December 1, 2009
EPOS, INC., MICHAEL VASILAKIS AND STEFANOS S. GERAZOUNIS, PLAINTIFFS-RESPONDENTS,
EVAN PANTELOPOULOS, NIJAAL, L.L.C. AND/OR NEWTON FOOD MANAGEMENT, INC., DEFENDANTS-APPELLANTS.
On appeal from Superior Court of New Jersey, Law Division, Special Civil Part, Camden County, Docket No. DC-009724-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted October 28, 2009
Before Judges Lyons and J. N. Harris.
Defendant, Newton Food Management, Inc. (Newton), appeals a trial court's order dated December 1, 2008, denying its motion to vacate a default judgment against it, as well as a subsequent order denying its motion for reconsideration. The following factual and procedural history is relevant to our consideration of the issues advanced on appeal.
Plaintiffs, Epos, Inc., Michael Vasilakis, and Stefanos S. Gerazounis were the owners of a diner in Oaklyn, New Jersey. In the summer of 2006, they entered into a contract to sell the diner to defendant, Evan Pantelopoulos (Pantelopoulos), "or his corporate or limited liability company nominee." The sale was finalized on August 8, 2006. The diner had a camera/security system, which plaintiffs had leased from a third-party.
Plaintiffs assert that defendant Pantelopoulos agreed, in connection with the purchase of the diner, to use and pay for the system. Evidently, at some time after the closing, defendant Pantelopoulos ceased paying for the camera/security system and the third-party owner of that system successfully sued plaintiffs for the amount owed under its contract with plaintiffs. Defendant Pantelopoulos was not a party to that action.
Following that action, plaintiffs filed suit in this case against defendants Pantelopoulos, Newton, and NIJAAL, L.L.C., seeking damages for an alleged breach of the purchase agreement, particularly with respect to the lease payments for the camera/security system.
Plaintiffs' complaint was filed on April 16, 2008. As this matter was filed in the Special Civil Part, service of process was attempted under Rule 6:2-3(b). The Special Civil Part summons was mailed, by certified and regular mail, to each of the defendants at 931 White Horse Pike, Oaklyn, New Jersey, the address of the diner. The return receipt card indicated it was signed by a person named "Christine," but her last name was illegible. Defendant Pantelopoulos, however, had sold the diner on July 30, 2007, to an unrelated party almost a full year before the service of the summons and complaint was attempted.
Defendant Pantelopoulos asserted and defendant Newton now asserts that at the time service was attempted, they neither owned the diner any longer nor had any employees there. Defendant Pantelopoulos did, however, learn of the complaint when "Christine" somehow contacted him. Accordingly, Pantelopoulos filed a pro se answer in June 2008. The answer, however, was filed solely on his behalf.
Later, on September 8, 2008, defendant Pantelopoulos filed a motion to amend his answer and to file a counterclaim against plaintiffs. On September 24, 2008, defendants Pantelopoulos and Newton filed a motion to permit Nicholas Pantelopoulos, a New York attorney and Pantelopoulos's son, to appear pro hac vice in the matter.
The trial was held on September 30, 2008. At that time, defendant Pantelopoulos appeared without counsel and plaintiffs appeared through counsel. The trial court initially addressed the outstanding motions. Because pro hac vice counsel and local counsel were not present, the trial court did not entertain the pro hac vice motion. The trial court also heard argument about the lack of service on defendants, but did not directly rule on that.
After hearing argument, the trial court noted that:
I am going to make it very simple. Anybody unhappy with the [c]court's ruling, after the case is over, you have 45 days to appeal.
This is a small lawsuit. It has been kicking around for 159 days....
This case is going to be tried on the plaintiff's complaint. I'll hear whatever the defendant's defense is. There will be a decision. Anybody unhappy is going to have 45 days to appeal. It's that simple. I'm not going to turn this into anything else.
Any counterclaims, cross-claims, issues concerning getting attorneys to represent you, frankly, both sides had the whole summer to do that, literally, the whole summer to do that.
As the corporate defendant, Newton, did not answer and was not represented by counsel, the trial court did not permit defendant Pantelopoulos to speak on its behalf. Following a bench trial, the trial court entered judgment in favor of defendant Pantelopoulos. The trial court then, however, found that Newton was in default for having not responded, and it permitted plaintiffs to put forth its proofs. As a result, the trial court entered judgment in favor of plaintiffs against Newton for $4,200. A motion to vacate the default judgment was heard and denied on December 1, 2008.
The trial court reasoned, that since defendant Pantelopoulos had actual notice of the pendency of the lawsuit and that since he was a fifty percent shareholder in Newton, service was adequate. The trial court did not find that there were conditions which made Newton's failure to answer excusable and, while it acknowledged that Newton may have a meritorious defense, it would not vacate the default. A motion for reconsideration of that order was denied and Newton filed this appeal.
