DECISION AND ORDER Procedural History/Facts Plaintiff commenced this action on June 2, 2021 seeking to recover $14,842.00 from defendants for failure to pay for goods delivered to defendants. On August 31, plaintiff filed an amended Verified Complaint seeking to suspend it’s claims against the corporate defendant (“NCR”) and sever the claims between the defendants. Plaintiff submitted a letter dated August 31, 2021, attached to the Verified Complaint, stating that NCR filed a Chapter 11 bankruptcy petition on October 22, 2019 (Case #19-23869) in the Southern District of New York. Plaintiff states that NCR failed to list plaintiff as a known debtor and as such, plaintiff did not receive notice of the bankruptcy proceeding. Plaintiff’s counsel, Krisly Zamor, states that NCR’s counsel, H. Bruce Bronson, sent plaintiff actual written notice of the bankruptcy on June 17, 2021. Defendant Joseph Forti has not appeared in this proceeding. Motion to Dismiss On November 10, 2021, the corporate defendant filed a motion seeking to dismiss the action. Defense counsel Bronson affirmed that he represented NCR in the bankruptcy action. He affirmed that the instant proceeding was commenced in violation of the automatic stay provisions of the United States Bankruptcy Code, as the filing of the bankruptcy petition triggered the automatic stay. Counsel affirms that this matter cannot be bifurcated and the action must be deemed void and dismissed in its entirety. On December 23, 2021, plaintiff’s filed an affirmation in opposition to the corporate defendant’s motion seeking to dismiss the action as void. Counsel Zamor affirms that after filing the letter and amended complaint on August 31, 2021, the plaintiff has made no effort to continue pursuing its claims against the corporate defendant but solely Mr. Forti, who has failed to appear in this action. Counsel argues that this action is not subject to dismissal because plaintiff, upon learning of the bankruptcy action, ceased prosecution of the instant action by seeking to suspend its claims against the corporate defendant and to sever its claims against each defendant. On December 29, 2021, the corporate defendant filed an affirmation in response to plaintiff’s opposition. NCR argues that it is undisputed that this proceeding was commenced in violation of the automatic stay. The bankruptcy action was filed on October 22, 2019. This action was commenced on June 2, 2021 and counsel for plaintiff was notified of the bankruptcy on or before July 1, 2021. NCR argues that contrary to plaintiff’s claims, the case has not and cannot be bifurcated because the claims against Joseph Forti arise solely from actions taken by him in his capacity as an agent for NCR. Thus counsel argues that NCR is a necessary party to the action and officers are protected by the automatic stay when they are essential to the debtor’s reorganization. NCR further argues that the plaintiff has not ceased prosecution against NCR or stayed the case upon the notice of bankruptcy since plaintiff continues to file motions seeking judgment and collection with a caption that names the debtor/corporate defendant. Counsel argues that prior to filing a motion for a default judgment, plaintiff should have filed a motion seeking severance of the action against NCR. Counsel argues that all of the actions taken by the plaintiff must be deemed void as willful violations of the automatic stay. Finally, plaintiff argues that the effort to obtain a default judgment against the debtor’s sole owner and operator would prejudice all parties to the bankruptcy action. In a February 4, 2022 letter to the court, plaintiff argues that the automatic stay provisions do no apply to Defendant Forti, a non-bankrupt defendant. Plaintiff further argues that Mr. Forti is liable individually because he signed his name on the check, without indication of his representative capacity. Plaintiff further maintains that the corporate defendant is not a necessary party and that delay in proceeding against Mr. Forti will cause undue prejudice to plaintiff. Plaintiff argues that the corporate defendant has not amended its bankruptcy petition to include plaintiff, even with knowledge of plaintiff as a legitimate creditor. Plaintiff argues that defendant’s bankruptcy plan has been finalized and approved prior to plaintiff’s notice of same and without including plaintiff’s claim. Thus plaintiff argues that severance of the claims against the defendants is warranted under these circumstances. In a February 7, 2022 letter, the corporate defendant argues that if plaintiff wanted to remove NCR as an unnecessary party it should have done so in a timely motion to bifurcate the case. Accordingly, NCR argues that the action remains void ab initio and must be dismissed in its entirety. Counsel argues that NCR’s plan has not been