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Lopez v. Vespa


June 24, 2008


On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, L-2184-97.

Per curiam.


Submitted December 12, 2007

Before Judges R. B. Coleman and Lyons.

Plaintiff Nicholas Lopez appeals from a March 16, 2007 order denying a motion to reconsider an order dated January 5, 2007 that denied plaintiff's motion to reinstate his complaint. We reverse and remand for a determination as to whether defendant would suffer demonstrable prejudice as a result of the reinstatement of the complaint.

This matter arises out of an automobile accident that occurred on May 31, 1996. Plaintiff and his wife, Theresa, filed a complaint on April 18, 1997, alleging that plaintiff suffered physical injuries as a result of the negligence of defendant Melissa Vespa who was operating a motor vehicle owned by defendant Charles T. Vespa. The complaint also alleged that Theresa suffered the loss of Nicholas's society, companionship, service and consortium. In due course, on May 6, 2003, defendants moved to stay the litigation because their automobile insurance carrier, the Home Insurance Company (Home Insurance), had been placed into rehabilitation. Thus, pursuant to an order dated May 30, 2003, the action was stayed initially for a period of ninety days. Home Insurance was then declared insolvent as of June 11, 2003. The New Jersey Property-Liability Insurance Guaranty Association (the Association) took up the administration of all Home Insurance claims, pursuant to the New Jersey Property-Liability Guaranty Association Act, N.J.S.A. 17:30A-1 to 20.*fn1

By a letter dated July 8, 2003, the Association advised plaintiff that he was required to submit his claim to his uninsured motorist (UM) carrier and to any other solvent carrier which may provide coverage for his claim before seeking coverage under the policy of an insolvent carrier such as Home Insurance. That letter further advised that "[a]ny amount recovered by [plaintiff] through coverage provided by a solvent carrier will reduce, by the same amount, any obligation the Association might otherwise have to pay statutory benefits."

Thereafter, following a status conference, the Law Division entered a November 24, 2003 order dismissing plaintiff's complaint without prejudice. That order of dismissal included the following provisions:

FURTHER ORDERED that plaintiff may re-file his Complaint at any time up to and including the thirtieth day following the conclusion of plaintiff's claim for uninsured motorist benefits, whether such claim was concluded by arbitration, or by a judgment entered in or a settlement of a lawsuit against plaintiff's uninsured motorist carrier(s), and it is

FURTHER ORDERED that any Complaint filed by plaintiff within the time period provided in the preceding paragraph shall be deemed timely and in compliance with the applicable statute of limitations.

The order also specified that it did "not act to release or waive any right, claim, or defense of the defendants which may be asserted in any Complaint" subsequently filed pursuant to the terms of the order.

Plaintiff submitted a claim for UM benefits to his insurance carrier Allstate Insurance (Allstate), and via a letter to the Association, dated February 25, 2004, plaintiff's counsel informed the Association of Allstate's intention to settle the UM claim for the full amount of available coverage, $15,000, in return for a general release. In that letter, plaintiff's counsel acknowledged that the Association would be entitled to a credit for any UM settlement, and he made a demand for the $250,000 limit of liability in the policy issued by Home Insurance to the Vespas. On July 6, 2004, plaintiff's counsel received settlement funds from Allstate for the UM claim in the amount of $15,000. He informed the Association of that development, and he periodically wrote to the Association demanding the policy limit.*fn2

Notwithstanding the provisions in the November 24, 2003 order that any complaint refiled by plaintiff within thirty days following the conclusion of his claim for UM benefits would "be deemed timely and in compliance with the applicable statute of limitations," plaintiff did not move to reinstate his complaint against defendants until November 10, 2006. In support of the motion, plaintiff's counsel certified that plaintiff's complaint alleging that defendants had rear-ended plaintiff's vehicle had been filed within the statute of limitations. He certified that after the Association took over the defense for defendant's insolvent insurer, plaintiff had pursued the UM claim under his own policy and defendants had submitted the stipulation of dismissal which was entered by the court. According to the certification of an associate of the law firm that represented plaintiff, "plaintiff's attorneys were unaware that the stipulation of dismissal contained the . . . clauses" relating to the refiling of the complaint and the thirty-day timeframe for such refiling. The associate certified that the language concerning reinstatement of the complaint was never discussed with him nor mentioned in communications from the Association during the ensuing two years when he communicated with the Association "to keep them advised of the state of the uninsured claim and to seek settlement from the Association."

