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New Century Financial Services, Inc. v. Carrero


January 25, 2008


On appeal from Superior Court of New Jersey, Law Division, Bergen County, DC 7662-98. Darryl T. Garvin argued the cause for appellant.

Per curiam.


Argued February 28, 2007

Before Judges Stern, Collester and Lyons.

Defendant appeals from an order of November 18, 2005 denying her motion to vacate a default judgment and from an order of February 3, 2006 denying reconsideration. We affirm.

Plaintiff New Century Financial Services, Inc. (New Century) is the assignee of defendant's defaulted Discover credit card. A complaint was filed on May 15, 1998 by New Century as assignee of the debt, asserting an outstanding balance in the amount of $5,127.66 in addition to post-default interest at the contract rate of 19.80 percent. An amended complaint was filed on June 9, 1998 and served on defendant on July 1, 1998. Defendant did not file an answer, and a default judgment was entered against her on July 29, 1998 for $8,741.96 plus costs of $239.84 totaling $8,981.60.

Plaintiff made several post-judgment efforts at collection, commencing with an information subpoena pursuant to R. 6:7-2 served by certified and regular mail. Following failure of plaintiff to respond, orders were entered for her arrest for her disregard of post-judgment discovery. However, plaintiff did not pursue the issuance of a warrant for defendant's arrest, but instead docketed its judgment on March 4, 1999 and sought to levy upon defendant's realty and personalty.

Defendant refused entry by sheriff's officers to levy upon saleable items. Plaintiff then applied for an order to compel defendant to permit entry by the officers. On June 10, 1999 a letter was received from an attorney for defendant objecting to entry, but plaintiff's motion was granted by the court on July 29, 1999. However, access was again refused, and plaintiff then filed a motion in aid of litigant's rights as well as another information subpoena. No response was received by defendant or her attorney and the order was granted.

More than four years later on April 8, 2003, defendant's then attorney moved to vacate the March 4, 1999 default judgment. In a certification defendant said she did not pay the balance on the credit card because the card was stolen and used without her authorization. She attached an undated letter from her attorney sent by certified mail to "NCO Financial Systems, Inc." stating that:

"Ms. Carrero had lost her credit cards. She did not incur the $9,364.23 claim by your company. She duly reported the loss to her credit card issuer. Therefore, she is not liable for the amount of $9,364.23."

Defendant argued that the judgment against her was void because of the federal Truth in Lending statute limiting a cardholder's damages to a maximum of $50 where there has been unauthorized use. 15 U.S.C.A. 1643.

On May 23, 2003, the motion judge vacated the default judgment against defendant for the following reasons:

It appears that the defendant may have taken reasonable steps to inform the credit card company that issued the card that the credit card was purportedly stolen and used without her authorization. Defendant was apparently under the impression that reporting the card stolen to the credit card company was the proper and adequate response in order for her not to be responsible for monies charged to the card. The court is satisfied that the defendant made a showing of excusable neglect in relying on her communication with the credit card company as satisfying her obligation.

Further, the court is satisfied that the defendant has a meritorious defense in that the default judgment may well be void as violative of 15 U.S.C.A. 1643. While the instant matter pushes the limit of timely challenging the purported void default judgment pursuant to R. 4:50-1(d), public policy favors the disposition based on the merits of the case, not on default. [Berger v. Paterson Veteran's Taxi, 244 N.J. Super. 200 (App. Div. 1990)] sets forth that a void judgment not entitled to enforcement may be vacated at any time pursuant to R. 4:50-1(d). The court is satisfied that the balance of the equities weigh in favor of allowing the defendant an opportunity to present the merits of their case.

Enforcement of the default judgment in the instant matter would be unjust and inequitable where there are allegations that the debt at issue was caused by a stolen credit card. Therefore, pursuant to R. 4:50-1(d) and R. 4:50-1(f) the court vacates the default judgment against the defendant and permits the defendant to interpose responsive pleadings within fourteen days of the order.

