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State v. Gilliam

Superior Court of New Jersey, Appellate Division

August 28, 2013

STATE OF NEW JERSEY, Plaintiff-Respondent,
v.
DERRICK GILLIAM, Defendant, and LEXINGTON NATIONAL INSURANCE CORP., Defendant-Appellant.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued March 11, 2013

On appeal from Superior Court of New Jersey, Law Division, Warren County, Indictment No. 06-03-00119.

John S. Furlong argued the cause for appellant (Furlong & Krasny, attorneys; Mr. Furlong, of counsel; Andrew Mark Ferencevych, on the briefs).

Joseph J. Bell, IV, argued the cause for respondent (The Bell Law Group, P.C., attorneys; Mr. Bell, on the brief).

Before Judges Espinosa and Guadagno.

PER CURIAM

Defendant Lexington National Insurance Company (Lexington) appeals from an order that denied its motion to vacate a default judgment and bail forfeiture. For the reasons that follow, we reverse and remand.

On November 20, 2005, Lexington posted a $100, 000 bond with the Superior Court in Warren County on behalf of Derrick Gilliam. After bail was posted, Lexington monitored Gilliam to ensure that he would appear at all of his scheduled court appearances. Nevertheless, Gilliam failed to appear in court on May 4, 2006. The trial court forfeited Gilliam's bail and issued a bench warrant for his arrest. Eight days later, on May 12, 2006, Gilliam appeared in court. The trial court reinstated bail and vacated the warrant. Lexington received notice that the bail had been forfeited but was not informed that bail had been reinstated.

On September 6, 2006, Gilliam was arrested in Pennsylvania. Warren County authorities were notified of the arrest and filed a detainer against Gilliam. Because he remained incarcerated in Pennsylvania, Gilliam failed to appear in Warren County for a scheduled hearing. Apparently unaware that a detainer had been filed against Gilliam, the court again forfeited Gilliam's bail and issued a warrant for his arrest. Lexington was never notified of this second forfeiture of bail.

Gilliam pled guilty in Pennsylvania in December 2007, was sentenced to a term of fifteen to thirty months, and paroled in June 2008. However, Gilliam remained incarcerated as a result of the detainer. Gilliam wrote a letter to the judge in Warren County, dated June 24, 2008, asking that the detainer be lifted, bail be reinstated and his hearing be re-scheduled. Lexington never received notice of this communication.

Gilliam was transported to Warren County in August 2008. The court vacated the warrant and reinstated his bail without any notice to Lexington. Two years later, Gilliam failed to appear in court for sentencing on August 19, 2010. The court again forfeited his bail.

The court sent a Notice of Bail Forfeiture for Surety, dated August 23, 2010, to Lexington. It is not disputed that Lexington received this notice and not contended that the notice failed to advise "that judgment will be entered as to any outstanding bail absent a written objection seeking to set aside the forfeiture, which must be filed within 75 days of the date of the notice." R. 3:26-6(a).

Lexington did not file a written objection seeking to set aside the forfeiture within the seventy-five-day period. Instead, it initiated an investigation, retaining the services of several agencies to determine what had occurred.

Rule 3:26-6(c) provides in part:

In the absence of a motion, when a forfeiture is not set aside or satisfied, the court shall, upon expiration of the 75 days provided for in paragraph (a), summarily enter a judgment of default for any outstanding bail and execution may issue thereon.

[(Emphasis added).]

On November 10, 2010, the trial court entered a default judgment in favor of the State and Warren County against Lexington, the bail agency, ABC Bail Bonds, Inc. (ABC), and the bail agent, William A. Lombardo, Jr., for the bail forfeited on August 19, 2010 in the amount of $100, 000.

Lexington filed a motion to vacate the bail forfeiture on January 31, 2011. In support of this motion, Lexington submitted a certification by Warren B. Lassin, an employee of ABC. The certification recited the history of defendant's appearances, failures to appear, bail forfeitures, and reinstatements. However, the certification provided no explanation for Lexington's failure to file a timely objection to the notice of forfeiture.

At oral argument, Lexington cited State v. Clayton, 361 N.J.Super. 388 (App. Div. 2003), to support its argument that the court lacked authority to reinstate Gilliam's bond without its consent following forfeiture, and that the reinstatement subjected Lexington to a material increase in the risk it had assumed. Lexington stated that it took no action prior to the August 2010 forfeiture because it believed defendant was still incarcerated in Pennsylvania. Lexington argued further that, because the prior reinstatements rendered the surety a nullity, anything ordered thereafter must be reversed; that the seventy-five-day filing period did not apply; and that the bail should be vacated based on the prior unauthorized bail reinstatements.

