April 14, 2011
EDWARD MATHIS, PLAINTIFF-APPELLANT,
ENCO HOME INSPECTIONS AND ROBERT HORVATH, DEFENDANTS-RESPONDENTS.
On appeal from Superior Court of New Jersey, Law Division, Special Civil Part, Bergen County, Docket No. SC-2001-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted January 4, 2011
Before Judges Payne and Baxter.
Plaintiff Edward Mathis, who filed suit for nonpayment of wages against defendants ENCO Home Inspections and its president, Robert Horvath, and was awarded a default judgment in the amount of $1435.50 on July 25, 2005, appeals from (1) orders entered on September 11, 2009 vacating a writ of execution and levy on the car and bank account of Horvath, and vacating the default judgment entered against defendants and restoring defendants' answer and defenses; (2) orders of October 1, 2009 insofar as they limited plaintiff's discovery demands and dismissed claims against Horvath as the result of plaintiff's failure to state a claim against him upon which relief could be granted; and (3) an order of October 28, 2009 dismissing claims against ENCO for lack of in personam jurisdiction. We remand for further proceedings.
The record discloses that plaintiff was employed by ENCO, a New York limited liability company, as a home inspector pursuant to an inspector employment agreement dated April 23, 2003. He was enrolled in a National Institute of Building Inspectors training program conducted in Bound Brook, New Jersey on May 9, 2003, but did not complete the program. He performed sixteen home inspections for ENCO in the period from June 24, 2003 to October 3, 2003. Asserting that some or all of the inspections were deficient, ENCO withheld compensation in the amount claimed by plaintiff. All inspections were conducted in the state of New York.
On April 12, 2005, plaintiff filed suit in the Special Civil Part, Small Claims Section against ENCO and its president, Horvath, alleging in Count One that he was an employee of ENCO and Horvath and that he performed work for which he should have been paid $708.50, but that payment had been refused. In Count Two, plaintiff sought "attorney's fees, costs and other remedies pursuant to New York Consolidated Law § 198, N.J.S.A. 34:11-56a4, et seq. (and any other applicable law), which provide for special damages and/or a 25% enhancement of any amount owed by the defendant to its former employee and other relief," and demanded judgment in the amount of $885 plus punitive damages, interest and attorney's fees. In Count Three, plaintiff alleged defendants' bad faith and again sought $885 in compensatory damages, punitive damages, interest, and attorney's fees.
Because the matter was within the jurisdiction of the Small Claims
Section, defendants were not required to obtain representation by
counsel, Rule 6:11, and no answer was required. R. 6:2-1.*fn1
Defendants were served*fn2 on May 18, 2005 and at that time were advised of a June 2, 2005 trial date. However,
on May 23, 2005, the Operations Manager of ENCO telefaxed a letter to
the Assistant Division Manager of the Bergen County Special Civil Part
requesting an adjournment to permit defendants to obtain the
documentation necessary to defend the claim, which was not kept on
site. The letter continued:
Additionally, ENCO Home Inspections is a limited liability company residing in New York State, and as an employee of said company, Robert Horvath cannot be held personally responsible in this action. Furthermore, we have to seek advice as to the above named court's jurisdictional authority in this matter since we are in fact a limited liability company registered in New York State. We also question the validity of the venue since this is a labor dispute. Possibly, you will be able to answer those questions.
Please contact me at this office at your earliest possible convenience with a revised trial date. If necessary, you can reach me at any of the numbers listed below.
There is no indication that a copy of the letter was sent to counsel for plaintiff, and receipt has been denied.
Defendants did not appear personally on June 2, and their adjournment request, if considered, appears to have been denied. A judgment was entered in favor of plaintiff and against defendant on July 25, 2005 in the amount of $1435.50. The record does not disclose whether the judgment was served on defendants. See R. 1:5-1(a). An information subpoena was served on defendants on or about August 31, 2005. Additional costs were included in the judgment on July 13, 2009, increasing its amount to $1595.55.
Pursuant to plaintiff's motion, on May 26, 2006 an order was entered requiring defendants to show cause on June 23, 2006 why they should not be adjudged to have violated plaintiff's rights by failing to answer the August 31, 2005 information subpoena. Again, defendants did not appear, but instead, sent an undated letter to the judge, that stated:
Last year, on May 23rd, we contacted Ms. Fessano in your office via fax regarding Docket # SC-2001-05 (please refer to attached) and received no response.
