Opinion
DOCKET NO. A-3341-12T4
05-21-2014
GLOUCESTER SENIOR HOUSING CAMPUS, L.P., Plaintiff-Respondent, v. CODE ELECTRICAL CONTRACTORS, INC. and CHARLES KARTSAKLIS, Defendants-Appellants.
Testa Heck Scrocca & Testa, P.A., attorneys for appellants (Justin R. White, on the briefs). Archer & Greiner, P.C., attorneys for respondent (Vincent P. Sarubbi, on the brief).
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges Sapp-Peterson and Lihotz.
On appeal from the Superior Court of New Jersey, Chancery Division, General Equity Part, Camden County, Docket No. C-14-12.
Testa Heck Scrocca & Testa, P.A., attorneys for appellants (Justin R. White, on the briefs).
Archer & Greiner, P.C., attorneys for respondent (Vincent P. Sarubbi, on the brief). PER CURIAM
Defendants Code Electrical Contractors, Inc. (CEC), and Charles Kartsaklis, individually and in his capacity as an officer of CEC, appeal from a Chancery Division order denying defendants' motion to vacate default and the final default judgment entered in favor of plaintiff, the Gloucester Senior Housing Campus, L.P. (GSHC). Defendants argue the judge erroneously denied their motion, contending they articulated good cause for the delay in filing an answer and demonstrated a meritorious defense to plaintiff's complaint. In denying defendants' motion to vacate default, the judge rejected defendants' assertions as insufficient to satisfy the legal standard of excusable neglect. We affirm.
On March 31, 2008, plaintiff executed a sales agreement with CEC to install a solar photovoltaic system at its Blackwood property. Plaintiff agreed to satisfy the $467,000 cost of the system as follows: 80% upon acceptance of the proposal; a 10% progress payment upon delivery of materials; and 10% upon final municipal electrical inspection.
The installation of a solar energy project produced New Jersey Solar Renewable Energy Certificates (SREC). Essentially, a certificate is earned as the solar installation generates 1000 kilowatt-hours of electricity. These certificates may be sold on an exchange, during the first fifteen years of the project's life. Ibid.
The sales agreement provided CEC would retain all SRECs in exchange for CEC's twenty-year preventative maintenance contract. CEC had assigned its interest in the SRECs to Kartsaklis. Because the value of the SRECs had dramatically increased, the parties agreed to reconsider these provisions. On November 10, 2009, plaintiff and CEC entered into a maintenance bond agreement. Plaintiff assumed certain maintenance responsibilities and CEC would continue to have sole authority over SRECs and would distribute to plaintiff ten percent of the proceeds received from the sale of the project-generated SRECs in the first ten years and five percent received for years eleven to twenty.
The project received final approval from Gloucester Township on March 1, 2010. CEC requested the final payment of $84,370, representing approximately 20%. However, plaintiff did not immediately remit payment and raised concerns with maintenance and other aspects of CEC's performance. Negotiations ensued. Plaintiff drafted a proposed amendment to the March 31, 2008 contract. The amendment provided an equal division of the revenue generated from the sale of the SRECs, effective February 1, 2010, full payment would be made to CEC, and CEC would install certain additional items including an information center about the solar photovoltaic system with its logo, with a place for advertising and a community bulletin board. Defendant Kartsaklis agreed to transfer the rights to half the SRECs and revenue generated from their sale to plaintiff. Both defendants signed the amendment on August 10, 2010.
When defendants failed to transfer the SRECs and any revenue generated from their sale, plaintiff filed this action on January 13, 2012. Plaintiff had difficulty securing personal service, attributed to Kartsaklis's efforts to avoid being served. Service on CEC was effectuated on March 15, 2012, and on Kartsaklis on March 21, 2012. Defendants did not answer and default was entered on May 18, 2012.
