July 11, 2007
SAIBER SCHLESINGER SATZ & GOLDSTEIN, LLC, PLAINTIFF-RESPONDENT,
DONALD CHIAPPE, INDIVIDUALLY AND AS EXECUTOR FOR THE ESTATE OF MARY CHIAPPA, AND THE ESTATE OF MARY CHIAPPA, DEFENDANTS-APPELLANTS.
On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-8884-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted May 16, 2007
Before Judges Wefing and Messano.
Defendants Donald Chiappe (Chiappe), individually and as executor of the estate of his mother Mary Chiappa, and the Estate of Mary Chiappa (the Estate) appeal a series of orders culminating in the denial of their motion to vacate a previously-entered default judgment in favor of plaintiff Saiber Schlesinger Satz & Goldstein, LLC (SSSG) in the amount of $77,908. The procedural history of the matter, closely intertwined with other litigation, is complicated and requires some explication.
SSSG represented defendants in probate litigation brought on behalf of the Estate against James K. Pryor. Defendants alleged that Pryor, an attorney who served as Mary Chiappa's court-appointed guardian while she was incompetent prior to her death, mismanaged and misappropriated her assets. At some point, the litigation was ostensibly settled, though Chiappe refused to execute the settlement agreement claiming SSSG entered into the settlement without his authority.
Sometime in July, 2003, SSSG advised Chiappe that it would no longer represent the Estate and presented him with a bill for services rendered in the litigation. On July 21, 2003, the Chancery judge entered an order in which he determined defendants were bound by the terms of the settlement. They appealed. In an unreported decision, we concluded that an evidentiary hearing was necessary to determine whether Chiappe had approved the terms of the settlement and had authorized SSSG to enter into it on behalf of the Estate. In the Matter of the Estate of Mary Chiappa, No.A-0881-03 (October 26, 2005). We remanded the matter to the Chancery judge to conduct the hearing.
In November, 2004, while the appeal was pending but before our decision, SSSG filed this complaint seeking to recover $77,908.13 in legal fees and expenses. In April, 2005, defendants filed a pro se answer and counterclaim that alleged, among other things, that SSSG had "increased the amount of their attorney's fees . . . because [Chiappe] refused to sign [the settlement agreement]," and had "breached its legal duty to [defendants] by making outrageous mistakes and/or omissions" in the probate litigation.
SSSG moved to dismiss the counterclaim based upon defendants' failure to comply with the Affidavit of Merit Statute. N.J.S.A. 2A:53A-26 through -29. On October 21, 2005, the motion judge entered an order dismissing the counterclaim with prejudice, "to the extent [it] allege[d] legal malpractice"; however, the judge denied SSSG's motion to dismiss "to the extent the counterclaim allege[d] breach of contract."
On February 16, 2006, the court notified the parties by form notice that a trial date was set for May 8. We gather that on February 17, 2006, the judge entered an order compelling Chiappe to appear for depositions. Although it is unclear from the record exactly what transpired thereafter, SSSG moved to dismiss the counterclaim and suppress defendants' answer with prejudice pursuant to R. 4:23-2(b)(3) claiming defendants had violated the court's order; defendants opposed the motion.
On March 31, 2006, the motion judge entered an order dismissing defendants' counterclaim and striking their answer without prejudice. The order reflects his decision to "treat this motion as a motion to dismiss without prejudice pursuant to R. 4:23-5." The judge conditioned the reinstatement of defendants' pleadings upon the following: 1) [Chiappe] had to "make himself available for the continuation of the deposition that he wrongfully terminated"*fn1 ; 2) defendants had to pay SSSG $500 in counsel fees as a sanction; and 3) defendants had to move for restoration and pay the appropriate fee. Lastly, the order provided
As R. 4:23-5 provides, the suppression [and] dismissal may be made with prejudice upon motion if, after 90 days, defendant has not cured the deficiencies and moved to restore. Thereafter, SSSG sought an adjournment of the May 8 trial date apparently based upon the March 31 order, but this request was denied by the civil division's presiding judge. On April 19, 2006, SSSG hand-delivered*fn2 a letter to Chiappe advising him of the adjournment request was denied and further providing,
[T]he Court expects the parties to appear on May 8, 2006 as previously noticed. However, [the presiding judge's] chambers has further advised us that in view of the fact that defendant's [a]nswer has been suppressed, and defendants' [c]ounterclaim dismissed, the Court will proceed with a proof hearing pursuant to R. 4:43-2(b) in lieu of a trial.
