On appeal from the Superior Court of New Jersey, Law Division, Union County, Docket No. L-3044-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Reisner and Ostrer.
The trial court denied defendant Alfred Gellene's motion to vacate a default judgment against him. Mindful that applications to vacate default judgments should be viewed with indulgence, we reverse because (1) defendant*fn1 offered a compelling excuse for not answering within time and promptly sought an order vacating the default judgment; (2) defendant has presented meritorious defenses; and (3) plaintiff would apparently suffer no irreparable prejudice if the judgment were vacated.
Defendant, an attorney, allegedly represented both sides in drafting a promissory note, executed September 29, 2006, that evidenced a purported loan by plaintiff Salvatore Carrano to Anastasia Dibizheva and Anastasia's mother, Lyubakhon Dibizheva. Carrano had maintained a "personal relationship" with Anastasia, which ended shortly after the note was signed.*fn2 He apparently knew the alleged conflict existed, as he had previously retained defendant to represent Anastasia in a child welfare matter.
According to the note's terms, Anastasia and Lyubakhon Dibizheva promised to repay $30,000 by September 29, 2008, "in consideration of value had and received between January 1, 2006 and September 1, 2006." The note imposed interest charges of two percent a month, described in the note as a "late fee," on the balance due each month after September 1, 2006. The note also conveyed "a lien on the net proceeds" that Anastasia might recover in a personal injury lawsuit filed on behalf of her son. The borrowers also agreed to pay the lender's reasonable fees and costs of collection. Defendant witnessed the note.
The borrowers allegedly defaulted on the note, and Carrano sued. The Dibizhevas did not file answers. Default was entered against them, but the trial court thereafter vacated the default by order dated September 23, 2009. The order vacating default also allowed Carrano to file an amended complaint adding Gellene as a defendant. The order required all three defendants to file their answers within the time allowed by the Rules of Court "or face a default judgment being instituted against them."
Carrano filed the amended complaint on October 5, 2009, asserting claims of negligence and breach of contract. Carrano alleged that defendant negligently drafted the note by including the wrong due date, and by describing the interest as a two-percent-a-month late fee, as opposed to twenty-four percent annual interest. Carrano also claimed that defendant failed to disclose and discuss his alleged conflict of interest.
Carrano asserted that he made the loan in reliance on defendant's actions. "In reasonable reliance on the accuracy of the Promissory Note . . . Carrano provided monies in the amount of $30,000.00 as a loan. . . ." He also alleged breach of contract, consisting of the borrowers' failure to pay the amount due, plus interest. He sought recovery of the sum certain of $45,640.95, utilizing an interest rate of eighteen percent (as opposed to the two percent a month in the note). Carrano also sought an accounting of the proceeds, if any, to the Dibizhevas from the lawsuit on behalf of Anastasia's son, which was mentioned in the note.
The Sheriff served defendant on October 15, 2009. Defendant did not answer in time.*fn3 Carrano's attorney promptly sought entry of default on December 1, 2009.
According to defendant's certification filed in support of his motion to vacate default, he called Carrano's attorney on December 2, 2009 and on numerous occasions in the following week and thereafter to request another copy of the complaint, which he could not locate. Defendant claimed that his calls were not returned. Carrano's attorney confirmed that defendant made multiple calls for a duplicate of the complaint, but he was out of the office and unable to respond. He asserted that one week after defendant's first call, his office staff left a voice-mail message for defendant, offering to provide a duplicate of the complaint if defendant paid for copying and postage charges.
However, plaintiff's counsel apparently did not disclose to defendant that by that time, he had already obtained entry of default pursuant to Rule 4:43-1. The record before us does not include proof of mailing of the entry of default as required.*fn4
See R. 4:43-1 (requiring service by ordinary mail). Defendant ultimately obtained a copy of the complaint from the clerk's office on January 7, 2010. Apparently he then learned that default had been entered.
However, on the same day, upon Carrano's request, the clerk entered default judgment against defendant pursuant to Rule 4:43-2(a). The clerk apparently relied upon a December 1, 2009 "Certification of Proof" by Carrano, who alleged that defendant's drafting errors caused a dispute between Carrano and the borrowers and put the total amount owing "at risk." After giving credit for payments made, and including fees of over $3000, Carrano sought judgment in the amount of $47,619.90. The record before us includes no proof ...