finalized or approved in bankruptcy court, and thus there is no prejudice to plaintiff to pursue its claims in accordance with proper procedures. NCR maintains that should this matter be allowed to continue against Mr. Fort that he be given an opportunity to answer the complaint on his own behalf as to plaintiff’s claims against him. Motion for Default Judgment On December 3, 2021, plaintiff filed a motion for default judgment against Defendant Joseph Forti. In support of the motion, Hal Roth states that he is a member of All Recycling, LLC. He affirms that up until June 2019, plaintiff and NCR had an ongoing business relationship, wherein NCR requested and All Recycling provided, car tires, aluminum wheels, and scrap metal in exchange for a rate set by NCR. Upon delivery to the Mount Vernon, NY or Waterbury, CT office locations, NCR employees or Defendant Forti himself signed for receipt of the goods. Mr. Roth affirms that plaintiff provided NCR with $17,186.80 worth of scrap material. A copy of the purported invoices are attached to the papers as Exhibit 10. However, the court notes that the invoices are illegible. Mr. Roth affirms that between June 2019 and July 2019 Defendant Forti promised to make payment to plaintiff through a series of text messages. Copies of text messages are attached to the papers as Exhibit 11. Mr. Roth affirms that NCR made a payment via check # 3129 in the amount of $14,842.00 on May 15, 2019. A copy of the check is attached as Exhibit 2. However, on June 10, 2019, plaintiff received notice from its bank that check was dishonored for insufficient funds. On June 8, 2019, NCR made a payment via check #3149 in the amount of $818.00. Mr. Roth affirms that based upon advice from plaintiff’s bank, plaintiff did not cash the check so as to avoid the incurring bounced check fees once again due to a dishonored check. A copy of the returned check is attached as Exhibit 12. Defendant Forti has not appeared and has filed no papers in opposition to the motions. Conclusions of Law Bankruptcy Stay “Federal bankruptcy law automatically stays the commencement or continuation of any judicial proceedings against a debtor upon the filing of bankruptcy petition” (State Farm Mut. Auto Ins. Co. v. Lopez, 69 Misc 3d 1224 (A) [Civ Ct Queens Co. 2020] (quoting Lubonty v. U.S. Bank N.A., 34 NY3d 250, 252, 116 N.Y.S.3d 642, 139 N.E.3d 1222 [2019]). The automatic stay is “effective immediately upon filing without further action” (Id.; (quoting Carr v. McGriff, 8 AD3d 420, 422, 781 N.Y.S.2d 34 [2d Dept 2004]), including an absence of notice of the bankruptcy proceeding’s commencement (Yen-Ching Chen v. Dickerson, 17 Misc 3d 61, 63, 847 N.Y.S.2d 334 [App. Term, 9th & 10th Jud Dists 2007]. Non-ministerial actions taken against the debtor after the automatic stay takes effect are void from their inception (Id. (citing W. Rogowski Farm, LLC v. County of Orange, 171 AD3d 79, 84, 96 N.Y.S.3d 88 [2d Dept 2019]; Emigrant Sav. Bank v. Rappaport, 20 AD3d 502, 503, 799 N.Y.S.2d 533 [2d Dept 2005]; Homeside Lending, Inc. v. Watts, 16 AD3d 551, 552, 792 N.Y.S.2d 513 [2d Dept 2005]). Here, plaintiff commenced this action by filing a summons and complaint on June 2, 2021, almost 20 months after the corporate defendant filed for bankruptcy on October 19, 2019. Thus it is undisputed that this proceeding was commenced in violation of the automatic stay notwithstanding that plaintiff was not listed as a creditor in the bankruptcy proceeding and notwithstanding its alleged lack of notice of the commencement of the bankruptcy proceeding (Yen-Ching Chen v. Dickerson, 17 Misc. 3d 61(internal citations omitted). Contrary to NCR’s claims, dismissal of the action is not warranted under these circumstances. As the Appellate Division, Second Department has stated, “the filing of a bankruptcy petition results in an automatic stay of actions against a debtor” (U.S. Bank N.A. v. Cid, 178 AD23d 875 [2d Dept 2019] (citing 11 USC §362 (a)(1)). However, “the commencement of an action in violation of the automatic stay does not deprive the court of jurisdiction but merely suspends the proceedings during the pendency of the automatic stay” (Id.) (citations omitted). Furthermore, “the mere service of the summons and complaint is not voidable, where as here, the plaintiff took no steps toward prosecuting the action…” (Id.) (citations omitted) (see aslo Kocher v. Smith, 42 Misc 3d 892 [City Ct. Poughkeepsie 2014]. The corporate defendant argues that the plaintiff continued to prosecute the action by engaging in motion practice against Defendant Forti before this court rendered a decision on plaintiff’s application to bifurcate and sever the claims. However, the court finds that plaintiff’s motion practice was permissible under the facts of this case. Defendant did not pursue judgment against the corporate defendant but