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Single summons served on corp officer; for corp and officer individually

Perez v. Garcia
BRONX COUNTY
Supreme Court

Justice Renwick

Dennis Perez commenced this breach of contract action against a cooperative corporation and its Board of Directors, seeking specific performance of an alleged contract for the sale of certain stocks appurtenant to a cooperative apartment. Plaintiff now moves for a default judgment based upon defendants’ failure to answer the summons and complaint. By a separate motion, defendants move for a dismissal of the action for lack of personal jurisdiction over the corporate defendant because plaintiff failed to effect proper service upon it. The motions are sua sponte consolidated for the purpose of joint disposition. The dispositive issue on these motions is whether “leave and mail” substitute service under CPLR §308(2) was sufficient to confer jurisdiction over the corporate defendant.

Factual Background

Defendant 976 Simpson Street Housing Development Fund Corporation is a low-income, shareholder-owned cooperative corporation. The cooperative corporation was formed when a tenant association acquired ownership to an abandoned building from the City of New York. The cooperative is self-managed by the tenants-shareholders; the day-to-day management is assigned to the officers of the corporation, who are also shareholders. Defendant Margarita Garcia is a tenant-shareholder and one of the officers of the corporation.

In the summons and complaint, plaintiff Dennis Perez claims that on March 23, 2001, he paid $250 to defendant 976 Simpson Street HDFC $250, for the shares appurtenant to apartment 3E. Subsequently, plaintiff paid to the cooperative $1,250 as security deposit. For several years, plaintiff made monthly payments of $650.00, presumably to cover his share of the common charges. Ultimately, however, the cooperative corporation refused to issue him shares to his apartment.

When plaintiff realized that the cooperative corporation considered him only a tenant and not a tenant-shareholder, plaintiff commenced this action in September 2004. Plaintiff sues both the cooperative corporation, 976 Simpson Street HDFC, and the Board of Directors, naming one of its directors, Margarita Garcia, as an individual defendant. When the time for defendants to answer the complaint expired, plaintiff instituted this motion seeking a default judgment against all defendants.

By a separate motion, defendants, represented by the same counsel, move for a dismissal of the action on the ground that this court never acquired personal jurisdiction over the corporate defendant. The affidavit of service of Terry PeÒa, a licensed process server, indicates that on September 19, 2004, she served the summons and complaint on the individual defendant-corporate officer, and the corporate defendant by”leave and mail” substitute service, pursuant to CPLR §308(2). Specifically, the summons and complaint were served to a person of suitable age and discretion, identified as Margarita Garcia’s 18-year old son, who was served at her mother’s apartment at the subject cooperative. Defendants, however, claim that service upon the corporate defendant by CPLR §308(2)’s “leave and mail” substitute service is inappropriate.

Discussion

The Court first examines defendants’ motion, for a dismissal of the claims against the corporate defendant based upon lack of personal jurisdiction, since the grant of such motion would render plaintiff’s motion moot. Plaintiff bears the ultimate burden of proving by a preponderance of the evidence that jurisdiction over the corporate defendant was obtained by proper service of process. See Bankers Trust Co. of California v. Tsoukar, 303 A.D.2d 343 (2nd Dept. 2003); Blue Spot, Inc. v. Superior Merchandise Electronics, 150 A.D.2d 175 (1st Dept. 1989); Frankel v. Schilling, 149 A.D.2d 657 (2nd Dept. 1989).

This court finds that plaintiff failed to meet his burden. As noted above, in support of his motion for a default judgment, plaintiff submitted the affidavit of service of Terry PeÒa, a license process server, indicating that on September 19, 2004, she served the summons and complaint on the individual defendant-corporate officer, and the corporate defendant by “leave and mail” substitute service, pursuant to CPLR §308(2), to a person of suitable age and discretion. In this case, “leave and mail” substitute service, pursuant to CPLR §308(2), was sufficient to confer jurisdiction over the individual defendant- corporate officer, but not over the corporate defendant.

Service on a corporation may not be made in accordance with the substitute methods of service authorized for the personal service of process on individuals. Service under CPLR §308(2) is applicable only to actions against natural persons and is inapplicable to actions against corporations, for which personal service must be made pursuant to §311(1). Lakeside Concrete Corp. v. Pine Hollow Bldg. Corp., 104 A.D.2d (2nd Dept. 1984), aff’d 65 N.Y.2d 865 (1985); see also, Faravelli v. Bankers Trust Co., 85 A.D.2d 335 (1st Dept. 1982) aff’d , 59 N.Y.2d 615 (1983). The service envisioned under CPLR §311(1) upon a corporate officer is in-hand service upon the specified officer. Substitute service under CPLR §308(2) and (4) is available only against individual defendants, and not corporations. Lakeside Concrete Corp. v. Pine Hollow Building Corp., 104 A.D.2d 551 (1984), affd, 65 N.Y.2d 865 (1985); Strong v. Bi-Lo Wholesalers, 265 A.D.2d 745 (3rd Dept. 1999); DeZego v. Bruhn, 99 A.D.2d 823 (2nd Dept. 1984); McLaughlin, Practice Commentaries to CPLR §311 at page 379. Thus, the “leave and mail” method cannot be used to effect valid service of process on a corporation.

The Appellate Division, Second Department addressed this very issue in Lakeside Concrete Corp. v. Pine Hollow Building Corp. 104 A.D.2d 551 (2nd Dept. 1984), affd. 65 N.Y.2d 865 (1985), where, as in the instant case, the plaintiff sued the corporation, as well as the corporate officer individually. Service upon the individual was made pursuant to CPLR §308(2). While sustaining service on the individual the court ruled that such service was only available for service upon a natural person and that jurisdiction over a corporation could only be acquired by personal service pursuant to CPLR §311(1). Moreover, the court in Lakeside Concrete Corp. supra, distinguished those cases like Port Chester Elec. Co. v. Ronbed Corp. 28 A.D.2d 1008 (2nd Dept. 1967), where a service of a single summons on a corporate officer who was also being sued individually was held to confer concomitant jurisdiction over both defendant corporation and the individual. See also Lac Leasing Corp. v. Dutchess Aero., Inc., 32 A.D.2d 949 (2nd Dept. 1967). The court held those cases inapposite because in all those cases service on the corporate officer was by personal delivery of the process on the individual. In Lakeside Concrete Corp. supra, like this case, however, service on the individual defendant- corporate officer was by substituted service. Id. The holding in Lakeside Concrete Corp., supra, is the controlling authority in the whole State of New York, as the decision was affirmed by the Court of Appeals, albeit without an opinion in Lakeside Concrete Corp. v. Pine Hollow Building Corp., 65 N.Y.2d 865 (1985).

Conclusion

In summary, since personal service was not effectuated upon the individual defendant-corporate officer (Margarita Garcia), “leave and mail” service on her was not sufficient to confer jurisdiction over the corporate defendant, 976 Simpson Street HDFC. Accordingly, defendants’ motion, seeking a dismissal of the claims asserted against the corporate defendant, 976 Simpson Street HDFC, based upon lack of personal jurisdiction, is granted. Likewise, plaintiff’s claims against the Board of Directors and the individual defendant- corporate officer, Margarita Garcia, are also dismissed since the claims asserted against them are based solely upon their corporate capacity. Therefore, plaintiff’s motion for a default judgment is denied as moot.

This constitutes the Decision and Order of the Court.