Deutsche Bank Nat'l Trust Co. v. Dacosta

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Judges

William F. Mastro

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Smart Summary

Factual and Procedural Background

In May 2005, Rosemarie T. DaCosta and Ryan DaCosta executed an adjustable rate note to borrow $328,000 from Indymac Bank, FSB, secured by a mortgage on their property in Central Islip. The DaCostas allegedly defaulted on payments starting March 1, 2007. The note and mortgage were assigned to the plaintiff, Deutsche Bank National Trust Company, which commenced a foreclosure action against the DaCostas among others. The DaCostas did not respond or appear, and a judgment of foreclosure and sale was entered on January 7, 2009, upon their default. Subsequently, the DaCostas moved to vacate the judgment and dismiss the complaint on various procedural grounds. The Supreme Court granted their motion to vacate and dismiss in part. The plaintiff appealed from that portion of the order.

Legal Issues Presented

Whether the defendants, Rosemarie T. DaCosta and Ryan DaCosta, were properly served with process pursuant to CPLR 308(2).
Whether the judgment of foreclosure and sale entered upon the defendants' default should be vacated pursuant to CPLR 317 and CPLR 5015(a)(4).
Whether the complaint should be dismissed as to the defendants pursuant to CPLR 3211(a)(3).

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Wassertheil v. Elburg, LLC, 94 A.D.3d 753, 941 N.Y.S.2d 679	Requirement that a defendant not served pursuant to CPLR 308(1) must show lack of actual notice and a potentially meritorious defense to vacate a default under CPLR 317.	Used to explain the standard for vacating a default when service is challenged and that mere denial of receipt is insufficient to rebut service presumption.
Matter of Rockland Bakery, Inc. v. B.M. Baking Co., Inc., 83 A.D.3d 1080, 923 N.Y.S.2d 572	Same as above; addresses the sufficiency of denial of receipt to rebut presumption of service.	Supported the court’s view that a sworn denial with specific facts is needed to rebut service presumption and trigger an evidentiary hearing.
Irwin Mtge. Corp. v. Devis, 72 A.D.3d 743, 898 N.Y.S.2d 854	Presumption of service established by process server’s affidavit and the need for more than mere denial to rebut it.	Referenced as part of the body of case law requiring evidentiary hearing when service is contested with specific factual denials.
Beneficial Homeowner Serv. Corp. v. Girault, 60 A.D.3d 984, 875 N.Y.S.2d 815	Similar principle regarding rebutting presumption of proper service.	Used to reinforce the legal standard for challenging service of process.
Hamlet on Olde Oyster Bay Homeowners Assn., Inc. v. Ellner, 57 A.D.3d 732, 869 N.Y.S.2d 591	Presumption of service and conditions for vacating a default judgment.	Supported the court’s reasoning on the necessity of an evidentiary hearing upon a sworn denial.
Mortgage Elec. Registration Sys., Inc. v. Schotter, 50 A.D.3d 983, 857 N.Y.S.2d 592	Standards for vacating a default judgment based on service challenges.	Part of the jurisprudence cited to justify remanding for a hearing on service.
Wells Fargo Bank, N.A. v. Christie, 83 A.D.3d 824, 921 N.Y.S.2d 127	A sworn denial of service containing specific facts generally rebuts the presumption of proper service and necessitates an evidentiary hearing.	Directly cited to support the need for a hearing on whether service was properly effected.

Court's Reasoning and Analysis

The court analyzed the defendants' motion to vacate the default judgment entered upon their failure to appear or answer. Under CPLR 317, if a defendant has not been served pursuant to CPLR 308(1), they are not required to show a reasonable excuse for default but must demonstrate lack of actual notice in time to defend and a potentially meritorious defense. The court noted that a mere denial of receipt of the summons and complaint is insufficient to rebut the presumption of proper service established by the process server’s affidavit. However, a sworn denial containing specific factual details generally rebuts that presumption and requires an evidentiary hearing.

Here, the DaCostas submitted a sworn denial of service with factual recitations sufficient to trigger the need for a hearing. The Supreme Court erred in granting the motion to vacate without first conducting such a hearing to determine whether service was properly effected under CPLR 308(2). Therefore, the Appellate Division reversed the order insofar as appealed from and remitted the matter for a hearing on service and a new determination of the defendants’ motion to vacate and dismiss.

Holding and Implications

The order of the Supreme Court is reversed insofar as appealed from. The case is remitted to the Supreme Court, Suffolk County, for a hearing to determine whether the defendants were properly served with process pursuant to CPLR 308(2), and thereafter for a new determination of their motion to vacate the judgment of foreclosure and sale and to dismiss the complaint.

The direct consequence is that the defendants’ motion to vacate the default judgment and dismiss the complaint has not been finally decided and must be reconsidered after the hearing on service. No new legal precedent is established by this decision.

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DEUTSCHE BANK NATIONAL TRUST COMPANY, etc., appellant, v. Rosemarie T. DACOSTA, et al., respondents, et al., defendants.

