September 19, 2007
JAMES P. WELSH AND LINDA J. URRUTIA, PLAINTIFFS-RESPONDENTS,
X-CLUSIVE VEHICLE ENHANCEMENTS, DEFENDANT-APPELLANT.
On appeal from Superior Court of New Jersey, Law Division, Special Civil Part, Burlington County, DC-5034-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted September 11, 2007
Before Judges Coburn and Chambers.
In this Special Civil Part case, defendant appeals from the denial of its motion to vacate a default. Defendant was not served with the complaint in accordance with the court rules, although it did receive a copy of the complaint from the defense attorney in the mail. When defendant failed to file a timely answer, plaintiffs obtained a default. Defendant's motion to vacate the default and file an answer, made a few months later, was denied by the court below. We reverse.
This lawsuit arises out of a bailment relationship. Plaintiffs had left their vehicle at the defendant's place of business in order to have defendant sell it on their behalf. Plaintiffs contend that the vehicle was left with defendant in good operating condition with no problems involving the clutch. When the vehicle failed to sell, plaintiffs retrieved the vehicle and discovered that the clutch had been damaged. Defendant maintains that this clutch problem was a pre-existing condition, present when it took possession of the vehicle.
On or about May 23, 2006, plaintiffs filed a complaint in the Special Civil Part seeking recovery in the sum of $1,904.44, representing the cost of repairing the clutch, and treble damages and attorney fees under the Consumer Fraud Act, N.J.S.A. 56:8-1 to -166.
Under the Rules of the Special Civil Part, the court serves the complaint by certified and ordinary mail to the address of defendant which is provided by plaintiff. R. 6:2-3(d)(1). In this case, plaintiffs' attorney provided the court with the address where defendant's business is located, namely, 534 Wrightstown-Sykesville Road, Wrightstown,*fn1 New Jersey. However, defendant did not receive mail at this address. Defendant's mailing address was a post office box. As a result, defendant did not receive the service of process sent by the court.
Plaintiffs' counsel was aware, when he gave the court defendant's street address, that defendant did not receive mail at that address and that the post office address was the proper address. At oral argument before the motion judge, he explained that, before filing the complaint, he wrote to defendant at the street address and the letter came back. As a result, he called defendant's place of business and was advised that it did not receive mail at the street address, rather its mail was received at a post office address which was provided to him. He stated that he provided the street address to the court anyway, because he had some concerns about the veracity of defendant's explanation that it did not receive mail at the street address and he thought there would be difficulties in effectuating service on a post office box. We note, however, that the court rules governing the Special Civil Part expressly permit service by mailing to a post office box. R. 6:2-3(d)(4).
On May 24, 2006, plaintiffs' counsel did send a courtesy copy of the complaint to the defendant, at both its street and post office address, and advised defendant that the complaint had been filed against it. Defendant acknowledges that it received a copy of the complaint from plaintiffs' counsel at its post office address. However, defendant explains that it was awaiting a copy of the docketed complaint before responding. It does not appear that defendant received a summons. The next communication defendant received on the matter was a copy of plaintiffs' notice to enter a default which plaintiffs' counsel sent to the court on or about July 24, 2006, with a copy to defendant at its post office address. Default was entered.
On October 31, 2006, defendant moved to vacate the default and sought permission to file an answer. After hearing oral argument, the motion judge noted that, while she could be convinced that there was a meritorious defense, she found no excusable neglect, because defendant was aware of the litigation and failed to respond. An order was entered on November 3, 2006, denying the motion.
While the record below, including the order denying defendant's motion and appellate briefs, refers to the entry of a default judgment, in fact, no default judgment has been entered pursuant to R. 4:43-2. Rather only a default was entered in accordance with R. 4:43-1. The motion filed below properly sought vacation of the default. At oral argument, references were made to a default judgment, and this mistake continued into the order and the appellate papers before this court. However, the issue is whether the default should have been vacated, not a default judgment.*fn2
Defendant maintains that since the service was defective, the court below should have granted its motion. Plaintiffs, on the other hand, contend that the motion was correctly denied because the error in service upon defendant constituted a mere technical violation of the rules, that defendant had actual knowledge of the lawsuit, that the address served was the one appearing on defendant's website, and that the service in this case did not violate due process, relying on Rosa v. Araujo, 260 N.J. Super. 458 (App. Div. 1992), certif. denied, 133 N.J. 434 (1993).
This court need not reach the constitutional question of whether the service here violated principles of due process; the case can be resolved based on the application of the court rules. Courts will not reach a constitutional issue if the matter can be resolved on another legal basis. N.J. Div. of Youth & Family Servs. v. S.S., 187 N.J. 556, 564 (2006). Where the service of a defendant meets due process requirements, a default judgment may still be set aside for substantial defects in service. Sobel v. Long Island Entm't Prods., Inc., 329 N.J. Super. 285, 292-93 (App. Div. 2000).
