Opinion
CA2003-002960.
Decided September 14, 2004.
DURR and KEINZ, (Donald E. Keinz, Esq., of Counsel), for the Plaintiffs.
Martin, Ganotis, Brown, Mould Currie for Defendant.
Plaintiff's counsel had written a letter to Dr. Braick in August of 2003, advising that he was handling a medical malpractice claim on behalf of the Plaintiffs against Dr. Braick, and that he should turn the matter over to his carrier. Mrs. Dunn had previously written Dr. Braick requesting a copy of her records. Dr. Braick forwarded the letter to his carrier and, when the carrier advised him he had no coverage by letter dated August 26, 2003, he consulted Attorney George Mould and requested Attorney Mould to look into the coverage issue for him and, in the absence of coverage, handle the matter privately. Dr. Braick was aware that he had not paid his medical malpractice "tail" premium; he could not have been shocked that the carrier refused to cover him.
This action was commenced by service of a summons and complaint upon "a person of suitable age and discretion" at the actual dwelling place of the Defendant, Dr. Braick, on December 23, 2003. On February 3, 2004, a "Default Judgment" was signed and filed. An inquest was then ordered and was held on March 15, 2004. The Court issued a decision dated March 30, 2004, and a "Default Judgment" was filed on March 31, 2004.
Dr. Braick moves to vacate the Default Judgment(s).
Eugene Di Lorenzo, Inc. v. A.C. Dutton Lumber Co., Inc. 67 N.Y.2d 138, 492 N.E.2d 116, 501 N.Y.S.2d 8 [N.Y.,1986]:
CPLR 5015(a) provides that a party may be relieved from a judgment on the ground of, among others, "excusable default" (CPLR 5015[a][1]). A defendant seeking to vacate a default under this provision must demonstrate a reasonable excuse for its delay in appearing and answering the complaint and a meritorious defense to the action (see, e.g., Gray v. B.R. Trucking Co., 59 N.Y.2d 649, 650, 463 N.Y.S.2d 192, 449 N.E.2d 1270; Blake v. City of New York, 90 A.D.2d 531, 455 N.Y.S.2d 34).
[2] A second provision for obtaining relief from a default judgment is found in CPLR 317. That section states, in part, that "[a] person served with a summons other than by personal delivery to him or to his agent for service under [CPLR] 318 * * * may be allowed to defend the action within one year after he obtains knowledge of entry of the judgment * * * upon a finding of the court that he did not personally receive notice of the summons in time to defend and has a meritorious defense." As has been emphasized in numerous cases, there is no necessity for a defendant moving pursuant to CPLR 317 to show a "reasonable excuse" for its delay (see, e.g., Simon Schuster v. Howe Plastics Chems. Co., 105 A.D.2d 604, 605, 481 N.Y.S.2d 82; Zuppa v. Bison Drywall Insulation Co., 93 A.D.2d 997, 462 N.Y.S.2d 83).
Dr. Braick was not personally served. He alleges that he did not obtain knowledge of the same in time to defend, and that during this period he was in the United Arab Emirates seeking to resume his medical career. He therefore claims relief pursuant to CPLR § 317. He also claims to have a meritorious defense and, in any event, a reasonable excuse for his failure to timely answer. He thus claims entitlement to relief pursuant to CPLR § 5015(a) as well. Because we conclude that Dr. Braick did indeed have timely knowledge of the action but chose not to respond he cannot satisfy the statutory requirement of lack of knowledge. And, because he did have actual knowledge of the service, and yet chose to do nothing, he cannot claim a reasonable excuse for the delay.
In the affidavits in support of the motion to vacate the default judgment the person upon whom the summons and complaint were served Lori McSweeney is described as an "unrelated acquaintance" of Dr. Braick. Dr. Braick testified that Lori McSweeney is his "common law wife", that they have lived together for fifteen years, and that they have two children together. Ms. McSweeney is one of the named beneficiaries of the Braick Family Trust, an irrevocable trust into which Dr. Braick's assets had been placed. Her interest and involvement utterly transcend the connotations of the phrase "unrelated acquaintance", and contributes to the finding that the fact of service was conveyed to Dr. Braick.