On appeal, Newton raises the following issues for our consideration:
NEWTON WAS NEVER PROPERLY SERVED WITH PROCESS.
THE ELEMENTS OF R. 4:50 WERE CLEARLY SATISFIED.
THE DEFAULT JUDGMENT AGAINST NEWTON IS COMPLETELY INCONSISTENT WITH THE FINDINGS AND THE DETERMINATIONS BY THE TRIAL COURT ON THE SUBSTANTIVE ISSUES IN THE CASE, AFTER A TRIAL ON THE MERITS.
At the outset, we need to review the propriety of the service of process as it relates to Newton. Newton was certainly not served in accordance with Rule 4:4-4(a)(6) or (b)(1)(C). Service was attempted pursuant to Rule 6:2-3(d). The address for service was the diner's. It was not the address of the registered agent for the corporation. Nor was there any proof in the record that a corporate officer, director, trustee, manager, or general agent, or any person authorized by appointment of law to receive service of process on behalf of the corporation, was at that address.
In addition, as was noted by the trial court, no answer was filed on behalf of Newton. At best, Newton filed a pro hac vice application which was implicitly denied because the attorneys were not present in court when the motion was presented to the trial court. The filing of that motion, however, does not constitute an appearance in accordance with Rule 4:4-6 or Rule 6:2-3(e).
Rule 4:50-1 provides relief from a final judgment. A motion to vacate a 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 general rule is that a default judgment will not be disturbed unless the failure to answer or otherwise appear was excusable under the circumstances and unless the defendant has a meritorious defense. Id. at 318. "If [the] judgment is void and, therefore, unenforceable, it is a particularly worthy candidate for relief...." Coryell, L.L.C. v. Curry, 391 N.J. Super. 72, 80 (App. Div. 2006). The meritorious defense condition may not as a matter of due process be required if the default was procured on the basis of defective service of process. Peralta v. Heights Med. Ctr., Inc., 485 U.S. 80, 86-87, 108 S.Ct. 896, 900, L.Ed. 2d 75, 82 (1988).
While we recognize that constitutional requirements of due process do not mandate perfect service, service must be effective. Coryell, supra, 391 N.J. Super. at 81. Here, however, there was a substantial deviation from the tenor of the service of process rules. See Sobel v. Long Island Entm't Prods., Inc., 329 N.J. Super. 285, 293 (App. Div. 2000). The address provided for service was a location at which Newton had no presence whatsoever. It is only by serendipity that defendant Pantelopoulos learned from a woman named "Christine" that he had been sued. Plaintiffs' argument is that because defendant Pantelopoulos was a fifty percent shareholder of Newton, it should be deemed as having been served. Plaintiffs intentionally ignored the existence of a known registered corporate agent on whom service could have been made. The substituted service rules specifically designed for Special Civil matters ease the more stringent personal service rules found in Rule 4:4-4. However, there is no de minimis lawsuit exemption which excuses proper service, contrary to plaintiff's counsel's implication when he stated:
... the fact that I knew that I have to serve [the name of the registered agent] just because he's a registered agent for an entity doesn't mean that's who you go and serve.
This was not a major case. This was a case for us to try to collect $4200 that we paid for a debt that he agreed to pay. That's all it was, a $4200 case.
While the sum at issue may not be monumental and, while the principal of the corporation may have learned of the suit by circuitous means, that does not excuse non-compliance with the rules. "[I]t is not sufficient that a defendant somehow receive a copy of the summons and complaint within sufficient time to file an answer." Sobel, supra, 329 N.J. Super. at 293. "The requirements of the rules with respect to service of process go to the jurisdiction of the court and must be strictly complied with. Any defects... are fatal and leave the court without jurisdiction and its judgment void." Driscoll v. Burlington-Bristol Bridge Co., 8 N.J. 433, 493, cert. denied, 344 U.S. 838, 73 S.Ct. 25, 97 L.Ed. 2d 652 (1952).
Rule 6:2-3(d)(4) provides service by mail shall have the same effect as personal service unless "the court has other reason to believe that service was not effected." Here there is uncontroverted testimony the address for service was improper as to Newton as well as Pantelopoulos. The court had a clear reason to believe, therefore, that service was not effective. There is, therefore, sufficient question about the adequacy of service to render Newton's failure to answer excusable under the circumstances. See T & S Painting & Maint., Inc. v. Baker Residential, 333 N.J. Super. 189, 192 (App. Div. 2000). As the trial court acknowledged there may be a meritorious defense and the court's verdict for Pantelopoulos supports that, we find the Marder elements were present and the default judgment should have been vacated.
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