First Department Underscores the Duty to Update the Contact Information of the Agent for Service of Process

• Posted on: Jun 1 2022

By: Jeffrey Haber

Under New York’s Business Corporation Law (“BCL”), the Secretary of State is designated as the “agent of every domestic corporation and every authorized foreign corporation upon whom process against the corporation may be served.”¹ “In addition to such designation of the Secretary of State, every domestic corporation or authorized foreign corporation may designate a registered agent in this state upon whom process against such corporation may be served.”² The BCL defines the term “process” to mean: “judicial process and all orders, demands, notices or other papers required or permitted by law to be personally served on a domestic or foreign corporation, for the purpose of acquiring jurisdiction of such corporation.”³ 

[Ed. Note: BCL § 1301(a) provides that a foreign corporation “shall not do business in this state until it has been authorized to do so.” As part of the registration process, a foreign corporation’s application for authority to do business in New York must include “[a] designation of the secretary of state as its agent upon whom process against it may be served.”⁴] 

The method of service upon a corporate agent is prescribed by BCL § 306. “Service of process on a registered agent may be made in the manner provided by law for the service of a summons, as if the registered agent was a defendant.” In contrast, “[s]ervice of process on the secretary of state as agent of a domestic or authorized foreign corporation” must be made “by personally delivering to and leaving with the secretary of state … duplicate copies of [the] process together with the statutory fee.”⁶ “Service of process on [a] corporation shall be complete when the secretary of state is so served.”⁷ This is so irrespective of whether the process subsequently reaches the corporate defendant.⁸ 

Thus, the BCL contemplates the service of “papers” (BCL § 102(11)) and provides that service on the Secretary of State, as the statutory agent for a corporation, shall be “complete” when “duplicate copies” of the initiatory papers have been personally delivered. There is nothing within this framework that allows the Secretary of State to relax the statutory requirements for service of process or to accept service on behalf of a corporation by a method other than the one established in BCL § 306(b).⁹ 

Against this backdrop, we examine, Majada Inc. v. E&A RE Capital Corp., 2022 N.Y. Slip Op. 03476 (1st Dept. May 31, 2022) (here), a case in which defendant failed to update the corporation’s contact information with the Department of State and was held to be in default in answering the complaint as a consequence of that failure.

Majada arose as a result of a dispute between the parties regarding ownership of real property after defendant, Giselle Gilman, allegedly transferred the same property on different dates to plaintiff and subsequently to co-defendant, E&A RE Capital Corp. (“E&A”).

Plaintiff served E&A on August 15, 2019, through the Secretary of State. E&A filed an answer on September 19, 2019, three days after the date on which a response or answer was due. E&A moved to compel plaintiff to accept its answer, arguing that the delay in answering was only three days, the default was not willful, defendant possessed meritorious defenses, and there was no evidence of prejudice to plaintiff. Among other arguments, E&A claimed that it “was unaware of the instant action” because, inter alia, the address on which the Secretary of State served the complaint was neither the address at which Majada’s principal was residing nor the address that constituted the company’s principal place of business. Majada’s principal “believed that the DOS address was updated,” and averred that he “did not willfully attempt to conceal [his] address”.

The motion court granted the portion of E&A’s cross-motion seeking to compel the acceptance of its answer. Plaintiff appealed. The Appellate Division, First Department reversed.

The Court held that “Supreme Court should have denied E&A’s cross motion insofar as it sought to compel plaintiff to accept its untimely answer, as E&A failed to show a reasonable excuse for its default in serving the answer.”¹⁰  The Court rejected E&A’s assertion that “it did not receive the summons and complaint, which had been served on the Secretary of State, because it had failed to keep its address updated.”¹¹ Under New York law, said the Court, “where a defendant does not receive service of process because it failed to keep a current address on file with the Secretary of State, courts will not find a reasonable excuse for a default.”¹² 

Takeaway

As discussed, under the BCL, the Secretary of State is designated as the “agent of every domestic corporation and every authorized foreign corporation upon whom process against the corporation may be served.”¹³ The rules governing designation and service of process are rigidly applied. There is nothing within the BCL that allows the Secretary of State to relax the statutory requirements for service of process. 

For this process to work, corporations must keep their contact information current with the Department of State. Too often, corporations, especially the small, privately held ones, forget to update the information on file with the Department of State. When the corporation is sued, as in Majada, the failure to update the information can have serious consequences. Indeed, as E&A learned in Majada, a corporate defendant’s failure to keep a current address on file with the Secretary of State is not a reasonable excuse for its delay in appearing and answering a complaint.

Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes and is not intended to be and should not be taken as legal advice.

References

1. BCL § 304(a)(2).
2. BCL § 305(a).
3. BCL § 102(11).
4. BCL § 1304(a)(6).
5. BCL § 306(a).
6. BCL § 306(b).
7. Id.
8. See, e.g., Micarelli v. Regal Apparel, 52 A.D.2d 524 (1st Dept. 1976).
9. See Cedar Run Homeowners’ Assn., Inc. v. Adirondack Dev. Grp., LLC, 173 A.D.3d 1330, 1330-1331 (3d Dept. 2019).
10. Slip Op. at *1 (citing, CPLR 3012(d), and Nouveau El. Indus., Inc. v. Tracey Towers Hous. Co., 95 A.D.3d 616, 618 (1st Dept. 2012)). A corporate defendant’s failure to receive copies of process served upon the Secretary of State due to a breach of its obligation to keep a current address on file with the Secretary of State does not constitute a reasonable excuse for its delay in appearing and answering a complaint. Conte Cadillac v. C.A.R.S. Purchasing Serv., 126 A.D.2d 621, 622 (2d Dept. 1987).
11. Id.
12. Id. (citing., NYCTL 1999-1 Trust v. 114 Tenth Ave. Assoc., Inc., 44 A.D.3d 576, 577 (1st Dept. 2007), appeal dismissed, 10 N.Y.3d 757 (2008), cert. denied, 555 U.S. 970 (2008); Associated Imports v. Amiel Publ., 168 A.D.2d 354, 354 (1st Dept. 1990), lv. dismissed, 77 N.Y.2d 873 (1991)).
13. BCL § 304(a)(2).