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Washington Mutual Bank v. Zipora


March 19, 2009


On appeal from Superior Court of New Jersey, Chancery Division, Hudson County, Docket No. F-19910-06.

Per curiam.


Submitted February 24, 2009

Before Judges Graves and Grall.

Defendant Fahima Zipora appeals from orders denying her motion to vacate a default judgment of foreclosure and reconsideration. Default judgment in favor of plaintiff Washington Mutual Bank was entered on March 6, 2007, and intervenor 6045-8B Associates, L.L.C., purchased the property at a sale conducted by the Sheriff for Hudson County on April 27, 2007. Zipora moved to vacate the judgment and sheriff's sale by order to show cause filed on August 7, 2007.

The trial court conducted an evidentiary hearing at which the following facts were established. The property at issue is condominium unit 8B, 6045 Boulevard East, West New York, New Jersey. Zipora purchased the condominium on July 8, 2005. Although Zipora lives and works in Israel, she signed an affidavit of title indicating her residence in the United States and intention to reside in the unit. On her mortgage application, Zipora provided her street address and the name of her town in Israel, but she indicated that the town was located in New York State.

Zipora purchased the unit as an investment, never stayed or lived in the unit and hired Vision Group Real Estate, L.L.C., to rent and manage the property. That conduct was not consistent with the mortgage documents Zipora executed, in which she acknowledged she would occupy and use the unit as her second home, keep it available for her exclusive use and enjoyment at all times, and not "give a management firm or any other person any control over the occupancy or use of the" mortgaged property. On May 13, 2006, Samira Ali rented Zipora's unit for a term beginning on May 18, 2006 and ending on May 17, 2007.

Payments on Zipora's mortgage were made by automatic deduction from a checking account she maintained with Washington Mutual Bank. The June 2006 payment was not deducted because the funds in the account were not sufficient, and in July 2006 Zipora traveled to the United States and deposited the necessary funds in her account. Zipora acknowledged that she made no additional payments on her mortgage. According to her testimony, the statements for her checking account were sent to her at her residence in Israel, but despite the fact that her balance increased as rents were deposited she did not inquire about the account or the status of her mortgage.

Washington Mutual filed its foreclosure complaint on October 31, 2006. A notarized affidavit of service executed by a private process server on November 10, 2006, indicates personal service of the summons and complaint upon Zipora at unit 8B. The description of the woman accepting service is not consistent with Zipora's age, height, weight or hair color, and it is undisputed that Zipora was in Israel when process was accepted. Her passport and work records which were admitted into evidence, so indicate.

Default judgment was entered on March 6, 2007, and on April 27, 2007 the intervenor purchased the property at a sale conducted by the Hudson County Sheriff.

In a certification of the general manager of Vision Group submitted to the trial court by Zipora, the general manager asserted that Zipora's tenant, Ali, alerted Vision Group that she had received a notice advising her that the property had been sold at a foreclosure sale. He then notified Zipora. Zipora testified that she first learned about the foreclosure on June 1 or 2, 2007 when the general manager telephoned her.

The trial court found that Zipora's testimony "regarding her being served and what she knew about what was happening with the subject [property]" lacked credibility. Reasoning that "[r]elief under Rule 4:50-1 is to be granted sparingly," the court concluded that Zipora did not meet her burden under Rule 4:50-1 and denied her motion.

While motions for relief from judgment are generally granted sparingly, motions to vacate default judgments are an exception to that rule. A motion to vacate a default judgment is "viewed with great liberality." Hous. Auth. of Morristown v. Little, 135 N.J. 274, 283 (1994) (quoting Marder v. Realty Constr. Co., 84 N.J. Super. 313, 318-19 (App. Div.), aff'd, 43 N.J. 508 (1964)). That indulgent approach is taken because "a default judgment deprives a party of the benefit of an adjudication on the merits." Allen v. Heritage Court Assocs., 325 N.J. Super. 112, 117 (App. Div. 1999). Because the trial court's discretionary decision was based on the wrong legal standard, it cannot be afforded the deferential review generally given decisions on motions "to open, vacate or otherwise set aside mortgage foreclosure proceedings." United States ex rel. United States Dep't of Agric. v. Scurry, 193 N.J. 492, 503 (2008); see Kavanaugh v. Quigley, 63 N.J. Super. 153, 158 (App. Div. 1960) (noting that an exercise of legal discretion based on a misconception of the law lacks foundation).

The preliminary questions presented in this case were whether Zipora was properly served and, if not, whether she had actual notice sufficient to satisfy the requirement of due process.