only Defendant Forti, as an individual (Ali v. DeMaddis, 14 Misc 3d 638 [Sup Ct. Suffolk Co. 2006] (stating “while the stay provisions of the Banktruptcy Code do automatically stay all proceedings against the debtor, they do not apply to non-filing parties, even a spouse who may be jointly liable on a debt with the debtor”). Severance Generally, where there are multiple parties to the litigation, the action may continue against the other parties even though the action is stayed as to the debtor. The Appellate Division, Second Department, has held that “it is in the discretion of the court to grant a severance…as well as a stay” (Rosenbaum v. Dane & Murphy, Inc., 189 AD2d 760, 761 [1993] (internal citations omitted]). “In furtherance of convenience or to avoid prejudice, the court may order a severance of claims, or may order a separate trial of any claim, or of any separate issue. The court may order the trial of any claim or issue prior to the trial of others.” (CPLR §603). The Chapter 11 Bankruptcy automatic stay relief does not extend to prohibit the continuation of claims against non-bankrupt parties, as long as those claims do not effect the bankrupt debtor’s property (Katz v. Mount Vernon Dialysis, LLC, 121 AD3d 856 [2d Dept 2014]; Beylerian v. Kuriga, 2013 NY Slip Op 34097(U) [Sup Ct. Nassau Co. 2013]). That said, an extension of the bankruptcy stay to a non-bankrupt co-defendant may be warranted in some special and unusual circumstances (Id.; see also Marty & Dorothy Silverman Found. v. 3-Legged Dog, Inc., 2020 NY Slip Op 33489(U) [Sup Ct. New York Co. 2020] (citations omitted). Examples include an obligation of which the debtor is a guarantor; a claim against the debtor’s insurer; an obligation of the debtor to provide indemnification; a claim that would reduce the debtor’s limited insurance proceeds, or “when an identity of interest between the debtor and third party non-debtor to the extent that the debtor is the real party defendant and a judgment against the third party non-debtor will affect directly the debtor” (Florists’ Transworld, Inc v. New York Floral Group, Inc., 25 Misc 3d 1225 (A) [2009] (citing In re North Star Contracting Corp., 125 BR 368, 370-371 [S.D. NY 1991] (internal citations omitted;). “Courts applying this criteria will stay actions against non-debtor officers and principals of debtor corporations only where the stayed action poses a serious threat to the debtor’s reorganization efforts” (SCR Joint Venture, LP v. 309 Realty, LLC, 2008 NY Slip Op 32268(U) [Sup Ct New York Co. 2008] (citing Gray v. Hirsch, 230 BR 239, 242 [SDNY 1999]). “The burden rests with the non-debtor co-defendant to establish that unsual circumstance exist” (Marty & Dorothy Sliverman Found. v. 3-Legged Dog, Inc., 202 NY Slip Op. 33489(U)); see also Aji v. City of New York, 2010 NY Slip Op 31146(U) [Sup Ct. New York Co. 2010)] (severance motion granted where nondebtor codefendant failed to demonstrate prejudice or unusual circumstances). In this action, the plaintiff has ceased prosecution of the claims against the corporate defendant but has filed a motion for a default judgment against Defendant Forti, who has failed to answer or appear. Thus, this Court must now determine if the debtor’s interest/estate/property would be impacted if the court allows this action to proceed against the corporate defendant’s officer/principal. In Florists’ Transworld, Inc. v. New York Floral Group, Inc., 25 Misc 3d 1224 (A),the plaintiff sued the corporation and the owner of the corporation as an individual defendant. Plaintiff moved for entry of a default judgment against both defendants for failure to comply with the court’s discovery order. The owner/individual defendant, a 100 percent shareholder of the corporation, had filed for bankruptcy and the plaintiff sought entry of a default judgment against the corporate defendant. In denying the default judgment motion, the court held that the [corporate defendant's] “claims against the individual defendant are entirely derivative of its claims against the corporation. Such is the case because any adjudication of the corporate defendant’s breach of contractual duties under the credit agreement would necessarily decide [owner's] liability to [corporate defendant] under his personal guarantee. The stay must extended to the corporate defendant since any adjudication against such defendant would diminish [owner's] estate in bankruptcy.” Conversely in Marty & Dorothy Silverman Found v. 3 Legged Dog, Inc., 2020 NY Slip Op 33489(U), the court found that the automatic bankruptcy stay would not be extended to the not-for-profit corporation’s founder as an individual defendant. In that action, plaintiffs sought to recover for breach of a loan agreement against the corporate defendant and its founder/owner. While the action was pending, the corporate