On appeal from the Superior Court of New Jersey, Law Division, Union County, L-1495-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted November 26, 2007
Before Judges Parrillo and Sabatino.
The crux of this appeal is whether the Law Division erred in denying a motion, pursuant to R. 4:50-1, to vacate a default judgment entered seventeen days before the motion was filed. The judgment declared appellant, Mary Jane Conte, personally liable for $55,994.90 in back rent and other charges on a commercial lease that plaintiff, Cleveland Plaza Associates ("the landlord"), had extended to a corporation in which appellant and her husband, Gregory Conte*fn1, were principals.
Because we are satisfied that appellant presented a potentially meritorious defense, namely the lack of her personal contractual liability for the corporation's rent, and because the landlord's evidentiary presentation of lease-related correspondence at the underlying proof hearing in the Law Division was incomplete and skewed, we vacate the judgment as to appellant and remand for a trial on the merits.
The following factual and procedural chronology informs our consideration of the issues on appeal. Appellant, along with her husband, operated a business called Sandy Deck's Parties. Beginning in March 2004, the business rented commercial space in landlord's shopping plaza in Cranford. The lease identified the tenant as "Conte Entertainment of Cranford, LLC" ("the LLC" or "the corporation"). Although the Contes owned and operated the LLC, they were not listed individually as tenants, and the lease did not contain any personal guarantees from them to be responsible for the LLC's rent obligations. The rent was $2,544.80 per month, for a lease term of sixty months, or five years.
About a year into the lease, the LLC fell behind in rent. Appellant acknowledged those rent arrearages in a letter she sent to the landlord's general partner, Anthony J. Vizzoni, on July 1, 2005. The letter was typed on the business stationery of Sandy Deck's Parties. In that letter, appellant admitted that the business was then $14,667.24 behind in rent payments, but stated that she "hope[d] to be current with [the] past due payments by October['s] [e]nd." She requested the landlord to "consider a payment plan."
Vizzoni responded in a letter to appellant dated August 12, 2005. His reply indicated that the landlord would allow the business to remain as a tenant, but only if appellant and her husband would personally guarantee the lease, both individually and jointly. Enclosed with Vizzoni's letter was a draft lease addendum, which contained signature lines to reflect the Contes' assent to such individual guarantees. The letter assured the Contes that the landlord had "extended the [proposed] payment schedule . . . whereby you would be current by the end of October 2005 to provide you with additional flexibility if you so elect."
The Contes did not sign the lease addendum. Instead, two months later, appellant wrote Vizzoni another letter, again on her company's letterhead. In that letter, dated October 7, 2005, appellant conceded that the rent was still in arrears. She explained that the company's other location in Basking Ridge was being sold, and that she was consolidating the company's operations at the Cranford store. Appellant anticipated that such consolidation would provide the business with the means to make the rent in Cranford current within a year.
Asserting that she planned to "sign and personally guarantee the [rent for the] next 12 months," appellant proposed in her October 7 letter that the lease be amended to include a right of assignment. She hoped that such an assignment would enable a potential future transfer of the business and the leasehold to a third party buyer.
On these various points, appellant's October 7 letter specifically stated:
When amending our lease, we will personally guarantee the rent for the next year. Additionally, I will kindly request an additional change. I would like to be able to assign the lease so that I have the ability to sell this location at anytime in the distant future. I realize that Cleveland Plaza has been more than patient.
I intend to bring current our past due amount. I will continue to make payments until this matter is resolved. [Emphasis added.]
The landlord responded to appellant's October 7 proposal through a letter from Vizzoni on November 10, 2005. That letter conveyed what it termed as the landlord's "final offer in the hopes of amicably resolving this matter." (Emphasis and bold face in original.) As described in the letter, the landlord's offer included a proposed schedule for repayment of the back rent, an agreement to allow the tenant to assign the lease, and a requirement that appellant and her husband "unconditionally personally guarantee the lease through the remaining term." The November 10 letter demanded a reply within ten days.
By this point, appellant had retained the services of an attorney, Anthony Ambrosio, Esq. On November 21, 2005, Ambrosio sent a letter to Vizzoni, confirming the substance of a telephone conversation he had with Vizzoni earlier that day regarding the lease negotiations. In the letter, Ambrosio confirmed his "client's agreement to 1) personally guarantee any past due rent; 2) [p]ay current rent going forward plus $500.00 on account of arrears." Ambrosio also proposed that "[i]f my client decides to close her business she will give the landlord 30 days prior notice, pay the current rent and continue to pay $500.00 per month on the unpaid past due rent . . . and will not be responsible for any future rent." At the conclusion of the letter, Ambrosio requested the landlord to "advise if the above terms are acceptable."
Despite the fact that the landlord had demanded personal guarantees from both appellant and her husband, Ambrosio's November 21 letter consistently used the singular in referring to Mary Jane Conte as his "client." Additionally, the "cc" on his letter copied only Mary Jane Conte and not Gregory Conte.
The next documented communication between the parties was an e-mail sent by Vizzoni to Ambrosio on December 7, 2005, to which Vizzoni attached a draft lease addendum for Ambrosio's review. The e-mail stated, in part, "[p]lease review and advise if [the draft] is acceptable so that we may get same signed up. We'd like to wrap it all up within the next week." The attached lease addendum recited that the LLC was in arrears a total of $20,620.14 through the end of November 2005. The proposed addendum also stated:
As additional inducement for Landlord forbearing in any collection and eviction actions, Mary Jane Conte and Gregory N. Conte . . . hereby unconditionally and irrevocably personally guarantee all the obligations of Conte Entertainment of Cranford, [LLC], (inclusive of the timely and punctual payment of rent when due) . . . . This guarantee is a joint and several guarantee of Mary Jane Conte and Gregory N. Conte. [Emphasis in original deleted.]
As it turned out, neither appellant nor her husband ever signed the amended lease containing such personal guarantees. Nor did the landlord ever attempt to evict the business from the shopping plaza. Rather, appellant moved out on her own accord.
The landlord learned of its tenant's impending departure though a January 26, 2006 letter from Ambrosio to the landlord's counsel, Glenn Cavanagh, Esq. Ambrosio stated in the letter that his client intended to vacate the premises by February 1, 2006.*fn2 Within the next six days, the LLC vacated the premises. The landlord did not secure another tenant for the premises until the summer of 2006.
Still owed money, the landlord filed a complaint in the Law Division against the LLC and both Contes in April 2006. The complaint initially sought $21,359.94 in compensatory damages and $112,402.40 in special damages, exclusive of costs and attorneys' fees. Although service of process was effected upon them, defendants did not answer the complaint. It is not entirely clear why they failed to file a timely responsive pleading or seek an extension of time do so, except that appellant, in her motion to set aside the judgment, certified that "[b]y the time the negotiations [with the landlord] ended unresolved the time to answer the complaint had expired." In addition, Ambrosio later certified, also in support of the R. 4:50-1 motion, that about this same time frame "negotiations were ongoing."
After the time for an answer had passed, the landlord requested that the court enter a default against all three defendants, which it did on June 7, 2006. Despite the default, the parties continued negotiations through ...