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RP Leasing Associates v. Kennedy

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


August 3, 2010

RP LEASING ASSOCIATES, PLAINTIFF-RESPONDENT,
v.
JOSEPH KENNEDY, VICTOR SILVA, EACH INDIVIDUALLY AND D/B/A FRONT ROW LIMOUSINE; FRONT ROW LIMOUSINE, INC., DEFENDANTS-APPELLANTS.

On appeal from the Superior Court of New Jersey, Law Division, Ocean County, Docket No. L-2025-03.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted: June 16, 2010

Before Judges Cuff and Fasciale.

Defendants, Joseph Kennedy, Victor Silva, each individually, d/b/a Front Row Limousine, and Front Row Limousine, Inc., appeal from a July 17, 2009, order denying their motion to vacate a default judgment. We affirm.

While Kennedy and Silva knew about the judgment, they waited between four and five years before they moved to vacate it. Since both responded differently to the judgment, we will address Kennedy and Silva in turn. Although they chose different ways to respond, one thing is similar: Kennedy and Silva delayed filing their motion to vacate. As a result of the delay, plaintiff was prejudiced.

I.

Plaintiff is a New York leasing company that leased vehicles to defendants for use in their livery company. Kennedy owned Front Row Limousine from 1994 to March 2003.*fn1 Both Silva and Kennedy personally guaranteed several of the lease agreements.

On July 18, 2003, plaintiff filed a lawsuit seeking money damages caused by defendants' failure to make payments pursuant to leasing agreements. Plaintiff sought to recover the deficiency balance, after credits and charges were applied, on the vehicles.

Default was filed on September 24, 2003. Default judgment was entered, pursuant to Rule 4:43-2(a), on October 7, 2003, in the amount of $180,884.53.*fn2 Plaintiff spent several years attempting to collect from defendants.

A. Silva

On January 4, 2004, Silva was served with a December 31, 2003, information subpoena and he ignored it. After learning about plaintiff's default judgment, Silva consulted four lawyers between April 23, 2004, and the filing of the appeal. Silva's motion to vacate was not filed until he retained the fourth lawyer. Silva's delay in filing the motion to vacate was inexcusable.

First, Silva retained Terrance L. Turnbach on April 23, 2004, to oppose plaintiff's motion to enforce litigants rights. On April 30, 2004, Silva appeared in court and filled out the information subpoena submitted to him following entry of plaintiff's default judgment. On June 14, 2004, Silva was served with a personal property levy. At that time, neither Turnbach nor defendant filed a motion to vacate the October 7, 2003 default judgment.

Second, Silva consulted Dennis Salerno to negotiate a settlement of plaintiff's default judgment after Silva was served with a wage execution on November 17, 2005, and after he learned that he was denied a line of credit due to plaintiff's default judgment. Unsuccessful settlement negotiations occurred between Salerno and plaintiff's counsel. At that time, neither Salerno nor defendant filed a motion to vacate the default judgment.

Third, Silva consulted Diane Ault Cullen sometime after September 12, 2007, when plaintiff successfully levied on Silva's PNC bank account in the amount of $2,211.08. Cullen unsuccessfully opposed plaintiff's turnover motion. On June 5, 2008, plaintiff served a subpoena duces tecum on PNC to produce documents on July 9, 2008, regarding Silva's line of credit. On June 6, 2008, a turnover order was filed. On July 2, 2008, Cullen also filed, on behalf of Silva's son and significant other, a motion to intervene and return monies levied on an alleged joint bank account and to quash the subpoena. On August 1, 2008, the court denied the motion to intervene and return monies. Neither Cullen nor Silva filed a motion to vacate the default judgment.

Fourth, Silva retained James F. Brady who filed a motion to vacate default judgment on December 23, 2008. The motion was filed almost four years after Silva learned about the judgment against him. On December 12, 2008, plaintiff successfully levied on another Silva bank account in the amount of $4,260.13.

B. Kennedy

After learning about plaintiff's default judgment, Kennedy chose to file for bankruptcy protection rather than move to vacate. His delay in filing a motion to vacate is inexcusable.

Kennedy admitted in his December 18, 2008 affidavit, that he "never challenged the judgment because it was too much for [him] to deal with besides [his] divorce and bankruptcy."

On September 30, 2004, Kennedy filed a Chapter XIII bankruptcy petition, which was terminated on October 27, 2005. On October 6, 2005, he filed a Chapter VII petition. Kennedy listed plaintiff's judgment*fn3 in the October 6, 2005 petition, thereby signaling that he was aware of plaintiff's judgment as of September 30, 2004, eleven months after the judgment was entered.

