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Due Diligence Requirement not shown on Nail and Mail

Credit Acceptance Corp. v. Greve, 17228-2006
Decided: March 22, 2007
Justice Peter H. Mayer

Supreme Court

Relin, Goldstein & Crane, LLP

Attorneys for Plaintiff

Justice Mayer

UPON DUE DELIBERATION AND CONSIDERATION BY THE COURT of the foregoing papers, the motion is decided as follows: it is

ORDERED that the plaintiff’s motion for a default judgment against the defendant is considered under CPLR §3215 and CPLR §308 and is hereby denied; and it is further

ORDERED that counsel for the movant shall serve a copy of this Order upon the defendant at the defendant’s last known address within twenty (20) days from the date of this Order pursuant to CPLR §2103(b)(1),(2) or (3) and shall thereafter file the affidavit(s) of service with the Suffolk County Clerk.

This action arose from the defendant’s alleged breach of an April 18, 2005 retail installment agreement (“Agreement”)1, under which the defendant purchased a used 1998 Chevrolet Blazer from the seller, Auto World USA, located at 37 Sunrise Highway, Patchogue, New York. At the time of the Agreement, the vehicle’s odometer had a reading of 125,929 miles. Under the terms of the Agreement, the purchase price of the vehicle was $7,295.00, plus sales tax in the amount of $701.20, less a $1,500.00 down payment, leaving an unpaid amount of $6,576,20 for the vehicle itself. After adding the $1,633.00 cost for an extended warranty, as well as fees in the amount of $142.00, the total amount to be financed by the defendant was $8,351.20, at an interest rate of 24.95 percent per annum.

The complaint alleges that the defendant defaulted on his obligation, and it appears that the vehicle may have been sold at auction some time thereafter. In the complaint, the plaintiff alleges that after all set-offs and credits, an amount of $7,282.63 remains due; however, neither the complaint, nor the affirmation in support of the motion specify what this amount is comprised of or what amount was paid by the defendant toward the principal amount of the loan. The plaintiff now seeks a default judgment against the defendant in the principal amount of $7,282.63, plus $1,334.91 for attorneys fees, on the basis of the defendant’s failure to answer or otherwise appear in this action.

In relevant part, CPLR §3215(a) states that “[w]hen a defendant has failed to appear, plead or proceed to trial of an action reached and called for trial, or when the court orders a dismissal for any other neglect to proceed, the plaintiff may seek a default judgment against him.” A copy of the plaintiff’s summons and complaint was purportedly served upon the defendant by the so-called “nail and mail” method pursuant to CPLR §308(4). According to the affidavit of service, the plaintiff’s process server attempted to deliver the summons and complaint to the defendant at 458 Richmond #5-E, Ronkonkoma, NY 11779, on July 5, 2006 at 8:14 a.m. and on July 7, 2006 at 6:33 p.m. The process server then affixed a copy of the summons and complaint to the door at the premises on July 8, 2006 at 2:07 p.m. and mailed a copy to the same address on July 13, 2006.

The “nail and mail” method of service pursuant to CPLR §308(4) may be used only where personal service under CPLR §308(1) and (2) cannot be made with “due diligence” (Lemberger v. Khan, 18 AD3d 447, 794 NYS2d 416 [2d Dept 2005]). The due diligence requirement of CPLR 308(4) must be strictly observed, given the reduced likelihood that a summons served pursuant to that section will be received (O’Connell v. Post, 27 AD3d 630, 811 NYS2d 441 [2d Dept 2006]; Scott v. Knoblock, 204 AD2d 299, 611 NYS2d 265 [2d Dept 1994]; Kaszovitz v. Weiszman, 110 AD2d 117, 120, 493 N.Y.S.2d 335 [2d Dept 1985]).

Since there is no indication that the process server made any attempt to locate the defendant’s business address or to effectuate personal service thereat, “due diligence” under CPLR 308(4) has not been shown (Sanders v. Elie, 29 AD3d 773, 816 NYS2d 509 [2d Dept 2006]; Earle v. Valente, 302 AD2d 353, 754 NYS2d 364 [2d Dept 2003]; Annis v. Long, 298 AD2d 340, 751 NYS2d 370 [2d Dept 2002]). Since the plaintiff has failed to meet the “due diligence” requirement for so-called “nail and mail” service under CPLR §308(4), jurisdiction over the defendant has not been established and the plaintiff’s motion must be denied (Sanders v. Elie, supra; Earle v. Valente, supra; Annis v. Long, supra).

