June 9, 2011
MARIO DUCCI AND ROBERTO DUCCI, PLAINTIFFS-RESPONDENTS,
BLUE SKY CONSULTANTS, INC., D/B/A LATERAL WINE BAR & GRILL, AND LAURIE KATAI, DEFENDANTS, AND NICHOLAS J. SAMBUCO, SR., DEFENDANT-APPELLANT.
On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-0434-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted March 7, 2011
Before Judges Lisa and Sabatino.
In this commercial lease case, defendant Nicholas J. Sambuco, Sr. ("Sambuco"), pro se, appeals the trial court's July 20, 2007 order denying his motion to vacate default judgment entered against him in the sum of $491,556.92, plus interest and costs. For the reasons that follow, we affirm the trial court's order. We do so without prejudice to Sambuco potentially seeking relief in the trial court under Rule 4:50-1(d) or (f), based upon plaintiffs' alleged waiver of damages above the $15,000 jurisdictional limit of the Special Civil Part.
The exceedingly contentious relationship between Sambuco and the commercial landlords, plaintiffs Mario Ducci and Roberto Ducci, has spawned at least six summary dispossession actions, at least two collection actions (including this case), as well as related bankruptcy proceedings. We need not detail the full history of those proceedings except insofar as it bears upon Sambuco's contention that his neglect in not filing a timely answer in the present litigation should have been excused by the trial court. We very briefly summarize the pertinent background as follows.
Plaintiffs are the owners of a commercial building in Nutley. Sambuco, along with the individual co-defendant, Laurie Katai, was a principal in defendant Blue Sky Consultants, Inc. ("Blue Sky"), a company doing business as Lateral Wine Bar & Grill. For several years, defendants operated a restaurant in plaintiffs' building, pursuant to written leases.
The tenancy became contentious for a variety of reasons that we need not canvass here. It will suffice to say that defendants repeatedly failed to pay their rent on time. Their non-payment led plaintiffs, or their related business entities, to file a series of summary dispossession actions against the tenants between 2003 and 2006, although none of those cases resulted in the tenants vacating the premises.*fn1
In July 2006, on the brink of a summary dispossession trial, the parties entered into a settlement agreement. Through that agreement, Sambuco and the other defendants agreed to pay plaintiffs certain outstanding rent arrears and also to enter into a new lease commencing August 2006.
After defendants failed to make timely rent payments under the August 2006 lease, plaintiffs filed a fifth summary dispossession action in October 2006. Plaintiffs simultaneously filed a collection action in the Special Civil Part for the overdue rent.
When the fifth summary dispossession action came to trial on November 14, 2006, the parties reached another settlement agreement. Under the terms of the settlement, the parties entered into a lease modification agreement, and both the summary dispossession action and the collection action in the Special Civil Part were dismissed.
The lease modification agreement specified that the rent would be due on the fourth day of each month, without exception. Moreover, if the rent was not received by the seventh day of the month, all future rent would be accelerated and due immediately. If the rent were not paid in full, the tenants would be evicted and they would be liable for the accelerated future rent, plus other specified charges and costs. In particular, paragraph twenty-one of the lease modification agreement stated, in relevant part:
The Tenant shall remain liable for such rents as may be in arrears or future rent that may become accelerated and due immediately as provided in Paragraph 1st, above, and also the rents as may accrue subsequent to the re-entry by the Landlord, to the extent of the difference between the rents reserved hereunder and the rents, if any received by the Landlord during the remainder of the unexpired term hereof, after deducting the aforementioned expenses, fees and costs; the same to be paid as such deficiencies arise and are ascertained each month.
Defendants breached the November 2006 lease modification by not paying the rent that was due on December 4, 2006. This failure prompted plaintiffs to file a sixth summary dispossession action in the Special Civil Part on January 18, 2007. On that same date, plaintiffs also filed a second collection action against defendants, this time in the Law Division.*fn2 That second collection action, which is the sole case underlying the present appeal, sought the amount of past due rent from defendants, plus the future rent under the lease's acceleration clause.
