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Lynch Metals, Inc. v. Griffin Thermal Products


June 30, 2008


On appeal from Superior Court of New Jersey, Law Division, Union County, Docket No. L-3457-05.

Per curiam.


Submitted November 26, 2007

Before Judges A. A. Rodríguez and Collester.

Defendant Hugh R. Griffin (Griffin) appeals from a Law Division order of February 2, 2007, denying his application to vacate a default judgment entered by the court on February 6, 2006. We affirm.

Plaintiff Lynch Metals, Inc. (Lynch), an aluminum distributor, was a vendor for Griffin Thermal Products, Inc. (Griffin Thermal) supplying goods which Lynch claims were specially manufactured for Griffin Thermal. In March 2005, Griffin Thermal owed a balance to Lynch, and it was agreed that Lynch would continue to supply product upon execution of a promissory note in the amount of $316,308.45 representing overdue invoices in addition to forthcoming invoices. The promissory note was designed to facilitate continued supply of metal to Griffin Thermal while at the same time allowing pay down of overdue and forthcoming invoices. On March 15, 2005, the promissory note was prepared on Griffin Thermal stationery. The note was signed by Griffin both as president of Griffin Thermal and personally. The note also bore the purported signature of Jacqueline G. Griffin (Jacqueline).

After the note was signed, Lynch Metals continued to supply Griffin with material. When payments were not made on the promissory note, Lynch filed its complaint on September 26, 2005 naming Griffin Thermal Products, Jacqueline, and Griffin as defendants. There is no dispute that the defendants were properly served with the complaint, but no answer was filed.

The complaint was stayed because the corporation filed for bankruptcy under Chapter 11. However, default was entered against Griffin and Jacqueline, and a final judgment by default was entered against both jointly and severally on February 6, 2006 in the amount of $117,706.63.

After the judgment by default was served upon Griffin and Jacqueline, they filed separate motions to vacate. Jacqueline certified that she was no longer active with Griffin Thermal when the promissory note was signed on March 15, 2005, and she was negotiating the terms of her divorce from Griffin. She denied signing the note or authorizing anyone to sign on her behalf or use her name to personally guarantee the obligation of Griffin Thermal. She said that after she was served with the complaint, she turned it over to Griffin after he assured her that his attorneys would take care of the matter. Later when she was served with the application for default, she again notified Griffin, and he told her that the matter had been resolved. Finally, when she was personally served with the final judgment by default, she hired counsel to vacate the judgment. The trial judge granted Jacqueline's application to vacate the default and dismissed the case against her since no one challenged her claim that her signature on the note was forged.

Griffin filed his motion to vacate the default judgment on April 5, 2006. He certified that he did not answer the complaint because Griffin Thermal was in the midst of Chapter 11 bankruptcy, and he had gone through his divorce and moved from South Carolina to Florida. He also asserted that the amount due under the promissory note based on the invoices submitted by Lynch to Griffin Thermal amounted to only $3,194.49. Lynch responded and annexed the certification of its controller, Mark Rann, as well as invoices and purchase orders supporting the amount of the default judgment.

The Law Division judge found that Lynch supplied sufficient evidence to support its claim for the judgment amount and also rejected defendant's claim of excusable neglect under Rule 4:50-1. The judge held that Griffin's motion would be denied unless he deposited the judgment funds with the court within fourteen days of the order. Griffin did not post the funds and his motion was therefore denied.

Subsequently, Lynch made efforts to collect on the judgment including retaining a law firm in Florida. After application was made to garnish his wages, Griffin filed a second motion to vacate the default judgment. He stated that when he made his earlier motion to vacate the judgment, he did not have the "financial wherewithal" to post the amount but now was able to do so if his motion was granted. Griffin made no further argument on the issue of excusable neglect to add to his 2006 certification. But he reiterated that he had a meritorious defense claiming that the amount he owed under the guarantee was substantially less than the amount claimed in the default judgment. He claimed that the default judgment should be vacated under Rule 4:50-1(c) because Lynch fraudulently misrepresented the amount due. He based his argument upon the August 30, 2006 order of the bankruptcy court rejecting Lynch's proof of claim against Griffin Thermal for $279,350, and fixing the allowed claim at $44,861.81.

