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Horizon Blue Cross Blue Shield of New Jersey v. Avolio

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


October 22, 2010

HORIZON BLUE CROSS BLUE SHIELD OF NEW JERSEY, PLAINTIFF-RESPONDENT,
v.
LOUIS F. AVOLIO, D.C., WOOD-RIDGE CHIROPRACTIC CENTER, INC., BERGEN NEURODIAGNOSTIC AND PHYSICAL THERAPY, INC., DEVON RALLS, AND LINDA MAIMONE, P.T., DEFENDANTS-APPELLANTS.

On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-2650-07.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued October 6, 2010

Before Judges Cuff, Simonelli and Fasciale.

Defendants Louis Avolio (Avolio) and Wood-Ridge Chiropractic Center, Inc. (Wood-Ridge Chiropractic) appeal from the March 5, 2010 Law Division order denying their motion for reconsideration of the January 22, 2010 order denying their motion to vacate default judgment. We reverse and remand for further proceedings.

Wood-Ridge Chiropractic is a New Jersey corporation with its principal place of business located at 225 Valley Boulevard in Wood-Ridge (the Wood-Ridge address), and its registered office located at 15 Boulevard in Hasbrouck Heights. Avolio is a chiropractor and the president and registered agent of Wood-Ridge Chiropractic. Avolio resided at 806 Sussex Road in Franklin Lakes (the Franklin Lakes address). He claims to have resided in Florida at all times relevant to this appeal.

On September 25, 2006, plaintiff Horizon Blue Cross Blue Shield of New Jersey filed a complaint against Avolio, Wood-Ridge Chiropractic and other defendants in the Superior Court, Camden County, alleging they had engaged in a scheme to defraud plaintiff. Plaintiff sought damages of approximately $2 million for insurance and common law fraud, unjust enrichment and restitution, negligent misrepresentation, tortious interference, and professional negligence and misconduct. Plaintiff also sought treble damages pursuant to the New Jersey Insurance Fraud Prevention Act (NJIFPA), N.J.S.A. 17:33A-1 to -30, and punitive damages.

In October 2006, plaintiff's counsel retained Selective Subpoena & Investigative Services, Inc. (Selective) to personally serve Avolio and Wood-Ridge Chiropractic at the Franklin Lakes address. Selective's process server allegedly notified plaintiff's counsel of his inability to effect service because the residence was located in a gated community and Avolio would not permit entry.

Plaintiff's counsel then attempted to serve Avolio and Wood-Ridge Chiropractic by regular and certified mail at the Franklin Lakes and Wood-Ridge addresses. The certified mail sent to the Wood-Ridge address was returned "unclaimed." The certified mail sent to the Franklin Lakes address was also returned; however, it is unclear from the record why it was returned. According to plaintiff's counsel, the regular mail was not returned from either address.

Despite this alleged mail service, Selective's process server allegedly personally served Avolio and Wood-Ridge Chiropractic at the Wood-Ridge address on October 24, 2006. However, the Affidavits of Service contain no description of the person served.

All defendants failed to file an answer, prompting plaintiff to file a request to enter default on December 21, 2006. As to Avolio and Wood-Ridge Chiropractic, plaintiff relied on the October 24, 2006 personal service, not the mail service. The record contains no competent proof that Avolio and/or Wood-Ridge Chiropractic received a copy of the request to enter default.

Avolio learned of the litigation in early 2007 through counsel for a co-defendant. Avolio's attorney, Santo Bonanno, Esq., contacted plaintiff's counsel on March 16, 2007, advising that his clients had not been served, and that counsel should so advise the judge who was to conduct a proof hearing on March 21, 2007.*fn1 Bonanno also sent counsel a copy of Avolio's passport and letter from Continental Airlines confirming that Avolio was on a return flight from Panama at the time of the alleged personal service.

In subsequent letters to plaintiff's counsel, Bonanno again disputed service, advised that Avolio currently resided in Florida and resided there at the time of the alleged personal and mail service, and instructed counsel to send him a copy of any future motion to set a proof hearing. In an April 30, 2007 letter to plaintiff's counsel, Bonanno stated, "Since I have not heard from you, I can only assume that all of Dr. Avolio's proof of where he had been has deterred you from filing another motion. Please contact me if this is not true."

