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Figueroa v. Hartford Insurance Co.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


February 6, 2008

CARLOS J. FIGUEROA, PLAINTIFF-APPELLANT,
v.
HARTFORD INSURANCE COMPANY, DEFENDANT, AND TWIN CITY FIRE INSURANCE COMPANY, DEFENDANT-RESPONDENT.

On appeal from the Superior Court of New Jersey, Law Division, Passaic County, L-3914-04.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted October 24, 2007

Before Judges Parker and R. B. Coleman.

Plaintiff Carlos Figueroa appeals from a December 15, 2006 order denying his motion to set aside entry of default and from a subsequent December 20, 2006 order granting the motion of defendant Twin City Fire Insurance Company (Twin City) for Final Judgment by Default. We reverse and remand.

The following factual and procedural history is relevant to our consideration of the issues advanced on this appeal. On March 20, 2002, plaintiff reported to the Jersey City Police Department and to his insurance agent that his 2001 Honda Civic was stolen. Sometime thereafter, plaintiff filed a claim for his alleged loss under his automobile insurance policy written and issued by Twin City. Twin City investigated plaintiff's claim and determined that it did not constitute a comprehensive loss and that the vehicle was not stolen. Based on those determinations, Twin City refused to compensate plaintiff for his asserted loss. According to Twin City, the following factors were among those it considered in reaching its determination: (a) a fire caused by an unknown accelerant destroyed the car; (b) there were no signs of forced entry; and, (c) many items typically removed in the course of a car theft remained in the vehicle. Twin City also noted that prior to the expiration of the lease on the Honda Civic, plaintiff had purchased another vehicle, though he is the only licensed driver in his household.

On September 13, 2004, plaintiff filed a complaint naming as defendant Hartford Insurance Company (Hartford). In the two count complaint, plaintiff alleged (1) that Hartford refused to provide comprehensive automobile coverage pursuant to plaintiff's automobile insurance policy and improperly terminated plaintiff's insurance coverage and (2) Hartford breached the covenant of good faith and otherwise acted in bad faith. In May 2005, Twin City, asserting that it had been improperly sued as Hartford, answered the complaint. In that answer, Twin City generally denied the allegations of the complaint but it admitted that it issued an insurance policy to plaintiff and that it had denied coverage under the policy for the alleged loss. In its separate defenses, Twin City asserted, among other things, that plaintiff's claims were barred to the extent plaintiff had engaged in fraudulent conduct.

In the meantime, the trial court had administratively dismissed the complaint for lack of prosecution, which necessitated that plaintiff file an application to restore the complaint to the active trial calendar. That being done, the court granted plaintiff's motion and entered an order, dated December 19, 2005, restoring the complaint.

Thereafter, on March 2, 2006, plaintiff filed an amended complaint that formally included Twin City as a defendant. Twin City filed an answer to the amended complaint and asserted a counterclaim. In the counterclaim, it alleged that plaintiff falsely reported that the vehicle had been stolen and that he had violated the New Jersey Insurance Fraud Prevention Act, more particularly, N.J.S.A. 17:33A-4 and -7(b). Plaintiff did not answer or otherwise respond to the counterclaim. Nor did plaintiff respond to discovery requests that had been served previously by Twin City on June 5, 2005.

Eventually, on September 11, 2006, Twin City moved for entry of default against plaintiff and for dismissal of plaintiff's complaint for failure to respond to interrogatories. In response, plaintiff contacted Twin City and arranged for a two week adjournment so that he could serve a response to the counterclaim and to all outstanding discovery demands. Plaintiff responded to the interrogatories; thus, Twin City withdrew its motion to dismiss the complaint. It did not, however, withdraw its application for entry of default on the counterclaim.

On October 20, 2006, the motion judge granted Twin City's motion for entry of default. Subsequently, on November 14, 2006, the judge issued an amended order entering default that superseded the October 20 order. Plaintiff then moved for an order vacating the November 14 order and allowing plaintiff to file an answer to the counterclaim. Defendant opposed the motion and cross-moved for an order entering final judgment against plaintiff and dismissing plaintiff's complaint.

On December 15, 2006, the motion judge denied plaintiff's motion to vacate the order entering default. On the order, the judge made a hand-written notation that read: "NO SHOWING OF MERITORIOUS DEFENSE OR EXCUSABLE NEGLECT." On December 20, 2006, the judge entered final judgment by default against plaintiff for the amount of $1,227.60 and dismissed plaintiff's complaint with prejudice.

On January 4, 2007, plaintiff filed a motion for reconsideration along with a letter brief setting forth its argument that a meritorious defense and excusable neglect are not required to vacate the entry of default. The court rejected that argument and denied plaintiff's motion. Subsequently, plaintiff filed this appeal, in which he presents the following argument:

POINT ONE: THE TRIAL COURT ABUSED ITS DISCRETION BY DENYING PLAINTIFF'S MOTION TO VACATE THE DEFAULT AND FILE AN ANSWER TO THE COUNTERCLAIM.

Rule 4:43-3, Setting Aside Default, authorizes relief from default. That rule provides: "For good cause shown, the court may set aside an entry of default and, if a judgment by default has been entered, it may likewise set it aside in accordance with R. 4:50." "The required good cause showing for setting aside an entry of default pursuant to this rule is clearly a less stringent standard than that imposed by R. 4:50-1 for setting aside a default judgment." Pressler, Current N.J. Court Rules, comment on R. 4:43-3 (2008); see also Tr. of Local 478 Trucking and Allied Indus. Pension Fund, 224 N.J. Super. 485, 488 (App. Div. 1988) ("If service was proper, then to successfully move to set aside an entry of default, defendant is required to show good cause.").

By contrast, "a default judgment will not be disturbed unless the failure to answer or otherwise appear and defend was excusable under the circumstances and unless the defendant has a meritorious defense . . . ." Pressler, Current N.J. Court Rules, comment 4.1 on R. 4:50-1 (2008); See also Marder v. Realty Constr. Co., 84 N.J. Super. 313, 318 (App. Div.), aff'd, 43 N.J. 508 (1964).

In the present case, plaintiff filed a motion "for an Order vacating the Order entered by the Court on November 14, 2006 entering a default . . . ." That motion challenged the entry of default, not a default judgment. As a result, the court should have set aside the judgment if plaintiff could show good cause.

R. 4:43-3. The motion judge's notation on the December 15 order denying plaintiff's motion, "NO SHOWING OF MERITORIOUS DEFENSE OR EXCUSABLE NEGLECT," evidences that the judge applied the incorrect standard when determining whether or not to grant plaintiff's motion. The language of the notation tracks R. 4:50-1, Relief From Judgment Or Order, not R. 4:43-3, Setting Aside Default. Thus, the trial judge did not evaluate plaintiff's motion under a "good cause" standard, as he should have done. R. 4:43-3; Local 478, supra. Instead, the judge obviously utilized the "more stringent" standard that applies to R. 4:50-1. See Pressler, supra, comment on R. 4:43-3 (2008).

Because the trial judge did not assess plaintiff's motion properly, we are constrained to remand the matter for a determination whether there was "good cause" to set aside the entry of default. We do not comment on whether or not the record supports a finding that the entry of default should be set aside for "good cause." In the event that the trial court finds "good cause" to set aside the entry of default, the order denying plaintiff permission to file a responsive pleading to Twin City's counterclaim should be vacated to give practical effect to the court's decision. We do not retain jurisdiction.

Remanded.

20080206

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