EXCELSIA LEATHERWARE COMPANY v. HOROWITZ LLC (2022)

In this action for fraud and breach of contract, plaintiff Excelsia Leatherware Company (“Excelsia”) moves pursuant to CPLR 3215 for leave to enter a default judgment against defendants Kenneth Horowitz and Bag Studio, LLC. Defendants have not submitted any opposition.

Background

Excelsia Leatherware Company (“Excelsia”) is a manufacturer of leather goods. Excelsia began exporting goods to defendant Bag Studio (“Bag Studio”) in 2016. Sometime in 2018, Bag Studio refused to timely pay for goods shipped by Excelsia. Excelsia regularly communicated with defendant, Kenneth Horowitz (“Horowitz”) regarding shipments and payment for Excelsia goods. Horowitz allegedly promised payment to Excelsia and allegedly made false statements to induce Excelsia to make and ship merchandise to Bag Studio.

Excelsia filed a summons and complaint against Bag Studio for breach of contract, fraud, conversion, and unjust enrichment. Excelsia sought $2,761,213.55 as damages for goods received by Bag Studio, but not paid for. As against Horowitz, Excelsia asserted claims for fraud seeking $101,932.39 in damages for allegedly fraudulent fees charged by Horowitz to Excelsia (NYSCEF doc. no. 1). Defendants, by counsel, filed a notice of motion to dismiss the complaint pursuant to CPLR 3211 (NYSCEF doc. no. 3).

On December 12, 2019, prior to the court's decision on the motion to dismiss, counsel for defendants moved by order to show cause to be relieved (NYSCEF doc. no. 28). Prior counsel for defendants served notice of its intention to be relieved (NYSCEF doc. nos. 27, 29). On January 9, 2020, this court (Sherwood, J.S.C.) granted counsel's application and ordered defendants to appoint a substitute attorney within 30 days of the mailing of said order (NYSCEF doc. no. 31). The court adjourned the preliminary conference and oral argument on the motion to provide time for defendants to appear by counsel. Prior counsel for defendants served both parties with notice of this court's order, relieving them from representation (NYSCEF doc. nos. 32-34). Defendants failed to appoint a substitute attorney and did not appear for oral argument or the preliminary conference.

By order dated November 30, 2020, this court (Sherwood, J.S.C.) granted, in part, defendants’ motion to dismiss. Justice Sherwood dismissed all the causes of action asserted in the complaint except the second cause of action for fraud as against defendant Horowitz, and the fifth cause of action for breach of contract as against Bag Studio (NYSCEF doc. no. 37). Excelsia served Horowitz with a copy of the decision, with notice of entry, by overnight U.S. priority mail on December 1, 2020 (NYSCEF doc. no. 39). Excelsia also served a copy of the decision and order on Horowitz via electronic mail on December 10, 2020 (NYSCEF doc. no. 45, ex. 2). Horowitz responded to plaintiff's email acknowledging receipt on December 14, 2020 (id.).

Excelsia served Bag Studio with a copy of the decision with notice of entry by U.S. priority mail on December 1, 2020 (NYSCEF doc. no. 40). Excelsia also served Bag Studio via the Secretary of State on December 29, 2020 (NYSCEF doc. no. 42).

Pursuant to CPLR 3211(f), defendants were required to answer the complaint within ten days after service of notice of entry of this courts’ order. Defendants did not serve an answer to the second or fifth causes of action in the complaint and have not appointed a substitute attorney.

Plaintiff now moves for a default judgment seeking $2,761,213.55 against defendant Bag Studio LLC, and $101,932.39 against defendant Kenneth Horowitz.

Discussion

On an application for a default judgment, pursuant to CPLR 3215, the plaintiff must submit “proof of service of the summons and the complaint[,] proof of the facts constituting the claim, [and] the default” (CPLR 3215 [f]). “[B]y defaulting, a defendant admits all traversable allegations contained in the complaint, and thus concedes liability, although not damages” (HF Mgt. Servs. LLC v Dependable Care, LLC, 198 AD3d 457 [1st Dept 2021]; Petty v Law Off. of Robert P. Santoriella, P.C., 200 AD3d 621, 621 [1st Dept 2021] [while plaintiff must submit proof of prima facie viability of its claims, “the standard of proof is minimal”] [internal quotation marks and citation omitted]). Plaintiff has met this burden.

