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National Enterprises, Inc., As the Successor In Interest To v. Manchester Property Co.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


July 24, 2012

NATIONAL ENTERPRISES, INC., AS THE SUCCESSOR IN INTEREST TO THE RESOLUTION TRUST CORPORATION, PLAINTIFF-RESPONDENT,
v.
MANCHESTER PROPERTY CO., INC.; MFG HOLDING CORP., INC.; ROBERT G. CARR; JOHN A. FISHER; SALVATORE V. FRASSETTO; ANTHONY J. GERBINO; CARL D. SILVERMAN; JAMES E. WOODS; THE STATE OF NEW JERSEY; PAUL J. BUCCI, PLUMBING & HEATING CONTRACTOR, DEFENDANTS, AND WILLIAM M. PALADINI, DEFENDANT-APPELLANT.

On appeal from the Superior Court of New Jersey, Chancery Division, Hudson County, Docket Nos. F-3574-91 and J-41438-93.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued March 14, 2012

Before Judges Axelrad and Sapp-Peterson.

Defendant, William Paladini, one of the guarantors of a commercial loan secured by a mortgage on a property in Jersey City, appeals from an order affirming a 1993 judgment against him in the amount of $511,350, less an offset of $190,000 for the fair market value of the mortgaged property at the time of the judgment. The 1993 judgment ordered the mortgagee to sell the mortgaged property and apply the proceeds of the sale to the judgment. At the time of the judgment, the property was encumbered by tax liens. The tax liens were never satisfied and the property was eventually lost in a tax foreclosure sale. Defendant argues he is entitled to relief from the judgment because the mortgagee failed to sell the property as ordered. We affirm substantially for the reasons expressed by Judge Thomas P. Olivieri in his June 21, 2011 well-reasoned oral decision.

Plaintiff, National Enterprises, Inc., is the successor in interest of the mortgagee, First Atlantic Federal Savings Association (First Atlantic). In 1993, First Atlantic obtained a judgment in the amount of $511,350 plus interest and fees against borrowers Manchester Property and defendant, an individual guarantor of the note,*fn1 for possession and foreclosure of the Jersey City property and collection of the outstanding balance on the note. The court ordered that the sums due "shall be raised and paid out of the [m]ortgaged [p]remises" and that

[p]laintiff shall not execute on the [f]inal

[j]udgment entered against the guarantors until after the sale of the [m]ortgaged

[p]remises, and that after said sale, the

[g]uarantors may apply to the [c]court for a determination of whether and to what extent, the amount the [f]inal [j]udgment shall be reduced, said determination to be established by the [c]court by conducting an evidentiary hearing on the fair market value of the [m]ortgaged [p]remises at the time of sale[.]

On February 8, 1996, the judgment was assigned to plaintiff.

In April 2002, plaintiff filed a motion seeking to compel defendant to submit to post-judgment discovery. The Chancery Division entered an order directing defendant to submit to a post-judgment deposition. The deposition was adjourned to allow defendant time to obtain counsel. There were additional adjournments, at defendant's request, a number of times thereafter. The last adjournment occurred in January 2003. The record contains no information regarding what then occurred, until April 9, 2010, when plaintiff filed a motion seeking to enforce litigant's rights.

One week later, defendant filed a cross-motion to vacate the judgment. In November 2010, the trial court scheduled a plenary hearing to determine what actions were taken, if any, by plaintiff to satisfy the conditions and to arrange for the foreclosure sale of the underlying property.

The hearing occurred on April 21, 2011. During the hearing, the court heard testimony from Karl Mucciolo, a real estate appraiser, as to the value of the subject property on April 12, 1993, the date of the original judgment. Mucciolo opined the fair market value of the property at that time was $190,000. Defendant proffered no evidence as to the fair market value of the property in 1993 or at any other time.