On November 14, 2005, plaintiff filed a secured lien against property that was part of Kennedy's estate. The trustee filed an adversarial proceeding in the bankruptcy court on March 16, 2006, seeking a determination of the priority of plaintiff's judgment. Plaintiff filed opposition in the bankruptcy court on March 24, 2006. On January 31, 2006, Kennedy received a discharge of plaintiff's lien, and the adversarial proceeding was settled. As a result of the settlement of the bankruptcy adversarial proceeding, plaintiff received $60,000 from the sale of Kennedy's home in full and final satisfaction of its judgment.*fn4

On May 8, 2009, five years and seven months after judgment was entered, the motion judge conducted oral argument on defendants' motion to vacate default judgment, and determined a plenary hearing was required. The plenary hearing occurred on June 12, 2009; the judge made findings of fact and denied the motion on July 17, 2009.

Both Silva and Kennedy testified at the plenary hearing. The motion judge actively participated during the proceedings and conducted an extensive cross-examination of Silva. On June 15, 2009, Cullen objected to the intensity of the judge's cross-examination. At the July 17, 2009 proceeding, the judge addressed defendants' attorney's objection and disposed of the motion.

The judge found that defendants were not personally served with the complaint; however, he concluded that Kennedy knew about the judgment on October 6, 2005, and Silva knew about the judgment in late spring 2004. Despite knowledge of the judgment, neither filed a motion to vacate for several years.

The judge characterized Silva's testimony as "mendacious" and determined that defendants sat on their rights between four and five years before moving to vacate the judgment. The judge also found that plaintiff would suffer prejudice if he vacated the judgment. The judge reasoned that "to vacate [the j]udgment would do [a] grave injustice . . . . Now some five or six years later[,] to reconstruct the [d]efault would be almost impossible. . . . [P]eople's memories certainly lapse, and reconstructing these types of issues are exceptionally difficult." Moreover, plaintiff spent years diligently attempting to collect the amount of the judgment.

II.

On appeal, defendants argue that (1) the default judgment is void because of defective service of process; (2) they are not barred by the doctrines of estoppel and laches; (3) plaintiff failed to provide notice of sale after repossession or notice of default judgment; (4) they have "bona fide" defenses; (5) they are entitled to relief under Rule 4:50-1(f); and (6) the judge overstepped his judicial role at the plenary hearing.

III.

Defendants' primary argument on appeal is that the default judgment is void because they were not properly served with the complaint and summons. Under Rule 4:50-1(d), they contend that the judge erred by denying their motion to vacate. We disagree.

While defendants were not served with the summons and complaint, Silva and Kennedy had notice of the lawsuit and the default judgment. Despite that knowledge, Silva and Kennedy made a conscious decision to delay the filing of a motion to vacate default judgment.

As to Silva, he had numerous opportunities to file a motion to vacate the default judgment, but failed to do so. For instance, he failed to seek that relief (1) when he was personally served with the information subpoena, three months after entry of the default judgment; (2) when he retained Turnbach to oppose plaintiff's motion to enforce litigant's rights; (3) when he appeared in court to fill out the information subpoena; (4) when he was served with a personal property levy; (5) when he was denied a line of credit due to the judgment; and (6) when he had Salerno attempt to negotiate a settlement of plaintiff's default judgment.

Over the five years since the judgment was entered, Silva sought the advice of four separate lawyers. The motion judge described Silva's testimony that he was unaware he was in jeopardy as "mendacious." Rather than move to vacate default judgment, Silva chose to attempt settlement negotiations with plaintiff. Even after the unsuccessful negotiations, Silva did not move to vacate default judgment until three years later. During that time, plaintiff made continuous significant collection efforts.

As to Kennedy, rather than move to vacate plaintiff's default judgment, he filed for bankruptcy. Kennedy knew about the judgment as of September 30, 2004, and he listed it in the October 6, 2005, petition. In fact, plaintiff and Kennedy fully litigated in the bankruptcy court the priority of plaintiff's lien. In the adversarial proceeding, plaintiff agreed to accept $60,000 in full and final settlement of the dispute. As a result, on January 31, 2006, Kennedy received a discharge of plaintiff's debt.

Plaintiff relies on Citibank, N.A. v. Russo, 334 N.J.

Super. 346, 352-53 (App. Div. 2000), to support the proposition that a motion to vacate default judgment, even if it is void, must be made within a reasonable time. While Citibank, N.A., is not directly on point, we agree that defendants' motion, even if it is void, must be filed within a reasonable time.

