November 3, 2008
PIERROT GHALEB AND KARLA GHALEB, PLAINTIFFS-APPELLANTS,
KING MOTORS, INC., AND/OR KING MOTOR SALES, INC., VECDI UGURLU AND VICTORIA PRE-OWNED AUTOS, DEFENDANTS-RESPONDENTS.
On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-1367-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued October 14, 2008
Before Judges R. B. Coleman and Simonelli.
Plaintiffs Pierrot Ghaleb (Pierrot) and Karla Ghaleb (Karla) appeal from the order of February 1, 2008 denying their motion to vacate the January 12, 2007 consent order of judgment (consent judgment), to enter judgment against defendant Vecdi Ugurlu (Ugurlu), or to grant a plenary hearing on whether defendants perpetrated a fraud on the court when they entered into the consent order of judgment. We reverse.
Ugurlu is the sole owner of defendant King Motors, Inc. (King Motors), a former car dealership. On July 21, 2004, Pierrot purchased from King Motors a 2002 Cadillac Escallade for $31,500. On August 24, 2004, Pierrot was arrested in New York, because the vehicle had been reported stolen. He was charged with various criminal offenses and had to hire a criminal attorney to represent him. He incurred attorney's fees of $7,000 as a result.
Plaintiffs sought damages against defendants for negligence and for a violation of the Consumer Fraud Act, N.J.S.A. 56:8-2 to-106. On January 12, 2007, the parties entered into a settlement, resulting in the consent judgment, which required King Motors to purchase another vehicle of plaintiffs' choosing at a value of $33,000 within thirty days from January 3, 2007, and pay $14,000 for plaintiffs' attorney fees ($5000 was due by January 17, 2007 and $9000 was due by March 8, 2007). All claims against Ugurlu were dismissed. Unbeknownst to plaintiffs at the time of the settlement and entry of the consent judgment, on or about December 13, 2006, approximately a month before the settlement, King Motors had surrendered its registration certificates and dealer plates to the New Jersey Motor Vehicle Commission (MVC) and ceased doing business.
King Motors gave plaintiffs a replacement vehicle but did not pay the $14,000. As a result, on March 15, 2007, plaintiffs served an information subpoena. After defendants failed to respond, plaintiffs filed a motion to enforce litigant's rights. An order, entered on May 25, 2007, compelled King Motors to produce a complete and accurate response to the information subpoena and permitted an arrest warrant to be issued against Ugurlu if he failed to do so. King Motors failed to comply. An arrest warrant was issued against Ugurlu on September 28, 2007.
On October 17, 2007, Ugurlu responded to the information subpoena and provided a statement for King Motors' corporate Visa card indicating available credit of $15,000 as of October 11, 2007, a notice from the MVC confirming King Motors' surrender of its registration certificates and dealer plates and copies of numerous judgments. Ugurlu later supplied a King Motors' checking account statement indicating a $3,080.83 balance as of November 30, 2007.
Plaintiffs then filed a motion to enforce the settlement, freeze assets, execute on the available Visa card credit and compel a turnover of funds. In an opposing certification, Ugurlu admitted King Motors had no assets and he would not use the available Visa card credit to pay the $14,000 because "[t]his is not an asset, and there is no way [he] will pass one debt on to another company just because it is a credit card. This would not only be unethical on [his] part, for if [he] did this, [King Motors], would not be able to pay the Visa card."
By order of December 7, 2007, the motion judge denied enforcement of the settlement and a turnover of funds from the available credit. However, the judge restrained King Motors from transferring, encumbering, dissipating or disposing of any funds, property or assets of any kind.
On December 20, 2007, plaintiffs demanded turnover of the $3080.83 in King Motors' checking account. On December 28, 2007, defendants' counsel notified plaintiffs' counsel that only $75 remained in that account.
Plaintiffs then filed a motion to vacate the consent judgment, to re-name Ugurlu as a direct defendant and to allow judgment to be entered against him individually or, alternatively, for a plenary hearing to determine whether defendants committed a fraud on the court. Plaintiffs argued that Ugurlu committed fraud by entering into the settlement when he knew King Motors was out of business and could not fully satisfy the consent judgment. The motion judge denied the motion, finding plaintiffs failed to prove fraud by clear and convincing evidence.
A decision to vacate a judgment lies within the sound discretion of the trial judge, guided by principles of equity. Hous. Auth. of Morristown v. Little, 135 N.J. 274, 283 (1994) (citing Hodgson v. Appelagte, 31 N.J. 29, 37 (1959); Shammas v. Shammas, 9 N.J. 321, 328 (1952)). A decision to grant or deny an application to vacate a judgment "will be left undisturbed unless it represents a clear abuse of discretion." Ibid. (citing Mancini v. EDS, 132 N.J. 330, 334 (1993); Court Inv. Co. v. Perillo, 48 N.J. 334, 341 (1996); Hodgson, supra, 31 N.J. at 37; Pressler, Current N.J. Court Rules, comment 1 on R. 4:50-1(1993)).
Rule 4:50-1(c) permits the court to relieve a party from a final judgment for fraud. "Fraud is not presumed; it must be proven through clear and convincing evidence." Stochastic Decisions, Inc. v. DiDomenico, 236 N.J. Super. 388, 395 (App. Div. 1989) (citing Albright v. Burns, 206 N.J. Super. 625, 636 (App. Div. 1986)), certif. denied, 121 N.J. 607 (1990). "The elements for actionable legal fraud are: (1) material representation of a present or past fact; (2) made knowing it was false and with the intent that it be relied upon; and (3) detrimental reliance incurred upon the representation." Ibid. (citing Jewish Center of Sussex Cty. v. Whale, 86 N.J. 619, 624 (1981)). "The representation may consist of a present intention to act or not act in the future. Id. at 395-96 (citing Van Dam Egg Co. v. Allendale Farms, Inc., 199 N.J. Super. 452, 457 (App. Div. 1985) ("A promise to pay in the future is fraudulent if there is no present intent ever to do so")). "This intention may be derived from circumstantial evidence such as: the recklessness or implausibility of the statement in light of later events; showing that the promisor's intentions were dependent upon contingencies known only to the promisor; or simply from evidence indicating that the promisor would not or could not fulfill the promise." Id. at 396 (citing Ocean Cape Hotel Corp. v. Masefield Corp., 63 N.J. Super. 369, 381 (App. Div. 1960)). Also, "[f]ailure to disclose a material fact with intent to mislead or defraud is equivalent to'fraudulent concealment'." Schmidt v. Schmidt, 220 N.J. Super. 46, 51 (Ch. Div. 1987) (citation omitted).
Based upon our review of the record, we conclude that the judge mistakenly exercised his discretion in denying plaintiffs' motion. There is no doubt from the evidence in the record that when Ugurlu negotiated his dismissal from the matter, he knew King Motors would not or could not satisfy the entire judgment.
His failure to disclose crucial information about King Motors inability to fulfill its obligations under the consent judgment constitutes fraudulent concealment.
Reverse and remanded for entry of judgment in the amount of $14,000 against Ugurlu effective January 12, 2007.
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