Ms. McSweeney was served on December 22, 2003 at the residence she shared with Dr. Braick. She called Dr. Braick in the UAE on December 23, 2003 and on other occasions in December of 2003 and January of 2004. Dr. Braick acknowledges that Ms. McSweeney told him about the lawsuit, but does not know when. Ms. McSweeney testified she told him about the lawsuit, but does not know when. He testified that his best recollection is January, 2004. Yet it is not credible that he was not told about it during the call of December 23. The service had occurred the previous day. It was a lawsuit against Dr. Braick. That it would be ignored in conversation the next day, yet recited in conversation a month later, is simply not believable. What would have brought it to Ms. McSweeney's attention as something to discuss in January, yet not on the day after it was served???
Dr. Braick testified that whenever it was Ms. McSweeney told him about the papers that he told her not to worry about it, he had spoken with Mr. Mould about the letter he had received in August from Mr. Keinz.
Dr. Braick does not make a prima facie showing for relief pursuant to CPLR § 317. He does not in fact testify to a lack of knowledge of the suit prior to the time an answer was due. Indeed, while the Court concludes that he must have known of the suit in December, even if it was late in January, 2004, he still had time to answer and could have contacted Mr. Mould, whom he had consulted on the very matter and testified he had asked to handle it for him privately if the carrier wouldn't assume the defense. Affirmative proof of non-knowledge within the time to answer is a necessary part of the remedy available under CPLR § 317, and Dr. Braick produces no such proof. On the contrary, if his testimony that he learned of it in January is correct, then he had actual knowledge before his time to Answer expired.
Since on his own testimony he cannot succeed under § 317, the question turns to whether Dr. Braick has shown a "reasonable excuse" for his default, so as to be entitled to relief under § 5015. Dr. Braick's proffer is that he somehow assumed that Mr. Mould or the insurance carrier would take care of the suit without his taking any steps. Dr. Braick testified that two or three lawsuits were pending against him at the time he was served in the Dunn suit, yet professes ignorance of the need to turn served papers over to someone to see to their handling. The records of the Oneida County Clerk show that Dr. Braick was sued five times in this County previous to the Dunn suit". Dr. Braick testified to having been served on ten to fifteen occasions (p. 67). Dr. Braick testified (p. 33):
The Plaintiffs were: Judy Delucia; Barbare Balfe; Jill Penc; Denise DiGiorgio; Emily Rugari. The Court has not investigated when, or if, service took place in each of the cases.
Q. Well, Doctor, you're not new to being served papers in December of 2003; you had been served a few times before, had you not?
A. It's always the same way. I always, always send them to the to the to the insurance company or to the lawyers who's working.
Yet this time he did not cause them to be forwarded to anyone. He just told Ms. McSweeney not to worry about them. And he testified just a few pages later (p. 35):
Q. Well, was it your understanding when you heard from your common law wife that she had been served with papers in the Dunn case that Mr. Mould was handling the matter for you?
A. This is my honest knowledge that it is. I always
believed that he would be getting the original papers, and I may have received a copy. I didn't think I am the only one who received it or I am going to do anything about it. I mean, I never did anything with any of these cases personally at all.
Q. How do you feel that Mr. Mould was going to get the original papers when the plaintiffs or the plaintiffs' attorney never knew that George Mould had talked to you about this matter? How did you feel those papers were going to get to him?
A. I believe he would have received them from the
malpractice insurance company because that's where I send the papers. And, usually, he would receive it from them.
Q. Well, did you tell your common law wife Lori to send those papers to your malpractice carrier?
A. No, I didn't.
"A defendant seeking to vacate a judgment entered upon its failure to appear or answer a complaint must demonstrate both a reasonable excuse for the default and the existence of a meritorious defense . . ." Mount Sinai Hosp. of Queens v. Hertz Corp. 3 A.D.3d 523, 770 N.Y.S.2d 757, [2nd Dept., 2004]. A "reasonable" excuse requires the demonstration of some reason for the inaction that led to default. Yet Dr. Braick demonstrates no reason whatever. Although he had always turned papers over to his carrier, he didn't this time. Mr. Keinz had written him, not his carrier. He had no reason to believe Mr. Keinz or the Plaintiffs knew who his carrier was, or if he had one; indeed, since Mr. Keinz specifically requested in the letter that he turn the letter over to his carrier, it should have been obvious to him that Mr. Keinz did not know who the carrier was. And the carrier had told Dr. Braick on August 26 that he had no coverage and that they wouldn't handle it. What reason does he offer to have believed that the carrier and/or Mr. Mould knew about this lawsuit or had been served the original papers, or that he didn't need to forward these papers although he had always done so in the past? None. Who was supposed to forward the papers to Mr. Mould? Not the carrier, for he had none. Had someone told Mr. Keinz whom to send papers to? There is no suggestion of that. Dr. Braick is asking the Court to believe that he believes in magic.