Judge Olivieri rendered an oral decision on June 21, 2011, permitting plaintiff to enforce its judgment and seek collection against defendant. The judge found, based on Mucciolo's report and testimony, the fair market value of the property in 1993 was $190,000. He also found the tax lien certificates sold before December 31, 1992 totaled in excess of $281,000, and that there was no equity in the subject property. The judge noted "[i]t would have been difficult for that property to be sold, given its status, meaning the liens, that were on the subject property, specifically, tax sales certificates were sold for unpaid tax years going back as far as 1988" and made clear "[the] encumbrance was as a result of defendant's failure to pay those taxes and secure the property . . . , and at that time[,] the property was not under the plaintiff's control." Judge Olivieri concluded "[t]he assignment of the judgment does not affect any of . . . defendant's obligations in this matter, [and] the statute of limitations for a judgment is [twenty] years[.]" As such, he declined to stay the collection proceedings but granted defendant an offset of $190,000.

On July 7, 2011, Judge Olivieri entered a written order confirming his verbal opinion. The order also contained a revised judgment against defendant of $511,350 plus interest and costs, less the fair market value of $190,000.

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

POINT I

THE TRIAL COURT ERRED IN ITS DECISION OF JULY 7, 2011 BY FAILING TO HAVE PLAINTIFF COMPORT WITH THE CONTINUING ORDER AND JUDGMENT OF JUDGE KIMMELMAN DATED APRIL 12, 1993[,] AND IN PERMITTING COLLECTION AGAINST THE CONDITIONAL JUDGMENT.

POINT II

DEFENDANT IS ENTITLED TO RELIEF FROM PLAINTIFF'S JUDGMENT IN ACCORDANCE WITH RULE 4:50-1 ET AL.

POINT III

THE TRIAL COURT MISCONSTRUED THE TERMS OF THE ORIGINAL JUDGMENT BY USING 1993 AS THE DATE FOR A FAIR MARKET HEARING RATHER THAN 2002 WHEN TITLE TO THE MORTGAGED PREMISES WAS TRANSFERRED.

Defendant argues he is entitled to relief from the judgment under subsections (d), (e) and (f) of Rule 4:50-1. Relief pursuant to this rule is committed to the sound discretion of the motion judge who is guided by equitable principles in determining whether relief should be granted. Hous. Auth. of Morristown v. Little, 135 N.J. 274, 283 (1994). Rule 4:50-1 permits a court to relieve a party from a final judgment for, among other reasons:

(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.

[R. 4:50-1.]

Defendant argues he is entitled to relief under subsection

(d) because of plaintiff's failure to arrange for the sale of the foreclosed property as required by the judgment. Under subsection (d), a judgment may be set aside as void if the rendering court lacked jurisdiction. See City of Passaic v. Shennett, 390 N.J. Super. 475, 486 (App. Div. 2007) (failure of process); Ganz v. Rust, 299 N.J. Super. 324, 337 (App. Div. 1997) (lack of subject matter jurisdiction). A judgment is not void merely because it contained errors, even if serious. Hendricks v. A.J. Ross Co., 232 N.J. Super. 243, 248--49 (App. Div. 1989). Defendant's contention that the judgment is void due to plaintiff's failure to comply with a condition of the judgment is without merit. Plaintiff's lack of compliance does not deprive the issuing court of personal jurisdiction or subject matter jurisdiction. As defendant alleges no other deficiencies which could invalidate the judgment, defendant is not entitled to relief under Rule 4:50-1(d).

Defendant next argues he is entitled to relief under subsection (e) because plaintiff's neglect resulted in the loss of title. A motion under subsection (e) seeking to set aside a judgment because it is no longer equitable that the judgment or order should have prospective application "must be supported by evidence of changed circumstances," and "[t]he party seeking relief bears the burden of proving that events have occurred subsequent to the entry of a judgment that, absent the relief requested, will result in 'extreme' and 'unexpected' hardship[.]" Hous. Auth. of Morristown, supra, 135 N.J. at 286. This rule is "rooted in changed legal or factual circumstances that call the fairness of the judgment into question[,]" DEG, LLC v. Twp. of Fairfield, 198 N.J. 242, 265--66 (2009), and is typically applied to consent judgments entered in public interest litigation, Pressler & Verniero, Current N.J. Court Rules, comment 5.5.2 on R. 4:50-1 (2012).