WILLIAM F. MASTRO

Rosicki, Rosicki & Associates, P.C., Plainview, N.Y. (Owen M. Robinson of counsel), for appellant.
WILLIAM F. MASTRO, A.P.J., DANIEL D. ANGIOLILLO, LEONARD B. AUSTIN, and SANDRA L. SGROI, JJ.

In an action to foreclose a mortgage, the plaintiff appeals, as limited by its brief, from so much of an order of the Supreme Court, Suffolk County (Blydenburgh, J.), dated August 4, 2010, as granted those branches of the motion of the defendants Rosemarie T. DaCosta and Ryan DaCosta which were pursuant to CPLR 317 and 5015(a)(4) to vacate a judgment of foreclosure and sale of the same court dated January 7, 2009, entered upon their default, and, in effect, pursuant to CPLR 3211(a)(3) to dismiss the complaint insofar as asserted against them.

ORDERED that the order is reversed insofar as appealed from, on the law, without costs or disbursements, and the matter is remitted to the Supreme Court, Suffolk County, for a hearing on the issue of whether the defendants Rosemarie T. DaCosta and Ryan DaCosta were properly served with process pursuant to CPLR 308(2), and a new determination thereafter of those branches of their motion which were pursuant to CPLR 317 and CPLR 5015(a)(4) to vacate the judgment of foreclosure and sale, and, in effect, pursuant to CPLR 3211(a)(3) to dismiss the complaint insofar as asserted against those defendants.

In May 2005 the defendants Rosemarie T. DaCosta and Ryan DaCosta (hereinafter together the DaCostas) executed an adjustable rate note to borrow the sum of $328,000 from Indymac Bank, FSB. The note was secured by a mortgage on the Dacostas' property located in Central Islip. The DaCostas allegedly defaulted in making the monthly installment payment due on March 1, 2007, and each monthly installment due thereafter. Pursuant to an assignment, Mortgage Electronic Registration Systems, Inc., as nominee for Indymac Bank, FSB, assigned the note and mortgage to the plaintiff. The plaintiff commenced this action against, among others, the DaCostas, to foreclose the mortgage.

The DaCostas did not answer, appear, or timely move to dismiss the complaint. In an order dated January 7, 2009, the Supreme Court granted the plaintiff's motion for the entry of a judgment of foreclosure and sale upon the DaCostas' default.

The DaCostas moved, inter alia, pursuant to CPLR 317, 5015(a)(3), and 5015(a)(4) to vacate the judgment of foreclosure and sale, and, in effect, pursuant to CPLR 3211(a)(3) to dismiss the complaint insofar as asserted against them. The Supreme Court granted those branches of the motion which were pursuant to CPLR 317, 5015(a)(4), and, in effect, 3211(a)(3). The plaintiff appeals.

To vacate a default pursuant to CPLR 317, a defendant who has not been served pursuant to CPLR 308(1) does not have to establish a reasonable excuse for his or her default, but must show that he or she did not actually receive notice of the action in time to defend it, and must further show that he or she has a potentially meritorious defense ( see Wassertheil v. Elburg, LLC, 94 A.D.3d 753, 753, 941 N.Y.S.2d 679;Matter of Rockland Bakery, Inc. v. B.M. Baking Co., Inc., 83 A.D.3d 1080, 1081, 923 N.Y.S.2d 572). The mere denial of the receipt of the summons and complaint is insufficient to rebut the presumption of service established by a process server's affidavit ( see Wassertheil v. Elburg, LLC, 94 A.D.3d at 753, 941 N.Y.S.2d 679;Rockland Bakery, Inc. v. B.M. Baking Co., Inc., 83 A.D.3d at 1081–1082, 923 N.Y.S.2d 572;Irwin Mtge. Corp. v. Devis, 72 A.D.3d 743, 898 N.Y.S.2d 854;Beneficial Homeowner Serv. Corp. v. Girault, 60 A.D.3d 984, 984, 875 N.Y.S.2d 815;Hamlet on Olde Oyster Bay Homeowners Assn., Inc. v. Ellner, 57 A.D.3d 732, 732, 869 N.Y.S.2d 591;Mortgage Elec. Registration Sys., Inc. v. Schotter, 50 A.D.3d 983, 857 N.Y.S.2d 592). However, a sworn denial of service containing specific facts generally rebuts the presumption of proper service established by the process server's affidavit, and necessitates an evidentiary hearing ( see Wells Fargo Bank, N.A. v. Christie, 83 A.D.3d 824, 825, 921 N.Y.S.2d 127). Here, in light of the factual recitation in the DaCostas' sworn denial of service, the Supreme Court should have conducted a hearing to determine whether service of process was properly effected.

Accordingly, we reverse the order insofar as appealed from, and remit the matter to the Supreme Court, Suffolk County, to conduct a hearing to determine whether service of process was properly effected upon the DaCostas, and for a new determination thereafter of those branches of the DaCostas' motion which were pursuant to CPLR 317 and 5015(a)(4) to vacate the judgment of foreclosure and, in effect, pursuant to CPLR 3211(a)(3) to dismiss the complaint insofar as asserted against them.

The plaintiff's remaining contentions either are without merit or need not be reached in light of our determination.