Supreme Court, Queens County, January 4, 2019

Law Offices of Xian Feng Zou, Flushing (William X. Zou of counsel), for Xi Hui Wu, defendant.

Law Offices of Vincent S. Wong, New York City (Vincent S. Wong of counsel), for plaintiffs.

Defendant Xi Hui Wu's motion, by order to show cause, is granted to the extent discussed in this order.

This case involves both index No. 708185/2015 (action No. 1) and index No. 6162/2015 (action No. 2), which is currently pending before this court. The two attorneys representing plaintiffs, Choi Yim Chi and Xiu Qin Lin, and defendant, Wu, have been retained to represent their respective clients on both cases.

As stated cogently in the reply affidavit of counsel for defendant Wu, both Wu and his legal entity of 9008 Queens Blvd Loft LLC paid the sum of $420,000 to the attorney representing plaintiffs Chi and Xiu Qin Lin, based on the understanding that these two plaintiffs would share the money with all the plaintiffs herein. Of the sum of $420,000, $210,000 was paid in bank checks and $210,000 was in the form of an assignment of mortgage and note. Thereafter, [*2]a stipulation of discontinuance was filed by the plaintiffs and Wu on December 5, 2016.^[FN1]

Contrary to Wu's expectations, Chi subsequently commenced action No. 2, a lawsuit directly related to the earlier action. Chi next obtained a default judgment against Wu from this court in a decision and order dated November 29, 2016. Based on that default judgment, Chi was issued a money judgment by the County Clerk of Queens County against defendant Wu in the amount of $431,903.85.

In the present order to show cause, Wu moves for a variety of relief, including dismissing the action based on res judicata,{**63 Misc 3d at 356} collateral estoppel and improper service, and vacating the default judgment obtained under the current index number.^[FN2]

The general law on vacating a default judgment is well-settled. A defendant seeking to vacate a judgment entered upon his default in appearing and for leave to serve a late answer must demonstrate both a reasonable excuse for the default and the existence of a potentially meritorious defense to the action. (See CPLR 5015 [a] [1]; Dimopoulos v Caposella, 118 AD3d 739, 740 [2d Dept 2014].) The application normally must be "made within one year after service of a copy of the judgment or order with written notice of its entry upon the moving party." (CPLR 5015 [a] [1]; Chase Home Fin., LLC v Weinfeld, 159 AD3d 867 [2d Dept 2018].) Plaintiffs, however, do not contend that the motion is untimely within the meaning of the law. Instead, they claim that Wu has failed to establish a reasonable excuse for the default and the existence of a meritorious defense to the action.

Wu's principal argument in support of his motion to vacate the default judgment is that he was not properly served in this case. Plaintiffs did not submit any affidavits in opposition to defendant Wu's order to show cause. Instead, their opposition consisted solely of a memorandum of law. The papers and court documents filed in this case reveal that the summons was not actually served on defendant Wu pursuant to section 308 (1) of the Civil Practice Law and Rules. Instead, jurisdiction was allegedly obtained over Wu when, on May 26, 2015, the process server left the papers for summary judgment in lieu of complaint with defendant Wu's daughter, T.W.^[FN3] (See CPLR 308 [2].) As revealed by the copy of her passport, which was presented as an exhibit by the defendant, T.W. was born on xx/xx/xxxx. Accordingly, at the time of the alleged service, she was 13 years old. Given that sensitive court documents were served on a 13-year-old youth in a case that defendant Wu had a good faith basis for believing had been resolved by a settlement in the amount of $420,000—$210,000 of which was paid in bank checks—the court finds that this defendant had a reasonable excuse for not appearing in this action.

Equally important, the court finds that Wu has demonstrated the existence of a potentially meritorious defense to this action.{**63 Misc 3d at 357} He tendered $420,000—an obviously significant [*3]sum—in the obvious expectation that this amount would be distributed to settle the case and extinguish all claims. Contrary to Wu's reasonably based belief that the legal dispute between the plaintiffs and him had finally ended, he was subjected to further litigations by the plaintiffs, all in an effort to procure further sums based on the same transaction. Wu, through ample evidence, including cancelled checks, demonstrated that he made all the payments required of him of the $420,000 amount. In opposition, neither plaintiff presented any statement, in affidavit form or otherwise, to dispute Wu's well-organized and amply documented factual account. Based on the court's finding that the defendant established both a reasonable excuse for the default and the existence of a potentially meritorious defense to the action, the default judgment under index No. 6162/2015 is, accordingly, vacated. (See CPLR 5015 [a] [1].)