Even if jurisdiction over the defendant had been established, the plaintiff’s motion would, nevertheless, require denial. With regard to the proof necessary on an application for judgment by default, CPLR §3215(f) states, in relevant part, that “[o]n any application for judgment by default, the applicant shall file proof of service of the summons and the complaint . . . and proof of the Facts constituting the claim, the default and the amount due by affidavit made by the party . . . Where a verified complaint has been served, it may be used as the affidavit of the Facts constituting the claim and the amount due; in such case, an affidavit as to the default shall be made by the party or the party’s attorney.”

In support of the motion, the plaintiff submits an affirmation by counsel, as well as a complaint verified by counsel, but no affidavit by the party-plaintiff. In the absence of either a proper affidavit by the party or a complaint verified by the party, not merely by an attorney with no personal knowledge, the entry of judgment by default is erroneous (see, Peniston v. Epstein, 10 AD3d 450, 780 NYS2d 919 [2d Dept 2004]; Grainger v. Wright, 274 AD2d 549, 713 NYS2d 182 [2d Dept 2000]; Finnegan v. Sheahan, 269 AD2d 491, 703 NYS2d 734 [2d Dept 2000]; Hazim v. Winter, 234 AD2d 422, 651 NYS2d 149 [2d Dept 1996]; Mullins v. DiLorenzo, 199 AD2d 218; 606 NYS2d 161 [1st Dept 1993]). On this basis, denial of the plaintiff’s motion would be required.

In addition to the jurisdictional and procedural bases for denying plaintiff’s motion, the moving papers present substantive reasons for denial. The Agreement contains a notice of assignment provision, which essentially states that the “Seller has assigned this Contract to the [plaintiff] in accordance with the terms and conditions set forth on the reverse side of this Contract.” This is presumably the basis upon which the plaintiff claims standing as a party in this matter; however, the moving papers do not include the “reverse side” of the contract. Therefore, the Court is unable to ascertain the terms and conditions applicable to the purported assignment.

With regard to attorneys fees claimed, paragraph 8 of plaintiff’s counsel’s affirmation states that “[t]he attorney fees which plaintiff is obligated to pay my firm in connection with this matter is a contingency fee, by retainer agreement at present in excess 15 percent of each dollar recovered from the defendant(s), which would total in excess of $1,334.91 if the principal is recovered” (emphasis added). Notwithstanding this contingency fee arrangement, plaintiff’s counsel recites his firm’s hourly rates and now seeks to add the requested fees to the principal amount of the claim, as opposed to taking the agreed contingency percentage from the total amount recovered. Although plaintiff wishes the Court to rely on the retainer agreement in awarding counsel fees, no such agreement is annexed to the moving papers.

Pursuant to the language contained on the face of the Agreement, this Court may not even be the proper forum for resolving disputes under the Agreement, as there is appears to be an arbitration clause applicable to the terms of the Agreement. In this regard, the Agreement states, “ARBITRATION NOTICE: PLEASE SEE THE REVERSE SIDE OF THIS CONTRACT FOR INFORMATION REGARDING THE ARBITRATION CLAUSE CONTAINED IN THIS CONTRACT” (capitalization emphasis in original). The Agreement also states, “ADDITIONAL TERMS AND CONDITIONS: THE ADDITIONAL TERMS AND CONDITIONS, INCLUDING THE ARBITRATION CLAUSE SET FORTH ON THE REVERSE SIDE HEREOF ARE A PART OF THIS CONTRACT AND ARE INCORPORATED HEREIN BY REFERENCE” (capitalization emphasis in original).

Despite these clear contractual references to an arbitration clause, the plaintiff has failed to include a copy of the “reverse side,” which includes the arbitration clause. Therefore, the plaintiff has not established that this Court, as opposed to an arbitrator, is the proper forum in which to seek the relief the plaintiff seeks.

For the reasons set forth herein, the plaintiff’s motion is denied. This constitutes the Decision and Order of the Court.