## Facts

- A lumber purchaser sued Phil-Mar Lumber Corp. and A.C. Dutton Lumber Co. for breach of contract in Supreme Court, New York County.
- Phil-Mar (a New York corporation) was served through the Secretary of State under CPLR 311 and Business Corporation Law § 306.
- The Secretary of State mailed process to Phil-Mar’s address on file, but the mailing was returned marked “Moved, Not Forwardable” because Phil-Mar had not updated its address.
- Phil-Mar did not answer, and a default judgment was entered against it; the action against Dutton was severed.
- After plaintiff served a restraining notice on Phil-Mar’s bank, Phil-Mar claimed it first learned of the action from the account restraint and promptly moved to vacate the default judgment and set aside the restraint.
- Phil-Mar asserted lack of actual notice, noted plaintiff allegedly knew Phil-Mar’s true business location, and proffered a potentially meritorious defense.
- Plaintiff argued Phil-Mar’s failure to update its address was deliberate and supported an inference of willful default, citing other returned mailings and a prior default in another action.

## Issues

1. Whether Supreme Court abused its discretion as a matter of law in vacating Phil-Mar’s default judgment despite valid statutory service through the Secretary of State.
2. Whether the record compelled a finding that Phil-Mar’s default was willful, rather than excusable, given the outdated address and competing evidence about notice.
3. What standard governs appellate review of a trial court’s decision granting relief from a default judgment.

## Decision

- The Court of Appeals reversed the Appellate Division’s determination that Supreme Court had abused its discretion as a matter of law.
- The Court held Supreme Court’s decision to vacate the default was within the permissible range of outcomes on this record.
- The matter was remitted to the Appellate Division to exercise its discretion on the vacatur motion under the proper standard, rather than treating Supreme Court’s ruling as legally erroneous.

## Legal Principles

- A motion to vacate a default judgment is committed to the trial court’s sound discretion.
- An appellate court may disturb that determination only for an abuse of discretion as a matter of law (i.e., a decision that is irrational or arbitrary on the record).
- Even when service on a corporation through the Secretary of State is legally sufficient, a default may be excused where the defendant promptly seeks relief, asserts lack of actual notice supported by record facts, and shows a colorable meritorious defense.
- Where the evidence allows conflicting inferences about willfulness and notice, it is generally within the trial court’s authority to credit a non-willful explanation and favor resolution on the merits.

## Conclusion

The Court of Appeals held that vacating Phil-Mar’s default was not an abuse of discretion as a matter of law because the record supported competing inferences regarding notice and willfulness and included a prompt motion with a proffered defense; the case was sent back for the Appellate Division to decide the motion within its discretionary role under the correct standard of review.


Eugene Di Lorenzo, Inc. v. A.C. Dutton Lumber Co., 67 N.Y.2d 138 (1986)