Proof of Service

Defendants, by counsel, waived service of the summons and complaint by stipulation dated June 22, 2019 (NYSCEF doc. no. 2). Defendants dispensed with personal service, accepted service of the complaint, and waived jurisdictional defendants and all objections to service of process (id.). Thereafter, defendants’ counsel moved to withdraw its representation. Both parties were served on January 10, 2020, with notice of entry and a copy of the decision and order on the motion to withdraw (NYSCEF doc. no. 32). Due to the notice of withdrawal, plaintiff served defendants directly with a copy of the summons and complaint. An affidavit by Cagla Yetis, sworn January 17, 2021 (NYSCEF doc. no. 46), states that Yetis served copies of the summons and complaint upon Horowitz and Bag Studio at their respective last known addresses. The affidavit avers that service occurred on January 14, 2020 (NYSCEF doc. no. 47). Defendants were also served with notice of the court's decision and order denying, in part their motion to dismiss (see, NYSCEF doc. nos. 39-40, 42, and 45 ex. 2).

Affidavits of service were filed showing Bag Studio was served with both the order granting its counsel's withdrawal, and this court's order denying dismissal of plaintiff's claim as asserted against it. Bag Studio was served with process by service on the secretary of state and at its last known address (NYSCEF doc. nos. 33, 40, 42). Such service is in conformity with CPLR 311(a)(1) and Business Corporation Law § 306(b).

Affidavits of service were filed showing Horowitz was served with the order granting his counsel's withdrawal, and this court's order denying dismissal of plaintiff's claim as asserted against him, via email and his last known address (NYSCEF doc nos. 33, 39, 45, ex. 2). Service at Horowitz’ last known address was in conformity with CPLR § 308(2).

Merits

As to the merits, in an action for goods sold and delivered, a plaintiff must submit proof of invoices and other documentary evidence that defendant placed orders for the goods on the dates at issue, the goods were delivered to defendant, defendant accepted delivery, and did not object to the product or invoices (A & W Egg Co., Inc. v Tufo's Wholesale Dairy, Inc., 169 AD3d 616, 617 [1st Dept 2019]). The plaintiff must also provide a “sufficient foundation to consider the invoices and most of the other documents submitted as business records” (id.; CPLR 4518[a]). “A proper foundation for the admission of a business record must be provided by someone with personal knowledge of the maker's business practices and procedures” (Autovest, LLC v Cassamajor, 195 AD3d 672, 673 [2d Dept 2021] [internal quotation marks and citation omitted]).

Here, Excelsia demonstrated the merits of its claims by affidavit from its owner, Ying Kit Mak (NYSCEF doc. no. 44). Mak attests that Excelsia is a leather goods producer based in Hong Kong, China (id. at para 8). Mak affirms that, on or about December 20, 2016, Excelsia exported goods to Bag Studio valued at $42,479 (id. at para 10). Bag Studio paid for this shipment of goods in full, and Excelsia continued to manufacture for, and ship goods to Bag Studio, and received prompt payment. Mak states that, around February 2018, Bag Studio failed to timely pay for goods shipped by Excelsia. Bag Studio continued to promise payments through communications and emails from Horowitz. Excelsia rendered multiple invoices for goods delivered and received by Bag Studio, and, according to Mak, to date, Bag Studio owes Excelsia $2,761,216.55 for good shipped to and received by Bag Studio (id. at pg. 3).

At that same time, Mak attests that Horowitz fraudulently induced Excelsia to pay fees and commissions to him personally. Mak claims that Horowitz insisted on this payment as an administrative fee required to continue the business relationship (id. at pg. 4). Mak's statement is in compliance with CPLR § 2106(b) and is sufficient proof of the goods sold and delivered and of an account stated.

Accordingly, it is

ORDERED that the motion brought by plaintiff Excelsia Leatherware Company, for default judgment against defendants Kenneth Horowitz and Bag Studio, LLC (motion sequence no. 003) is granted, without opposition; and it is further

ORDERED that the clerk of the court is directed to enter judgment in favor of plaintiff Excelsia and against defendant Kenneth Horowitz in the principal sum of $101,932.39, together with interest at the statutory rate from the date of entry of this judgment and thereafter, together with costs and disbursements as taxed by the Clerk upon the submission of an appropriate bill of costs; and it is further

ORDERED that the clerk of the court is directed to enter default judgment in favor of plaintiff Excelsia and against defendant Bag Studio in the principal sum of $2,761,216.55, together with interest at the statutory rate from the date of entry of this judgment and thereafter, together with costs and disbursements as taxed by the Clerk upon the submission of an appropriate bill of costs.

This constitutes the decision and order of the court.

Robert R. Reed, J.