| Bond v Giebel |
| 2012 NY Slip Op 08619 [101 AD3d 1340] |
| December 13, 2012 |
| Appellate Division, Third Department |
| Randy Bond, Respondent, v Daniel Giebel et al., Defendants.Progressive Insurance Company, Proposed Intervenor-Appellant. (Action No. 1.) Randy Bond,Respondent, v Progressive Insurance Company, Appellant, et al., Defendant. (ActionNo. 2.) |
—[*1] Robert J. Krzys, Amsterdam, for respondent.
Stein, J. Appeal from an order of the Supreme Court (Reilly Jr., J.), entered January 18, 2012in Schenectady County, which, among other things, denied a motion by Progressive InsuranceCompany for, among other things, vacatur of a default judgment and leave to intervene in actionNo. 1.
In January 1999, plaintiff was injured when the snowmobile he was operating collided with aparked car. Plaintiff thereafter commenced an action (hereinafter action No. 1) in 2002 againstthe owners of two cars—the car with which he collided and the car parked directly in frontof it—alleging, among other things, that both cars had been parked in the roadway. The carwith which plaintiff actually collided was owned by defendant Daniel Giebel and the car parkedin front of Giebel's car was owned and/or driven by defendants Theresa O'Rourke and RobertO'Rourke and insured by Progressive Insurance Company. Upon the O'Rourkes' failure to appearin the action, a default judgment on the issue of liability was entered against them in July 2002.Following protracted litigation concerning plaintiff's claims against Giebel (see generally Bond v Giebel, 14 AD3d849 [2005]), an inquest was held with regard to the claims against the O'Rourkes and adefault judgment on damages was rendered against them in 2008 for approximately $1.2million.[FN1] When the O'Rourkes notified Progressive of the judgment shortly thereafter, Progressivedisclaimed coverage on the basis that it never received notice of the lawsuit, as required by theO'Rourkes' policy.
The O'Rourkes subsequently entered into an agreement with plaintiff (hereinafter theassignment agreement) pursuant to which they assigned to plaintiff their rights againstProgressive and the O'Rourkes' insurance broker, defendant Hopmeier-Evans-Gage Agency(hereinafter HEG).[FN2] In exchange for such assignment, plaintiff agreed to pay the O'Rourkes 40% of any recovery thathe received from Progressive in excess of $300,000. Plaintiff then commenced an action(hereinafter action No. 2) in April 2009, as assignee of the O'Rourkes' rights, asserting, aspertinent here, a claim against Progressive pursuant to Insurance Law § 3420 (a) (2) torecover part of the unsatisfied default judgment in action No. 1, as well as a bad faith claim basedupon Progressive's disclaimer of coverage. Both claims rely primarily upon plaintiff's allegationsthat the O'Rourkes provided timely notice to Progressive in 2002 and that Progressive failed todefend and/or indemnify them. Progressive moved for, among other things, an order vacating thedefault judgment against the O'Rourkes in action No. 1 pursuant to CPLR 5015 (a) (3) or in theinterest of justice. Progressive also sought permission to intervene in action No. 1 and, uponintervention, summary judgment dismissing the complaint in that action against the O'Rourkes.Finding that Progressive's delay in seeking intervention would cause significant prejudice toplaintiff, Supreme Court denied all of the relief requested.[FN3] This appeal by [*2]Progressive ensued.