I would like to reiterate our points because we are not available to appear for a motion scheduled for tomorrow. The case brought by Edward Mathis is an employment challenge. Mr. Mathis was an employee of ENCO Home Inspections, LLC and was paid via payroll check. He was not an independent contractor, nor was he a vendor. The issue is not whether he "was not paid for work done" as he claims but about an unfulfilled employment contract. To this date, Mr. Mathis has not fulfilled his terms of employment with this company.
ENCO is a New York State registered limited liability company. Mr. Mathis was employed and worked within New York State. Under those conditions, Mr. Mathis would be required to file his claim with the New York State Labor Commission in order to seek restitution.
We look forward to a response from your office.
A copy of this letter, like the first letter to the court, does not appear to have been sent to plaintiff's counsel. On September 6, 2006, an order to enforce litigant's rights was entered against defendants requiring that they respond to the information subpoena within ten days or face arrest. Proof of service on defendants is not contained in the record.
Approximately three years later, on July 14, 2009, a writ of execution, noting the judgment and an amount due of $1595.55, was served on Horvath. On August 5, 2009, defendants, through counsel, prepared an answer to plaintiff's complaint together with affirmative defenses, moved to vacate the July 25, 2005 default judgment and additionally moved to dismiss claims against ENCO for lack of in personam jurisdiction. A jurisdictional motion was not filed on behalf of Horvath, who was a New Jersey resident. On August 12, 2009, a levy was made on Horvath's automobile and bank account. Plaintiff thereafter moved for turnover of the assets.
Following a hearing conducted on September 11, 2009, the motion judge vacated the default judgment and levy entered against defendants, finding on the basis of ENCO's prompt response to court proceedings as manifested by the two letters that it sent to the court that excusable neglect and a meritorious defense existed. Thus, the judgment was vacated pursuant to Rule 4:50-1(a). The judge found the evidence presented to be insufficient to decide ENCO's jurisdictional motion and permitted discovery to occur on that issue. Plaintiff's request for an turnover order was denied.
Following the September 11 hearing, plaintiff moved for additional discovery, consisting of interrogatories and a document demand. In an order dated October 1, 2009, the judge denied authorization to serve a document demand and restricted plaintiff's proposed interrogatories. In response to a motion by defendants, the judge entered an additional October 1 order scheduling ENCO's jurisdictional motion for October 23, 2009, denying ENCO's motion to dismiss for failure to state a claim, and granting Horvath's motion to dismiss premised on his status as an employee of ENCO.
ENCO's jurisdictional motion was argued, as scheduled, on October 23, 2009. At that time, counsel for defendants presented evidence that ENCO was a New York limited liability company that, during the relevant time period, had no physical presence in New Jersey and did not conduct business in the State. Although it later purchased an interest in a New Jersey business, that occurred in February 2007, four years after plaintiff's cause of action arose. During the relevant time period, ENCO's business was confined to Westchester and Rockland Counties. In response, counsel for plaintiff relied on ENCO's 2007 purchase of a portion of a New Jersey business, upon plaintiff's training in New Jersey, and upon a hearsay statement allegedly made by ENCO's office manager that ENCO performed home inspections in New Jersey because Horvath lived and had contacts there. At the conclusion of the hearing, the judge granted leave to plaintiff's attorney to brief the issue of whether ENCO's contacts with New Jersey commencing after plaintiff's cause of action arose were relevant for jurisdictional purposes.
In a rider to an October 28, 2009 order dismissing plaintiff's complaint against ENCO for lack of in personam jurisdiction, the judge found plaintiff's vague allegations that ENCO performed home inspections in New Jersey, the fact that he had received training in the State, and the fact that ENCO later acquired an interest in a New Jersey business to be insufficient to establish jurisdiction over that entity. Plaintiff's suit was thus dismissed. This appeal followed.
On appeal, plaintiff contends that the motion judge erred in vacating the default judgment against Horvath on grounds of excusable neglect pursuant to Rule 4:50-1(a), because his motion to vacate was untimely pursuant to Rule 4:50-2, which requires such a motion to be filed within one year of the entry of judgment and because excusable neglect was not demonstrated. We agree that the judge was mistaken in relying on that Rule.
Rule 4:50-1 creates the means by which a party may obtain relief from a final judgment or order, providing:
On motion, with briefs, and upon such terms as are just, the court may relieve a party or the party's legal representative from a final judgment or order for the following reasons: (a) mistake, inadvertence, surprise, or excusable neglect; (b) newly discovered evidence which would probably alter the judgment or order and which by due diligence could not have been discovered in time to move for a new trial under R. 4:49; (c) fraud (whether theretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party; (d) the judgment or order is void; (e) the judgment or order has been satisfied, released or discharged, or a prior judgment or order upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment or order should have prospective application; or (f) any other reason justifying relief from the operation of the judgment or order.