defendant filed a petition for bankruptcy. Defendants first argued that an adverse decision against the individual owner would negatively impact the bankruptcy proceeding by causing him to shift his attention away from the proceeding. Second, defendant’s claimed that the owner’s liability as a guarantor is derivative of the corporate defendant’s liability and would impact the corporate defendant’s estate. The owner affirmed in his affidavit the he was responsible for nearly every aspect of the corporate defendant’s operations and was heavily involved in coordinating the bankruptcy filing. The court held that, the mere fact that he is an officer or principal of the debtor corporation, standing alone, is insufficient to extend the bankruptcy stay to him. The court further held that defendants’ contention that the owner’s attention would be drawn away from the bankruptcy proceeding if the action is not stayed was wholly conclusory. Further, the court found that the defendants failed to establish that a judgment rendered against the owner would be the equivalent of a judgment against the debtor corporate defendant, noting that the “[d]efendants have offered no admissible proof that [the owner] is the [corporate defendant's] sole shareholder.” Moreover, the court found that the automatic stay could not be extended to the nondebtor codefendant, seemingly independently liable to plaintiff as a guarantor of the debt of the corporation. This court finds that this matter is on point with findings in Marty & Dorothy Silverman Found.. Here, the nondebtor has failed to appear or file an answer in this proceeding, thus failing to meet his burden that unusual circumstances exist warranting extension of the automatic stay to him as an individual. Moreover, NCR has failed to establish through documentary evidence how a judgment against Defendant Forti, individually, would impact NCR’s estate/property. The mere fact that Defendant Forti is the sole officer or principal of the defendant corporation, standing alone, is insufficient to extend the bankruptcy stay to him. Defendants offer no admissible proof that Defendant Forti is the sole shareholder. There has been no proof submitted that the corporate defendant is contractually obligated to indemnify Defendant Forti (Soil Solutions, Inc. v. Trocom Constr. Corp., 2015 NY Slip Op 31789(U) [Sup Ct. New York Co. 2015], or that severing the action will have any effect on the corporate defendant’s reorganization efforts (SCR v. Joint Venture, LP v. 309 Realty, LLC, 2008 NY Slip Op 32268(U). For the above stated reasons, the motion to sever is granted (Katz v. Mount Vernon Dialysis, LLC, 121 AD3d 856). Default Judgment Entry of a default judgment requires, in addition to proper service of the summons and complaint, proof of the claim, an affidavit executed by a party with personal knowledge of the merit of plaintiff’s claim, or at least a verified complaint (CPLR 3215). Once a plaintiff establishes that a defendant is in default, it is incumbent upon the defendant to come forward with a reasonable excuse for his default and to demonstrate a meritorious defense to the action to avoid the entry of a default judgment (Ennis v. Lima, 305 A.D.2d 632 [2d Dept. 2003]). The affidavit of service filed with the Court provides that the defendant was served with Summons and Verified Complaint on June 7, 2022 at 9:51am at 627 South Columbus Avenue, Mount Vernon New York. Karen Cassidy, identified as an employee, accepted service on Defendant Forti’s behalf. Plaintiff also filed the affidavit of Hal Roth, as outlined above, of the facts constituting the claim. Here Defendant Forti has failed to appear in the action. However at the court appearance on December 23, 2021, Defense counsel for NCR stated that Mr. Forti has not answered because he was awaiting the Court’s decision on NCR’s motion to dismiss the matter in its entirety. Defense counsel also asked this court to give Defendant Forti an opportunity to respond on his own behalf should the Court find that the matter could in fact proceed against Mr. Forti as an individual. The plaintiff did not oppose this application. Accordingly, the motion for a default judgment is held in abeyance. Defendant Forti has until April 29, 2022 to file answering papers with the court. This constitutes the Decision and Order of this court. The court considered the following papers on this motion: Plaintiff Letter, dated August 31, 2021. Motion to Dismiss, dated November 5, 2021. Affirmation in Opposition to Motion to Dismiss, dated December 23, 2021; Exh. 1-4. Reply Affirmation, dated December 29, 2021. Notice of Motion for Default Judgment, dated December 3, 2021; Affirmation in Support; Affidavit in Support; Exh. 1-13. Plaintiff letter, dated February 4, 2021. Defendant NCR letter, dated February 7, 2022 Dated: April 8, 2022