The Law Division heard oral arguments on plaintiff's motion to reinstate the complaint on January 5, 2007, and it denied the motion, explaining:

[t]he defense contends that plaintiff's counsel does not base his motion on any cited case law and can only be moving forward under Court Rule 4:50-1. Defense notes that Section (d) and (e) of that rule would not apply to this case . . . . That any action for relief under [Sections (a) (b) and (c)] of the rule, must be brought within one year of the order being entered. And since this order was entered by [the prior judge] on November 24th of 2003, the one year period has elapsed. Defendant argues therefore that section (f), the catchall provision is the only one that might apply, but plaintiff is not entitled to relief under the provision because there are no exceptional circumstances present in the matter which warrant relief.

The court finds in this case there are no exceptional circumstances present in the matter which would warrant relief under the rule. Plaintiff's counsel has not provided reasons that would sufficiently warrant relief under the exceptional circumstances standard.

It appears to the court plaintiff's counsel failed to perhaps diligently read the order.

[Plaintiff's counsel] [w]as in possession of the proposed order and the signed order for really three years. That would be from January -- well I'll say two years and 10 months. January of 2004 until November of 2006 when the matter was brought to the court's attention.

Therefore, counsel clearly was on notice of the dismissal without prejudice.

But more importantly, the 30 day time period within which to refile the complaint. A failure to read or understand the order does not present exceptional circumstances. I can find no basis at all upon which to grant the motion when the relief is sought, as I said, nearly three years later.

Following that ruling, plaintiff filed a motion for reconsideration on January 25, 2007. In a certification submitted in support of that motion, plaintiff's counsel stated that the order requiring plaintiff to apply for reinstatement of the complaint within thirty days of the resolution of the UM claim was not entered as a result of a motion or ruling of the court and was not entered as a consent order. He, therefore, contended the order was invalid.

Oral argument on that motion was held telephonically on March 16, 2007, and the motion for reconsideration was denied. The court reiterated:

At the original motion to reinstate this matter, a motion which the Court denied, I said in ruling, the following. The Court finds there are no exceptional circumstances present in this case which would warrant relief under Rule 4:50-1(e) [sic].

Plaintiff's counsel has not provided any reasons which would warrant relief under the exceptional circumstances standard, other than the fact that plaintiff's counsel failed to diligently read the order at the time he received it.

[C]counsel was constructively on notice of the dismissal without prejudice and of the 30 day time period within which to refile the complaint.

The court at this point does not accept the argument that [the judge's] order is void because it lacks counsel's signature. The record is clear that counsel, plaintiff's counsel, was aware of the order. It was plaintiff's counsel that sent the order to New Jersey PLIGA to resolve the UIM [sic] matter.

With regard to plaintiff's lack of signature on the order, it is hard for the Court to believe that plaintiff would sit back and do nothing about the order if plaintiff, after receiving the order from [the judge], had a problem with it. That was not done in this case.

The court entered an order dated March 16, 2007 that memorialized the denial of the motion for reconsideration, and plaintiff filed a timely Notice of Appeal from that order on April 4, 2007. Plaintiff raises the following arguments in his appellant's brief:



In effect, plaintiff contends that the November 24, 2003 order of dismissal was a nullity because it did not comply with Rule 4:42-1(b), which provides that except as otherwise provided by paragraphs (c) and (d) of this rule, by other rule or by law, . . . no judgment or order shall be signed by the court unless the form thereof has been settled on motion on notice to all parties affected thereby who are not in default for failure to appear, or unless the written approval of such attorneys or parties to the form thereof is endorsed thereon.