On May 8, 2007, Avolio wrote to plaintiff's counsel denying personal or mail service and challenging counsel's attempt to proceed with a proof hearing. He claimed he did not reside in New Jersey and was out of the country at the time personal and mail service allegedly occurred, and Wood-Ridge Chiropractic's office had been closed since 2005. Avolio also advised plaintiff's counsel that Bonanno represented him and counsel must contact Bonanno regarding the matter. Avolio wrote to plaintiff's counsel again on June 12, 2007, instructing her to send a copy of the complaint to Bonanno.

Plaintiff's counsel disregarded Bonanno's and Avolio's correspondence as, without notice to Bonanno, she wrote to the court three times requesting a proof hearing and the court scheduled a hearing for June 4, 2009. Also, despite knowing of the dispute concerning the validity of the Franklin Lakes and Wood-Ridge addresses, plaintiff's counsel sent letters to Avolio and Wood-Ridge Chiropractic at those addresses advising them of the proof hearing.

The proof hearing occurred in Bonanno's and his clients' absence and without plaintiff's counsel's advising the court of the dispute over service of process. Also, plaintiff presented no competent evidence establishing Avolio's and Wood-Ridge Chiropractic's liability or connection to the co-defendants, and no proof of damages resulting from Avolio's and Wood-Ridge Chiropractic's alleged wrongful conduct. Nevertheless, finding that defendants had violated the NJIFPA, the court entered judgment in the amount of $359,130 against Avolio and Wood-Ridge Chiropractic, and in the amount of $6,264,348 against Avolio and two other defendants, jointly and severally. Again without notice to Bonanno, on June 24, 2009, plaintiff's counsel sent letters to Avolio and Wood-Ridge Chiropractic at the Franklin Lakes and Wood-Ridge addresses, advising them of the entry of the default judgment.

Defendants filed a motion to vacate the default judgment based on defective service. Avolio certified that he did not live in New Jersey and was out of the country on the date of the alleged personal and mail service, he never lived in a gated community, his Franklin Lakes home had been sold and Wood-Ridge Chiropractic's office had been closed prior to the alleged personal and mail service, and plaintiff's counsel failed to communicate with Bonanno as instructed. In opposition, for the first time plaintiff's counsel mentioned the mail service. She did not deny receiving Bonnano's and Avolio's letters, or explain why she failed to communicate with Bonnano and continue sending correspondence to Avolio and Wood-Ridge Chiropractic at the disputed addresses.

The trial judge denied the motion, concluding that defendants failed to establish excusable neglect or a meritorious defense. The judge found that defendants were on notice of the pending action and willfully failed to answer the complaint. The judge also denied defendants' motion for reconsideration. This appeal followed.

On appeal, defendants contend that the trial judge erred in denying their motion for reconsideration because (1) service was defective, (2) the judge applied the wrong standard of review, (3) defendants did not receive notice of the proof hearing, and (4) the evidence does not support the judgment. We agree with contentions (2) and (4), and need not address contention (3). We also conclude that contention (1) requires a plenary hearing.

It is well-settled that

[r]econsideration should be utilized only for those cases which fall into that narrow corridor in which either 1) the Court has expressed its decision based upon a palpably incorrect or irrational basis, or 2) it is obvious that the Court either did not consider, or failed to appreciate the significance of probative, competent evidence. [D'Atria v. D'Atria, 242 N.J. Super. 392, 401 (Ch. Div. 1990).]