The court notes that Wu further contends that the doctrines of res judicata or collateral estoppel should bar the instant action. The defendant's reliance on these doctrines can be debated and argued, but the legal rule mandates generally an identity of parties and issues and a full opportunity to litigate before these well-established doctrines can be invoked and maintained. Under the circumstances of this case, the court is reluctant, on this motion, to apply the principles of res judicata and collateral estoppel. The defendant is, however, not foreclosed from raising these issues at a later date.

Nevertheless, the court will not sit passively to permit an injustice and inequitable conduct, especially where the parties traded, reviewed, signed, and exchanged stipulations of discontinuance. The Appellate Division, Second Judicial Department, in Mahon v New York City Health & Hosps. Corp. (303 AD2d 725, 725 [2003]), articulated:

"In order to vacate the stipulation of settlement on the ground of mutual mistake, the plaintiff was required to demonstrate that the mistake existed at the time the stipulation was entered into and that it was so substantial that the stipulation failed to represent a true meeting of the parties' minds (see Matter of Gould v Board of Educ. of Sewanhaka Cent. High School Dist., 81 NY2d 446, 453; Matter of Janet L., 287 AD2d 865 [2001]; see also Hallock v State of New York, 64 NY2d 224, 230 [1984]). The plaintiff met this burden, as she{**63 Misc 3d at 358} established that none of the parties considered the impact of a potential Medicaid lien in negotiating the settlement and that therefore there was no true meeting of the parties' minds with respect to the amount of damages. Moreover, under these circumstances, enforcement of the stipulation would be unjust (see Weitz v Murphy, 241 AD2d 547 [1997]; Goldstein v Goldsmith, 243 App Div 268, 272 [1935]). Accordingly, the Supreme Court properly vacated the stipulation of settlement." (Accord Lakshmi Grocery & Gas, Inc. v GRJH, Inc., 138 AD3d 1290 [3d Dept 2016] [a contract may be rescinded when it is shown by clear and convincing proof that a mutual mistake existed when the contract was executed that was so substantial that there was no true meeting of the parties' minds].)

In this case, an argument can be genuinely made that there was no true meeting of the minds on the prior settlement. The defendant, however, has not requested that the court set aside the stipulation executed in this case. Thus, the court will not, sua sponte, vacate that prior settlement. Nevertheless, given that "[a]rticle VI, § 7 of the NY Constitution establishes the [*4]Supreme Court as a court of 'general original jurisdiction in law and equity' (NY Const, art VI, § 7 [a])," this court finds it appropriate to invoke its equitable powers in this case. (See Sohn v Calderon, 78 NY2d 755, 766 [1991].) Accordingly, the court orders that all sums given by Wu to the plaintiffs are to be delivered to defendant's attorney, who is directed to hold such funds in escrow pending further litigation in this case.

In addition, based on the affirmation of Wu's attorney and Wu's affidavit, the court orders a traverse hearing in this case. The court stresses that it has a great deal of difficulty finding that a 13 year old is a person of suitable age and discretion upon whom a summons may be served. (See CPLR 308 [2]; see also Wells Fargo Bank Minn. v Roman, 10 Misc 3d 1075[A], 2006 NY Slip Op 50082[U] [Sup Ct, Richmond County 2006].) In that respect, the court notes that the Court of Appeals has apparently never addressed the issue of service upon a young teenager. When confronted with a case in which service of process was disputed, the Court of Appeals noted that "no question has been raised concerning the fact that the youngsters, one 14 and the other 15, were of 'suitable age and discretion.' " (Bossuk v Steinberg, 58 NY2d 916, 918 [1983].) The Appellate Division, however, has addressed this issue. For instance, in{**63 Misc 3d at 359} Marathon Structured Asset Solutions Trust v Fennell (153 AD3d 511 [2d Dept 2017]) the Second Department held that defendant's 15-year-old daughter was a person of suitable age and discretion and that service upon her was sufficient to obtain personal jurisdiction.

Of course, at the time of service in this case, T.W. was 13 years of age. In that respect, there is some legislative support for the proposition that a person under the age of 14 is not old enough to be served with process. For example, in suits against individuals under the age of 18, the legislature has mandated that a person 14 years or older must be personally served with process. Even in that context, however, the legislature, obviously concerned that a person under the age of 18 would not be able to appreciate the significance of being served with a court document, mandated that an adult must also be served on behalf of an infant. As noted in the Practice Commentaries:

"CPLR 309(a) specifies the procedure for service of process on an infant, i.e., a person under the age of 18 (CPLR 105(j)). To help ensure protection of the infant's interests, an adult must be personally served on behalf of the infant. If the infant is of the age of 14 years or over, personal service must also be made on the infant. The failure to make dual service when the infant is 14 or older is a jurisdictional defect. Randall v. Randall, 1958, 12 Misc.2d 468, 172 N.Y.S.2d 985 (Sup.Ct.Bronx Co.)." (Vincent C. Alexander, Practice Commentaries, McKinney's Cons Laws of NY, CPLR C309:1.)