Paragraph (c) of that rule provides for submission of a form of order under the so-called five-day rule, whereby the court may, within five days after service, sign the order unless a party served with a copy of the proposed order makes specific objections in writing. Paragraph (d) of Rule 4:42-1 authorizes the court to enter consent judgments or orders if the form of judgment or order recites that all parties have in fact consented to its entry in the form submitted.

Plaintiff contends that because the contested order of dismissal did not comply with those provisions for settling the form of order, the order is void and its terms cannot be enforced against him. In the alternative, plaintiff argues the circumstances of this case are exceptional and warrant relief pursuant to Rule 4:50-1.

Defendants respond that plaintiff is not entitled to relief under any provision of Rule 4:50-1, and they further contend that plaintiff failed to file his motion for reinstatement within the time provided by the order of dismissal or within a reasonable time, as required by Rule 4:50-2. In the alternative, defendants assert that plaintiff's action is barred by the equitable defenses of laches, waiver and estoppel.

After a careful consideration of the applicable court rules and pertinent facts, we agree with the Law Division, that plaintiff had constructive notice of the order of dismissal, which may have been subject to reconsideration and revision, but not void; but we reverse and remand because we are convinced the motions were analyzed under the wrong rule. The Law Division relied on Rule 4:50-1 when it ruled on the motion to reinstate and the motion for reconsideration. We find that reliance was in error. This matter should not have been analyzed under Rule 4:50 and its more demanding standard of extraordinary circumstances.

We have previously held that "R. 4:50 applies only to final judgments and orders adjudicating all claims as to all parties." Lawler v. Isaac, 249 N.J. Super. 11, 16 (App. Div. 1991). To be considered a final judgment appealable as of right, the order generally must dispose of all issues as to all parties. Scalza v. Shop Rite Supermarkets, Inc., 304 N.J. Super. 636, 638 (App. Div. 1997); Tradesoft Techs., Inc. v. The Franklin Mut. Ins. Co., Inc., 329 N.J. Super. 137, 140-41 (App. Div. 2000). In this instance, the order of dismissal did not purport to adjudicate or dispose of any of the issues raised by the complaint. Nor was the order initiated pursuant to Rule 4:23 because of a failure of the plaintiff to make discovery, as was the case in, for example, Cooper v. Consol. Rail Corp., 391 N.J. Super. 17, 19 (App. Div. 2007) and Kwiatkowski v. Gruber, 390 N.J. Super. 235, 236-37 (App. Div. 2007), nor even pursuant to Rule 1:13-7 because of a lack of prosecution on the part of plaintiff. See, e.g., Rivera v. A. Coast Rehab. and Health Care Ctr., 321 N.J. Super. 340, 344 (1999). Rather, it appears to have been entered in anticipation of a lack of prosecution, as a docketing expedience.

The order of dismissal recites that it was entered following a status conference and, so far as can be gleaned from the circumstances and the certifications in the record, the dismissal was solely a matter of calendar control, prompted by the liquidation proceedings involving the tortfeasors' insurer, the substitution of the Association for the insolvent insurer and the desire to avoid having the complaint pending or inactive for whatever time would be needed for the plaintiff to pursue the UM claim under his own policy and claims against any other solvent carriers.

The Law Division, of course, retains control over its orders until entry of final judgment. R. 4:42-2; Gangemi v. Nat'l Health Labs., Inc., 305 N.J. Super. 97, 103 (App. Div. 1997); Lawler, supra, 249 N.J. Super. at 17; Ford v. Weisman, 188 N.J. Super. 614, 619 (App. Div. 1983). In general, Rule 4:42-2 governs the discretion of a court to revise interlocutory orders in the interest of justice, providing, in pertinent part, that: any order or form of decision which adjudicates fewer than all the claims as to all the parties shall not terminate the action as to any of the claims, and it shall be subject to revision at any time before the entry of final judgment in the sound discretion of the court in the interest of justice.

Beyond indicating that the discretion is to be exercised in the interest of justice, that rule does not provide any fixed standard for the exercise of discretion.

