SABO v. EISENBERG (2025)

DECISION & ORDER

In an action, inter alia, to recover damages for fraud, the plaintiffs appeal, and the defendants cross-appeal, from an order of the Supreme Court, Rockland County (Rolf M. Thorsen, J.), dated January 9, 2024.  The order, insofar as appealed from, granted those branches of the defendants’ motion which were pursuant to CPLR 5015(a) to vacate so much of an order of the same court dated June 13, 2023, as granted those branches of the plaintiffs’ motion which were for leave to enter a default judgment against the defendants Sol Eisenberg and Moshe Eisenberg and so much of a judgment of the same court dated July 7, 2023, as is in favor of the plaintiffs and against those defendants.  The order, insofar as cross-appealed from, denied those branches of the defendants’ motion which were pursuant to CPLR 5015(a) to vacate so much of the order dated June 13, 2023, as granted those branches of the plaintiffs’ motion which were for leave to enter a default judgment against the defendants Middletown North Dev., LLC, 48 North Realty 2019, LLC, and Valley View Equities Corp. and so much of the judgment dated July 7, 2023, as is in favor of the plaintiffs and against those defendants.

ORDERED that the order dated January 9, 2024, is reversed insofar as appealed from, on the law and the facts, and those branches of the defendants’ motion which were pursuant to CPLR 5015(a) to vacate so much of the order dated June 13, 2023, as granted those branches of the plaintiffs’ motion which were for leave to enter a default judgment against the defendants Sol Eisenberg and Moshe Eisenberg and so much of the judgment dated July 7, 2023, as is in favor of the plaintiffs and against those defendants, is denied;  and it is further,

ORDERED that the order dated January 9, 2024, is affirmed insofar as cross-appealed from;  and it is further,

ORDERED that one bill of costs is awarded to the plaintiffs.

In August 2022, the plaintiffs commenced this action against the defendants, inter alia, to recover damages for fraud, and although properly served, the defendants failed to appear or answer the complaint.  In an order dated June 13, 2023, the Supreme Court granted the plaintiffs’ motion for leave to enter a default judgment against the defendants (hereinafter the default judgment order).  A judgment dated July 7, 2023, was entered in favor of the plaintiffs and against the defendants (hereinafter the judgment).

In December 2023, the defendants moved, among other things, to vacate the default judgment order and the judgment.  In an order dated January 9, 2024, the Supreme Court granted those branches of the defendants’ motion which were to vacate so much of the default judgment order as granted those branches of the plaintiffs’ motion which were for leave to enter a default judgment against the defendants Sol Eisenberg and Moshe Eisenberg (hereinafter together the Eisenbergs) and so much of the judgment as is in favor of the plaintiffs and against the Eisenbergs, and denied those branches of the defendants’ motion which were to vacate so much of the default judgment order as granted those branches of the plaintiffs’ motion which were for leave to enter a default judgment against the defendants Middletown North Dev., LLC, 48 North Realty 2019, LLC, and Valley View Equities Corp. (hereinafter collectively the corporate defendants) and so much of the judgment as is in favor of the plaintiffs and against the corporate defendants.  The plaintiffs appeal, and the defendants cross-appeal.

“[A] defendant seeking to vacate a default in appearing or answering must provide a reasonable excuse for the default and demonstrate a potentially meritorious defense to the action” (Bank of N.Y. Mellon v. Genova, 159 A.D.3d 1009, 1010, 74 N.Y.S.3d 64 [internal quotation marks omitted];  see McCarey v. Offshore Trophy Room, Inc., 223 A.D.3d 893, 893, 202 N.Y.S.3d 459).  “The determination of what constitutes a reasonable excuse lies within the Supreme Court's discretion” (Davis v. Durand, 227 A.D.3d 774, 776, 211 N.Y.S.3d 182 [internal quotation marks omitted];  see Delucia v. Mar Lbr. Co., Inc., 210 A.D.3d 636, 637, 177 N.Y.S.3d 669).  “Where the defendant fails to demonstrate a reasonable excuse for the default, the court need not consider whether a potentially meritorious defense was offered” (Windward Bora, LLC v. Lodico, 206 A.D.3d 1038, 1039, 168 N.Y.S.3d 887 [internal quotation marks omitted];  see Cartessa Aesthetics, LLC v. Demko, 217 A.D.3d 821, 822, 191 N.Y.S.3d 494).