The court acknowledges that "[t]here appears to be no 'bright-line' age below which a child is not a suitable person for service of process, even though 'at some point a person should be deemed by the court, as a matter of law, to be too young to have a valid status as deliveree.' " (Wells Fargo Bank Minn. v Roman, 2006 NY Slip Op 50082[U], *2, quoting in part from Room Additions v Howard, 124 Misc 2d 19, 19 [Civ Ct, Bronx County 1984].) For this reason, the court declines to find that, as matter of law, T.W. was too young to accept service on behalf of her father. Nevertheless, based on T.W.'s age alone, a traverse hearing is ordered to determine whether or not, on the date in question, she was "objectively . . . of sufficient maturity, understanding and responsibility under the circumstances so as to be reasonably likely to convey the summons to the defendant." (Roldan v Thorpe, 117 AD2d 790, 791 [2d Dept{**63 Misc 3d at 360} 1986]; Marathon Structured Asset Solutions Trust v Fennell, 153 AD3d at 512.)

The traverse hearing will be held on a date to be determined. The court notes that, at that hearing, "the plaintiff bears the ultimate burden of proving by a preponderance of the evidence that jurisdiction over the defendant was obtained by proper service of process." (Bankers Trust Co. of Cal. v Tsoukas, 303 AD2d 343, 343 [2d Dept 2003]; see also Roberts v Anka, 45 AD3d 752 [2d Dept 2007].) If the plaintiffs fail to meet their burden of proof, this action will be dismissed.

In closing, the court notes that the defendant has not waived his right to raise the jurisdictional question in this case. With certain exceptions—none of which exist in this case—a claim of lack of personal jurisdiction is not waived by a defaulting defendant. (See Cadlerock Joint Venture, L.P. v Kierstedt, 119 AD3d 627 [2d Dept 2014].) In addition, a motion to vacate a default judgment under section 5015 (a) (4) of the Civil Practice Law and Rules, predicated on a "lack of jurisdiction to render the judgment or order," may be made at any time. (See David D. Siegel, Practice Commentaries, McKinney's Cons Laws of NY, C5015:3.) It is well-settled that a defendant's actual knowledge that the instant action had been commenced against him is irrelevant on the issue of personal jurisdiction. "[N]otice received by means other than those authorized by statute cannot serve to bring a defendant within the jurisdiction of the court." (Feinstein v Bergner, 48 NY2d 234, 241 [1979]; see also Markoff v South Nassau Community Hosp., 61 NY2d 283 [1984]; McDonald v Ames Supply Co., 22 NY2d 111 [1968]; Washington Mut. Bank v Murphy, 127 AD3d 1167, 1174 [2d Dept 2015].)

The court further notes that, "[a]lthough a party moving to vacate a default must normally demonstrate a reasonable excuse and a meritorious defense, the movant is relieved of that obligation when lack of personal jurisdiction is asserted as the ground for vacatur." (Velez v Forcelli, 125 AD3d 643, 644 [2d Dept 2015]; see also Harkless v Reid, 23 AD3d 622, 622-623 [2d Dept 2005]; Deutsche Bank Natl. Trust Co. v Pestano, 71 AD3d 1074 [2d Dept 2010].) In that respect, the court is aware that when a defendant seeks to vacate a default judgment based on a jurisdictional objection pursuant to CPLR 5015 (a) (4), the jurisdictional question must first be resolved before determining whether it is appropriate to grant a discretionary vacatur of the default under CPLR 5015 (a) (1). (See Marable v{**63 Misc 3d at 361} Williams, 278 AD2d 459 [2d Dept 2000]; see also Taylor v Jones, 172 AD2d 745, 746 [2d Dept 1991].) Given the court's finding, however, that, in this case, the defendant has established the two prerequisites for a default judgment, there is no need to first decide the jurisdictional question.

Finally, although not requested, the court grants defendant Wu leave to file an answer in this case. Such answer must be verified and served upon the plaintiffs no later than 20 business days following the County Clerk's date-stamped notice of entry of the court's decision and order on the traverse hearing.

For reasons stated in this decision and order, it is hereby [*5]ordered that the default judgment taken against defendant Xi Hui Wu under the current index No. 6162/2015 is vacated; and it is further ordered that the proceeds of the settlement of the earlier action under index No. 708185/2015 are to be delivered to Mr. Zou, who is to hold such funds in escrow. The funds must be delivered within 30 days of the County Clerk's date-stamped notice of entry of this decision and order; and it is further ordered that Wu's attorney is directed by the court to hold the proceeds of that settlement that will be returned to him by defendant's attorney in an escrow account, subject to the court's determination and future direction.

The defendant's motion is granted in accordance with this decision and order.