Then there is the communication between Dr. Braick and Atty. Elizabeth Hughes following Ms. Hughes' learning of the default judgment through the commencement of the action to set aside the conveyances of all Dr. Braick's assets, discussed below. Ms. Hughes testified to having advised Dr. Braick that it was imperative to attempt to open the default and defend the medical malpractice case, or all the assets would potentially be exposed to the Dunns' judgment. On February 14 Dr. Braick e-mailed her: "I contacted Mr. Mould's office . . . I requested through his aid that he proceeds defending the case as you advised". There is no expression of surprise consistent with his belief that the Dunn case was somehow being taken care of. Merely an expression that since Atty. Hughes has advised defending the case, he is now contacting Mr. Mould's office to do so. On page 15 Ms. Hughes testified in response to Mr. Keinz's quotation from an e-mail of Dr. Braick:
Q. "When I understood my options, I chose the one your wisdom recommended." What did you recommend?
A. He most likely is referring there to my indication that the action needed to be defended, and it needed prompt attention.
Q. Prompt attention?
A. Yes.
These are the statements of a man who has just decided to defend the case, not one who thought it was being defended.
Dr. Braick's e-mail of February 16 expressly makes clear his intention to move assets as far as possible from the reach of creditors: "If she [his sister, Meriam] bought some parcels from the trust, it should put the assets a step further from the creditors, and the cash received can be instantly moved."
Also troubling is Attorney Hughes' e-mail to Dr. Braick on March 2, 2004: ". . . It is indeed a shame that Lori did not contact a lawyer, any lawyer, to file an answer to that summons and complaint served in December. The complications that are following upon your failing to answer. . . . are having repercussions that (I suspect), neither of you had any notion . . .", emphasis added and suggesting knowledge of the service, and decision to do nothing, by both of them.
Dr. Braick's unfounded, unprecedented opinion that the matter was being seen to by the carrier which had already said no or Mr. Mould, who had no way to know about it, does not rise to the level of an acceptable excuse.
While the Court does not find Dr. Braick's excuse for inaction reasonable on its face for an experienced litigant, or virtually any knowledgeable person, there are indeed other reasons to suspect that the default herein was not inadvertent at all, but rather a deliberate strategy to avoid litigation which was only abandoned when Dr. Braick learned that his efforts to transfer his assets to a "family trust" possibly would fail, and that his assets might be susceptible to the claims of creditors, including malpractice judgment creditors.
On July 10 of 2003 Dr. Braick, who had lost his license to practice medicine in 2001 and was described as having no income (the family apparently living on Ms. McSweeney's earnings as a psychiatric nurse) and was at the time looking into employment abroad and working there as an unpaid volunteer, signed deeds conveying all his real estate, as well as a broker's account, without consideration, to the "Braick Family Trust", with his sister and brother as trustees. Attorney Elizabeth Hughes described the transactions as being in the course of normal estate planning. It is not "normal" to utterly divest oneself of assets while having no income unless there are other, more immediate considerations than estate planning. Avoiding creditors' claims comes instantly to mind. The deeds were recorded in September and October 2003. As a result, Dr. Braick believed himself to have no ownership of any real property or other assets in Oneida County (p. 57ff) as of the date of service of the summons and complaint herein. Early in February, 2004, Plaintiffs here commenced a separate lawsuit to have the conveyances to the trust set aside. It was only after Dr. Braick's sister had been served in this separate lawsuit and Ms. Hughes advised Dr. Braick that the medical malpractice action needed to be defended that Dr. Braick contacted Mr. Mould concerning the default herein.
