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N.P. 1300, LLC v. K.H. Cleaners


May 17, 2010


On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket Nos. L-119-07 and L-9035-08.

Per curiam.


Argued April 27, 2010

Before Judges Carchman and Parrillo.

Plaintiff NP 1300, LLC appeals from: 1) a June 4, 2009 order of the Law Division, granting defendant K.H. Cleaners, Inc.'s motion to dismiss plaintiff's complaint (Docket No. L-5439-08); and 2) a July 31, 2009 order of the same court denying plaintiff's motion to vacate a previously entered April 9, 2008 stipulation of dismissal of an earlier complaint with prejudice (Docket No. L-115-09).*fn1

These are the facts relevant to both appeals. Plaintiff owned property located at 12 South Street, New Providence (the property). In 1984, defendant, K.H. Cleaners, Inc., assumed operation of an existing dry cleaning store (the store) located on the property and had operated the store since approximately 1984, pursuant to a lease entered into with plaintiff dated October 18, 1978.*fn2 The most recent renewal of the lease was executed between the parties on November 1, 2003, for a term of five years ending on October 30, 2008. Defendant sold the store on April 12, 2008.

On January 5, 2007, plaintiff filed a three-count complaint against defendant and Kwang Han Kim, agent of K.H. Cleaners who had signed the October 18, 1978 lease, in the Law Division, asserting that defendants had caused a discharge, release, spill or disposal "of hazardous substances and/or chemical contaminants onto and/or near the Property during plaintiff's ownership of the Property resulting in soil and/or groundwater contamination." Plaintiff alleged it "has expended and expects to expend in excess of $300,000 to investigate, clean up and remove the hazardous substances and to respond to the [New Jersey Department of Environmental Protection] directives" due to defendants' actions. Plaintiff, citing N.J.S.A. 58:10-23.11g, alleged that defendants were responsible for the costs incurred in the contamination clean-up.

Plaintiff also claimed in Count Two of the complaint, that defendants had an obligation under the lease to reimburse plaintiff for all costs incurred, including interest, attorney's fees and other appropriate relief. The third count sought to uphold personal liability on Kim.

On August 17, 2007, defendant filed its answer, denying all allegations, except admitting that defendant took over the operation of the store by entering into a lease with plaintiff and that "Kwang Han Kim []executed a guaranty regarding the lease . . . ."

For reasons not articulated at the time, on April 9, 2008, plaintiff executed a stipulation agreeing to dismiss the complaint with prejudice.

Seven months later, on November 12, 2008, plaintiff filed a two-count complaint against the same defendant, K.H. Cleaners, Inc.*fn3 , proffering the same allegations as it had in its previous complaint and noting that defendant is liable to plaintiff for reimbursement for costs incurred by plaintiff in investigating, cleaning and removing hazardous substances discharged by defendant. According to plaintiff, as a result of the alleged contamination and directives by the New Jersey Department of Environmental Protection, plaintiff expended over $300,000 to investigate and remediate the discharge and anticipates incurring additional expenses related to the remediation process.

Defendant moved to dismiss the second complaint arguing that plaintiff's complaint was barred by principles of res judicata and the entire controversy doctrine. The motion judge dismissed the complaint, and plaintiff appealed.*fn4

On July 9, 2009, just prior to filing its first appeal, plaintiff moved to vacate the April 9, 2008 stipulation of dismissal pursuant to R. 4:50-1. Included in support of this motion was a certification by Mr. John Rudder, plaintiff's principal, who stated that:

[i]n April, 2008, I agreed to dismiss the Complaint based upon Defendants' representations that 1. they could not locate any of their pre-1987 insurance policies. Before 1987, insurance policies typically covered environmental liabilities.

From 1987 on, they did not. 2. the business was substantially worthless, and Defendant Kim individually had no substantial assets. Collectively, the Defendants were judgment[] proof.