The trial court asked why Lexington did not "immediately file" an objection after receiving the forfeiture notice. Counsel for Lexington stated that, after receiving the notice, "[t]hey first started to search to look for [Gilliam], but they didn't realize that he was even out on the street" and it was afterward that their investigation determined the history that had transpired. Counsel stated that Lexington only learned of the reinstatements of bail after the default judgment was entered, as a result of its investigation.

The trial court denied the motion and set forth its reasons in a written decision. The court noted that, at the time of its decision, the defendant remained a fugitive. Lexington has not paid the amount of the default judgment, but has posted a supersedeas bond, in satisfaction of its obligation under N.J.S.A. 17:31-12.

Lexington presents the following issues for our consideration in this appeal:

POINT I

THE TRIAL COURT'S ORDER FORFEITING THE ENTIRETY OF THE BAIL BOND WAS NOT IN THE INTERESTS OF JUSTICE AND WAS AN ABUSE OF DISCRETION.
A. THE TRIAL COURT ABUSED ITS DISCRETION WHEN IT DENIED DEFENDANT'S MOTION TO VACATE FORFEITURE ON A PROCEDURAL FAILURE WITHOUT CONSIDERING ANY JUSTIFICATION FOR THE PROCEDURAL DEFAULT.
B. THE TRIAL COURT ABUSED ITS DISCRETION WHEN IT DENIED DEFENDANT'S MOTION TO VACATE FORFEITURE BECAUSE THE TERMS AND CONDITIONS OF THE CONTRACT WERE MATERIALLY ALTERED WHEN THE TRIAL COURT REINSTATED [GILLIAM'S] BAIL ON TWO SEPARATE OCCASIONS WITHOUT NOTICE TO APPELLANT.
C. THE TRIAL COURT ABUSED ITS DISCRETION WHEN IT DENIED DEFENDANT'S MOTION TO VACATE JUDGMENT AND FAILED TO CONSIDER SETTING ASIDE THE FORFEITURE IN PART.

As we have noted, Rule 3:26-6(c) requires the court to enter a judgment of forfeiture if a surety has failed to file an objection within seventy-five days. It is undisputed that Lexington failed to file any objection within that time period. The default judgment was, therefore, properly entered.

Lexington's motion to vacate the forfeiture was governed by Rule 4:50-1, which permits a court to relieve a party from a final judgment for the following reasons:

(a) mistake, inadvertence, surprise, or excusable neglect; (b) newly discovered evidence which would probably alter the judgment or order and which by due diligence could not have been discovered in time to move for a new trial under R. 4:49; (c) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party; (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.

Lexington argues that its failure to file an objection within seventy-five days was merely a "procedural default" that the court should have overlooked because it was not due to a willful disregard of the rules, but was the result of Lexington's decision to investigate the facts before filing any objection or motion. Lexington argues that this delay constituted excusable neglect because it would undermine judicial economy for sureties to file motions to vacate forfeitures before they have information to justify why the court should vacate the forfeiture. This argument is entirely lacking in merit.

As the trial judge astutely observed, the prudent course of action here was to file an objection upon receipt of the forfeiture notice and then conduct an investigation. At a minimum, Lexington knew that bail had been forfeited in 2006, that he was incarcerated thereafter, and that bail was forfeited in 2010 when he failed to appear again. This knowledge that there were two forfeitures certainly gave Lexington reason to suspect that bail may have been reinstated without its consent, providing grounds for an objection. In the event that further investigation was required before the objection could be considered on the merits, Lexington could have requested an adjournment of the hearing. To argue that a surety should be free to ignore the seventy-five-day filing period and take no action until an investigation is complete is to argue that the seventy-five-day filing period is only a suggestion. Thus, Lexington has failed to demonstrate that it was entitled to relief under Rule 4:50-1 due to excusable neglect. See Mancini v. EDS, 132 N.J. 330, 335 (1993) (defining excusable neglect as excusable carelessness "attributable to an honest mistake that is compatible with due diligence or reasonable prudence.").

This does not end our review, however. Although Lexington clearly and unjustifiably failed to comply with the seventy-five-day filing period, it did file its motion to vacate the forfeiture judgment within a reasonable time following the default judgment. See R. 4:50-2.