We begin with Progressive's request for vacatur of the default judgment in action No. 1. It iswell settled that a judgment may be vacated by a court upon the motion of "any interestedperson" (CPLR 5015 [a]; accord Oppenheimer v Westcott, 47 NY2d 595, 602 [1979]).Consistent with the legislative goal of "assur[ing] that a broad class of persons, not limited toparties in the formal sense, could move [for relief pursuant to CPLR 5015]" (Oppenheimer vWestcott, 47 NY2d at 603), it has been held in this context that "all that is necessary is thatsome legitimate interest of the moving party will be served and that judicial assistance will avoidinjustice" (Lane v Lane, 175 AD2d 103, 105 [1991] [internal quotation marks andcitation omitted]). In our view, that purpose will be served under the particular circumstancespresent here by permitting Progressive to move to vacate the default judgment against theO'Rourkes, notwithstanding its disclaimer of coverage.[FN4] Specifically, by virtue of the assignment agreement, Progressive is the only person or entity withan interest in vacating the default judgment, as the O'Rourkes have the potential to benefitfinancially by allowing that judgment to remain in effect. Without the judgment, neither plaintiffnor the O'Rourkes would stand to reap any significant benefit from action No. 2 (see Lane vLane, 175 AD2d at 105).[FN5] Thus, the particular terms of the assignment agreement place the O'Rourkes in the unusualposition of opposing Progressive's motion to vacate the substantial judgment entered againstthem. While the collusive nature of the assignment agreement may not have led to the defaultjudgment, the financial benefit that the O'Rourkes stand to gain as a result of that agreementclearly provides them with an incentive to act in unison with plaintiff going forward.[FN6] At the very least, to allow such a result offends our [*3]sense ofjustice and propriety and cannot be condoned.
With regard to the merits of Progressive's motion to vacate the default judgment, plaintiffargues that, inasmuch as the assignment agreement was not made until after the judgment wasentered, Progressive lacks grounds for vacatur pursuant to CPLR 5015 (a) (3). Additionally,plaintiff argues that Progressive's motion is untimely. In recognition of the strong preference fordeciding cases on their merits, we are of the view that, even if the circumstances of this case donot fall squarely within CPLR 5015 (a) (3), Supreme Court should have exercised its inherentpower to vacate the challenged default judgment in the interest of justice (see CPLR5015; Wade v Village of Whitehall,46 AD3d 1302, 1303 [2007]; Birsett v General Acc. Ins. Co. of Am., 241 AD2d 683,685 [1997]; compare Dyno v Lewis, 300 AD2d 784, 785 [2002], appealdismissed 99 NY2d 651 [2003]). As to the timeliness of the motion, we note that, although asubstantial period of time had elapsed since entry of the default judgment, Progressive allegesthat it had no reason to question the propriety of such judgment until it learned in September2010—after the commencement of action No. 2—of the assignment agreementwhich could potentially result in the O'Rourkes recovering a significant sum of money in theevent that plaintiff successfully recovered from Progressive. Progressive then moved to vacatethe judgment in action No. 1 within a reasonable period of time after it became aware of theassignment agreement (compare Rizzo vSt. Lawrence Univ., 24 AD3d 983, 984 [2005]; City of Albany Indus. Dev. Agency vGarg, 250 AD2d 991, 993 [1998]; B.U.D. Sheetmetal v Massachusetts Bay Ins. Co.,248 AD2d 856, 856-857 [1998]).
Furthermore, the collusive nature of the assignment agreement created a disincentive for theO'Rourkes to ensure that the judgment was in conformance with the law and the facts. Indeed, itis undisputed that such judgment was based upon a factual error that could impact thedetermination as to whether the location of the O'Rourkes' vehicle was a substantial factor incausing plaintiff's injuries—and, therefore, the extent of the O'Rourkes' liability, ifany—and that the amount of the judgment exceeds the amount permitted by CPLR 3215(b). Thus, regardless of the merits of action No. 2, vacatur of the default judgment in action No. 1will uphold the integrity of the judicial process under the particular circumstances of this case.
