ITALIAN ELEGANT JEWELRY LLC v. Diamond Mine International, Inc., et al., Defendants. (2022)

Order, Supreme Court, New York County (Arthur Engoron, J.), entered on or about November 29, 2021, which, to the extent appealed from, granted defendants’ motion to vacate the default judgment entered against them and denied the motion to dismiss the complaint upon vacatur of the default judgment and for sanctions against plaintiff and its counsel, unanimously modified, on the law, to deny the motion to vacate the default judgment as against defendants Leah Fteha and Joseph Fteha (the Ftehas) and the matter remanded for a traverse hearing to determine whether the Ftehas were properly served pursuant to CPLR 308(4) and for consideration of defendants’ request for sanctions and the Ftehas’ request for dismissal pursuant to CPLR 3211(a)(1) in the first instance, and otherwise affirmed, without costs.

The default judgment was properly vacated as against defendants Diamond Mine International, Inc., Diamond Gem Jewelers Corp., and Bergan Diamond and Jewelry Outlet Inc. (the corporate defendants) based on lack of personal jurisdiction, because there was no evidence that they were ever served with the summons and complaint (see generally CPLR 5015[a][4]).  Contrary to plaintiff's contention, defendants’ counsel did not accept service on their behalf and there is no other indication that they were served.

Plaintiff submitted affidavits of service that constituted prima facie proof of proper service on the Ftehas pursuant to CPLR 308(4) (see Ocwen Loan Servicing, LLC v. Ali, 180 A.D.3d 591, 591, 119 N.Y.S.3d 474 [1st Dept. 2020], lv denied 36 N.Y.3d 1046, 140 N.Y.S.3d 477, 164 N.E.3d 283 [2021];  Eros Intl. PLC v. Mangrove Partners, 191 A.D.3d 464, 464–465, 142 N.Y.S.3d 21 [1st Dept. 2021]).  The Ftehas rebutted the presumption of proper service by averring that service was effectuated at the wrong address (e.g. Chaudry Constr. Corp. v. James G. Kalpakis & Assoc., 60 A.D.3d 544, 545, 875 N.Y.S.2d 78 [1st Dept. 2009]).  The process server's subsequent affidavit did not establish proper service as a matter of law, because that affidavit, among other things, did not specifically confirm that the follow up mailings had been sent to the correct address (see Avakian v. De Los Santos, 183 A.D.2d 687, 688, 583 N.Y.S.2d 275 [2d Dept. 1992]).  Accordingly, a traverse hearing is required to determine whether personal jurisdiction was obtained over the Ftehas via service pursuant to CPLR 308(4).  The Ftehas’ remaining arguments relating to service do not establish that they were entitled to vacatur without a traverse hearing (see Lancaster v. Kindor, 98 A.D.2d 300, 306, 471 N.Y.S.2d 573 [1st Dept. 1984], affd 65 N.Y.2d 804, 493 N.Y.S.2d 127, 482 N.E.2d 923 [1985];  Matter of Pasanella v. Quinn, 126 A.D.3d 504, 505, 5 N.Y.S.3d 413 [1st Dept. 2015];  Bank Leumi Trust Co. of N.Y. v. Katzen, 192 A.D.2d 401, 401, 596 N.Y.S.2d 368 [1st Dept. 1993]).

Because proper service on the Ftehas remains an open issue, dismissal of the complaint as against the Ftehas under CPLR 306–b is not warranted at this juncture.  After remand, and upon the conclusion of the traverse hearing, Supreme Court should consider the Ftehas’ request to dismiss the complaint under CPLR 306–b.  We do not consider the Ftehas’ argument that the complaint should have been dismissed as against the corporate defendants under CPLR 306–b, because the corporate defendants have not appealed from the order for review.

Supreme Court did not consider the portion of defendants’ motion that sought sanctions or dismissal of the complaint as against the Ftehas pursuant to CPLR 3211(a)(1).  Thus, we remand this matter for Supreme Court to consider those requests in the first instance.