Please be guided accordingly.
Defendants failed to appear at the trial call on May 8, 2006, and the matter was assigned to another judge for a proof hearing which did not take place until two days later, on May 10, 2006. Nothing in the record demonstrates that defendants were advised of this new date. After hearing testimony from one of SSSG's representatives and considering certain documentary evidence, the judge entered default judgment in favor of SSSG and against both defendants "jointly and severally" in the amount of $77,908.*fn3
Defendants immediately moved to set aside the judgment and extend time to reinstate their pleadings. Although we have not been provided with the motion papers or any supporting documents, we gather from the June 9, 2006, order entered by the judge that defendants contended Chiappe failed to appear on the trial date because of confusion. In his order denying defendants' request, the judge noted
While the court is sympathetic with the defendants['] confusion about dates, this was not a contested trial set for 5/8/06 nor for the proof hearing referred out . . . that same day [and] finally completed on May 10, 2006. Defendant[s] ha[ve] not shown what meritorious defense [they] could have present[ed] on May 8, 2006 or May 10, 2006 once [their] defenses had been suppressed.
The defendants' answer [was] suppressed on 3/31/06 [and] no attempt to restore has been made by complying with this court's order of 2/17/06.
Defendants filed another motion. They sought 1) to vacate the March 31, 2006 order suppressing their defenses and dismissing their counterclaim; 2) vacate the May 10, 2006, default judgment; and 3) reschedule the trial date. SSSG cross-moved seeking to dismiss the counterclaim and suppress the defenses with prejudice, pursuant to R. 4:23-5(a)(2). Although the judge heard oral argument, we have not been provided with a transcript of the hearing. In any event, by order dated July 21, 2006, the judge denied defendants' motion and granted SSSG's cross-motion. Defendants then filed this pro se appeal.*fn4
In large part, defendants' brief rehashes objections to SSSG's handling of the probate litigation and reiterates the claim that the settlement of that case was never authorized. They argue that it was inappropriate for the court to enter judgment in this matter while the evidential hearing required by our remand was still pending.
While the probate litigation and this lawsuit are clearly related, we fail to see why SSSG's claim for legal expenses due and owing necessarily needed to await the outcome of the remand hearing. Assuming defendants prevailed there, and the settlement was overturned, SSSG's claim would still be extant and it was not dependent upon the ultimate outcome of the probate litigation. Since defendants' legal malpractice counterclaim was dismissed with prejudice in this case, any favorable outcome in the probate litigation would not adversely impact SSSG's claim. See Saffer v. Willoughby, 143 N.J. 256, 272 (1996) (holding that ordinarily an attorney may not collect fees for services negligently performed).
More importantly, since this appeal was filed, the evidential hearing required by our remand was conducted and resulted in the Chancery judge concluding that Chiappe understood the terms of the settlement and authorized SSSG to settle the Estate's claims in accordance with its terms. Therefore, any claim that this litigation should not have proceeded because of the pending remand is moot.
Defendants, however, also contend that the motion judge improperly exercised his discretion in failing to vacate the default judgment entered against them. Given the numerous procedural irregularities, we agree that defendants' motion should have been granted and so we reverse.
We begin by recognizing that a motion seeking relief under R. 4:50-1 is addressed to the motion judge's sound discretion, and we will not disturb that decision unless it resulted from a clear abuse of discretion. Housing Auth. of Town of Morristown v. Little, 135 N.J. 274, 283-84 (1994). A request to vacate a default judgment, as opposed to other relief sought under the rule, must be "viewed with great liberality, and every reasonable ground for indulgence is tolerated to the end that a just result is reached." Marder v. Realty Const. Co., 84 N.J. Super. 313, 319 (App. Div.), aff'd, 43 N.J. 508 (1964); see also Pressler, Current N.J. Court Rules, comment 1 on R. 4:50-1 (2007) (noting, "[e]xcept for motions for relief from default judgments which are liberally viewed, . . . a motion for relief [under the rule] . . . should be granted sparingly").
Defendants argue that relief from the default judgment should have been granted under R. 4:50-1(a) -- because of "mistake, inadvertence, surprise or excusable neglect" -- or subsection (d) -- because the judgment is void. We also consider defendants' argument under subsection (f) of the rule which permits the court to set aside a judgment "for any other reason justifying relief." While this subsection's broad equitable reach is reserved for "exceptional cases," we have repeatedly utilized it, along with general notions of fairness, to "achieve equity and justice." Court Invest. Co. v. Perillo, 48 N.J. 334, 341 (1966).
