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Household Finance Corp. v. Russell


April 27, 2009


On appeal from the Superior Court of New Jersey, Chancery Division, Hudson County, Docket No. F-20830-00.

Per curiam.


Submitted February 11, 2009

Before Judges Waugh and Newman.

Third-party defendant Brian Lyles appeals the denial of his application to vacate a default judgment in the principal amount of $228,000 docketed against him on April 23, 2002. We affirm.


The underlying litigation began as a foreclosure action against third-party plaintiff Gladys Russell in December 2000. At the same time she filed her responsive pleading in March 2001, Russell included a third-party complaint against Lyles, among others, alleging fraud and other wrongful conduct in connection with her acquisition of the property that was the subject of the foreclosure.

Based upon a return of service by the Hudson County Sheriff, a default judgment in the amount of $228,000 was entered against Lyles on January 23, 2002, and docketed on April 23, 2002.

Lyles concedes that he first learned about the default judgment from a bankruptcy related Charles Jones search in or before April 2004. He subsequently learned in September 2006 that the judgment was not dischargeable in bankruptcy because it was premised on allegations of fraud. Lyles's bankruptcy attorney had made an application in the Chancery Division to cancel the judgment of record because Lyles had been through bankruptcy, but the application was denied in an order dated October 11, 2006.

After attempting to obtain asset discovery with minimal success, Russell moved in October 2007 for an order of incarceration to force Lyles to supply responsive asset discovery as previously ordered by the court. Lyles filed a cross-motion seeking to set aside the default judgment, relying on Rule 4:50-1(d).

Following an evidentiary hearing, Judge Thomas P. Olivieri denied the motion to vacate the judgment. His findings of fact and conclusions of law included the following:

The evidence in this matter, in this court's mind, is clear, and although I appreciate Mr. Lyles's candor, Mr. Lyles does not deny receiving the third party summons and complaint in this matter. He doesn't remember it, but he can't deny it.

The documents in this matter, that is the third-party complaint and the summons in this matter, reflect that Mr. Lyles was served. I believe, and so find, that on or about March 16, 2001, he was served with the third-party complaint. I make that finding based upon Mr. Lyles's own testimony, where he doesn't deny receiving it, the fact that he lived at 122 Bidwell Avenue Jersey City on that date, and when the court looks at [the summons and complaint] in evidence, at least the summons portion of that document refers to Mr. Lyles as the defendant.

Mr. Lyles, as the court pointed out, was not a first-party plaintiff or defendant in this matter. He certainly knew sometime in 2001 that his aunt and he, his aunt being another third-party defendant, were being sued, since he did see [the summons and complaint].

And as I indicated, Ms. Russell, the plaintiff -- well, the third-party plaintiff in this matter, in April of '02 obtained a judgment entered by this court against Mr. Lyles in the amount of $228,000. At best, Mr. Lyles learned in 2004 in Bankruptcy Court about this instant judgment. He learned in 2006 that this judgment was not dischargeable as a result of the order that I entered, and yet, he did nothing during that time period to either vacate the judgment or take any other action.

It wasn't until an action was filed to have him arrested because of his failure to abide by prior court orders did Mr. Lyles do anything to vacate the prior judgment in this matter.

Rule 4:50-2 provides that a motion to vacate judgment must be made within one year, under sections (a), (b) and (c) of Rule 4:50-1. Under subsection (d) of Rule 4:50-1 it indicates that the motion is to be made within a reasonable time, notwithstanding the fact that the judgment may be void because of lack of personal jurisdiction.

I don't find that there is a lack of personal jurisdiction here. Assuming for the sake of this decision that there may have been some technical defect in the service of process, not every technical defect in the service of process constitutes a denial of due process. Rosa v. Araujo, 260 N.J. Super. 458 (App. Div. 1992), certif. denied, 133 N.J. 434 (1993).

Mr. Lyles lived at the subject property. The return of service indicates he was served and lived at the subject property. A fair reading of the summons and complaint in this matter indicates that he was a third-party defendant and was served at the subject property.

Additionally, he did nothing for an extensive period of time upon learning of the judgment, and he does not deny necessarily receiving DL-5, which was the notice for the proof hearing, although he does not recall getting DL-5. The address on DL-5 is 122 Bidwell Avenue. DL-5 was sent certified mail, return receipt requested, and signed by a business associate, but again, Mr. Lyles does not recollect receiving it, he does not deny receiving it, he just doesn't remember receiving it.

This appeal followed.


The gist of Lyles's argument on appeal is that the default judgment was void because the court never obtained personal jurisdiction over him. He points to various defects in the summons, particularly the fact that the format of summons served was intended for the service of an initial complaint rather than a third-party complaint. In addition, he points to the following: (1) Russell's counsel referred to herself as counsel for the third-party defendant instead of third-party plaintiff; (2) the summons refers to the Law Division rather than the Chancery Division; (3) it is directed to "The Defendant third- party" rather than the third-party defendant; (4) Lyles is referred to as the defendant rather than the third-party defendant; (5) it is not dated; and (6) it is not signed by hand. Consequently, he argues that he was "served with merely a form, not with a true Summons."

