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NYDIC Management Services, L.L.C. v. DS Montvale


January 3, 2008


On appeal from Superior Court of New Jersey, Law Division, Bergen County, No. L-5768-05.

Per curiam.


Argued November 8, 2007

Before Judges Wefing and Parker.

Defendant appeals from a judgment entered against it for $58,376.52. After reviewing the record in light of the contentions advanced on appeal, we affirm that judgment to the extent it represents a return to plaintiff of its security deposit, together with interest. To the extent it represents an award of counsel fees and costs, we reverse.

Defendant is the owner of commercial premises located at 221 West Grand Avenue in Montvale. In 1988 it leased a portion of those premises to plaintiff's predecessor. Thereafter, the parties executed a series of amendments and supplements to the original lease, expanding the area plaintiff occupied. In conjunction with its leasehold, plaintiff gave to defendant a total security deposit of $48,592.69. On or about May 31, 2003, plaintiff surrendered possession of the premises, but defendant failed to return the security deposit despite plaintiff's repeated requests.

Plaintiff eventually filed suit in August 2005 to recover that security deposit. When defendant did not file an answer to plaintiff's complaint, plaintiff requested the clerk to enter default against defendant in October 2005. In November 2005 plaintiff filed a motion to enter a default judgment against defendant. In response, defendant filed a cross-motion to set aside the default previously entered against it and to dismiss the action for insufficiency of service of process. The trial court denied plaintiff's motion to enter a default judgment and granted defendant's motion to set aside the default. It also denied defendant's motion to dismiss the complaint for insufficiency of process. Finally, it denied plaintiff's application for counsel fees without prejudice, noting that plaintiff was free to renew its application in conjunction with a determination on the merits of plaintiff's claim.

The matter was tried to a jury, which returned a verdict in plaintiff's favor. Plaintiff thereafter renewed its motion for counsel fees and costs incurred in connection with obtaining entry of default against defendant and opposing defendant's motion to set aside that default. The trial court granted plaintiff's application, leading to the judgment which is before us on appeal.

Defendant makes two arguments on appeal--that the trial court erred in denying its motion to dismiss the complaint for insufficiency of process and that the trial court erred in awarding plaintiff counsel fees. We reject the first but agree with the second.

In support of its first argument, defendant contends that service of process was defective because it was not made in compliance with R. 4:4-4(a)(5). That rule governs the manner by which service is to be made upon partnerships and unincorporated associations; it specifies that a copy of the summons and complaint is to be left with an officer or managing agent, or, in the case of a partnership, with a general partner.

Defendant, however, is neither a partnership nor an unincorporated association. Rather, it is a limited liability company, formed under N.J.S.A. 42:2B-1 to -70. Although our court rules do not specifically provide for service of process upon limited liability companies, we are persuaded that in light of the statutory protection provided to the members of such companies against personal responsibility for the debts of the companies, N.J.S.A. 42:2B-23, limited liability companies should not be treated as partnerships or unincorporated associations for purposes of service of process.

In our view, one of the purposes underlying the service provisions of R. 4:4-4(a)(5) is the potential for an individual partner's liability which exists in a suit against a partnership. That potential does not exist in a suit against a limited liability company, and we can perceive no policy justification for insisting that a limited liability company be served in the same manner as a partnership. We have previously indicated, in another context, that there is "no indication that the Legislature intended to incorporate any provision of the Uniform Partnership Act into the L[imited] L[iability] C[ompany] law." Kuhn v. Tumminelli, 366 N.J. Super. 431, 439 (App. Div. 2004). That is particularly so in the present instance, in which defendant does not deny that it had actual knowledge of the complaint filed against it and has never questioned the authority of the individual who received the summons and complaint on its behalf.

A different result obtains, however, with respect to the trial court's award of counsel fees and costs. As we noted, plaintiff's application for counsel fees was not premised on the fact that it filed suit to recover its security deposit (N.J.S.A. 46:8-21.1 is inapplicable to commercial property, Presberg v. Chelton Realty Inc., 136 N.J. Super. 78, 84 (Passaic County Ct. 1975)), but, rather, it sought such an award in connection with defendant's application to set aside the default entered against it. Those cases which have granted such an award have all involved applications to set aside default judgments, not applications to set aside the default itself. Here, no default judgment was ever entered because defendant filed its motion to set aside the default before a default judgment was entered. In such a posture, counsel fees were not recoverable.

The judgment under review is affirmed in part and reversed in part, and the matter is remanded to the trial court for entry of an amended judgment.


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