Dunn v. Braick Family Trust, et al.,
Dr. Braick's testimony is spread over 100 pages of transcript. The Court had the opportunity to hear his testimony vive voce and observe his demeanor and timing of response. On the whole the Court finds Dr. Braick not credible in his explanation of why no action was taken in response to the service of papers upon the mother of his children and irrevocable beneficiary of a portion of his estate at their home on December 22. Taken together with the realities of asset transfers and apparent efforts at becoming judgment proof, the Court concludes that Dr. Braick intended to do nothing about the original Dunn action since he would be personally responsible for defense costs and was judgment proof anyway until he learned that the asset transfers were being attacked and that his assets may indeed be exposed. It was only thereafter that he contacted his attorneys to take action. "Only excusable, hence unintentional, defaults may be vacated." H.H. Mink Co., Inc. v. G T Terminal Packaging Co., Inc. 89 A.D.2d 821, 453 N.Y.S.2d 524 [4th Dept. 1982]. Murphy v. Hall 24 A.D.2d 892, 264 N.Y.S.2d 782 [2nd 1965]. Dr. Braick has utterly failed to demonstrate that the default herein was unintentional or give the Court any reasonable basis upon which to suppose it was. All indications, both from the content of the testimony and the demeanor of Dr. Braick as he testified, are that the default was simply a ploy to avoid a costly and, it seemed, unnecessary defense
Dr. Braick raises an interesting though ultimately unavailing procedural point: the action was commenced by filing on December 2, 2003. Service was effectuated on Ms. McSweeney personally on December 22, 2003 with following-up mailing on December 23, 2003. The affidavit of service was filed on December 30, 2003. Pursuant to CPLR § 308, service would be complete ten days after the filing, and pursuant to CPLR § 320 Defendant would then have thirty days to answer or move. The time to so answer or move would have expired on February 9, 2004. But the Plaintiffs moved for a default judgment prior to that date, and indeed filed a Judgment on February 3, 2004. That Judgment recited, first, that the Dunns were entitled to Judgment on the causes of action in the complaint and, second, that a hearing would be held to determine damages. A hearing was thereafter had on March 15, 2004, and the Court rendered a Decision based on the hearing on March 30, 2004. A Judgment was then filed on March 31, 2004 awarding the Plaintiffs damages. It is not argued or alleged that the Default had been cured in any fashion prior to the entry of the Judgment of March 31; Dr. Braick had not as of then appeared or moved in the action. The Defendant argues that the February 3, 2004 Judgment was pre-mature, that Dr. Braick was not then in Default, that the February 3 Judgment is a nullity and that with the fall of that procedural prop the entire default procedure collapses.
CPLR § 3215 provides the rules regarding defaults. The significant sections are:
(a) Default and entry. When 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. . . . Where the case is not one in which the clerk can enter judgment, the plaintiff shall apply to the court for judgment.
(b) Procedure before court. The court, with or without a jury, may make an assessment or take an account or proof, or may direct a reference.
(f) Proof. On any application for judgment by default, the applicant shall file proof of service of the summons and the complaint, or a summons and notice served pursuant to subdivision (b) of rule 305 or subdivision (a) of rule 316, and proof by affidavit made by the party of the facts constituting the claim, the default and the amount due.
When the acts and steps taken herein, leading up to the filing of the March 31 Judgment, are contrasted with the requirements of the statute, it is impossible to see how the statute was not satisfied, even if the February 3 Judgment was a nullity; in a sense, the Defendant may actually be too right in this case. The February 3 Judgment may indeed have been a nullity, but may indeed have been a nullity even if it had been filed on February 13, when the Defendant was unequivocally in default, since it would appear that the only significant Judgment herein is that filed on March 31, and there appears no respect in which that Judgment was not based on the procedures and proofs required in the statute. The required proofs of service and default were indeed in the file at the time of the hearing. The Defendant had not yet appeared. The Court determined upon the hearing that "The Plaintiff by a preponderance of the evidence proved that the Defendant performed an unnecessary hysterectomy, wrongly failed to remove the Plaintiff's entire cervix, and wrongly removed the Plaintiff's right fallopian tube and ovary", thus entertaining and making a finding upon evidence of Defendant's negligence and liability. In view of the steps which both the Parties and the Court did (or did not) take following the admitted date of default, February 9, 2004, there is nothing required that appears missing: there was an application, which if made early nonetheless persisted until timely; all the required proofs were in the file at the time of the hearing and subsequent Judgment; a prima facie case of liability was spread on the record at the hearing. Everything actually required by the relevant parts of CPLR § 3215 was done prior to the entry of the ultimate Judgment and after the default. If the first Judgment was a nullity — and for all it accomplishes it may well have been one even if timely — the second one is in no observable way undermined by that nullity, since the second was properly based on everything required: a continuing application, an unequivocal default, proofs of service, prima facie proof of liability, proof of damages. No notice was required as of the time of the March 31 Judgment because there had never been an appearance. Woodson v. Mendon Leasing Corp. 232 A.D.2d 291, 648 N.Y.S.2d 911 [1st Dept. 1996].
While it is unquestionably the policy of the law to determine cases on the merits, and defaults are frowned upon and should be opened when a reasonable excuse and meritorious defense have been shown, in this case there is no reasonable excuse for the default which, on the contrary, appears to have been intentional and based upon a misguided premise of judgment-proofing. Accordingly, the motion must be denied and the Judgment maintained.