Eugene Di Lorenzo, Inc. v. A.C. Dutton Lumber Co., Inc.

Eugene Di Lorenzo, Inc. (Di Lorenzo) (plaintiff) sued Phil-Mar Lumber Corporation (Phil-Mar) and A.C. Dutton Lumber Company, Inc. (Dutton) (defendants) for breach of contract. Di Lorenzo served Phil-Mar with the summons and complaint by delivering the papers to the New York secretary of state (secretary), who sent a copy to Phil-Mar at the address Phil-Mar provided to the secretary for service purposes. However, Phil-Mar had moved without notifying the secretary, and the post office returned the papers to the secretary with a notation that the mail was not deliverable or forwardable. Di Lorenzo obtained a default judgment against Phil-Mar after Phil-Mar did not answer the complaint. Soon thereafter, Di Lorenzo sent a restraining notice to Phil-Mar’s bank in connection with the default judgment. Phil-Mar promptly moved to vacate the default judgment, alleging that it discovered Di Lorenzo’s suit when it discovered the restraining notice. Di Lorenzo responded, among other things, that Phil-Mar intentionally did not notify the secretary about its new address in an effort to defraud creditors. Phil-Mar denied knowing that its address with the secretary was incorrect until shortly before the relevant events. Phil-Mar based its motion to vacate on Civil Practice Law and Rules (CPLR) § 5015(a), pursuant to which Phil-Mar was required to provide a reasonable excuse for not promptly answering the complaint and to show it had a meritorious defense. Phil-Mar did not rely on CPLR § 317, which allowed a defendant who was served with a summons other than via personal delivery to defend the action within one year after learning of entry of judgment by showing that the defendant did not personally receive the summons in time to defend the action and by showing that the defendant had a meritorious defense. The supreme court granted Phil-Mar’s motion to vacate but did so pursuant to both §§ 317 and 5015(a) despite its recognition that Phil-Mar did not rely on § 317. The appellate division reversed, holding that Phil-Mar did not satisfy § 5015(a) because Phil-Mar was responsible for not receiving the notice and summons due to its stale address with the secretary. The appellate division did not consider § 317, apparently based on its view that a defendant who cited only § 5015(a) could not obtain relief under § 317. Phil-Mar appealed.