On appeal from the Superior Court of New Jersey, Chancery Division, Essex County.
Petrella, Dreier and Ashbey. The opinion of the court was delivered by Dreier, J.A.D.
Defendant Baron Holding Corporation (Baron Holding) has appealed from a default judgment entered against it in this mortgage foreclosure action. It also appeals from a denial of its motion to vacate its default. Baron Holding had given two mortgages as security for its guaranty of certain obligations of Baron Motor Carriers (Baron Motors). The Hon. Harry A. Margolis, J.S.C. denied defendant's motion to vacate the default and entered a judgment of foreclosure against defendant for $412,719.72 plus $4,227.20 in attorney fees. Defendant then entered into Chapter 11 proceedings in federal court, and at the behest of Baron Holding, the Bankruptcy Court permitted special counsel, paid by the stockholder, Albert Baron, Sr. (Baron, Sr.), to take this appeal.
Baron Motors and Baron Holding are closely held family corporations. As noted, Baron, Sr. is the sole stockholder of Baron Holding, his son, Albert Baron, Jr., (Baron, Jr.) is the president, and Baron, Jr.'s wife, Janet Baron, is the secretary. Baron, Jr. is the sole stockholder and president of Baron Motors, and Janet Baron is the secretary. Baron Motors occupies and transports commodities out of facilities owned by Baron Holding on Blanchard Street in Newark.
Pursuant to a series of collective bargaining agreements and a declaration of trust with Local 478 of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, Baron Motors was obligated to make contributions to Local 478's Pension and Welfare Funds (plaintiff). Baron Motors fell into substantial arrears and entered into two separate agreements to repay the arrearages, interest and penalties. The first agreement, dated February 13, 1984,
was a settlement of pending litigation; the second was dated June 13, 1986. As part of the arrangement, Baron Holding signed guaranties and executed separate mortgages on the Blanchard Street corporate property to secure the guaranties.*fn1 The 1984 mortgage to secure Baron Motors' debt to plaintiff was for $150,775.59. The 1986 mortgage was for $350,570.69, which appears to represent Baron Holdings' remaining equity in the property.
Baron Motors failed to make timely payments to the Welfare and Pension Funds, and pursuant to the terms of the agreement, plaintiffs elected to sue Baron Holding on the two guaranties and to foreclose on the mortgages to recover all arrearages, interests, penalties, attorney fees and costs. Defendant defaulted, and as noted earlier, a default judgment was entered.
On this appeal Baron Holding contends that the trial judge erroneously refused to vacate the default, arguing that the summons and foreclosure complaint were improperly served, that both the 1984 and the 1986 mortgages from Baron Holding are invalid, and that the ERISA penalties are only applicable against Baron Motors, not Baron Holding.
The threshold question presented by defendant is whether there has been valid service on defendant Baron Holding. If service was improper, then the complaint should have been dismissed. If service was proper, then to successfully move to set aside an entry of default, defendant is required to show good cause. R. 4:43-3. Although the requisite good cause does not appear to be readily quantifiable, it should be noted that even an application to set aside a default judgment, which requires a more stringent showing of cause under R. 4:50-1
than the setting aside of a default, is "viewed with great liberality, and every reasonable ground for indulgence is tolerated to the end that a just result is reached." Marder v. Realty Construction Co., 84 N.J. Super. 313, 319 (App.Div.), aff'd 43 N.J. 508 (1964). Nevertheless, before a default is set aside, defendant must at the very least show the presence of a meritorious defense worthy of a judicial determination. O'Connor v. Abraham Altus, 67 N.J. 106, 128-129 (1975); Bank of New Jersey v. Pulini, 194 N.J. Super. 163, 165-166 (App.Div.1984). This is especially so in a foreclosure case where the mere denominating of the matter as a contested case moves it from the expeditious disposition by the Office of Foreclosure in the Administrative Office of the Courts, R. 1:34-6 and R. 4:64-1(a), to a more protracted ...