Defendant's motion for reconsideration was denied. On June 5, 2003, defendant filed an answer denying the allegations in plaintiff's complaint and setting forth thirteen separate defenses as well as eight separate counterclaims seeking damages including punitive and treble damages, damages under the New Jersey Consumer Protection Act as well as damages for loss of reputation, credit standing and the like. Plaintiff sought discovery by requests for admissions and written interrogatories, which were sent to defendant on July 16, 2003. After no response was received, plaintiff sent a letter pursuant to R. 1:6-2(c) to defendant's counsel advising that discovery was past due and that application would be filed before the court if answers were not received within ten days. When no response was received from defendant, plaintiff noticed both defendant and her attorney of an application to suppress defendant's pleadings for failure to answer interrogatories. The motion was unopposed and an order was entered suppressing plaintiff's defenses and counterclaims on November 7, 2003. Plaintiff moved to enter judgment against the defendant in the sum of $13,403.56 plus costs. Notice was again sent to defendant's counsel and to defendant personally. Again there was no response by either. Accordingly, judgment was entered against defendant for $13,736.63 on February 5, 2004.

Plaintiff once again pursued collection efforts, and on March 4 and March 11, 2005, the sheriff levied on defendant's real estate as well as rental income due to defendant from tenants occupying the real estate. On May 26, 2005, plaintiff filed a motion seeking turnover of rental payments by tenants on defendant's property. The order was served upon the tenants, and as of the date of the filing of plaintiff's brief on appeal, the amount of $11,269 was paid. We assume that the remaining portion of the debt has been satisfied.

Defendant retained new counsel, who filed a motion on July 27, 2005, to vacate the February 5, 2004 "second judgment" against her. In her accompanying certification she stated that her prior attorney never advised her of the order of suppression and that she was completely unaware of the 2004 default judgment against her until February 2005 when her present counsel discovered it while reviewing title work for a scheduled closing. She further claimed her prior attorney never advised her that her case was in jeopardy and instead gave her the impression that she was "winning." As to prior notices sent by plaintiff's counsel to her, she said she does not read English and was relying upon her attorney to take care of things. Once again she claimed a meritorious defense because her card was stolen and that any charges were made by the thief. However, this time her motion to vacate the second default judgment was denied on November 23, 2005, as was her subsequent motion for reconsideration. This appeal followed.

Defendant argues the motion judge erred as follows: (1) requiring "excusable neglect" to vacate a void default judgment; (2) by not finding the default judgment was void under 15 U.S.C.A. 1643; (3) by disregarding the law of the case; (4) by relying upon representations made by plaintiff's counsel that were false; and (5) by not vacating the default judgment under R. 4:50-1(f).

Defendant's motion to vacate was filed on July 27, 2005, almost a year and a half after the February 5, 2004 default judgment. R. 4:50-2 imposes a one-year limitation on motions to vacate a judgment or order pursuant to subsection (a) (a mistake, inadvertence, surprise or excusable neglect), subsection (b) (newly discovered evidence), and subsection (c) (fraud, misrepresentation, or misconduct). Therefore, defendant is barred from asserting these grounds in seeking relief from the second default judgment entered against her. However, applications made pursuant to R. 4:50-1(d) (void judgment or order) or subsection (f) (any other reason justifying relief from the operation of the judgment or order) are not subject to the same time limitation under R. 4:50-2.

An application to vacate a default judgment 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). Here, defendant argues that the default judgment against her was void due to plaintiff's failure to comply with the requirements of 15 U.S.C.A. 1643 and that the time delay between entry of the default judgment and defendant's motion to vacate did not preclude her from obtaining relief under subsection (d). Therefore, we must consider whether or not the second default judgment was void.

As defined by our Supreme Court in James v. Francesco, 61 N.J. 480, 485 (1972), "a judgment is void if there has been a failure to comply with a requirement which is a condition precedent to the exercise of jurisdiction by the court." A void judgment is one rendered by a court lacking jurisdiction with regard to the party against whom it is rendered or lacking jurisdiction of the subject matter of the action, Restatement, Judgments (2d) Section 1 pp 30-33 (1982), and it may be set aside without the need of showing a meritorious defense. See Jameson v. Great Atlantic, 363 N.J. Super. 419, 425 (App. Div. 2003). Moreover, while a judgment is void if there is lack of personal jurisdiction or notice absent intervening rights of a third party, City of Newark v. (497) Block, 1854, 244 N.J.

Super. 402 (App. Div. 1990), in this case service was conceded and notice was given as to the application to suppress as well as the entry of default judgment. Therefore, the judgment was not void for reasons of personal jurisdiction.

A judgment is void for lack of subject matter jurisdiction when the court has no authority to adjudicate the controversy.

