Default Judgment Vacated By Court in Subro Action

In New York State practice, a lawsuit is started when a Summons and Complaint is filed with the Clerk of the Court.  You generally have 120 days (i.e., approximately four months) to serve the defendant with the Summons and Complaint after it has been filed.  It is the act of filing that stops any applicable statute of limitations from running.  For example, let’s say a fire occurred August 1, 2012 and an Electrolux clothes dryer is the suspected cause. Strict products liability and negligence claims generally run three years from the date of the loss. [1]   I file suit with the Albany County Clerk on July 30, 2015.  I serve Electrolux via the New York State Secretary of State on November 15, 2015.   In this hypothetical, everything should be ok.  The act of filing (not serving) stops the statute of limitations from running, and so long as defendant is served within 120 days of the filing, then the lawsuit was properly initiated.

What happens when I file suit, serve the defendant, but the defendant never answers the complaint?   This is called a “default” and it happens fairly regularly, usually when the defendant has no insurance and does not have an attorney.  Generally, in New York, the defendant has twenty days to answer a Summons and Complaint if these documents were personally served on the defendant.  If service of these documents is by something other than personal service, the defendant has thirty days to answer. [2]   In my hypothetical, if I serve Electrolux via the New York State Secretary of State, Electrolux has thirty days from the date of service upon the Secretary to answer. If I know that the defendant has insurance, it is my practice to mail a “courtesy” copy of the Summons and Complaint to the defendant’s carrier via certified mail as soon as the defendant is served.  That way, I have proof that the defendant’s carrier was given timely notice of this lawsuit and cannot try to disclaim if its insured failed to turn over suit papers since I can prove the carrier had actual notice of the lawsuit.

If a defendant doesn’t answer the complaint (i.e., the defendant “defaults”), then I, on behalf of the subrogating carrier, must file a default judgment motion with the court.  This motion must be filed within one year of the default or the right to file such a motion has been waived.   If the court grants a default judgment motion, then the defendant is unable to raise any defenses to liability.   Plaintiff must still prove its damages, so the court will schedule an “inquest” hearing following the finding of default, at which time Plaintiff must show the dollar amount of the judgment to which Plaintiff claims it is entitled.  In subrogation actions, my proof of damages at the inquest is usually testimony from the insurance adjuster.  Because default has drastic consequences (i.e., defendant can no longer defend himself/herself), Courts are reluctant to enter or sustain a default unless the Plaintiff proves indisputably that the defendant was properly served with the Summons and Complaint and yet elected not to respond to it.

A couple weeks ago, an appellate court sustained a trial court’s decision to vacate a default judgment in a subrogation action.   USAA Casualty, as subrogating carrier, sued defendant Mittnacht to recover approximately $7,000 which USAA had paid as a result of a motor vehicle accident.   USAA’s process server brought the Summons and Complaint to an address in Staten Island.  When the process server rang the doorbell, the person answering indicated he/she was not Mittnacht.   The process server nonetheless served the papers, then followed it by mailing the papers to that same address.  The Court granted a default judgment motion, then allowed USAA to enter a judgment against Mittnacht following an inquest.   Mittnacht found out that a default had been entered against him and moved to vacate the judgment, arguing that USAA failed to prove it had properly served him.   Mittnacht swore to an affidavit claiming that he had never lived at the address where USAA process server served the papers.   The trial judge agreed with Mittnacht and vacated (i.e., wiped out) the default judgment.  USAA appealed and the appellate court modified the trial court’s order.  The appellate court found that the trial court should hold a hearing and allow both sides to submit proof as to whether or not Mittnacht had lived at that Staten Island address at the time the process server dropped off the papers to someone (not Mittnacht).  [3]   The appellate court noted that the process server’s affidavit established that someone was served at that address but USAA had not submitted any proof that the address was where Mittnacht actually lived.   There should be a hearing at which USAA (through its process server) can submit evidence that Mittnacht is lying in his affidavit and that he did actually live there at the time the process server went to that address.

Bottom Line: When serving the defendant with the Summons and Complaint, it is always preferable that the process server actually hand the papers to the defendant.   While the law allows “sub-service” upon a “person of reasonable age and discretion,” it is always preferable to have the server actually, physically handed the papers to the defendant. [4]  That way, the server can swear to an affidavit that the defendant was actually served (and include a general description of the age and physical appearance of the defendant) and, if necessary, come to court and identify the defendant as being the person served.   If sub-service is used, the process server must be able to prove that the address at which the papers were served was in fact a valid residence of the defendant at the time of service.  This could be hard to prove if the defendant denies he was living there.   Plaintiff would have to come forth with some type of proof that defendant is lying and that databases such as DMV registration, post office records (which you can obtain via Freedom of Information request), voter enrollment, personal observation (i.e., surveillance) etc. prove indisputably that the address at which served was in fact where the defendant was living.  All this can be avoided if the defendant is actually physically handed the papers.

[1] Breach of warranty claims generally run four years from the date the product was purchased.
[2] Where the defendant has insurance and/or an attorney, the deadline for serving a response to the summons and complaint can be extended by mutual agreement of the attorneys.
[3] Carter v Mittnacht, 2015 N.Y. Misc. LEXIS 2462 (2nd Dept July 14, 2015)
[4] If the defendant is a corporation, they can usually be served via the New York State’s Secretary of State’s office here in Albany, followed up by a mailing to that corporation’s last known address prior to filing a default against a corporation.

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