Service Of Process On Secretary Of State Fails?

Readers of our alerts, practitioners, as well as lenders and servicers will recognize the message that often appears here:  Process service is the stage of a foreclosure most fertile for time consuming and vexing defenses.  While typically this assessment applies to serving individuals (borrowers in particular) a recent case instructs that it can even be a problem when serving the Secretary of State on behalf of a corporation. [JPMorgan Chase Bank v. Adventure Corp., 155 A.D.3d 1013, 65 N.Y.S.3d 531 (2d Dept. 2017).]

Without exploring all the minutia of service upon a corporation (for statutes, see CPLR § 311 and BCL §306), such service can be effected upon an officer or a managing agent (or an authorized agent).  If dwelling upon the concept, how is it determined – with certainty – who fits one of these positions?  It will be difficult at best.  Worse still, when a process server arrives at a corporate business office, some type of receptionist will be encountered and it is unlikely that the process server will be invited in to hand papers directly to, for example, the president of the company.

Even assuming the receptionist will accept service of process, it cannot be known whether that person actually has authority to do so.  It is not uncommon for a corporate defendant to emerge at some time during the course of an action (or after it) protesting that no service was made upon it.  In response to the disclosure that service was made upon the receptionist, the reaction is either that no such person ever existed, or that the person never had authority to accept service.

This would be an eternal dilemma, rescued, however, by the ability to serve the office of the Secretary of State in Albany for any domestic corporation (or one authorized to do business in New York) or any limited liability company.  This approach is foolproof to a significant extent, although there are some exceptions.  One appears in the new case mentioned.

Examining the statute allowing service upon the Secretary of State, it requires presentation of duplicates of the process.  The Secretary of State has an office in Albany and a desk where this is accomplished daily countless times, but duplicates remain an obligation.  In the noted case, there was an ambiguity in the process server’s affidavit as to whether duplicates were indeed delivered.  While the trial court blessed the service and found no need for a hearing, on appeal there was a reversal, the case was sent back to the trial court and a hearing had to be conducted.  The time and expense caused by the miscue of the process server was significant.

The lesson is that while service upon the Secretary of State for corporate defendants is still the best path, attention must be paid not only to the service of duplicate copies, but the recitation of that in the affidavit of service as well.  It should be effortless, but it wasn’t so easy in this case.

Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2018), is a partner with Berkman, Henoch, Peterson, Peddy & Fenchel, P.C. in Garden City, New York. He is also a member of the USFN, The American College of Real Estate Lawyers, The American College of Mortgage Attorneys, an adviser to the New York Times on foreclosure issues and writes a regular servicing column for the New York Law Journal. He is AV rated by Martindale-Hubbell, his biography appears in Who’s Who In American Law and he has been for years listed in Best Lawyers In America and New York Super Lawyers.