"The decision whether to vacate a judgment on one of the six specified grounds is a determination left to the sound discretion of the trial court, guided by principles of equity." F.B. v. A.L.G., 176 N.J. 201, 207 (2003) (citing Hous. Auth. of Town of Morristown v. Little, 135 N.J. 274, 283 (1994) and Hodgson v. Applegate, 31 N.J. 29 (1959)). Reversal can occur only if the decision "represents a clear abuse of discretion." Ibid. (quoting Little, supra, 135 N.J. at 283; Hodgson, supra, 31 N.J. at 37).
In this matter, counsel for defendants argued that judgment against ENCO should be vacated pursuant to subsection (d) of the rule because the judgment was void for lack of jurisdiction. Counsel argued that the judgment against Horvath should be vacated, as a matter of justice and equity, pursuant to subsection (f). The judge, however, determined the motion pursuant to subsection (a), finding excusable neglect and a viable defense to the action. That determination was incorrect, since a motion pursuant to subsection (a) must be filed within one year of the entry of judgment. See R. 4:50-2. Although the record contains no evidence of when the default judgment was served by plaintiff on defendants, the information subpoena, served on August 31, 2005, recites the entry of a judgment against Horvath and ENCO on July 25, 2005 in the amount of $1435.50. Thus, the one-year period to vacate that judgment applicable to motions pursuant to Rule 4:50-1(a), (b) and (c) commenced then, if not earlier. Farrell v. TCI of Northern N.J., 378 N.J. Super. 341, 354 (App. Div. 2005) (holding that the timeliness, pursuant to Rule 4:50-2, of a defendant's motion to vacate a judgment is measured from the date of actual notice of that judgment). The motion to vacate the judgment in this case was not filed until August 5, 2009, more than four years after entry of judgment and just slightly less than four years after notice of the judgment was provided by service of the information subpoena. It thus was untimely under Rule 4:50-1(a) and 4:50-2. However, that conclusion does not end our analysis.
As we stated previously, Horvath sought to have the default judgment against him vacated pursuant to Rule 4:50-1(f), a portion of the Rule that the motion judge did not consider. In construing that provision, the Court has held:
In respect of relief under subsection
(f) we have said that "[t]he very essence of
(f) is its capacity for relief in exceptional situations. And in such exceptional cases its boundaries are as expansive as the need to achieve equity and justice." [Little, supra, 135 N.J. at 285] (quoting Court Inv. Co. v. Perillo, 48 N.J. 334, 341 (1966)). However, like subsection
(e), due to the importance ascribed to the finality of judgments, exceptional circumstances must be present in order to justify relief. Little, supra, 135 N.J. at 285. [F.B., supra, 176 N.J. at 208.]
A determination as to whether exceptional circumstances exist requires a case-by-case analysis, premised on the specific facts presented. In the Matter of Guardianship of J.N.H., 172 N.J. 440, 474 (2002). "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.'" Ibid. (quoting C.R. v. J.G., 306 N.J. Super. 214, 241 (Ch. Div. 1997)). "On a Rule 4:50 motion, the need to achieve equity and justice always is balanced against the state's legitimate interest in the finality of judgments." Ibid. (citing Manning Eng'g, Inc. v. Hudson Cnty. Park Comm'n, 74 N.J. 113, 120 (1977) and C.R., supra, 306 N.J. Super. at 242).
Applying those principles to the present matter, we recognize that Horvath did not seek relief in a timely fashion. Nonetheless, a strong argument can be made that, at the time suit was instituted through counsel, plaintiff could not have reasonably concluded that he was an employee of Horvath as an individual, and that his complaint against him was frivolous, in that it utterly lacked support in fact or law. While, as plaintiff notes, a corporate officer may be held personally liable for a tort committed by the corporation on a participation theory, should the facts permit, Saltiel v. GSI Consultants, Inc., 170 N.J. 297, 303 (2002), this is not a tort case. To impose liability upon Horvath, plaintiff would have to demonstrate grounds for piercing ENCO's corporate veil. Plaintiff did not meet his burden in that regard in any respect. See Richard A. Pulaski Constr. Co., Inc. v. Air Frame Hangars, Inc., 195 N.J. 457, 472-73 (2008) (discussing evidence required).
Moreover it may be anomalous to preserve plaintiff's legally unsupportable judgment against Horvath if, upon further consideration in connection with a remand of this matter,*fn3 the motion judge's order vacating the judgment against ENCO - the proper object of plaintiff's claims - remains in effect. In the peculiar circumstances of this case, equity and justice may require that the judgment against Horvath be vacated, despite its longstanding nature. We leave a decision on this issue to the remand judge.