Plaintiff requested entry of a default judgment on December 6, 2012. On December 7, 2012, counsel for defendants communicated with plaintiff's attorney, requesting a copy of plaintiff's motion for entry of final judgment by default. Defendants filed a cross-motion opposing entry of a default judgment and seeking to vacate the default. CEC alleged its failure to respond to the complaint resulted from financial hardship asserting although it consulted with counsel in May 2012, it lacked the funds to provide the necessary retainer. Kartsaklis asserted he too experienced financial difficulties and also was embroiled in a difficult divorce.
More specifically, defendants relied on Kartsaklis's certification to establish the requisite good cause for failing to respond to the complaint served in March 2012. The certification averred:
3. During this period of time, divorce proceedings between me and my wife were just beginning. My business [CEC] was failing, and I was financially destitute. I even consulted with a bankruptcy lawyer.Counsel was hired in November 2012 and the motion was filed in January 2013.
4. Despite these difficulties, I did take . . . [p]laintiff's [v]erified [c]omplaint seriously. On or about May 4, 2012, I had an appointment with [counsel] . . . I wanted to hire the . . . firm to defend me in this case. [Counsel] presented me with a legal services agreement. I simply could not afford their legal services at the time.
Defendants also filed an answer alleging there was no consideration for the amendment and also claimed the amendment was executed under duress. A proposed counterclaim asserted plaintiff violated the Prompt Payment Act, N.J.S.A. 2A:30A-1 to -2.
Following argument, the motion judge found plaintiff had not presented facts supporting "excusable neglect" and denied the cross-motion to vacate the default. Considering the uncontroverted proofs submitted by plaintiff, the judge entered final judgment requiring defendants to pay plaintiff $59,726.25, representing half the value received from the sale of the SRECs. The judgment also ordered defendants to transfer the SRECs to plaintiff. This appeal ensued.
"The basis for the entry of default under [Rule 4:43-1] is the litigant's failure to participate in the litigation-by failing 'to plead or otherwise defend[.]'" N.J. Div. of Youth & Family Servs. v. M.G., 427 N.J. Super. 154, 168 (App. Div. 2012) (quoting R. 4:43-1). "Entry of default is a necessary predicate to a default judgment." Clark v. Pomponio, 397 N.J. Super. 630, 641 (App. Div.) (citing R. 4:43-2), certif. denied, 195 N.J. 420 (2008).
A party may move to vacate an entry of default, which the court may set aside for good cause. US Bank Nat. Ass'n v. Guillaume, 209 N.J. 449, 466-67 (2012). See also R. 4:43-3. The term "good cause" appears in many of our statutes and rules; however, the term is difficult to precisely define. Del. Valley Wholesale Florist, Inc. v. Addalia, 349 N.J. Super. 228, 232 (App. Div. 2002). "Its application requires the exercise of sound discretion in light of the facts and circumstances of the particular case considered in the context of the purposes of the Court Rule being applied." Ibid.
"[T]he requirements for setting aside a default under Rule 4:43-3 are less stringent than . . . those for setting aside an entry of default judgment under Rule 4:50-1." N.J. Mfrs. Ins. Co. v. Prestige Health Grp., LLC, 406 N.J. Super. 354, 360 (App. Div.) (citation omitted), certif. denied, 199 N.J. 543 (2009). "Excusable neglect" is among the bases for relief from a judgment. R. 4:50-1(a). Nevertheless, the very essence of the phrase "good cause" suggests relief is afforded "in exceptional situations[,]" and the specific facts and circumstances of the case must be evaluated. Hovland v. Dir., Div. of Taxation, 204 N.J. Super. 595, 600 (App. Div. 1985) (citing Nemeth v. Otis Elevator Co., Inc., 55 N.J. Super. 493, 497 (App. Div. 1959)). "Whenever the words 'good cause' appear in statutes or rules relating to the opening of defaults they mean (in the absence of other modifying or controlling words) a substantial reason that affords legal excuse for the default." Nemeth, supra, 55 N.J. Super. at 497.
