By Adam L. Browser
Ruskin Moscou Faltichek P.C.
With so much to worry about as a home improvement contractor, you probably pay little attention to your business address. You probably never considered that it can expose you to loss and/or expense. But it can. Let me explain.
When you first formed your business, either as a corporation or a limited liability company, you filed papers with the New York Secretary of State. That filing listed an address for your business, and authorized the Secretary of State to send legal papers to that address. Most often, the address on file with the Secretary of State is your home or business address. Sometimes it is your lawyer’s address. After the initial filing and address designation, you probably gave this little thought. That is where the problem can arise.
If an owner, supplier or subcontractor sues you, it need not send the Summons and Complaint directly to you. It can deliver those documents to the Secretary of State, which by law is designated as your agent to receive a Summons and Complaint. Once the Secretary of State receives the Summons and Complaint, it will mail them to you at the address you supplied when your business entity was formed. But that address may no longer be effective in notifying you of the lawsuit. You may have moved your business. If the address listed was your lawyer’s or accountant’s, he or she will receive the papers from the Secretary of State. If your professional advisor has retired, moved or you are no longer in contact with him or her, you may not receive notice of the lawsuit.
Whatever the reason, if you are unaware of the lawsuit, you cannot defend it and the plaintiff will get a judgment on default. Once a default judgement is entered, the judgment creditor can restrain your bank accounts or seize vehicles or other property (including accounts receivable) belonging to your company. A default judgment can be set aside in certain circumstances. But setting aside a judgment can be expensive and is not certain. To do so, you must demonstrate that you have a valid defense to the claim. If you do not maintain good records, proving you have a valid defense may be difficult.
To guard against a default judgment, make sure your current address is on file with the Secretary of State. Doing so is easy but critical. It is your obligation, and a prudent business practice, to update your address with the Secretary of State if you move. The Secretary will not try to determine your current address if papers it sends you are returned as undelivered.
The possibility you will not get notice of a lawsuit in order to defend it may seem remote, but it is not an uncommon occurrence. It is easily avoided, however. A little attention to this housekeeping item will avoid an unpleasant and expensive surprise.