In Citibank, N.A., the defendant argued that he was not properly served with the summons and complaint. Id. at 351. After attempts at personal service were unsuccessful, the defendant was served by certified and regular mail. Id. at 352. The certified mail was returned as "unclaimed." Ibid. Shortly after entry of default judgment was entered, the defendant filed a voluntary petition for bankruptcy and forwarded it to the plaintiff's attorney. The defendant later argued that the service was defective because service by regular mail may not provide the foundation for a default judgment. Id. at 351. After rejecting the defendant's argument, we said that "even if there had been a technical defect in the method of service of process, defendant would not be automatically entitled to vacate the default judgment against him." Id. at 352.

Personal jurisdiction over a defendant is required to protect the individual's "liberty interest flowing from the Due Process clause." Rosa v. Araujo, 260 N.J. Super. 458, 462-63 (App. Div. 1992) (citing Ins. Corp. of Ir. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702, 102 S.Ct. 2099, 2104, 72 L.Ed. 2d 492, 501 (1982)), certif. denied, 133 N.J. 434 (1993). Therefore, "the court rules which describe the manner in which process is to be served must be read in the context of effecting due process." Id. at 463. "Where due process has been afforded a litigant, technical violations of the rule concerning service of process do not defeat the court's jurisdiction." Ibid.

"Generally, where a default judgment is taken in the face of defective personal service, the judgment is void," id. at 462 (citing Garza v. Paone, 44 N.J. Super. 553 (App. Div. 1957)), but "'not every defect in the manner in which process is served renders the judgment upon which the action is brought void and unenforceable,'" Citibank, N.A., supra, 334 N.J. Super. at 352 (quoting Rosa, supra, 260 N.J. Super. at 462).

We accept for the purpose of this opinion that neither Silva nor Kennedy were personally served with the summons and complaint. The record demonstrates, however, that both were fully aware of this action and the default judgment for years. Thus, due process was afforded to Silva and Kennedy. Nevertheless, Silva and Kennedy delayed moving to vacate the default judgment for several years. As we said in Citibank, N.A., supra, 334 N.J. Super. at 353 (quoting Rule 4:50-2), "[e]ven if a judgment is void[,] . . . a motion to vacate the judgment still must be 'made within a reasonable time.'" Here, Kennedy and Silva failed to timely move to vacate the judgment.

IV.

Silva and Kennedy contend that the doctrines of estoppel and laches do not bar their motion to vacate. We disagree.

In County of Morris v. Fauver, 153 N.J. 80, 105 (1998) (internal quotations and citations omitted), the Court explained that:

Laches has been found where there is unexplainable and inexcusable delay in enforcing a known right whereby prejudice has resulted to the other party because of such delay. The policy behind laches is to discourage stale claims. The time constraints imposed are flexible under the doctrine. The factors to be considered when determining whether to apply laches include: length of delay; reasons for the delay; and changing conditions of either or both parties during the delay. It is assumed that the party to whom laches is imputed has knowledge of his rights, and sufficient opportunity to assert them in the proper forum. The other party, in contrast, may have good reason to believe those rights have been abandoned.

"The core equitable concern in applying laches is whether a party has been harmed by the delay." Knorr v. Smeal, 178 N.J. 169, 181 (2003) (citing Lavin v. Bd. of Educ. 90 N.J. 145, 152-53 (1982)). Plaintiff was prejudiced by the delay in filing the motion to vacate.

Silva knew about the default judgment three months after it was filed. Four years later, he moved to vacate the judgment. During that time, he attempted to avoid plaintiff's substantial collection efforts, and he attempted to settle directly with plaintiff. Silva's delay is unexplainable and inexcusable especially since he was denied a line of credit, he participated in supplementary proceedings, his bank accounts were levied upon, and he consulted four lawyers. Silva had knowledge of his rights and a sufficient opportunity to assert them. The motion judge concluded that Silva's testimony that he was unaware he was in jeopardy was "mendacious."

Kennedy knew about the judgment one year after it was filed. Four years and three months later, he moved to vacate the default judgment. Kennedy had knowledge of his right to seek a vacation of the judgment and a sufficient opportunity to do so, but chose to file bankruptcy instead. Kennedy's delay in moving to vacate plaintiff's default judgment is therefore unexplainable and inexcusable.

Finally, plaintiff would be severely prejudiced if the default judgment was vacated. The judge reasoned that "to vacate [the j]udgment would do [a] grave injustice . . . . Now some five or six years later[,] to reconstruct the [d]efault would be almost impossible. . . . [P]eople's memories certainly lapse, and reconstructing these types of issues are exceptionally difficult." Moreover, plaintiff spent at least six years diligently attempting to collect the amount of the judgment.