In considering whether good cause exists, trial courts should consider the circumstances surrounding entry of default. In assessing the culpability of the moving party, the court must consider whether granting relief prejudices the opposing party. In our review of a trial judge's determination to grant or deny a motion to vacate a default, we will not interfere unless we find an abuse of discretion. Cf. Guillaume, supra, 209 N.J. at 467.
Guided by these standards, we reject as unfounded defendants' assertion "the vacating a default is so run-of-the-mill," suggesting any request, once made, must be routinely granted. Although we acknowledge the motion judge applied the more stringent standard applicable to default judgments of "excusable neglect" rather than the applicable "good cause" standard, directed to vacating defaults, the question of whether the facts establish a basis for relief under Rule 4:43-3 are undisputed, making the determination of whether defendant is entitled to relief a legal one. Accepting defendants' facts in the most favorable light, we determine them insufficient to establish the legal standard of good cause necessary to vacate a default.
Defendants knew the litigation was initiated. Formal service was effectuated in March 2012, once plaintiff overcame defendants' efforts, described by the process server as efforts that "appeared to be evading service." Kartsaklis admits he consulted counsel, presumably learning of the obligations to address the suit. Defendants did not request an extension of time or take steps for Kartsaklis, unburdened by the requirements of having legal representation, which attaches to corporations. See R. 1:21-1(c). Many people experience difficulties and personal trials, like divorce or temporary cash flow strain. Most routine personal life challenges do not justify ignoring obligations arising when litigation is initiated. Indeed, the types of personal detours described by defendants do disrupt smooth daily routines but do not satisfy the legal standard of good cause. Kartsaklis's certification offers no support for a finding that he acted diligently or reasonably in addressing the claims presented by plaintiff. Rather, the facts show defendants took no action for ten months, until final judgment was imminent. Because the factual circumstances here do not support that default be vacated, we need not interfere with the February 22, 2013 order denying defendants the requested relief.
For completeness, we next consider whether defendants presented a meritorious defense to plaintiff's claims, warranting relief from the subsequently entered default judgment. We conclude defendants failed to present proof of a meritorious defense. See R . 4:50-1.
In light of the executed amendment to the parties' original agreement, which expressly divides the SRECs equally, defendants allege the amendment is invalid as lacking consideration. Further, defendants' maintain execution of the amendment resulted from duress.
Defendants correctly assert that to be enforceable, a contract, including a modification to an existing contract, must include consideration where both sides "get something out of the exchange." Cont'l Bank of Pa. v. Barclay Riding Acad., Inc., 93 N.J. 153, 170 (1983) (internal quotation marks and citation omitted). See also Oscar v. Simeonidis, 352 N.J. Super. 476, 485 (App. Div. 2002) (stating consideration applies to modifications to existing contracts). "Any consideration for a modification, however insignificant, satisfies the requirement of new and independent consideration." Simeonidis, supra, 352 N.J. Super. at 485.
The amendment to the parties' agreement states its purpose as follows: "[T]he intention of the parties was to assure the lowest possible costs for the [plaintiff]. Due to the increase of the value of solar reserve energy credits (S.R.E.C.S) the parties have agreed that equity requires a division of this revenue source between the parties." This recital reflects the consideration requirement identified in Simeonidis.
As for duress, Kartsaklis's personal problems motivating him to resolve the dispute with plaintiff do not rise to the legal defense of duress, warranting relief from assumed contractual obligations. See Barclay Riding Acad., supra, 93 N.J. at 170 (holding economic duress requires a defendant must show: "1. . . he has been the victim of a wrongful or unlawful act or threat, and 2. Such act or threat must be one which deprives the victim of his unfettered will"). Defendants have not satisfied these standards.
Affirmed.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION
See New Jersey's Clean Energy Program, SREC Registration Program, http://www.njcleanenergy.com/renewable-energy/programs/solar-renewable-energy-certificates-srec/new-jersey-solar-renewable-energy (last visited May 9, 2014).