On February 20, 2007, the summary dispossession action came on for trial before Judge Carey, who found that the lease modification agreement was clear and unambiguous, and entered judgment for possession in favor of plaintiffs. Plaintiffs then filed for a warrant of removal, based upon an alleged accelerated rent due of $492,444.46.
After the warrant of removal was issued, defendants sought an order to show cause staying their lockout. At an ensuing hearing on March 5, 2007, Civil Presiding Judge Codey declined to vacate the judgment for possession or to stay the warrant of removal.
Defendants then filed a notice of appeal of the summary dispossession order. Eventually, defendants abandoned that appeal, which was dismissed after we granted plaintiff's motion for summary disposition. It is undisputed that defendants have since vacated the premises.
Meanwhile, Sambuco and Katai filed a Chapter 11 bankruptcy petition on behalf of Blue Sky on March 8, 2007. The Bankruptcy Court dismissed the petition on April 9, 2007.
As he concedes, Sambuco was served with the summons and complaint in the present collection action at his residence on January 30, 2007. At the same time, the process agent served the papers on another woman at Sambuco's residence, mistakenly believing her to be co-defendant Katai.
As there were no timely answers filed, on March 15, 2007, plaintiffs requested the trial court to enter default in the collection action. The default was accordingly entered, and plaintiffs then submitted an affidavit of proof and non-military service signed by Mario Ducci, seeking $3,356.00 in base rent due, plus $486,400.92 in accelerated future rent for the period from February 1, 2007 through the end of the lease term on July 31, 2016. The trial court issued an order on May 3, 2007 awarding default judgment against Sambuco and Katai in the sum of $491,556.92, plus costs and prejudgment interest.
Sambuco then moved to vacate the default judgment. In his certification dated June 6, 2007 filed in support of that motion, Sambuco contended that he had been attempting to negotiate payment terms with defendants but that they had rejected his entreaties, and that he had even been trying to secure a deal with a reality television program to film at the restaurant. He claimed that he did not learn of the default judgment against him in the collection action until on or about May 17, 2007, after Blue Sky's bankruptcy petition had been dismissed.
In an effort to explain his failure to file a timely answer to the collection complaint, Sambuco certified that "in light of all of these matters occurring at this time, I neglected to pay attention to the fact that I was served with the other [collection] lawsuit in this matter." He added that he had "wrongfully believed that because there was a [bankruptcy] stay of the proceedings as a result of having filed [a] Chapter 11 [petition], that it placed everything on hold. However, I unfortunately now come to learn that the stay was limited to the corporation [Blue Sky] which was the only party that had filed for bankruptcy protection." Sambuco further claimed that plaintiffs had not given him notice of the entry of the default before the default judgment was entered. Further, Sambuco contended that he had a meritorious defense to the judgment, because, among other things, the landlords had not mitigated their damages for lost rent.
After oral argument before Judge Davidson on July 20, 2007, at which both Sambuco and plaintiffs were each represented by counsel, the court denied Sambuco's motion to vacate the default judgment. In her oral ruling, Judge Davidson accepted that Sambuco had raised what could be regarded as a meritorious defense to the complaint. Nevertheless, the judge was not persuaded that Sambuco had shown excusable neglect for ignoring the complaint, and consequently found that "there's absolutely no basis to vacate the default judgment as to him."*fn3
Sambuco now appeals, essentially arguing that the trial court erred in finding that he had not demonstrated excusable neglect under Rule 4:50-1(a), and in thereby declining to vacate the defaul`t judgment against him on that basis. We disagree.
"In order to achieve relief pursuant to subsection (a) [Rule 4:50-1] . . . the defendant must be prepared to 'show that  [his] neglect to answer was excusable under the circumstances and  that [he] has a meritorious defense.'" Dynasty Bldg. Corp. v. Ackerman, 376 N.J. Super. 280, 285 (App. Div. 2005) (quoting Marder v. Realty Constr. Co., 84 N.J. Super. 313, 318 (App. Div.), aff'd, 43 N.J. 508 (1964)). In Mancini v. EDS, 132 N.J. 330 (1993), the Supreme Court elaborated that "[c]arelessness may be excusable when attributable to an honest mistake that is compatible with due diligence or reasonable prudence." Id. at 335.