Under the New Jersey Court Rules, a default may be vacated "[f]or good cause shown." R. 4:43-3. To vacate a default, defendant must "at the very least show the presence of a meritorious defense worthy of judicial determination." Trs. of Local 478 v. Baron Holding Corp., 224 N.J. Super. 485, 489 (App. Div. 1988). The court may also consider whether the defendant had engaged in any contumacious conduct as well as other circumstances. See O'Connor v. Altus, 67 N.J. 106, 128-29 (1975). The "good cause" standard under R. 4:43-3 is a less stringent standard than that governing the vacation of a default judgment. Bernhardt v. Alden Cafe, 374 N.J. Super. 271, 277 (App. Div. 2005). Courts have "broad discretion" to vacate defaults under R. 4:43-3. Eileen T. Quigley, Inc. v. Miller Family Farms, Inc., 266 N.J. Super. 283, 293 (App. Div. 1993).
In this case, under the belief that she was dealing with a default judgment, the motion judge applied the standard governing the vacation of default judgments. That standard provides that a default judgment will be vacated where defendant shows excusable neglect and a meritorious defense. Marder v. Realty Constr. Co., 84 N.J. Super. 313, 318-19 (App. Div.), aff'd, 43 N.J. 508 (1964). However, even applying this higher standard, the motion still should have been granted. Defendant has proffered a meritorious defense, namely that the damage to the vehicle was pre-existing and, as the case law below demonstrates, the failure to file a timely answer was excusable.
Applications to vacate default judgments should be looked at indulgently and granted with "great liberality" in order that a just result can be reached in the litigation. Id. at 319. The decision is "left to the sound discretion of the trial court, and will not be disturbed absent an abuse of discretion." Mancini v. EDS ex. rel. N.J. Auto. Full Ins. Underwriting Ass'n, 132 N.J. 330, 334 (1993). Certainly, under the less stringent standard of R. 4:43-3, a motion to vacate a default should also be granted with great liberality, and the lower court's decision will not be overturned unless there has been an abuse of discretion. The court's liberality in vacating defaults and default judgments is justified, since a default judgment is based on only one side's presentation of the evidence without due consideration to any countervailing evidence or point of view, and, thus, may not be a fair resolution of the dispute.
While minor flaws in service of process will not mandate the vacation of a default judgment, a "substantial deviation" from the court rules governing service will require setting aside a default judgment, provided the rights of innocent third party have not intervened. Sobel v. Long Island Entm't Prods., Inc., supra, 329 N.J. Super. at 292-93. This is true even though the defendant had actually received a copy of the complaint within the time to file an answer. Ibid.
The failure of service involved here was a substantial deviation from the court rules. Defendant never received the service from the court under R. 6:2-3(d)(1). Defendant never received a summons or a copy of the filed complaint because it was sent to an incorrect address. Admittedly, defendant did have actual knowledge of the litigation due to receipt by mail of a copy of the unfiled complaint sent to it by plaintiffs' attorney. Under these circumstances, however, defendant did not act unreasonably by expecting to be served with the complaint and waiting to file an answer until that happened. The court rules "do not provide for an affirmative duty on the part of a party who was improperly served to take any protective action," even when that party has actual knowledge of the litigation. Wohlegmuth v. 560 Ocean Club, 302 N.J. Super. 306, 311 (App. Div. 1997).
Under certain circumstances, principles of laches and estoppel may bar relief from the resulting default judgment.
Id. at 314. These principles, however, do not apply here. Once defendant obtained the notice that an application for a default was being made, defendant applied for relief from the court within approximately three months. This was not an unreasonable amount of time, and no one has been prejudiced by the delay.
The "absence of evidence establishing willful disregard of the court's process is an important consideration" when weighing whether to vacate a default judgment. Davis v. DND/Fidoreo, Inc., 317 N.J. Super. 92, 100 (App. Div. 1998), certif. denied, 158 N.J. 686 (1999). Here defendant has not engaged in a willful or calculated disregard of the court process, but rather was awaiting service under the rules. Once defendant became aware that the case was moving ahead, despite the failure of service, it took reasonably timely steps to vacate the default and file an answer.
Significantly, defendant's delay in filing an answer and the resultant entry of default is the direct result of plaintiffs' failure to give the court defendant's correct mailing address. In this situation, where plaintiffs knew the address provided to the court would not result in service upon defendant and plaintiffs had in their possession the correct address, it is most inequitable to let the default stand. Under these circumstances, defendant has shown good cause for vacating the default under R. 4:43-3, and the motion judge's refusal to do so was a mistaken exercise of discretion.