Judge Olivieri found as fact that Lyles was actually served with the summons and third-party complaint. Under Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974), the findings of a trial judge sitting without a jury are "considered binding on appeal when supported by adequate, substantial and credible evidence." Appellate judges "are not in a good position to judge credibility and, ordinarily, should not make new credibility findings," unless we are "'thoroughly satisfied that the finding is clearly a mistaken one and so plainly unwarranted that the interests of justice demand intervention and correction.'" Mountain Hill, L.L.C. v. Twp. Comm. of Middleton, 403 N.J. Super. 146, 193 (App. Div. 2008), certif. denied, ____ N.J. ____ (2009) (quoting Ridley v. Dennison, 298 N.J. Super. 373, 378 (App. Div. 1997)). We are satisfied that Judge Olivieri's factual findings are fully supported by the record.

The Sheriff's return of service in this case is "prima facie evidence" that service of the form of summons used and the third-party complaint was made and "raises a presumption that the facts recited therein are true." Garley v. Waddington, 177 N.J. Super. 173, 180 (App. Div. 1981). Although the presumption is "rebuttable, it can be rebutted only by clear and convincing evidence that the return is false." Id. at 180-81. As noted by Judge Olivieri in his decision, Lyles never denied receiving the summons and third-party complaint, he merely testified that he had no recollection of having done so. At the same time, he admitted that he saw a similar summons and third-party complaint that had been served separately on his aunt, a co-defendant on the third-party complaint, who told him: "[W]e are being sued." The question then becomes whether any defects in the form of the summons prevented the court from obtaining personal jurisdiction. Judge Olivieri concluded that they did not, relying upon our decision in Rosa v. Araujo, 260 N.J. Super. 458, 462-63 (App. Div. 1992), certif. denied, 133 N.J. 434 (1993) (citations omitted), in which we held:

Generally, where a default judgment is taken in the face of defective personal service, the judgment is void. However, not every defect in the manner in which process is served renders the judgment upon which the action is brought void and unenforceable. The requirement that a court have personal jurisdiction over a defendant is designed to protect the defendant's individual liberty interest flowing from the Due Process clause. Thus, the court rules which describe the manner in which process is to be served must be read in the context of effecting due process. In recognition of that concept our Supreme Court in O'Connor v. Abraham Altus, 67 N.J. 106, 126 (1975) stated:

An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is 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.

[(quoting Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 657, 94 L.Ed. 865, 873 (1950)).]

Where due process has been afforded a litigant, technical violations of the rule concerning service of process do not defeat the court's jurisdiction. Id. at 127-28.

See also Citibank, N.A. v. Russo, 334 N.J. Super. 346, 352-53 (App. Div. 2000). We are satisfied that Judge Olivieri correctly determined that there was personal jurisdiction based upon the service found in the record.

Lyles also contends that Judge Olivieri erred in holding that his motion to vacate the default judgment was untimely. We disagree. Even assuming that Lyles was not properly served such that the court did not acquire personal jurisdiction, failure to take action to set the default judgment aside within a reasonable time can constitute a waiver of the right to do so.

We note that although a claim of voidness of the judgment under section (d) of Rule 4:50-1 is not subject to the one-year limitation applicable to sections (a), (b), and (c) imposed by Rule 4:50-2, that rule nevertheless requires all motions under Rule 4:50-1 to be brought within a reasonable time. Since our decision in Garza v. Paone, 44 N.J.Super. 553, 556-560 (App. Div. 1957), our courts have uniformly held that the reasonable-time requirement applies to judgments alleged to be void because of a failure of in personam jurisdiction. We point out, however, that lack of personal jurisdiction is a waivable defense. See, e.g., Hupp v. Accessory Distribs., 193 N.J. Super. 701, 711 (App. Div. 1984). There is thus a conceptual symmetry in a rule which limits a challenge to a judgment on that ground to a reasonable time thereafter. That is to say, just as the defense to the action itself may be waived, so may the right to attack an ensuing judgment on that ground be deemed waived if not exercised within a reasonable time.

[Bascom Corp. v. Chase Manhattan Bank, 363 N.J. Super. 334, 340-41 (App. Div. 2003), certif. denied, 178 N.J. 453, cert. denied, 542 U.S. 938, 124 S.Ct. 2911, 159 L.Ed. 2d 813 (2004) (citations omitted).]

The record in this case is quite clear that Lyles knew about the litigation at or shortly after the time he was served with what he considers defective process in March 2001. He also acknowledged that he may have received notice of the proof hearing, R. 4:43-2(b), in 2002. He was told about the default judgment in connection with his bankruptcy filing in early 2004. He never took any action to vacate the default judgment.

In 2006, he learned that the judgment was not dischargeable in bankruptcy when his bankruptcy attorney moved unsuccessfully to have it cancelled and removed from the record. Lyles made no motion at that time to vacate the default judgment for lack of personal jurisdiction. See Wohlegmuth v. 560 Ocean Club, 302 N.J. Super. 306, 314 (App. Div. 1997) (suggesting that laches would apply to a party who moves to set aside a judgment on other grounds but does not raise lack of personal service at the same time).

Lyles again failed to file a motion to vacate the default judgment when Russell's counsel started to pursue information subpoenas and related asset discovery. It was not until he was faced with an application for arrest for his failure to make asset discovery that he finally raised the issue, more than five years after he knew he was being sued and more than three-and-a- half years after he learned that a default judgment had actually been entered. With those facts, Judge Olivieri's determination that Lyles's motion was untimely was both legally and factually correct.


In summary, we affirm the order under review on the grounds that (1) the trial court had personal jurisdiction over Lyles when the default judgment was entered; and (2) the application to vacate the default judgment was, in any event, not brought within a "reasonable time" under Rule 4:50-2. We are also satisfied that there was no deprivation of Lyles's due process rights to receive notice of the suit brought against him.



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