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Lapatka Associates, Inc., A New Jersey Corporation v. John Garry Merrett

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


July 7, 2011

LAPATKA ASSOCIATES, INC., A NEW JERSEY CORPORATION, PLAINTIFF-RESPONDENT,
v.
JOHN GARRY MERRETT, A/K/A GARY MERRETT, DEFENDANT-APPELLANT.

On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-13310-04.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted June 8, 2011

Before Judges Cuff and Sapp-Peterson.

Defendant appeals from the denial of his motion to vacate the entry of default judgment pursuant to Rule 4:50 based upon defective service and the assertion of a meritorious defense. The motion judge denied the motion, finding defendant was aware of the lawsuit and that his due process rights had not been violated.

In February 2002, defendant was a member and CEO of Caven Carteret, LLC (Caven), which was attempting to develop property in Jersey City for multi-family residential use. On February 20, 2002, defendant, in his capacity as CEO, entered into an agreement with plaintiff for engineering services. Plaintiff subsequently billed Caven for services provided in the amount of $30,697.16, which Caven did not pay. Plaintiff filed a complaint against defendant in October 2004. The Affidavit of Service executed by a process server, Steven Inghilleri, stated that the summons and complaint were served upon defendant on November 12, 2004, at 31-11 Broadway, Fair Lawn, by leaving "a copy with a competent household member over 14 years of age residing therein[,]" defendant's son, Gary Merrett, Jr.

Defendant did not answer the complaint or otherwise respond to the pleadings, and plaintiff obtained a default judgment against defendant for $45,008.57. In April 2010, defendant received a copy of the application to record the judgment in Florida, where he has a residence. He filed a motion in August 2010, seeking an order vacating the default judgment. In support of the motion, defendant submitted a certification indicating that 31-11 Broadway was not his residence but a commercial office building. He stated further that August 2004 was the last time he was at the building, but the landlord allowed he and his son to receive mail at the address, which his son would pick up. He alleged, however, that he "did not receive from [his] son a copy of the subject Summons and Complaint." In addition, the certification claimed that the services plaintiff performed were on behalf of Caven, that at all times he acted in his capacity as CEO, and the Certification of Proof of Amount Due did not have as attachments the invoices for the services allegedly performed.

Plaintiff opposed the motion and submitted two certified letters dated January 20, 2005, addressed to defendant at 31-11 Broadway. Both letters were marked received with a signature from "Shadeequa Jones." Plaintiff additionally argued that defendant "at least" had an agent at the location to accept service of process in the event defendant was absent.

The court conducted oral argument and, at its conclusion, rendered its decision orally. The court acknowledged that leaving a copy of the summons and complaint at the "place of business" rather than at defendant's residence was a technical violation, but concluded that 31-11 was the address in the contracting agreement, "defendant was certainly at that address admittedly until three months before the service of process[,]" and that his certification did not definitively state that "he was unaware certainly that there was a dispute and that money was owed and unaware that plaintiff was pursuing it by way of a complaint." Additionally, the court noted that defendant did not deny his son received a copy of the summons and complaint and that "defendant acknowledges receiving a judgment [at] the same address, on the same day in a case of Lapatka Engineering v. Danmark Partners, LLC. The [c]court notes that defendant was a member of Danmark Partners, LLC."

The court also rejected defendant's contention that he had a meritorious defense to the actions, finding defendant acknowledged that services had been performed by plaintiff and failed to "raise any meaningful substantive defense as to the services provided." The court concluded that defendant was a sophisticated businessman who "relied on technical service issues and perhaps his own relocation in strategically choosing not to respond." Finally, the court found that plaintiff waited over five years before he sought relief from judgment, which the court concluded was unreasonable.

On appeal, defendant raises the following points for our consideration:

POINT I

THE COURT BELOW ERRED IN DENYING MERRETT'S MOTION TO VACATE THE DEFAULT[] JUDGMENT UNDER RULE 4:50 AND APPLICABLE CASE LAW.

A. SERVICE OF PROCESS ON MERRETT WAS DEFECTIVE AND VIOLATED HIS RIGHT TO DUE PROCESS.

B. MERRETT ALLEGED MERITORIOUS DEFENSES AS TO BOTH LIABILITY AND DAMAGES.

C. THE COURT BELOW ERRED IN NOT VACATING THE DEFAULT JUDGMENT.

After carefully examining the record on appeal, we conclude that the judge erred in denying defendant's motion without first conducting a hearing.