Here, the Supreme Court should have denied those branches of the defendants’ motion which were to vacate so much of the default judgment order as granted those branches of the plaintiffs’ motion which were for leave to enter a default judgment against the Eisenbergs and so much of the judgment as is in favor of the plaintiffs and against the Eisenbergs.  The Eisenbergs’ alleged mistaken belief that the summons and complaint in this action pertained to a prior action does not constitute a reasonable excuse for their default under the circumstances (see Wells Fargo Bank, N.A. v. Lewis, 232 A.D.3d 649, 651, 221 N.Y.S.3d 195;  Insiders Success Ventures, LLC v. Onewest Bank, FSB, 187 A.D.3d 866, 867, 133 N.Y.S.3d 635).  Furthermore, Sol Eisenberg's unsubstantiated claims that he had moved out of the country and was no longer involved in the day-to-day operations of a business where service of process was effected does not constitute a reasonable excuse under the circumstances (see Williamson v. Marlou Cab Corp., 129 A.D.3d 711, 713, 9 N.Y.S.3d 410;  Tribeca Lending Corp. v. Crawford, 79 A.D.3d 1018, 1019, 916 N.Y.S.2d 116).

In view of the absence of a reasonable excuse, we need not consider whether the Eisenbergs demonstrated a potentially meritorious defense to the action (see Wells Fargo Bank, N.A. v. Lewis, 232 A.D.3d at 651, 221 N.Y.S.3d 195;  Kuznetsova v. Dart Seasonal Prods., Inc., 226 A.D.3d 763, 764, 208 N.Y.S.3d 702).  For the same reasons, the Supreme Court properly denied those branches of the defendants’ motion which were to vacate so much of the default judgment order as granted those branches of the plaintiffs’ motion which were for leave to enter a default judgment against the corporate defendants and so much of the judgment as is in favor of the plaintiffs and against the corporate defendants.

“CPLR 5015(a)(3) permits a court to vacate a judgment or order upon the ground of fraud, misrepresentation, or other misconduct of an adverse party” (Heitner v. Capital One, N.A., 226 A.D.3d 979, 981, 212 N.Y.S.3d 102;  see Christiana Trust v. McCobb, 187 A.D.3d 981, 982, 131 N.Y.S.3d 243).  “A defendant seeking to vacate a default pursuant to CPLR 5015(a)(3) based on intrinsic fraud must establish a reasonable excuse for the default and a potentially meritorious defense to the action” (Bank of N.Y., N.A. v. Scarso, 233 A.D.3d 739, 740, 224 N.Y.S.3d 433 [internal quotation marks omitted]).  Intrinsic fraud includes “presenting false statements or information to a court” (id. at 740, 224 N.Y.S.3d 433 [internal quotation marks omitted]).  Relatedly, the omission of material information from materials presented to the court during the course of litigation generally constitutes intrinsic fraud (see id.;  HSBC Bank USA N.A. v. Kantor, 215 A.D.3d 643, 645, 187 N.Y.S.3d 267).  By contrast, extrinsic fraud prevents a defendant from fully and fairly litigating the action by “some device, trick, or deceit that led him or her to believe that he or she need not defend th[e] action” (US Bank N.A. v. Nunez, 208 A.D.3d 711, 713, 173 N.Y.S.3d 627 [alterations and internal quotation marks omitted]).

Here, the defendants’ allegation that the plaintiffs improperly failed to disclose the existence of a prior action between the parties concerning the same subject matter was an allegation of intrinsic fraud (see Bank of N.Y., N.A. v. Scarso, 233 A.D.3d at 740–741, 224 N.Y.S.3d 433;  Wells Fargo Bank, N.A. v. Plaut, 206 A.D.3d 953, 955, 171 N.Y.S.3d 143).  Since the defendants failed to establish a reasonable excuse for their default, they were not entitled to vacatur of the default judgment order and the judgment pursuant to CPLR 5015(a)(3) (see Bank of N.Y., N.A. v. Scarso, 233 A.D.3d at 741, 224 N.Y.S.3d 433;  Wells Fargo Bank, N.A. v. Plaut, 206 A.D.3d at 955, 171 N.Y.S.3d 143).

In light of our determination, we need not reach the parties’ remaining contentions.

DUFFY, J.P., BRATHWAITE NELSON, WARHIT and TAYLOR, JJ., concur.