October 2, 2012
DAN STAN AND ELENA STAN, PLAINTIFFS-RESPONDENTS,
DOROTHY A. SMITH AND HERBERT E. SMITH, DEFENDANTS-APPELLANTS.
On appeal from the Superior Court of New Jersey, Law Division, Special Civil Part, Sussex County, Docket No. DC-1609-11.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted September 19, 2012 -
Before Judges Fisher and Waugh.
Defendants Dorothy A. and Herbert E. Smith appeal the orders of the Special Civil Part denying their motion to dismiss for lack of personal jurisdiction, entering judgment by default against them, and denying their motion to vacate the judgment. We affirm the denial of their motion related to jurisdiction, vacate the judgment, and remand for a trial on the merits.
We discern the following facts and procedural history from the record on appeal.
In autumn 2009, plaintiffs Dan and Elena Stan purchased the Smiths' home in Hopatcong. In September 2009, the Smiths moved to Florida. They did not visit or maintain contacts in New Jersey after relocating to Florida.
The Stans moved into the house in October 2009. The ground level of the two-story ranch house included the living room, a bedroom, a bathroom, a boiler room, and a two-car garage. In March 2010, following "the first heavy rain" of the spring, the ground floor flooded and became temporarily uninhabitable.
The Stans cleaned the ground floor of the home but postponed re-finishing it. The attorney who had represented them in purchasing the home informed them that the rain had been exceptionally heavy, to a degree "that never occurred in the last 100 years."
The home suffered no additional flooding for about a year. In spring 2011, however, the ground floor flooded again after another heavy rain. "The level of the water was about 2 inches everywhere" on the ground floor. The Stans engaged a contractor to remediate the problems, incurring expenses in the approximate amount of $7000.
In April 2011, the Stans filed a complaint against the Smiths. The Smiths filed an answer in May 2011. They also requested the court to dismiss the complaint due to lack of personal jurisdiction, but did not file a formal motion to dismiss prior to trial.
The trial was scheduled for June 20. The Smiths state that a court employee told them prior to that date that they could participate by telephone. The Stans appeared for trial, but the Smiths did not. The trial judge entered default against the Smiths, and proceeded to hold a proof hearing. He determined that the court had personal jurisdiction over the Smiths and entered judgment against them for $7000, plus costs.
In June, the Smiths moved to vacate the default judgment, and to dismiss for lack of personal jurisdiction. The judge denied those motions on July 21.
This appeal followed. The trial judge subsequently submitted a written supplemental statement of reasons as permitted by Rule 2:5-1(b).
On appeal, the Smiths argue that the trial judge erred in denying their motion to dismiss for lack of personal jurisdiction, and that he further erred in entering a default judgment and then denying their motion to vacate that judgment. The Stans urge us to affirm the judge's orders.
The dispute between the parties arises from the sale of real property located in this State. For that reason, the issue of jurisdiction is governed by the law concerning "specific" jurisdiction. Waste Mgmt., Inc. v. Admiral Ins. Co., 138 N.J. 106, 119 (1994) (citing Lebel v. Everglades Marina, Inc., 115 N.J. 317, 322 (1989)), cert. denied, sub nom. WMX Techs. v. Canadian Gen. Ins. Co., 513 U.S. 1183, 115 S. Ct. 1175, 130 L. Ed. 2d 1128 (1995).
"In the context of specific jurisdiction, the minimum contacts inquiry must focus on 'the relationship among the defendant, the forum, and the litigation.' The 'minimum contacts' requirement is satisfied so long as the contacts resulted from defendant's purposeful conduct and not the unilateral activities of the plaintiff." Lebel, supra, 115 N.J. at 323 (citations omitted). "Jurisdiction may be created through a contract that has substantial connections to the forum state." Waste Mgmt., supra, 138 N.J. at 126. "Once the defendant is found to have minimum contacts to the forum, 'the 'fair play and substantial justice' inquiry must still be made.'" Id. at 124 (quoting Lebel, supra, 115 N.J. at 328). This analysis weighs whether the exercise of personal jurisdiction is "reasonable in the overall context of the matter." Reliance Nat'l Ins. Co. in Liquidation v. Dana Transp., Inc., 376 N.J. Super. 537, 544 (App. Div. 2005).
Inasmuch as the Stans' claims relate to the New Jersey residential property they purchased from the Smiths, we agree with the trial judge that the court had personal jurisdiction over the Smiths. The judge properly denied the Smiths' motion to dismiss, and we affirm that decision.*fn1
The fact that consideration of the Smiths' application for dismissal on jurisdictional grounds did not take place until the actual trial day put them in the unfortunate position of having to travel to New Jersey for a trial that might not take place. It appears that they were told that a hearing by telephone was possible, but either they were not told how to request such a hearing or they did not do so effectively.
Rule 1:2-4(a)(c) allows a trial judge to strike an answer for failure of a defendant to appear for trial "without just excuse." It is well established that such a severe sanction should be imposed sparingly. See Gonzalez v. Safe & Sound Sec. Corp., 185 N.J. 100, 115-116 (2005).
This is not a case in which out-of-state defendants simply ignored the summons and complaint by failing to answer and failing to raise their jurisdictional issue. As the judge noted, participation by telephone is something that he allows under appropriate circumstances. Although the Smiths should have confirmed that they could participate by telephone with the court on the trial date, the reasons articulated for their failure to appear for trial were not unreasonable.
"A motion [to vacate a default judgment] under Rule 4:50-1 is addressed to the sound discretion of the trial court, which should be guided by equitable principles in determining whether relief should be granted or denied." Hous. Auth. of Morristown v. Little, 135 N.J. 274, 283 (1994). We conclude that, under the specific circumstances presented in this case, the judge should have vacated the default judgment in the interests of justice and given the Smiths an opportunity to present their defense on the merits. Consequently, we vacate the default judgment and remand to the Special Civil Part for a trial on the merits.*fn2
Affirmed in part, vacated in part, and remanded.