In our review of the exercise of discretion by the Law Division, we recognize that we should "decline [] to interfere with [such] matters of discretion unless it appears that an injustice has been done." Cooper, supra, 391 N.J. Super. at 23 (quoting Comeford v. Flagship Furniture Clearance Ctr., 198 N.J. Super. 514, 517 (App. Div. 1983), certif. denied, 97 N.J. 581 (1984)). Here, we conclude such an injustice may have been done.

As noted, the order of dismissal in this case was entered without prejudice. We reiterate that it was not entered as a sanction for non-compliance with any discovery requirements under Rule 4:23-5 or for any other fault or failure on plaintiff's part. Cf. Cooper, supra, 391 N.J. Super. 17, 22-25 (App. Div. 2007). Rather, the order of dismissal was akin to an administrative dismissal under Rule 1:13-7, under which dismissals are "'designed to clear the docket of cases that cannot, for various reasons, be prosecuted to completion.'" Rivera, supra, 321 N.J. Super. at 346 (quoting Mason v. Nabisco Brands, Inc., 233 N.J. Super. 263, 266 (App. Div. 1989)). In this instance, the dismissal was to allow plaintiff to pursue what was believed to be a threshold claim related to his UM benefits, which would, in turn, reduce the liability of the Association.*fn3 In that context, "reinstatement is ordinarily routinely and freely granted when plaintiff [cures] the problem that led to the dismissal even if the application is made many months later." Rivera, supra, 321 N.J. Super. at 346; Mason, supra, 233 N.J. Super. at 267-70.

We acknowledge that effective September 5, 2000, Rule 1:13-7 was amended to provide for reinstatement after dismissal on a motion for good cause shown. Ghandi v. Cespedes, 390 N.J. Super. 193, 197 (App. Div. 2007). Even prior to that amendment, we had recognized and applied a similar standard. For example, concerning the effect of a substantial delay in seeking reinstatement, we have stated: we have uniformly held that even a substantial delay--in some cases a year or more--will not bar the continued prosecution of the action where the failure of timely service was either for good cause or attributable only to counsel's neglect and, in addition, the defendant was not prejudiced thereby in the ability to maintain a defense. [Rivera, supra, 321 N.J. Super. at 346-47.]

Again, recently in our opinion in Ghandi, supra, we reaffirmed that "absent a finding of fault by the plaintiff and prejudice to the defendant, a motion to restore under Rule 1:13-7 should be viewed with great liberality." 390 N.J. Super. at 197.

Also in SWH Funding Corp. v. Walden Printing Co., Inc., we noted that "'[g]ood cause is difficult of precise delineation.

Its application requires the exercise of sound discretion in light of the facts and circumstances of the particular case considered in the context of the purposes of the Court Rule being applied.'" 399 N.J. Super. 1, 11 (App. Div. 2008) (quoting Del. Valley Wholesale Florist v. Addalia, 349 N.J. Super. 228, 232 (App. Div. 2002); see Leitner v. Toms River Reg'l Schs., 392 N.J. Super. 80, 87 (App. Div. 2007) (listing factors to be considered in deciding whether good cause has been shown for an extension of discovery in the absence of a fixed arbitration or trial date). The critical question in this case is that posed by Rule 4:42, namely, whether revision of or adherence to the order requiring a motion for reinstatement to be filed within thirty days of the resolution of the UM claims, is in the interest of justice.

On the motion for reconsideration, the Law Division continued to apply the stringent extraordinary circumstances requirement under Rule 4:50-1. Typically, we review rulings on motions for reconsideration for mistaken exercise of discretion. Fusco v. Newark Bd. of Educ., 349 N.J. Super. 455, 462 (App. Div. 2002); Marinelli v. Mitts & Merrill, 303 N.J. Super. 61, 77 (App. Div. 1997); Cummings v. Bahr, 295 N.J. Super. 374, 389 (App. Div. 1996). However, where as here, the trial court misconceives the applicable law or misapplies it to the factual complex, in total effect the exercise of legal discretion lacks a foundation and becomes an arbitrary act. When this occurs it is the duty of the reviewing court to adjudicate the controversy in light of the applicable law in order that a manifest denial of justice be avoided. [State v. Steele, 92 N.J. Super. 498, 507 (App. Div. 1966); Kavanaugh v. Quigley, 63 N.J. Super. 153, 158 (App. Div. 1960).]

