On appeal from Superior Court of New Jersey, Law Division, Ocean County, Docket No. L-307-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Collester and Graves.
In this contract action, defendant Eliyahu Weinstein appeals from a final judgment entered in favor of plaintiff Scott Siegelman on August 27, 2008, in the amount of $161,500 with prejudgment interest from March 13, 2006. Defendant's primary argument is that there was no default because the course of dealing between the parties demonstrated that plaintiff tolerated and accepted late payments from defendant.
On December 31, 2004, the parties executed a handwritten promissory note in which defendant acknowledged a debt to plaintiff in the amount of $1,061,500. On January 19, 2005, plaintiff filed a complaint in part based on breach of contract. Defendant had signed two demand notes. The first for $1,121,468.28 and the second, after a partial payment, for $1,061,500. On March 13, 2006, the parties entered into a settlement agreement that required defendant to pay plaintiff the total sum of $900,000. Defendant agreed to pay $100,000 on March 13, 2006, $250,000 by April 13, 2006, and the balance of $550,000 in monthly installments over two years, beginning on May 13, 2006. To secure the payments, defendant agreed to give plaintiff a mortgage on property he owned. The settlement agreement provided: "[Plaintiff] shall have right to enter a default judgment against Defendant of any payment required within this settlement with a 5 day grace period only." It also provided: "In event of default Plaintiff may enter Judgment in the amount of [$]1,061,500, less any payments made to date of default, plus interest at judgment rate." Defendant was late making the initial payment of $100,000, as well as the subsequent payment of $250,000. On April 21, 2006, plaintiff moved to enter default judgment, and on May 12, 2006, default judgment was entered.
On May 16, 2006, defendant moved to vacate the default judgment. The judge declined to enforce the settlement agreement finding "substantial compliance" by the defendant, and suggested that plaintiff should receive $25,000 as compensation for expenses. As a result, on June 23, 2006, the parties entered into a handwritten supplemental settlement agreement which required defendant to pay the $250,000 that was due on April 13, 2006, $24,376.34 that was due on May 13, 2006, and $24,376.34 that was due on June 13, 2006. In addition, defendant paid plaintiff the sum of $25,000 as compensation for "late payments and legal expenses." Defendant also gave plaintiff a deed to some property, and, in the event of a default, defendant authorized plaintiff to sell the property in a commercially reasonable manner if defendant did not make the payments authorized in the prior agreement at the end of the five-day grace period and to retain the outstanding balance owed by defendant. The agreement was amended by court order on August 25, 2006, allowing as substitution of collateral seven mortgages and deeds with the total value of $1.5 million.
After the parties entered into the supplemental settlement agreement, on numerous occasions plaintiff accepted late payments from defendant. When payments were not received for July 2007, October 2007 and November 2007, plaintiff's counsel sent defendant's counsel fax cover sheets on November 14, 2007, with messages stating that if the respective payment was not received by a certain date, plaintiff would "proceed to his available remedies without further notice." Plaintiff did not specifically declare defendant in default under the parties' agreement, and he did not proceed to any remedies available to him under those agreements. Rather, he accepted defendant's late payments.
Notwithstanding plaintiff's November 14, 2007, notice, defendant made no payment for November or December 2007. Nonetheless, plaintiff did not move to enter default judgment. The parties entered into another agreement whereby defendant was to pay plaintiff a $7,500 late fee together with November and December 2007 payments in order to cure the default.
The November and December 2007 payments, plus the $7,500 late fee, were sent via overnight mail on January 4, 2008, and by letter dated January 4, 2008, defendant advised plaintiff's counsel: "The January 2008 check shall be paid to your Client within the time set forth on the Stipulation of Settlement." However, the January 2008 payment was not received by January 18, 2008. As a result, on January 22, 2008, plaintiff, without notice to defendant, had his attorney acting as the escrow agent remove two of the deeds from escrow and record them. Thereafter, on January 25, 2008, plaintiff accepted defendant's January 2008 payment.
On February 8, 2008, defendant filed an order to show cause seeking: (i) invalidation of the transfer of real property placed as collateral; (ii) payment by plaintiff of all costs and fees associated with filings necessary to invalidate the deeds filed; (iii) imposition of sanctions against plaintiff for his frivolous and baseless actions; and (iv) imposition of sanctions against the escrow agent for breach of duty. On February 18, 2008, the February 2008 monthly settlement payment was delivered to plaintiff, but plaintiff claimed there were insufficient funds in defendant's account so that he did not deposit the check.
On February 20, 2008, plaintiff filed his response to defendant's order to show cause as well as an application to enter judgment by default based on late payments by defendant. While both applications were pending before the court, the plaintiff accepted payments from defendant for February, March, April, May and June 2008. When the matter was heard, defendant had paid $900,000 under the settlement agreement.
Because the January payment was not received until January 25, 2008, the court ruled that there was a default by defendant and entered final judgment for $161,500. The court explained:
This settlement was reached where the plaintiff agreed to discount the amount of money which [he] felt [he] was entitled to by $160,000. That ...