Rule 4:50-1(d) permits the court to relieve a party from a final judgment where the "judgment or order is void." A judgment entered based upon defective service is void or voidable. Jameson v. Great Atl. & Pac. Tea Co., 363 N.J. Super. 419, 425 (App. Div. 2003), certif. denied, 179 N.J. 309 (2004). The decision whether to grant a motion to vacate a default judgment is left to "the sound discretion of the trial court," and will not be disturbed absent an abuse of discretion. Marder v. Realty Constr. Co., 84 N.J. Super. 313, 318 (App. Div.), aff'd, 43 N.J. 508 (1964). A motion to vacate a judgment that "is void and, therefore, unenforceable . . . is a particularly worthy candidate for relief (R. 4:50-1(d)) provided that the time lapse [between the entry of the judgment and the motion to vacate the judgment] is not unreasonable and an innocent third party's rights have not intervened." Bank v. Kim, 361 N.J. Super. 331, 336 (App. Div. 2003) (citing Berger v. Paterson Veterans Taxi Serv., 244 N.J. Super. 200, 205-06 (App. Div. (1990)); Coryell, L.L.C. v. Curry, 391 N.J. Super. 72, 80 (App. Div. 2006). All doubt should be resolved in favor of the party seeking relief. Arrow Mfg. Co. v. Levinson, 231 N.J. Super. 527, 534 (App. Div. 1989) (citing Foster v. New Albany Mach. & Tool Co., 63 N.J. Super. 262, 269-70 (App. Div. 1960)). With these standards in mind, we address defendant's contention that the trial court erred in denying his motion to vacate the default judgment.

It is undisputed that 31-11 Broadway is not defendant's place of residence. Rule 4:4-4 requires that personal service upon an individual be accomplished by delivering a copy of the summons and complaint to the individual personally, or by leaving a copy thereof at the individual's dwelling place or usual place of abode with a competent member of the household of the age of 14 or over then residing therein, or by delivering a copy thereof to a person authorized by appointment or by law to receive service of process on the individual's behalf[.] [R. 4:4-4(a)(1).]

There is no dispute that service upon defendant in accordance with this rule was not accomplished by service of the summons and complaint upon his son at 31-11 Broadway, a commercial building. However, "not every defect" in service of process constitutes a denial of due process that qualifies a defendant for relief from a default judgment. Rosa v. Araujo, 260 N.J. Super. 458, 462-63 (App. Div. 1992), certif. denied, 133 N.J. 434 (1993). A minor defect in service, along with proof of a defendant's actual knowledge of the cause of action, does not offend due process. Id. at 463 (finding no due process violation where complaint was received by someone not a member of the defendant's household, but defendant and his attorney acknowledged receipt before default was entered). It is only where there has been a "substantial deviation from the service of process rules" that relief from a default judgment is required, and such relief is warranted even "if [the] defendant ha[s] actual knowledge of the pendency of the suit by other means." Pressler and Verniero, Current N.J. Court Rules, comment 5.4.2 on R. 4:50-1 (2011) (citing Sobel v. Long Island Entertainment, 329 N.J. Super. 285, 293-94 (App. Div. 2000)).

Although the service here was not accomplished by serving defendant personally or at his usual place of abode, it was accomplished at his place of business or former place of business by leaving a copy of the summons and complaint with his son. The court noted there was no evidence that defendant had a "fractured" relationship with his son and, therefore, implicitly characterized the defect as minor. However, concluding that the defect is minor satisfies only one part of the Araujo analysis. Araujo, supra, 260 N.J. Super. at 463. Defendant denied receiving notice of the action from his son, and there is nothing in the record indicating that his son was his authorized agent for the receipt of such papers. Thus, the court should have conducted a hearing to determine whether defendant had actual knowledge of the litigation. Ibid. The court found defendant was aware of the litigation based upon his purported acknowledgement that he had received correspondence in January 2005 at the 31-11 address related to other litigation, although defendant expressly denied receiving such correspondence in his certification. Further, without any reference to the facts upon which the court was relying, the court concluded that defendant unreasonably delayed seeking relief from judgment.

The record here, at the very least, engenders a genuinely disputed issue of fact as to whether defendant had actual knowledge of the litigation and whether defendant unreasonably delayed in moving for relief from the default judgment.

Finally, in addition to asserting one of the grounds for relief from judgment under Rule 4:50-1, a defendant must establish a meritorious defense to the action. Marder, supra, 84 N.J. Super. at 318. Defendant claimed that at all times in his interactions with plaintiff, he acted in his capacity as CEO and that the debt incurred by Caven was a corporate debt. The court acknowledged in its findings that this defense "may have been available to defendant if he had timely filed an answer or sought relief from a default judgment within a reasonable time[.]" Therefore, we deem the second prong of the requirement for relief from judgment as satisfied.

Reversed and remanded for further proceedings. We do not retain jurisdiction.

20110707

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