The Law Division was unquestionably and understandably influenced by the failure of plaintiff's attorney to move promptly to reinstate the matter, but such failure, without more, should not have led the court to deny relief to the plaintiff.

We reviewed a comparable situation in Jansson v. Fairleigh Dickinson Univ., 198 N.J. Super. 190 (App. Div. 1985). In Jansson, concededly a case decided prior to the amendments of the rules in 2000, the trial court dismissed a negligence action by the plaintiffs due to the attorney's failure to answer interrogatories. Id. at 192. The plaintiffs, represented by different counsel years later, unsuccessfully attempted to have the complaint reinstated. Id. at 193. In reviewing the matter, we indicated that the trial court should have taken into consideration "(1) the extent of the delay, (2) the underlying reason or cause, (3) the fault or blamelessness of the litigant, and (4) the prejudice that would accrue to the other party."

Id. at 195. Most importantly, we held that "in the absence of demonstrable prejudice to the other party it is neither necessary nor proper to visit the sins of the attorney upon his blameless client." Id. at 196. The amendments to the rules have not diminished our respect for that view. See, e.g., SWH Funding Corp., supra, 399 N.J. Super. at 14; Leitner, supra, 392 N.J. Super. at 93; Ghandi, supra, 390 N.J. Super. at 198.

Here, the action had been dismissed without prejudice for the obvious purpose of clearing the docket while plaintiff exhausted a contractual remedy and explored the availability of other available insurance coverage. The order explicitly contemplated that the action was to be reinstated, albeit within a narrow timeframe that appears never to have been discussed among counsel and the court. The narrow timeframe is not alleged to be mandated by the applicable statute or by any rule. Yet, so far as we can discern, the denial of plaintiff's motion to reinstate the complaint was based solely on the attorney's tardiness in moving for reinstatement. To be sure, the court can and should enforce its orders, but it must do so "in light of the facts and circumstances of the particular case considered in the context of the purposes of the Court Rule being applied." SWH Funding Corp., supra, 394 N.J. Super. at 11 (quoting Del. Valley Wholesale Florist, supra, 349 N.J. Super. at 232). The Law Division did not search for and the record does not reveal any "demonstrable prejudice" to the Association that should have required adherence to the thirty-day timetable. Jansson, supra, 198 N.J. Super. at 196.

Moreover, the denial of the motion to reinstate is not compelled by the purposes of the New Jersey Property-Liability Insurance Guaranty Association Act. That Act was adopted "to protect policyholders of insurance companies which become insolvent." Lehmann, supra, 240 N.J. Super. at 246. In addition, "[t]he protection provided by the Act extends to nonpolicyholder claimants such as the plaintiff in this case." Ibid. The Association is deemed the insurer to the extent of its obligation on the covered claims and to such extent shall have all the rights, duties and obligations of the insolvent insurer as if the insurer had not become insolvent. N.J.S.A. 17:30A-8(a)(2). In short, the Association is responsible to pay covered claims of the insolvent insurer. "The purpose of the Act is '. . . to provide a mechanism for the payment of the covered claims . . . .'" Lehmann, supra, 240 N.J. Super. at 246 (quoting N.J.S.A. 17:30A-2(a)).

Finally, we note that the Association suggests that it may have lost contact with defendant Melissa Vespa, but it is not clear whether the Association lost contact with her before or after the thirty-day period following the resolution of the UM claim. If it was before, no prejudice would have been caused by a delayed reinstatement. Assuming it was after that time, the significance of Melissa's unavailability is nonetheless questionable as a basis for claimed prejudice because the vehicle she was operating rear-ended plaintiff's vehicle. In addition, this case was pending long enough before the dismissal without prejudice that substantial discovery already should have been completed.

Still, because the trial court mistakenly exercised its discretion when it decided the motion under Rule 4:50, and because we find the record before us inadequate for us to make a substantive finding as to the existence of "demonstrable prejudice" to the Association, we remand to the Law Division for further proceedings consistent with this opinion.

Reversed and remanded.

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