juseinoski v Board of Educ. of City of N.Y., 15 AD3d 353 [2005]; Kaplinsky v Mazor, supra; Flora Co. v Ingilis, 233 AD2d 418 [1996]; Bodi v Orciuoli, 195 AD2d 841 [1993]).

Accordingly, the Supreme Court should have denied the motion to vacate. Prudenti, P.J., Schmidt, Luciano and Lifson, JJ., concur.

Evan-Schwartz

Evan S. Schwartz
Founder of Schwartz, Conroy & Hack
800-745-1755
ESS@schwartzlawpc.com

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