Service in conformity with the rules was not established. On appeal, Washington Mutual does not argue otherwise. In the trial court Washington Mutual relied exclusively on the affidavit of personal service in accordance with Rule 4:4-4(a)(1). Assuming, without deciding, that the affidavit of a private process server gives rise to a presumption that the facts recited are true, when there is evidence tending to disprove those facts the presumption is eliminated. Jameson v. Great Atl. & Pac. Tea Co., 363 N.J. Super. 419, 426-27 (App. Div.), certif. denied, 179 N.J. 309 (2003). Zipora presented such evidence to support her claim that she was not the person served. In addition to her own testimony that she was in Israel on the date the process was served, Zipora introduced her passport and work records to corroborate her assertion. Moreover, there was no dispute that the physical description of the woman who accepted the summons and complaint did not fit Zipora. Given the evidence discrediting the information reported in the return of service, the trial court's disbelief of Zipora's testimony did not provide adequate support for a finding that she was served.

While technical deviations from the rules governing service of process are not determinative, Rosa v. Araujo, 260 N.J. Super. 458, 462 (App. Div. 1992), certif. denied, 133 N.J. 434 (1993), due process requires "notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections." Id. at 463 (internal quotations omitted).

Given provisions of the mortgage documents Zipora executed and violated, personal service of a woman residing in the unit could be viewed as reasonably calculated to apprise Zipora of the pending action, but Washington Mutual provided no evidence to support a finding that the complaint and summons were given to a woman residing in the property. Faced with Zipora's evidence of her presence in Israel when the complaint and summons were served, it was incumbent upon Washington Mutual to come forward with evidence of the identity of the person who accepted the documents. Without evidence of the predicate fact that the tenant accepted the summons and complaint, one could not infer that the tenant, who promptly notified Zipora through Vision Group when alerted about the sheriff's sale, also notified Zipora of the pending foreclosure action. Thus, there was no evidence to establish actual knowledge.

Washington Mutual contends that Zipora was not entitled to an order vacating the default judgment because she did not and could not establish a meritorious defense. But, when a defendant did not have notice of a pending action, the defendant's right to vacate a default judgment cannot be conditioned on the existence of a meritorious defense. Peralta v. Heights Med. Ctr., Inc., 485 U.S. 80, 108 S.Ct. 896, 99 L.Ed. 2d 75 (1988). Zipora's claim, which was that she had and would have paid the amount due on the mortgage if she had notice of the proceeding, is nearly identical to the claim raised by the defendant in Peralta, which was that if he had notice, he would have paid the debt and avoided sale of his property. Id. at 81-83, 108 S.Ct. at 897-98, 99 L.Ed. 2d at 79-80; see Intek Auto Leasing, Inc. v. Zetes Microtech Corp., 268 N.J. Super. 426, 430-31 (App. Div. 1993) (discussing Peralta and distinguishing the case on grounds not available to Washington Mutual in this case).

We recognize the relevance of unreasonable delay, intervening rights of innocent third parties and considerations of waiver, estoppel and laches raised by the conduct of the parties. Wohlegmuth v. 560 Ocean Club, 302 N.J. Super. 306, 317 (App. Div. 1997). But the trial court's decision did not rest on those considerations, and, on the evidence presented, those considerations are not sufficiently one-sided to overcome Zipora's right to vacate a default judgment acquired and a sheriff's sale completed without notice to her.

Zipora had no notice of the pending actions until the sale was completed and took action within two months of obtaining information and before the purchaser took any action to improve the property. Washington Mutual's claimed reliance on Zipora's misrepresentations about using her condominium unit as second residence is of no avail; service at a second residence is not compliant with Rule 4:4-4(a)(1) and, with exercise of minimal diligence, Washington Mutual could have acquired Zipora's mailing address from its own records of her mortgage payments and checking account. Zipora's alleged misrepresentations may be relevant to any defense she may assert on the merits, but are not relevant to the question of vacating a default judgment entered without prior notice. Wohlegmuth, supra, 302 N.J. Super. at 317. In short, this case is not comparable to those in which the conduct of the defendant has been found to bar relief from a default judgment entered without notice. See, e.g., City of Newark v. (497) Block 1854, Lot 15, 9-11 S. 7th St., 244 N.J. Super. 402, 411 (App. Div. 1990).

The order denying the motion to vacate the default judgment and sheriff's sale is vacated and the matter is remanded to permit the trial court to impose just terms and for further proceedings on the merits. R. 4:50-1.


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