New York Law Review

Tag: Corporate Service

  • Fashion Page, Ltd. v. Zurich Insurance Co., 50 N.Y.2d 265 (1980): Valid Service on a Corporation Through an Employee

    50 N.Y.2d 265 (1980)

    A corporation can be properly served if the process server, after making reasonable inquiry, delivers the summons to an employee who the corporation’s employees identify as authorized to accept service, even if that employee is not a designated agent or officer.

    Summary

    Fashion Page, Ltd. sued Zurich Insurance to recover on a fire insurance policy. Zurich moved to dismiss, arguing improper service because the summons was delivered to a secretary, not an authorized agent. The process server inquired at Zurich’s office and was directed to the secretary, who accepted the summons. The New York Court of Appeals held that service was valid, emphasizing that the process server acted reasonably in relying on the corporation’s employees to identify the proper person for service. The court reasoned that a corporation cannot benefit from internal procedures that mislead process servers if the method of service, viewed objectively, provides fair notice to the corporation.

    Facts

    Fashion Page, Ltd. sought to recover under a fire insurance policy issued by Zurich Insurance after a fire destroyed the insured building.

    The process server went to Zurich’s office, informed the receptionist of his intent to serve a summons and complaint, and asked who could accept service.

    The receptionist directed him to Ann Robertson, a secretary to the vice-president.

    Robertson accepted the papers, stating, “Okay, leave it with me…I’ll take it,” and confirmed she was authorized to do so.

    Robertson routinely accepted service on behalf of the corporation, without objection, for five years whenever her boss was unavailable, then forwarded the papers to the legal department.

    Procedural History

    Zurich moved to dismiss the action, claiming that Robertson was not authorized to accept service under CPLR 311(1).

    A Special Referee determined that service was valid because the process server acted diligently and served the person identified by Zurich’s employees as authorized to accept service.

    The Supreme Court confirmed the Referee’s report and denied Zurich’s motion to dismiss.

    The Appellate Division affirmed.

    The New York Court of Appeals granted leave to appeal.

    Issue(s)

    Whether service upon a corporation is valid under CPLR 311(1) when the summons and complaint are delivered to a secretary identified by the corporation’s employees as authorized to accept service, even if the secretary is not a designated agent or officer of the corporation.

    Holding

    Yes, because the process server acted reasonably in relying on the corporation’s employees to identify the appropriate person to accept service, and the method of service, viewed objectively, provided fair notice to the corporation.

    Court’s Reasoning

    The court emphasized that the purpose of CPLR 311(1) is to ensure that the corporation receives notice of the lawsuit.

    The court stated, “The corporation is free to choose its own agent for receipt of process without regard to title or position.”

    The court distinguished between appointing an agent to accept service generally and formally “designating” an agent under CPLR 318, noting the latter is optional and provides benefits like preventing the statute of limitations from tolling if the defendant leaves the state.

    The court reasoned that a process server cannot be expected to know a corporation’s internal procedures and can rely on corporate employees to identify the proper person for service. If the process server makes a reasonable inquiry and serves the summons as directed by the corporation’s employees, the service should be upheld.

    The court found that the process server acted reasonably by inquiring with the receptionist and relying on her direction to Robertson, who then confirmed her authority to accept service.

    The court concluded, “If despite these circumstances the summons was in fact served on the wrong person, the fault lies with the defendant, and not with the process server who did all that he should be expected to do to see that it was properly delivered.”

    Judge Gabrielli concurred, arguing that the decision should rest on the fact that Mrs. Robertson was impliedly appointed an agent for service of process.

  • McDonald v. Ames Supply Co., 22 N.Y.2d 111 (1968): Sufficiency of Service on a Corporation

    McDonald v. Ames Supply Co., 22 N.Y.2d 111 (1968)

    Personal service on a corporation requires delivery of the summons to a person authorized to receive service; leaving it with a receptionist who is not an employee of the corporation, even if the receptionist later delivers it to the correct person, does not constitute valid service.

    Summary

    McDonald sued Ames for injuries sustained from a defective can of spray paint. Ames then attempted to serve a third-party complaint on Aerosol, the manufacturer of the defective spray head, by leaving the summons with a receptionist in Aerosol’s New York office. The receptionist, not an employee of Aerosol, later gave the summons to Aerosol’s eastern sales manager, Schlossman. The court held that this did not constitute valid personal service on Aerosol because the summons was not “delivered” to an authorized agent of the corporation as required by CPLR 311. The requirement of delivery necessitates more than leaving the summons with any available person.

    Facts

    • John McDonald was injured by a defective can of spray paint in 1961.
    • McDonald sued Ames Supply Co., the seller of the paint can, alleging negligence and breach of warranty.
    • Ames then attempted to serve a third-party summons and complaint on Aerosol Research Co., the manufacturer of the spray head, on November 19, 1965.
    • The process server left the summons with a receptionist in Aerosol’s New York office, who was not an employee of Aerosol.
    • The receptionist later handed the summons to Jack Schlossman, Aerosol’s eastern sales manager.
    • Aerosol was not licensed to do business in New York.

    Procedural History

    • McDonald sued Ames; Ames then filed a third-party complaint against Aerosol.
    • Aerosol defaulted on the third-party complaint.
    • The trial court severed the main action and the third-party action.
    • McDonald recovered against Ames in the main action.
    • Ames was awarded recovery over against Aerosol after inquest on the default.
    • Aerosol moved to dismiss the third-party complaint for lack of personal jurisdiction.
    • The Special Referee quashed service and dismissed the third-party complaint.
    • The Appellate Division affirmed.
    • The Court of Appeals granted leave to appeal.

    Issue(s)

    1. Whether the requirement of CPLR 311 that the summons be “delivered” to a person authorized to receive service for a corporation is satisfied when the summons is left with a receptionist, not employed by the corporation, who later redelivers it to the proper person.

    Holding

    1. No, because personal delivery of a summons to the wrong person does not constitute valid personal service, even if the summons ultimately reaches the party to be served.

    Court’s Reasoning

    The Court reasoned that CPLR 311 requires that service be made by “delivering the summons” to a specified agent of the corporation. Leaving the summons with a receptionist who is not an employee of the corporation does not constitute valid delivery, even if the receptionist later hands it to an authorized agent. The Court emphasized the importance of adhering to the statutory requirements for service of process to ensure proper notice and protect against default judgments. The Court cited numerous prior cases holding that personal delivery to the wrong person is insufficient, even if the summons eventually reaches the correct party. The Court distinguished cases where the process server acted reasonably and diligently in attempting to effect service, such as when a defendant resists service, finding no evidence of such diligence here. The court reasoned that upholding service in this case would “encourage carelessness, or worse, thus increasing the risk of default by parties who in fact fail to receive the summons.” The court distinguished the facts from situations where process servers have acted with due diligence and where the redelivery was “so close both in time and space that it can be classified as part of the same act”.