When, as here, a defendant seeks to vacate a default judgment, the motion should be viewed "with great liberality, " and the court should tolerate "every reasonable ground for indulgence . . . to the end that a just result is reached." Mancini, supra, 132 N.J. at 334 (quoting Marder v. Realty Constr. Co., 84 N.J.Super. 313, 319 (App. Div.), aff'd, 43 N.J. 508 (1964)). The decision whether to grant or deny a motion to vacate a default judgment must be guided by equitable considerations. Prof'l Stone, Stucco & Siding Applicators, Inc. v. Carter, 409 N.J.Super. 64, 68 (App. Div. 2009). Although "[t]he decision whether to grant such a motion is left to the sound discretion of the trial court, and will not be disturbed absent an abuse of discretion[, ] [a]ll doubts . . . should be resolved in favor of the parties seeking relief." Mancini, supra, 132 N.J. at 334 (internal citation omitted).

In its written statement of reasons, the trial court agreed that because Gilliam's bail was reinstated without Lexington's consent, the reinstatement was a nullity. Nonetheless, the court stated this defect in the underlying basis for the judgment was vitiated by Lexington's failure to file an objection in a timely manner. The court stated that the failure to file a timely objection precluded Lexington from recovering 100% of the bail. It therefore concluded that Lexington's argument that the forfeiture judgment should be vacated as based upon a nullified surety lacked any merit.

However, the failure to timely file an objection does not preclude recovery by the surety. Rule 3:26-6(b) provides: "[t]he court may, either before or after the entry of judgment, direct that an order of forfeiture or judgment be set aside, . . . if its enforcement is not required in the interest of justice[.]" (Emphasis added); State v. Korecky, 169 N.J. 364, 372-73 (2001); see also N.J.S.A. 2A:162-8.

Further, it is well-settled that if the terms of the bail contract are modified "without the consent of a compensated surety, the surety will be discharged if the modification materially increases his risk." State v. Weissenburger, 189 N.J.Super. 172, 176 (App. Div. 1983) (citing Restatement, Security, § 128 at 340-41 (1941)); see also State v. Tuthill, 389 N.J.Super. 144, 148 (App. Div. 2006), certif. denied, 192 N.J. 69 (2007); Clayton, supra, 361 N.J.Super. at 395. E.g., State v. Ceylan, 352 N.J.Super. 139, 144-45 (App. Div.) (material increase in risk where trial court established new bail for Turkish national after conviction on second-degree offense), certif. denied, 174 N.J. 545 (2002); Weissenburger, supra, 189 N.J.Super. at 176-77 (material increase in risk where prosecutor agreed that a defendant who was required to remain in the state unless otherwise permitted could exercise his own discretion in determining whether an emergent threat warranted his flight without giving notice).

In this case, it is undisputed that Gilliam's bail was reinstated after forfeiture on two separate occasions prior to the August 2010 forfeiture. In the first instance, in May 2006, Gilliam appeared in court a few days after the non-appearance that prompted the forfeiture. Although it is arguable that the reinstatement at this juncture did not result in a material increase in Lexington's risk, the same cannot be said for the second reinstatement in 2008. At this point, Gilliam had been arrested on a new charge in Pennsylvania. His bail was forfeited, without notice to Lexington, when his incarceration there precluded his appearance in court. Again, without notice to Lexington, his bail was reinstated after he completed his sentence. Focusing on the reinstatement in 2008, Lexington asserted that the risk associated with providing bail for a defendant who committed a new offense while on bail was materially increased without its consent. Although the trial court agreed that the reinstatement here was a nullity, it stated, "the reinstatement of bail on two prior occasions is not at issue in the instant Motion" It is true that the reinstatements were not directly at issue in the motion to vacate the forfeiture If however the judgment was based upon a reinstatement that was a nullity this fact would carry substantial weight in the determination whether a denial of the motion would cause an unjust result See Mancini, supra, 132 N.J. at 334

In sum the trial court erred in assuming that the motion to vacate judgment was untimely because it was filed more than seventy-five days after the default judgment and in concluding that this purported untimeliness precluded consideration of the motion on its merits In light of the court's implicit recognition that the underlying reinstatement was a nullity these erroneous premises led to a mistaken exercise of discretion See Flagg v. Essex Cnty. Prosecutor, 171 N.J. 561 571 (2002); Barr v. Barr, 418 N.J.Super. 18 46 (App Div 2011)

Accordingly we reverse the order denying Lexington's motion to vacate the default judgment and remand for the court to consider the motion in light of the principles we have set forth in this opinion We do not retain jurisdiction


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