SSSG initially moved to suppress and dismiss defendants' pleadings under R. 4:23-2(b)(3) which permits the judge to "strik[e] out pleadings . . . or dismiss the action or proceeding . . . with or without prejudice, or render a judgment by default against the disobedient party" who "fails to obey an order to provide or permit discovery." The motion judge, however, treated the motion as one brought under R. 4:23-5. Effective September 1, 2002, the sanctions imposed under the two-step procedure contemplated by that rule apply only to certain discovery delinquencies and are not available as sanctions for violating an order compelling a deposition. See Pressler, Current N.J. Court Rules, comment 3 on R. 4:23-5 (2003) (noting amendment made it clear that the only discovery obligations that come within the ambit of the rule are interrogatories, document demands, and medical examinations).
We assume the motion judge was attempting to provide defendants, appearing pro se, with clear guidance as to their discovery obligations and believed his March 31, 2006, order accomplished that goal. However, as we noted in Colonial Specialty Foods, Inc. v. County of Cape May, 317 N.J. Super. 207, 210 (App. Div. 1999), a subsequent dismissal with prejudice pursuant to R. 4:23-5(a)(2) can only be predicated upon a proper dismissal without prejudice under R. 4:23-5(a)(1).
More importantly in terms of what transpired, the March 31, 2006, order clearly allowed defendants the reasonable belief that if they complied with the order's conditions, their pleadings would be restored, and, of equal importance, SSSG could not move to convert the dismissal to one "with prejudice" until ninety days elapsed.
Unfortunately, within thirty-eight days, the case was listed for trial. When defendants failed to appear, default was entered and two-days later, after a proof hearing, judgment was entered.
The entry of default and judgment were both improper under our Court Rules. First, pursuant to R. 4:43-1, default may be entered against a party who has "failed to appear," or whose "answer has been stricken with prejudice." Since defendants' pleading was specifically stricken and dismissed without prejudice by the terms of the March 31, 2006, order, default was not appropriate.*fn5 See also Kolczycki v. City of East Orange, 317 N.J. Super. 505, 520 (App. Div. 1999) (holding that proof hearing should not have occurred while suppression of defendant's pleading was "without prejudice").
Second, R. 4:43-2(b), requires that notice of the proof hearing be provided by ordinary mail. There is no indication from the record that defendants were ever advised of the proof hearing that took place two days after default was entered.
SSSG argues that defendants had actual notice of the trial date, never requested an adjournment and simply failed to appear. Though not specifically cited by plaintiff, we recognize that R. 1:2-4(a) permits the striking of an answer and the dismissal of a counterclaim "[i]f without just cause or excuse or because of failure to give reasonable attention to the matter," a party fails to appear "on the day of trial." However, there are a number of reasons why this rule does not authorize the entry of default, much less default judgment, against defendants in these circumstances.
First, we have held that any dismissal based upon a failure to appear is a sanction of last resort. See Connors v. Sexton Studios Inc., 270 N.J. Super. 390, 393 (App. Div. 1994) (reversing dismissal of pro se litigant's complaint for failure to appear when lesser sanction was appropriate). Second, any dismissal under this rule is presumed to be without prejudice unless the court for good cause orders otherwise. Ibid. The record does not reveal any indication that the presiding judge dismissed defendants' pleadings with prejudice at the calendar call on May 8, 2006. Lastly, the record does not reveal that any judge ever determined that defendants lacked "just cause" for not appearing. Rather, when defendants filed their first motion to vacate the default judgment, the motion judge "was sympathetic to defendants['] confusion about dates." We assume that defendants' confusion was well-founded given the conflict between the March 31, 2006, order, that implied an available ninety-day period for defendants to restore their pleadings, and SSSG's April 19, 2006, letter that conveyed the court's requirement that defendants appear, not for trial, but for a proof-hearing, which, for the reasons already discussed, was improper.
We conclude, therefore, that the motion judge's refusal to vacate the default judgment because defendants had "not show[n] what meritorious defense [they] could have present[ed] . . . once [their] defenses had been suppressed" was a mistaken exercise of his discretion. Since the entry of the default judgment was inappropriate in the first instance, under the exceptional circumstances presented, defendants were entitled to relief pursuant to R. 4:50-1(f). We therefore vacate the orders entered on March 31, 2006, June 9, 2006, and July 21, 2006, as well as the May 10, 2006, default judgment.