We review a trial judge's determination of a motion for reconsideration under an abuse-of-discretion standard. Pressler & Verniero, Current N.J. Court Rules, comment 4.11 to R. 2:10-2 (2011); see also Cummings v. Bahr, 295 N.J. Super. 374, 389 (App. Div. 1996) (adopting the abuse-of-discretion standard "as the appropriate norm for appellate review of a denial of a motion for reconsideration"). The abuse-of-discretion standard also applies to a trial court's determination of a motion to vacate a default judgment. Hous. Auth. of Morristown v. Little, 135 N.J. 274, 283 (1994) (citations omitted). An abuse of discretion occurs when the trial judge's "decision [was] made without rational explanation, inexplicably departed from established policies, or rested on an impermissible basis." United States ex rel. USDA v. Scurry, 193 N.J. 492, 504 (2008) (assertion in original) (internal quotation marks ommited).

Applying these standards, we conclude that the trial judge abused his discretion in denying the motions to vacate the default judgment and for reconsideration. The judge incorrectly applied Rule 4:50-1(a) to deny the motion to vacate the default judgment, which requires proof of excusable neglect and a meritorious defense. However, defendants moved to vacate pursuant to Rule 4:50-1(d), claiming that the judgment is void for lack of personal jurisdiction due to defective service. A motion pursuant to Rule 4:50-1(d) does not require proof of excusable neglect and a meritorious defense. See Jameson v. Great Atl. & Pac. Tea Co., 363 N.J. Super. 419, 425 (App. Div. 2003), certif. denied, 179 N.J. 309 (2004). Rather, such a motion requires proof that the judgment is void and, in this case, void for lack of personal jurisdiction due to defective service.

In requesting entry of default, plaintiff relied on the October 24, 2006 Affidavits of Service to prove personal service on Avolio. A return of service is not conclusive evidence of effective service. Rather, it "raises a presumption that the facts as therein recited are true." ABE Goldfarb v. Roeger, 54 N.J. Super. 85, 89 (App. Div. 1959); see also Jameson, supra, 363 N.J. Super. at 426. Prior to 2002, the law presumed the truth of the facts recited in the return of service of process by a sheriff or other officer, rebuttable only by clear and convincing evidence.

There is no authority applying the presumption of truth to persons now authorized by Rule 4:4-3 to make service of process. See Pressler & Verniero, supra, comment to R. 4:4-7. Assuming the presumption applies to such persons, the record contains some evidence tending to rebut that presumption. "If some evidence is presented tending to disprove the return, but is not sufficient to establish that the return is false, the presumption is nevertheless eliminated from the case." See Jameson, supra, 363 N.J. Super. at 426--27. "Once the presumption is removed from [the] case, it remains plaintiff's overall burden of persuasion to demonstrate that service upon [defendant] was achieved[.]" Id. at 428--29.

Because there is at least "some doubt" as to whether Avolio and Wood-Ridge Chiropractic were served with the summons and complaint, we conclude that the judge had to conduct a plenary hearing to determine not only the truth of the facts contained in the Affidavits of Service, but the truth of the process server's representation to plaintiff's counsel that he could not personally serve Avolio in October 2006, which formed the basis for the mail service, and the truth of the mail service as well.

Also, in the context of a default judgment proof hearing, a trial court is obliged to view plaintiff's proofs indulgently, and the general practice is "to require only a prima facie case." Heimbach v. Mueller, 229 N.J. Super. 17, 20 (App. Div. 1988). In the context of a default judgment, "the court should ordinarily apply the prima facie standard to plaintiff's proofs, thus not weighing evidence or finding facts, but only determining their sufficiency." Kolczycki v. City of East Orange, 317 N.J. Super. 505, 514 (App. Div. 1999). "[U]nless there is intervening consideration of public policy or other requirement of fundamental justice, the judge should ordinarily apply to plaintiff's proofs the prima facie case standard of R. 4:37-2(b) and R. 4:40-1." Pressler & Verniero, Current N.J. Court Rules, comment 2.2 on R. 4:43-2 (2011).

The proofs submitted in this case do not meet the prima facie standard because they are riddled with incompetent evidence. Accordingly, in the event the trial court finds, after a plenary hearing, there was proper service of process, it shall, with notice to all parties and their counsel, conduct an evidentiary hearing to establish Avolio's and Wood-Ridge Chiropractic's liability and the damages attributable to them, if any.

Reversed and remanded for further proceeding consistent with this opinion. We do not retain jurisdiction.


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