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The Second Department Decides “A Simple Question That Has Not Previously Arisen” Regarding Service of Process

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  • Posted on: Feb 4 2022

By Jonathan H. Freiberger

In its December 10, 2021, article entitled: “Service of Process and Personal Jurisdiction,” this Blog discussed the notion of a court’s personal jurisdiction over a defendant and the importance of proper service of process. In today’s article we will discuss Everbank v. Kelly, a mortgage foreclosure action decided on February 2, 2022, by the Appellate Division, Second Department, in which the Court resolved:

a simple question that has not previously arisen: whether an affirmative misrepresentation by a relative of a defendant at a residential address that the address is proper, which is relied upon by a process server, may establish that service was valid, if evidence establishes that the address is not, in fact, the defendant’s actual dwelling place or usual place of abode. We hold that, under the circumstances of this action, service of process upon the defendant at an address that was not actually his dwelling place or usual place of abode was defective, notwithstanding information provided to the process server at the doorstep.

In 2004, James Kelly and his father-in-law, Edward Bressler, executed a promissory note, the repayment obligation for which was secured by a mortgage on certain real property (the “Property”). As is typically the case, the mortgage contained an occupancy rider by which Bressler “expressed his intention to primarily reside at the [Property] within 60 days”.

After a payment default, lender commenced an action to foreclose the mortgage. The process server served the defendants at the Property pursuant to CPLR 308(2) (suitable age and discretion), by delivering copies of the summons and complaint to Crystal Kelly, Bressler’s daughter and James’ wife, who “verified” that Bressler “actually resides at this location.” The requisite follow-up mailing was sent to Bressler at the Property.

Defendants defaulted in appearing and supreme court issued an order of reference. Lender moved for a judgment of foreclosure and sale and, thereafter, Bressler moved to vacate the order of reference (pursuant to CPLR 5015(a)(4)) and to dismiss the complaint for lack of personal jurisdiction (pursuant to CPLR 3211(a)(8)). Bressler supported his motion by: arguing that he resided elsewhere for 40 years and that the Property was not his “dwelling place or usual place of abode”; and, providing supreme court with copies of his driver’s license, numerous bills, an insurance renewal notice and other similar documents. Crystal, in her supporting affidavit, averred, inter alia, that Bressler did not reside at the Property, and that she did not tell the process server that he did.

Supreme court held both motions in abeyance and ordered a hearing to

“determine the validity of service of process on Bressler.” At the hearing, the process server, relying on his affidavit of service, testified that in his conversation with Crystal she “identified [James] as her husband and Bressler as her father, and that each resided at the [P]roperty.” Bressler testified that he lived elsewhere for 40 years and presented documentary evidence to support his testimony. Crystal attended the hearing but did not testify.

Subsequently, supreme court granted lender’s motion to confirm the referee’s report and for a judgment of foreclosure and sale and denied Bressler’s motion and, in so doing, found:

[process server]’s testimony credible, that Crystal … had stated to him that the recipients of process resided at the [P]roperty. The court drew a discretionary negative inference against Bressler from the failure of Crystal … to testify at the hearing, despite the fact that she had been present for it. The court also found that process server acted reasonably in relying upon the representations of Crystal … that Bressler resided at the [P]roperty.

On Bressler’s appeal, the Court reversed the judgment of foreclosure and sale and granted Bressler’s motion to vacate the order of reference and to dismiss the complaint. The Court noted that proper service under CPLR 308(2) requires that the process be served in strict compliance with that rule. The Court noted that the process server’s testimony was consistent with his contemporaneously prepared affidavit of service. The Court deferred “to the credibility findings of the Supreme Court, and [took] no issue with the negative inference that it chose to draw from Crystal[‘s] … failure to testify at the hearing.” (Citation omitted.) The Court also noted the “significant” evidence presented by Bressler demonstrating that he resided for 40 years at a location other than where service of process was purportedly effectuated.

In framing and resolving the issue in the case, the Court stated:

The question raised by this appeal, therefore, is whether [Crystal’s] representation to the process server that her father lived at the service address may override the greater quantum of evidence that he did not, in fact, live there. In other words, may a process server reasonably rely upon the representations of a family member at the service address, that the defendant actually dwells at that address, for service of process to be effectuated there? While the Supreme Court held that there can be such reasonable reliance for service of process to be effective, so as to implicitly excuse service at an incorrect address, we conclude that a representation, or misrepresentation, of a family member does not override the plain language of CPLR 308(2) that service be made at the defendant’s actual “dwelling place or usual place of abode.”

The Court explained the language of CPLR 308(2) and that strict adherence to its

requirements is important. The Court did point out several limited exceptions to “following the precise language of CPLR 308.” These exceptions include, but are not limited to, circumstances: (1) where under the concept of apparent authority, “a recipient of process [at a proper location] represents that he or she is authorized to accept service on behalf of an entity, when in fact such authority is lacking”; (2) when a defendant is estopped from “challenging the location and propriety of service of process [because the] defendant has engaged in affirmative conduct which misleads a party into serving process at an incorrect address”; or, (3) where a defendant “resists service under CPLR 308(1) and (2)”. As to estoppel, and as relates to Everbank, the Court recognized that “[f]or a defendant to be estopped from raising a claim of defective service, the conduct misleading the process server must be the defendant’s conduct, as distinguished from conduct of a third party.” (Citation omitted.) Specifically, the Court noted that Crystal did not misrepresent “‘who’ could accept service of process in the sense of an apparent authority exception to CPLR 308” but, “[c]rediting Burke’s hearing testimony, … Crystal … instead made a representation, or perhaps a misrepresentation, about ‘where’ Bressler resided, which was then relied upon by the process server.” The Court stated that “[e]stoppel does not bar Bressler from arguing that he lived at an address other than the [P]roperty, as the statement relied upon by the process server about where he lived was not uttered by him but by a third person.” (Citations omitted, emphasis in original.)

Crystal’s statement that Bressler lived at the Property, could not overcome the significant evidence to the contrary. Thus, the Court concluded that:

an acceptance of service by a person of suitable age and discretion is invalid if the service address is not, in fact, the defendant’s actual place of business, dwelling place, or usual place of abode. That is exactly what occurred here. The process server must perform a proper inquiry to determine the defendant’s actual place of business, dwelling place, or usual place of abode, which under CPLR 308 must be correct absent very limited exceptions not applicable here. In this case, there is a dispositive distinction between what Crystal … said at the time of the service from what Bressler’s dwelling place apparently was in fact. (Emphasis in original.)

Further, the reasonableness of the process server’s belief based on what Crystal told him “is not relevant to whether the service was at a qualifying location under CPLR 308(2).”

Finally, the Court found that the occupancy rider or the notice provision in the underlying loan documents could not save lender. The stated purpose of the occupancy rider “was to contractually authorize a sale of the [Property] or financial adjustments to the note in the event Bressler were to reside elsewhere.” Moreover, the rider merely expressed Bressler’s future intent to reside at the Property, which is not “tantamount to proof of actually dwelling at the [P]roperty, as intents may be changed and as the occupancy rider envisioned adjustments to the note in the event Bressler were to live elsewhere.” Similarly, the notice provision, requiring notices to be sent to the Property, “pertains to ministerial ‘notices . . . provided for in this Security Instrument,’ which is not a contractual opt-out of the service of process rules of CPLR 308.”

Jonathan H. Freiberger 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.

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