According to Rudder, in May 2008, a month after plaintiff voluntarily dismissed its first complaint, Kim located one of the lost pre-1987 insurance policies. Rudder stated that "[h]ad he found that policy before the Dismissal, I would not have agreed to the Dismissal." He had been defendant's landlord for more than twenty years, and "had strong reason to believe both Defendants were in fact judgment proof." According to Rudder, he agreed to dismiss the complaint "to be a nice guy."

Plaintiff argued that it was mislead into entering into the stipulation by the representation by defendants that there was no insurance. Plaintiff argued that it "didn't want to go after Mr. Kim personally" if there were no pre-existing insurance policies. Plaintiff argued that it "assum[ed], and it is purely an assumption . . . that when Mr. Kim said that he could not locate policies he was being honest and he couldn't."

Defendant did not file any responsive certification disputing the factual rendition, but in its responding brief, it argued that there was nothing to suggest that defendant purposely concealed its insurance policies, that plaintiff failed to file its motion within one year of the stipulation and that these were not exceptional circumstances warranting vacation of the dismissal or relaxation of the one-year time bar of certain sections of Rule 4:50-1. Further, defendant claimed that the terms of the settlement should be enforceable as both parties were represented by counsel during its execution. Finally, it claimed, without specifying how, it would be prejudiced if the litigation were to be reopened.

The motion judge considered the application of the subsections of Rule 4:50-1*fn5 (a), (b), (c) and (f) and found none of them applicable. He observed that Rule 4:50-2 requires a moving party to file a motion under Rule 4:50-1(a) to (c) within a year and plaintiff failed to do so; and further, that while Rule 4:50-1(f) is not subject to the one-year time bar, the facts were not sufficiently unique to warrant the court to grant relief. He denied plaintiff's motion to vacate the April 9, 2008 stipulation in an order dated July 31, 2009.

Plaintiff appealed that order as well.*fn6

On this latter appeal, although plaintiff raises a number of issues, it primarily asserts that "in order to achieve equity and justice, the judgment should be vacated pursuant to R. 4:50-1(f)." We focus our attention on this contention as we deem it to be dispositive of both appeals.

A motion for relief from judgment under Rule 4:50-1 should be granted sparingly. Furthermore, when reviewing such motions we generally defer to the broad discretion afforded to the trial judge, whose determinations should be left undisturbed unless they result from a clear abuse of discretion. Morristown Hous. Auth. v. Little, 135 N.J. 274, 283-84 (1994); St. James AME Dev. v. Jersey City, 403 N.J. Super. 480, 487 (App. Div. 2008); Del Vecchio v. Hemberger, 388 N.J. Super. 179, 186-87 (App. Div. 2006).

The Court has informed us, however, that any decision to grant or deny relief from judgment must be guided by the principles of equity. Little, supra, 135 N.J. at 283.

Since the granting of relief from a judgment in effect reverts the action to its pre-dismissal status, the potential and extent of prejudice to any party to the litigation are factors to consider when determining the application to vacate a judgment. Miller v. Estate of Kahn, 140 N.J. Super. 177, 182 (App. Div. 1976).

Subsection (f) of Rule 4:50-1 is the "catchall" category. "No categorization can be made of the situations which warrant redress under subsection (f) . . . [T]he very essence of (f) is its capacity for relief in exception situations. And in such exceptional cases its boundaries are as expansive as the need to achieve equity and justice." Court Inv. Co. v. Perillo, 48 N.J. 334, 341 (1966). See also DEG, LLC v. Twp. of Fairfield, 198 N.J. 242, 269-71 (2009).

A movant's right to relief depends on the totality of the circumstances, and the correctness or error of the original judgment is ordinarily an irrelevant consideration. See Pressler, Current N.J. Court Rules, Comment 5.6.1 on R. 4:50-1 (2010); In re Guardianship of J.N.H., 172 N.J. 440, 476 (2002). In order to obtain relief under subsection (f), the movant must demonstrate that the circumstances are an exception and that enforcement of the order or judgment would be unjust, oppressive or inequitable. Lawson Mardon Wheaton, Inc. v. Smith, 160 N.J. 383, 404-07 (1999); Nowosleska v. Steele, 400 N.J. Super. 297, 304-05 (App. Div. 2008); City of East Orange v. Kynor, 383 N.J. Super. 639, 646 (App. Div.), certif. denied, 188 N.J. 352 (2006).