We now turn to the judgment against ENCO. As we have previously noted, the motion judge initially vacated that judgment pursuant to Rule 4:50-1(a) and then, after permitting discovery, granted summary judgment to ENCO as the result of the absence of personal jurisdiction over it. We, instead, consider the matter, as presented by ENCO, under Rule 4:50-1(d) to determine whether the judgment against it was properly vacated as void.
Plaintiff has argued in support of his appeal that the judge erred in failing to permit additional jurisdictional discovery, including a deposition of Horvath and a production of documents. We find no abuse of discretion by the motion judge, who carefully edited plaintiff's discovery requests in a fashion designed to elicit responses that were relevant to the issue of the existence of personal jurisdiction and the operative time frame. In reaching this conclusion, we are mindful of the requirement that, for New Jersey's courts to assert jurisdiction over ENCO, plaintiff must demonstrate that ENCO's contacts with this State were such that it "should reasonably anticipate being haled into court" here. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S. Ct. 559, 567, 62 L. Ed. 2d 490, 501 (1980). To do so, plaintiff was required either to establish that his cause of action arose out of ENCO's contacts with New Jersey, thereby establishing specific jurisdiction, or that ENCO's contacts with New Jersey, although they did not concern plaintiff, were sufficiently continuous and substantial as to justify an assertion of general jurisdiction over it. Charles Gendler & Co. v. Telecom Equip. Corp., 102 N.J. 460, 470-72 (1986). However, when seeking leave to serve expanded discovery, plaintiff offered no evidence that he performed work for ENCO in New Jersey, and he offered no competent evidence that would suggest that ENCO's contacts with New Jersey in 2003 were sufficiently extensive that an exercise of general jurisdiction over it would be appropriate. Given the paucity of plaintiff's initial proffer, we find no error on the part of the motion judge, in a Small Claims proceeding, in permitting only limited and focused discovery on the issue of the existence of in personam jurisdiction.
We are further satisfied, as was the motion judge, that under the principles we have set forth, no personal jurisdiction over ENCO existed in this case. Because plaintiff's work was all conducted in New York, we find that plaintiff has no grounds for an assertion of specific jurisdiction. The fact that plaintiff may have obtained some training in this State is irrelevant for jurisdictional purposes, since plaintiff has made no showing that ENCO had an ownership interest in the National Institute of Building Inspectors, the entity providing his training. Further, we find insufficient grounds for an assertion of general jurisdiction, rejecting plaintiff's contention that ENCO's acquisition of an interest in a New Jersey business in 2007 can be considered for jurisdictional purposes in an action arising out of conduct occurring in 2003. Harlow v. Children's Hospital, 432 F.3d 50, 61-62 (1st Cir. 2005). Accordingly the judgment entered against ENCO was void. Peralta v. Heights Med. Ctr., 485 U.S. 80, 86-87, 108 S. Ct. 896, 900, 99 L. Ed. 2d 75, 82 (1988); City of Passaic v. Shennett, 390 N.J. Super. 475, 485 (App. Div. 2007); Jameson v. Great Atl. & Pac. Tea Co., 363 N.J. Super. 419, 425 (App. Div. 2003), certif. denied, 179 N.J. 309 (2004).
However, we are mindful of our decision in Wohlegmuth v. 560 Ocean Club, 302 N.J. Super. 306 (App. Div. 1997), in which, after consideration of relevant precedent, we recognized the applicability of principles of laches and estoppel to a determination whether a void judgment should be vacated pursuant to Rule 4:50-1(d). Because Rule 4:50-1(d) was considered only indirectly by the motion judge, whose focus was upon Rule 4:50-1(a) and upon the law of personal jurisdiction, the factual circumstances surrounding defendants' failure to formally respond to plaintiff's complaint and the effect of defendant's conduct on plaintiff were not analyzed in the manner that Wohlegmuth and other applicable precedent suggests would be proper. In the absence of a complete record in that regard, we remand the case to the trial court for further consideration of defendants' motion to vacate plaintiff's judgment against Horvath and ENCO in light of this opinion. In this regard, the judge may wish to consider, among other things, defendants' pro se status, their understanding of the court proceedings against them including plaintiff's collection efforts, the effect of the three-year hiatus in those collection efforts, and the effect of the expiration of the statute of limitations. The judge may also wish to consider whether N.J.S.A. 2A:14-28 or any comparable New York statute can be utilized to preserve plaintiff's rights.
Remanded. Jurisdiction is not retained.