Bedford Med. Care, P.C. v Encompass Ins. Co., 2011 NY Slip Op 21023 (Civ Ct City NY, Kings County)
In general, a default judgment is a presumptively valid judgment entitled to enforcement, unless or until reversed or set aside (All Terrain Properties, Inc. v Hoy, 265 AD2d 87 [1st Dept 2000]; but see also Fleet Business Credit, LLC v Michael P Costelloe, Inc., 19 Misc 3d 29 [App Term 2d & 11th Jud Dists 2008] [limited exception for out-of-state defaults where defendant alleges a lack of personal jurisdiction in the prior action]). To avoid enforcement of a default judgment, a defendant must move to vacate and offer both a reasonable excuse for its default and a meritorious defense to the underlying action (CPLR 317). In the court's view, a declaratory judgment, issued on default, should be treated in the same manner. Plaintiff's proper recourse, if it wishes to proceed with this action, is to move to vacate the default judgment in the declaratory judgment action by offering a reasonable excuse for its failure to appear and a meritorious defense to that action.
The court is empowered to stay its own proceedings "[e]xcept where otherwise prescribed by law…in a proper case, upon such terms as may be just" (CPLR 2201). One instance in which the staying of a given action is often deemed appropriate is when another (collateral) action is pending (see CPLR 2201, Comment 4 [discussing implied stay provision on a motion to dismiss pursuant to CPLR 3211(a)(4)]). Since plaintiff contends that the declaratory judgment cannot be given preclusive effect because it was not "actually litigated," this court will stay the instant matter to afford plaintiff the opportunity to move to vacate its Supreme Court default and, if granted, to "actually litigate" the coverage question in the declaratory judgment action.
What if a motion to vacate is made, but denied? What then? At what point does the stay end. A better approach, in my opinion, would be to grant defendant a stay on the condition that it vacate the default, allow an answer to be interposed, and actually litigate the matter. Problem solved.