Relief under subsection (f) is not automatically barred by reason of a party's failure to have made a timely motion for relief. See Pressler, supra, Comment 5.6.1 on R. 4:50-1 comment 5.6.1.; Baumann v. Marinaro, 95 N.J. 380, 393 (1984).

The motion judge, in denying plaintiff relief under subpart (f), faulted plaintiff on its failure to conduct an independent investigation into whether defendant had a pre-1987 insurance policy. "But Mr. Rudder[] . . . wasn't about to do his own independent investigation. People can do investigations to see if there's existing policies if you have the certain names, numbers, tax I.D.'s or whatever. There's ways to do searches and such, I assume."

The judge concluded:

I don't find this exceptional. It's a commercial business decision being made and it perhaps is being made because people want to move on in their business and bring finality, and now they have a thought -second thoughts about it.

Also, there is no explanation and I certainly don't want to hear it as to why the worse with prejudice, or not with prejudice - it's not ambiguous so the Court can say that this is not an ambiguous document so we do need to put all the evidence in the hearing. It's - the language is absolutely clear. So the parties' having determined to use that language is a real factor to say is there any reason that that language shouldn't be enforced.

And I just don't think it rises to the level to show that this is really an exceptional circumstance case to relax the rule as it's stated.

While we do not fault the motion judge's analysis, we conclude that there were other relevant factors to be considered that impact on the relief sought by plaintiff.

[w]hether exceptional circumstances exist is determined on a case by case basis according to the specific facts presented . . . .

Among the factors to be taken into account on a Rule 4:50 motion are the 'extent of the delay in making the application for relief, the underlying reason or cause, fault or blamelessness of the litigant, and any prejudice that would accrue to the other party.' [F.B. v. A.L.G., 176 N.J. 201, 208-09 (2003) (citing J.N.H., supra, 172 N.J. at 474.]

Critical to any analysis is the fact that plaintiff entered into the dismissal with prejudice. At oral argument, counsel readily conceded that the dismissal with prejudice, as opposed to without prejudice, was nothing more than an error. He further noted that the dismissal of the original action was gratuitous on plaintiff's part and provided no benefit to plaintiff. In simplest terms, it relieved defendants of any liability based on an understanding that they were judgment proof. The delay in moving for relief under the Rule was explained by the filing of the second action based on a trial court ruling in an unrelated matter in Monmouth County involving a similar clean-up dispute. Finally, defendant here offers nothing to contradict plaintiff's recitation of the relevant events and most important, neither factually supports an argument nor suggests that it is in any way prejudiced by a vacating of the stipulation and reinstatement of the complaint.

It does not and cannot assert that it relied on a sense of repose, since, as the carrier, it was never involved in the litigation in the first instance.

Ultimately, the parties should be afforded the opportunity to have the issues involved fairly and fully litigated. The delays and errors in the management of this litigation have been acknowledged and explained. We deem the equitable and just result to be a vacation of the stipulation of dismissal and reinstatement of the original complaint. As to the appeal in A-115-09T3, we reverse and reinstate the original complaint filed on November 12, 2008.

Our decision in A-115-09T3 renders the appeal in A-5439-08T3 moot. If plaintiff is of the view that the subsequent complaint filed in this matter raises additional issues, it may move to amend in the Law Division. We need not address the issue of when the cause of action accrues or other related issues and to the extent they are relevant to the cause of action, they, too, may be raised in the Law Division as well.

As to the appeal in A-115-09T3, we reverse and remand for reinstatement of the complaint. As to A-5439-08T3, we dismiss the appeal as moot.

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