Defendants failed to timely move to vacate the October 7, 2003, default judgment, and are, therefore, barred from doing so.

V.

Kennedy and plaintiff are bound by the settlement reached in the bankruptcy adversarial proceeding. Bd. of Trs. of Trucking Employees of N. Jersey Welfare Fund, Inc. Pension Fund v. Centra, 983 F.2d 495, 504-05 (3d Cir. 1992) (finding that where a bankruptcy judgment is entered by consent by the same parties, a subsequent suit based on the same cause of action is barred); see also Adam v. Itech Oil Co. (In re Gibraltar Resources, Inc.), 210 F.3d 573, 576 (5th Cir. 2000) (holding that a bankruptcy court's approval of a settlement order is a final order entitled to the full dispositive effect of claim preclusion). It must be noted that the bankruptcy settlement at issue in Centra, supra, did not bar the subsequent litigation because the causes of action in the bankruptcy action and following suit were different. 983 F.2d at 504-05. Here, the causes of action in the adversary proceeding before the bankruptcy court and the cause of action in the suit before the superior court are identical as they both arise from Kennedy's default on the leasing agreements. In general, judgments entered by consent are final judgments on the merits, Interdynamics, Inc. v. Firma Wolf, 653 F.2d 93, 96-97 (3d Cir.), cert. denied sub nom. Trans Tech, Inc. v. Interdynamics, Inc., 454 U.S. 1092, 102 S.Ct. 658, 70 L.Ed. 2d 631 (1981), and state and federal courts are required to give federal court judgments the effect prescribed by the federal law of claim preclusion, Semtek International Inc. v. Lockheed Martin Corp., 531 U.S. 497, 507, 121 S.Ct. 1021, 149 L.Ed. 2d 32 (2001) (citing Stoll v. Gottlieb, 305 U.S. 165, 171-72, 59 S.Ct. 134, 83 L.Ed. 104 (1938)). In this case, plaintiff accepted $60,000 in full satisfaction of the default judgment, and the balance of the lien, as to Kennedy, was discharged by the bankruptcy court. "[A]s a result of the discharge in bankruptcy, [Kennedy] was discharged of his personal obligation on the debt to plaintiff." See Chem. Bank v. James, 354 N.J. Super. 1, 8 (App. Div. 2002) (citing 11 U.S.C.A. § 524(a)(1)). Therefore, just as defendant cannot avoid the judgment entered in the bankruptcy court, plaintiff is not permitted to recover from Kennedy more than the $60,000 settlement received in the adversarial proceeding. The disposition in the bankruptcy court must be respected.

VI.

We now turn to defendants' argument that the default judgment must be set-aside because the judge was unnecessarily aggressive and intrusive during the plenary hearing. After the hearing, defendants' attorney wrote the judge and objected to the way in which he conducted the proceedings. She objected to the judge "assum[ing] the role of cross[-]examiner." In her June 15, 2009, letter, she indicated that the judge badgered Silva by asking repeated questions without allowing him to answer.

Generally, a trial judge has broad discretion to question witnesses in order to clarify existing testimony or to elicit facts that are necessary for trial. State v. Medina, 349 N.J. Super. 108, 131 (App. Div.), certif. denied, 174 N.J. 193 (2002). A trial judge may intervene when testimony is unclear and confusing. State v. Cohen, 211 N.J. Super. 544, 552-53 (App. Div. 1986), certif. denied, 107 N.J. 115 (1987). When doing so, however, the judge must maintain the atmosphere of impartiality and not demean or disparage the witness. See State v. Ray, 43 N.J. 19, 25 (1964); Band's Refuse Removal, Inc. v. Borough of Fair Lawn, 62 N.J. Super. 522, 548 (App. Div.), certif. denied, 33 N.J. 387 (1960). The limitations upon questioning by a trial judge have usually been considered within the framework of a jury trial. However, "the necessity of judicial self-restraint is no less important where the judge sits alone; if he participates to an unreasonable degree in the conduct of the trial, even to the point of assuming the role of an advocate, what he does may be just as prejudicial to a defendant's rights as if the case were tried to a jury." Band's Refuse Removal, supra, 62 N.J. Super. at 549.

Although we agree that the judge was unnecessarily aggressive and intrusive, we are satisfied that his conduct did not alter the result. There is no question that Silva and Kennedy knew about the default judgment shortly after it was entered and did not timely move to vacate it.

In light of our holding that defendants are barred from moving to vacate the judgment, we conclude that the remaining arguments raised by defendants "are without sufficient merit to warrant further discussion in a written opinion." R. 2:11-3(e)(1)(E).

Affirmed.


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