For the same reasons, Supreme Court should have granted Progressive's motion forintervention. While we recognize that such intervention may result in further delay in this alreadyprotracted litigation, the question of "[w]hether there was undue delay depends on the facts andcircumstances of the case" (Matter of Fink v Salerno, 105 AD2d 489, 490 [1984] lvdismissed and appeal dismissed 63 NY2d 907 [1984], lv dismissed 63 NY2d 607[1984]). Assuming, for the purposes of the motion, the truth of Progressive's allegation that itfirst learned of action No. 1 after judgment was entered, the delay can be excused because itmoved for relief within a reasonable time after it became aware of the assignment agreement (see generally Halstead v Dolphy, 70AD3d 639, 640 [2010]; Poblocki vTodoro, 55 AD3d 1346, 1347 [2008]; compare Agway Ins. Co. v P & R Truss Co., Inc., 11 AD3d 975,976 [2004]; Buckeridge v Ludlow Motor Co., Inc., 276 App Div 511, 513 [1950], lvdismissed 301 NY 609 [1950]). Moreover, a significant portion of the overall delay in theresolution of action No. 1 is attributable to the process of completing plaintiff's litigation withrespect to Giebel before proceeding with an inquest on the claim against the O'Rourkes. Inaddition, as previously stated, given the combined effect of the assignment agreement and thefactual errors in plaintiff's motion for a default judgment, we cannot conclude that it would beunjust to require plaintiff to meet its [*4]burden of proving itsentitlement to relief in action No. 1 with the participation of a party who is motivated to defendthat action. In our view, it is more important to reach the correct result than to conclude thematter expeditiously. While any further delay is unfortunate, a contrary result would potentiallyreward plaintiff and the O'Rourkes for their improvident agreement. Accordingly, Progressive'smotion to intervene should have been granted (see generally Town of N. Elba v Grimditch, 96 AD3d 1305,1306-1307 [2012]; Berkoski v Board ofTrustees of Inc. Vil. of Southampton, 67 AD3d 840, 843-844 [2009]; compare Carnrike v Youngs, 70 AD3d1146, 1147 [2010]).
Finally, although Supreme Court did not directly address the merits of Progressive's motionfor summary judgment, upon our own factual review of the record, we find that questions of factexist—for example, as to whether the O'Rourkes' vehicle was parked on the side of theroad or in the roadway and, if in the roadway, whether this was the proximate cause of plaintiff'sinjuries—which preclude summary judgment (see Grant v Nembhard, 94 AD3d 1397, 1398-1399 [2012]). Thus,that part of Progressive's motion seeking summary judgment in action No. 1 is denied, renderingProgressive's motion for summary judgment in action No. 2 academic.
To the extent not specifically addressed herein, the parties' remaining contentions have beenexamined and are either academic or without merit.
Mercure, J.P., Lahtinen, Malone Jr. and Egan Jr., JJ., concur. Ordered that the order ismodified, on the law, without costs, by reversing so much thereof as denied the motion ofProgressive Insurance Company to (1) vacate a default judgment in action No. 1 and (2)intervene in action No. 1; motion granted to that extent and said default judgment vacated; and,as so modified, affirmed.
Footnote 1: Notably, it is undisputed thatliability was initially determined on the basis of an inaccurate description of the accident.Specifically, plaintiff alleged that he collided with the O'Rourkes' vehicle. In addition, thedamage award was greater than the amount demanded in the summons with notice.
Footnote 2: A copy of the assignment,prepared by plaintiff's counsel, is not contained in the record on appeal, but its existence isundisputed.
Footnote 3: Although the supportingaffidavit of Progressive's counsel included a request for summary judgment dismissing thecomplaint in action No. 2 in the event that summary judgment dismissing action No. 1 wasgranted, the notice of motion contained only the caption of action No. 1 and did not set forth arequest for any relief in action No. 2. Progressive continues to argue on appeal that it is entitledto such relief despite Supreme Court's failure to address the request therefor in the order appealedfrom.
Footnote 4: Inasmuch as Progressive did notdisclaim coverage until after it was notified of the default judgment, due to its alleged lack ofnotice of action No. 1 prior to that time, it cannot be said at this juncture that Progressive made avoluntary election to refuse to defend the O'Rourkes in action No. 1 while it was being litigated,thereby waiving its right to seek vacatur of the default judgment (see generally Shaw vShaw, 97 AD2d 403, 404-405 [1983]; compare Schellenberg v Wiemann, 120 AD2d659, 660 [1986], lv denied 68 NY2d 609 [1986]).
Footnote 5: Under the O'Rourke policylimits, the most that plaintiff could recover is $100,000. However, under the bad faith claim,plaintiff could recover the full amount of the default judgment—approximately $1 million.
Footnote 6: Since we do not have the benefitof reviewing the exact terms of the agreement, we do not know whether it, in fact, requires theO'Rourkes to cooperate with plaintiff to the detriment of Progressive.