State of New York
Supreme Court : County of Monroe

- against -

Index No. 2001/7985

This opinion is uncorrected and is subject to revision in the official Reports

ANDREW V. SIRACUSE, J.

Defendant National Car Rental has moved to reopen a default judgment against defendant Damian Drewery. This is not the most common of motions; defendants are usually seeking to reopen their own defaults, not those of co-defendants. But little in this case is business as usual.

Plaintiff's decedent, Maleka Watson, was killed in an automobile accident while a passenger in a car which defendant Damian Drewery was driving. Drewery was convicted and sentenced to jail for his part in this accident. The plaintiff claims that Natasha Rogers, who rented the car from defendant National Car Rental, gave her then-boyfriend Drewery permission to drive the car.

Drewery was served with the summons and complaint in jail on August 27, 2001, and never answered. Default judgment was granted against him on January 31, 2002. National Car Rental now moves to defend him, claiming that its failure to answer on his behalf was due to plaintiff's failure to tell them that Drewery had been served. National argues that if it had known that service had been effected on the co defendant it would have appeared for him.

It should not be necessary to remind National that a plaintiff has no obligation to inform defendants of the progress of their service of process. Drewery has been clearly listed on the caption since the beginning of this action, and it would have been simple for National to ask Drewery or plaintiff at any time if Drewery had been served. Drewery did not request a defense from National--in fact, as will be seen, their interests are opposed to one another--and he has a right to default if he so chooses. Defendant argues that plaintiff was guilty of misconduct that led it to believe that Drewery had not yet been served. Its chief argument is that plaintiff served a deposition notice on Drewery only seven days after service of the summons and complaint. This was a violation of CPLR 3106 (a), which requires an order of the court if a party is to be deposed before his or her time to answer has expired.

This is quite true, and the deposition was technically improper. But National's attorney participated extensively at this deposition, and could have asked at the deposition or beforehand what Drewery's status was. Furthermore, a court order would have been required under CPLR 3106 (c) for any EBT of Drewery while he was imprisoned, regardless of his status as a party. Even at oral argument defendant exhibited no knowledge of this provision. Its strenuous argument that the plaintiff's committed serious misconduct by violating CPLR 3106 (a) is partially undermined by its own ignorance of CPLR 3106 (c).

The conduct of the deposition, however, raises substantial questions. The defendant shows that Natasha Rogers, the renter, had originally stated that her car had been stolen before the accident. She informed National of this alleged theft and filed a police report. On these facts, of course, Drewery had no permission to drive the car and National would have no liability. During her own deposition, however, Ms. Rogers changed her story and claimed that she had given Drewery permission to drive the car. This was corroborated by Drewery at his EBT, which took place shortly after Rogers's. Furthermore, during the deposition Drewery consulted with plaintiff's counsel and informed National's attorney that he would be testifying on behalf of the plaintiff.

The court is troubled by the ease with which the case against National developed and the contacts between plaintiff's counsel and Drewery, an adverse party not yet adjudged in default. But National's own conduct is troubling as well. Its continued failure to inquire as to Drewery's status is difficult to explain, though there may be some merit in its argument that its bankruptcy filing resulted in a lack of activity regarding the case.

That bankruptcy adds the final twist to the factual situation here, because proceedings against National itself are stayed during its pendency. Those against Drewery are not so stayed, and it is apparently plaintiff's belief that after a determination of damages National can be called upon to satisfy the judgment obtained against Drewery. The plaintiff argues that the bankruptcy stay will not prohibit this. But National is a defendant, and if plaintiff moves separately against Drewery the result will not bind National. Both defendants must have an opportunity to contest both liability and damages.

Furthermore, even if damages were conceded by all parties, National would not be compelled to satisfy a judgment against Drewery without further proceedings. National is liable for Drewery's negligence on some facts but not others, and those facts are yet to be determined. Regardless of the contents of the complaint, which does indeed allege permissive use, whether or not Drewery had permission to drive the car in which Maleka Watson died is no part of the case against him. Thus, no finding on the permissive use issue is implied by the default judgment.

The Fourth Department has recently reiterated that a plaintiff's default does not bind an insurer, which can litigate facts that were determined in a prior proceeding even if the insurer had improperly refused to defend the action (Matijiw v New York Central Mut. Ins. Co., __AD2d__, 2002 N.Y. App. Div. LEXIS 2759; see also, Servidone Construction Corp. v Security Ins. Co. of Hartford, 64 NY2d 419). By analogy, National--a co-defendant which may be vicariously liable, and which has done nothing to prejudice the other co-defendant's rights--has all the more right to a full and fair opportunity to contest all the issues which bear on its liability. It cannot do in a case against Drewery alone.

There are further complications, however. Even though courts have plenary power to vacate default judgments in the interests of justice (see, Lane v Lane, 175 AD2d 103), it is not clear how allowing National to appear on Drewery's behalf will serve these ends. The actual interests of the parties are misleadingly represented by the caption. Drewery's liability is conclusively established by his criminal conviction. It is obviously in his interest to argue that he had permission to drive the car, because otherwise the burden of any judgment will fall on him alone. This is just as obviously in the plaintiff's interest.

National, on the other hand, stands to lose if permissive use is established and to gain if it is disproved. Its interests are opposed to the party for whom it wishes to appear. If it were allowed to open the default, justice would be served only by National's assigning the case to independent counsel insulated from its own defense. The possibility for a conflict of interest is far too great for any other remedy.

Yet nothing would be gained by doing this. The results of granting this motion would be little different from those of denying it. If the default remained, any damage award would still have to be preceded by a trial on permissive use and other defenses, with plaintiff's and defendant's current counsel. Otherwise it would be ineffective as against National. If the motion to vacate were granted, the same trial would take place, but with plaintiff's counsel and counsel for Drewery arguing for the most part on one side and counsel for National on the other. In short, the sole difference would be the number of attorneys involved. The court cannot see that the vacation of a duly granted judgment and the expense of a third attorney would serve any reasonable purpose.

The stay complicates matters, but this court cannot prejudice National's position without subverting the purpose of the bankruptcy code. Unless the stay is lifted for the purposes of this action, plaintiff can have a judgment only if it were to discontinue the action against National. In that case, of course, it would end up with a judgment that is likely uncollectible and which is completely unenforceable against National.

The motion to vacate is dismissed, without costs or disbursements. There is one change that is required by the current set of facts, however. The order granting default judgment had directed that an immediate inquest on damages should be held. Because National must be represented at any inquest and cannot participate for the duration of the stay, there can be no inquest until the bankruptcy court allows one. The court sua sponte directs that this paragraph be stricken from that order.

Counsel for National should therefore prepare an order dismissing the motion but vacating the second decretal paragraph of the default judgment order, which had directed an immediate inquest on damages.

DATED: Rochester, New York

April 30, 2002

Andrew V. Siracuse, J.S.C.

This opinion is not available for publication in any official or unofficial reports, except the New york Law journal, without the approval of the State Reporter or the Committee on Opinions (22 NYCRR 7300.1)

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