The changed factual circumstances in this case do not call into question the fairness of the judgment. Defendant was aware he had a judgment against him. He must have therefore anticipated the property would be sold to satisfy the judgment but due to the outstanding liens on the property he could not reasonably have expected to receive a credit had the property been sold at that time, when the appraised value of the property was significantly less than the outstanding liens. Although plaintiff failed to sell the property as anticipated, Judge Olivieri, in the exercise of his discretion, nonetheless credited defendant with the $190,000 appraised fair market value of the property in 1993. That defendant is still liable for the deficiency is hardly unanticipated and thus cannot be deemed an "extreme and unexpected" hardship. See, e.g., DEG, supra, 198 N.J. at 267 ("[O]rdinarily, . . . modification should not be granted where a party relies upon events that actually were anticipated at the time it entered into a decree."). As such, defendant is not entitled to relief under Rule 4:50-1(e).

Defendant finally argues he is entitled to relief under subsection (f) because this matter is an "exceptional case" as contemplated by the rule and interpretive cases. Defendant contends he lived his life relying on an explicit judgment that permitted access to collection only after plaintiff arranged for the sale of the mortgaged property and he was afforded a fair market hearing at the time of sale. Defendant argues plaintiff provided neither and now, years later, threatens him with financial ruin in the later years of his life.

Each case brought under subsection (f) "must be resolved on its own particular facts." Johnson v. Johnson, 320 N.J. Super. 371, 378 (App. Div. 1999) (citing Baumann v. Marinaro, 95 N.J. 380, 395 (1984)). However, "subsection (f) is to be used 'sparingly' and only 'in situations in which, were it not applied, a grave injustice would occur[.]'" First Morris Bank & Trust v. Roland Offset Serv., Inc., 357 N.J. Super. 68, 71 (App. Div. 2003) (quoting Hous. Auth. of Morristown, supra, 135 N.J. at 289). The burden is on the movant to "demonstrate the circumstances are exceptional and enforcement of the judgment or order would be unjust, oppressive or inequitable." Johnson, supra, 320 N.J. Super. at 378 (citing Quagliato v. Bodner, 115 N.J. Super. 133, 138 (App. Div. 1971)). In such exceptional circumstances, the boundaries of Rule 4:50-1(f) "are as expansive as the need to achieve equity and justice." Ibid. (quoting Court Invest. Co. v. Perillo, 48 N.J. 334 (1966)).

Defendant's reliance on the sale as a precondition for collection, potential financial ruin and allegations of plaintiff's misconduct are not exceptional circumstances which would render enforcement "unjust, oppressive or inequitable." Examples of exceptional circumstances implicating grave injustice have included: protection of a family, which included five minor children from being evicted from public housing and rendered homeless,

Housing Auth. of Morristown, 135 N.J. at 290-94; protection of a public fund, [Mancini v. EDS ex rel. N.J. Auto. Full Ins. Underwriting Ass'n., 132 N.J. 330, 337-38 (1993)]; the prevention of recovery for damages for breach of an illegal public contract, Manning Eng'g, Inc. v. Hudson Cnty. Park Comm'n, 74 N.J. 113, 123-25 (1977); and prevention of harm to a party misled by his attorney who was subject to disciplinary proceedings that ultimately led to disbarrment, [Perillo, supra, 48 N.J. at 344-47]. [First Morris Bank & Trust, supra, 357 N.J. Super. at 71.]

If the property had been sold at the time judgment was originally entered, defendant would have been liable for a deficiency of approximately $400,000. Defendant was fully aware of the judgment and, having made no payment towards this debt, defendant could not have reasonably expected that years later he would be absolved of all responsibility, especially since there were attempts, albeit unsuccessful, over the years to enforce the judgment against him. While plaintiff did not continuously and consistently attempt to enforce the judgment over the years, defendant was not harmed because Judge Olivieri awarded defendant a $190,00 credit. Had the property been sold in 1993, it is unlikely that defendant would have received any credit given the size of the outstanding liens and the fair market value of the property at that time. Thus, defendant is no worse off now than he was at the time of the judgment. As such, defendant is not entitled to relief under Rule 4:50-1(f).

The remaining arguments advanced by defendant are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).

Affirmed.


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