Our scope of review of determinations by the trial courts on such issues is a limited one. "Generally, a decision to vacate a default judgment lies within the sound discretion of the trial court, guided by principles of equity." Coryell, L.L.C. v. Curry, 391 N.J. Super. 72, 79 (App. Div. 2006) (citing Hous. Auth. of Morristown v. Little, 135 N.J. 274, 283 (1994)). "The decision to grant or deny a motion to vacate the entry of judgment 'will be left undisturbed unless it represents a clear abuse of discretion.'" Ibid. (quoting Little, supra, 135 N.J. at 283).
The trial court did not abuse its discretion here in finding that Sambuco's failure to file and serve a timely answer to the complaint in the collection action was inexcusable. The record shows that Sambuco had been embroiled in litigation with his landlords and others on multiple occasions in the past. After entering into the lease modification, he surely knew that the landlords were insisting on timely rent payments, and that they would be prepared to enforce their rights in court expeditiously if those payments were, once again, not made.
Sambuco's explanation for his inattentiveness to the collection action until after he was served with the default judgment is undercut by his involvement in other related court proceedings, in which the pendency of this collection action was explicitly acknowledged. For example, at the March 5, 2007 hearing in the summary dispossession action, Sambuco himself presented Judge Codey with a copy of the complaint in this case, and was present when his co-defendant, Katai, stated that "we do have an L [Law Division] docket coming up." Thereafter, at another hearing in the summary dispossession hearing before Judge Kaprowski on May 2, 2007, Sambuco, appearing pro se at the time, noted that the case with "the L docket" number was "still out there." Sambuco affirmatively argued to the court that day that a deposit that defendants had made to court should be returned to them, pending the outcome of their claim for money damages.*fn4
In sum, the trial court had ample reason to reject Sambuco's claim of excusable neglect, especially given the surrounding context of extensive prior litigation between the parties. We consequently affirm the order dated July 20, 2007, denying Sambuco's motion to vacate.
We do add a caveat. In his reply brief on appeal, Sambuco argues that the judgment should be vacated to the extent that it exceeds the $15,000 jurisdictional limit of the Special Civil Part because of a waiver contained in paragraph two of the collection complaint. That paragraph reads as follows:
Pursuant to R. 6:1-3(c) [sic], Plaintiffs waive the excess over the $15,000 monetary limit of the Special Civil Part and will accept a sum not exceeding the limit, plus costs.
This reference to Rule "6:1-3(c)", a provision that does not exist, appears to be a mis-citation to Rule 6:1-2(c), which allows a plaintiff to waive monetary claims exceeding the jurisdictional limit of the Special Civil Part:
(c) Waiver of Excess. Where the amount recoverable on a claim exceeds the monetary limit of the Special Civil Part or the Small Claims Section, the party asserting the claim shall not recover a sum exceeding the limit plus costs and on the entry of judgment shall be deemed to have waived the excess over the applicable limit.*fn5
The record before us further indicates that when the parties appeared on the summary dispossession case on March 5, 2007, Judge Codey specifically noted to defendants that:
Truthfully, the L docket number helps you because [plaintiffs are] waiving the accelerated balance in the second clause of the complaint. [Plaintiffs are] restricting any recovery they could possibly get to $15,000 versus if the[y] accelerate and don't get another tenant, you'll owe 400 [thousand dollars] plus thousand[s] on rent.
Sambuco now argues, apparently for the first time, that these passages void the portion of the judgment against him exceeding $15,000.
We will not resolve this argument on appeal, since it was not raised in the trial court. Nieder v. Royal Indemn. Ins. Co., 62 N.J. 229, 234 (1973). The argument, and any claim of reliance by Sambuco, is preserved for consideration by the trial court, should Sambuco file a motion for relief on that basis under Rule 4:50-1(d) (voidness) or Rule 4:50-1(f) (exceptional circumstances). We express no views concerning the merits of such a motion.