In denying Griffin's second motion to vacate the default judgment the motion judge stated:

[O]n an application pursuant to Rule 4:50 alleging fraud and that the judgment should be overturned based on fraud.

In support of the fraud argument, defendant is relying upon the fact that in bankruptcy proceeding, there was a claim that the corporation owed Lynch Metals $279,000. Whereas there was a statement from a Mr. Rand that the corporation owed $239,000, neither of which have anything to do with what's in front of me. What's in front of me is the . . . $117,000 judgment. . . .

[T]he argument is, there's fraud because there's a discrepancy in this amount as to the corporation. That's not what's in front of me. It's not showing me fraud. . . . There's no proof to this allegation. There's no proof that anything is wrong with the $117,000 judgment.

So for that reason, I do not think that defendant has met the standards of Rule 4:50-1 to show fraud, and I'm not going to grant the application.

This appeal followed. It is well settled that an application to vacate an 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 Constr. Co., 84 N.J. Super. 313, 319 (App. Div.), aff'd, 43 N.J. 508 (1964). The decision whether to grant such a motion is left to the sound discretion of the motion judge and will not be disturbed absent a clear abuse of discretion. Hous. Auth. of Morristown v. Little, 135 N.J. 274, 283 (1994); Mancini v. EDS, 132 N.J. 330, 334 (1993).

A defendant seeking to reopen a default judgment must show both that the failure to defend was excusable under the circumstances and that there was a meritorious defense to the cause of action or the quantum of damages assessed. Marder, supra, 84 N.J. Super. at 319; Hous. Auth., supra, 135 N.J. at 283; Mancini, supra, 132 N.J. at 355.

Defendant's argument to vacate the default judgment by reason of excusable neglect was rejected by the denial of his first application to vacate, and no appeal was taken from that order. With respect to the order under review denying his second motion, defendant does not claim excusable neglect, but asserts he has a meritorious defense to the quantum of damages awarded. Under our case law both the excusable neglect and a meritorious defense are requisite to vacating a default judgment. Marder, supra, 84 N.J. Super. at 318. Defendant can satisfy neither requirement. While defendant suffered the loss of his business, stress of a divorce, and a relocation, he does not deny service of the complaint and the motion for default and motion to enter judgment by default. He does not submit any proof that he was incapable of responding at any time during the pendency of the action. He does not contest the statements by his ex-wife that he told her that the action was going to be resolved and later that it had been resolved. It appears that he simply ignored the orders of the New Jersey courts and, as found by the motion judge on the first application to vacate, there was no showing of excusable neglect. See, e.g., Shannon v. Academy Lines Inc., 346 N.J. Super. 191, 197 (App. Div. 2001); Fineberg v. Fineberg, 309 N.J. Super. 205, 217 (App. Div. 1998).

With respect to defendant's claim of a meritorious defense we agree with the motion judge that the issue before the court was not the amount set forth in Lynch's proof of claim against Griffin Thermal but the amount of damages claimed by Lynch against Griffin personally, and it is undisputed that the total amount owed by Griffin personally differed from the amount owed by the corporation. Moreover, the purchase order, invoices, and payment schedule annexed to Rann's certification support the amount of $117,706.63 set forth in the February 6, 2006 final judgment by default and as found by the judge denying Griffin's second motion to vacate. Defendant's argument that Lynch committed fraud or otherwise misrepresented the amount due and owing by him personally under the promissory note is without support. Therefore, we find no abuse of discretion by the motion judge in denying the motion to vacate the default judgment.

The remaining arguments put forth by defendant are without sufficient merit to warrant discussion in a written opinion. Rule 2:11-3(e)(1)(E).



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