See Bank v. Kim, 361 N.J. Super. 331, 339 (App. Div. 2003) (mortgage foreclosure judgment void in violation of bankruptcy automatic stay). Here defendant argues that the default judgment was void because the default was not entered in compliance with the Truth in Lending Act requirements of 15 U.S.C.A. 1643 pertaining to the liability of the holder of the credit card. However, nothing in the Act precludes the subject matter jurisdiction of the courts of this State to hear and adjudicate claims by credit card issuers or their assignees against the credit card holder. Although defendant claims plaintiff violated section 1643(b), which places the burden of proof on the card issuer to show that the use of the card was authorized, nothing in the Truth in Lending Act states that a default judgment entered absent such proof renders the judgment void. Also we are cited to no authority to preclude entry of a default judgment consistent with State procedural requirements when a defense, under 15 U.S.C.A. or otherwise, is not properly or timely asserted.

This case is unlike Riverview Towers Assocs. v. Jones, 358 N.J. Super. 85, 88 (App. Div. 2003) in which we held that the court lacked subject matter jurisdiction to issue judgments of possession against tenants where the landlord failed to comply with HUD lease termination notice requirements. Such requirements are required for jurisdiction for summary dispossession of protected HUD tenancies, but no such jurisdictional requirement is present in the Truth in Lending Act. In short, we find no issue of Federal preemption and no lack of subject matter jurisdiction to declare the default judgment void. See Psensky v. American Honda Finance Corporation, et al., 378 N.J. Super. 221, 225 (App. Div. 2005).

Contrary to defendant's argument, statements by the motion judge vacating the first default judgment were not binding on the judge hearing the motion to vacate the second default judgment. The "law of the case" is a discretionary rule which is binding on a court or equal jurisdiction hearing the same matter, and the second default judgment is a different matter. See Monaco v. Hartz Mountain Corp., 178 N.J. 401, 413 (2004). Furthermore, we question whether the judge on the first motion to vacate made a legal finding since his statement was only that "the default judgment may well be void as violative of 15 U.S.C.A. 1643." In this instance we find that the default judgment entered on February 5, 2004 arising from failure to answer interrogatories is not a void judgment under R. 4:50-1(d).

Therefore, the only remaining ground for relief from the second default judgment is R. 4:50-1(f), the catchall permitting courts to look at the entire circumstances to determine whether the case presents exceptional circumstances warranting redress of an order or judgment that would be unjust, oppressive, or inequitable. Lawson Mardon Wheaton, Inc. v. Smith, 160 N.J. 383, 404-07 (1999); Baumann v. Marinaro, 95 N.J. 380, 395 (1984); Port Invest. Co. v. Perillo, 48 N.J. 334, 341 (1966). Here, the circumstances are hardly exceptional, for the suit is simply for collection of a credit card debt. See New Century Financial v. Dannegar, 394 N.J. Super. 595, 603-05 (App. Div. 2007). Moreover, while relief under subsection (f) is not automatically barred by failure to make a timely motion under the Rules of Court, it is available when the application is within a reasonable period of time under R. 4:50-2. Baumann, supra, 95 N.J. at 395. We find under these circumstances that the application was not made within a reasonable time from the receipt by defendant and her prior attorney of the notices to suppress defendant's pleadings and to enter default judgment. Moreover, even assuming defendant's prior attorney shares fault, the remedy for attorney negligence in a legal malpractice action is available to her. Id. at 395-98; See also Manning Eng'g Inc. v. Hudson Cty. Park Comm'n, 74 N.J. 113, 125 (1977).

The further arguments presented by defendant seeking relief under R. 4:50-1(f) are largely based on mistake or excusable neglect relating to the alleged conduct of her prior attorney as well as her inability to read English. These arguments fall under R. 4:50-1(a) and is subject to R. 4:50-2, which conditions relief on acting within a reasonable time specified as one year from the application for relief is based on subsection (a). In this case the application was seven years after the first judgment, two years after the first judgment was vacated, and a year and a half after the entry of the second default judgment. Defendant's argument regarding the impact of the 2003 finding of a meritorious defense suggests that no default or default judgment could ever be entered, irrespective of defendant's failure to ever defend, and clearly that cannot be the case. There has been no indication of a meritorious defense other than a statement that the card was stolen and its use unauthorized without any production of receipts to show unauthorized charges or signatures. Furthermore, we find no "excusable neglect" as required by R. 4:50-1(a). Marder, supra, 84 N.J. Super. at 319.

The remaining arguments made by defendant are without sufficient merit to warrant discussion. R. 2:11-3(e)(1)(E).



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