Opinion
DOCKET NO. A-2801-13T1
08-25-2015
JEFFREY REICHLE and DOROTHY REICHLE, Plaintiffs-Respondents, v. JORDAN'S ORNAMENTAL IRON WORKS, JOHNSON'S POWDER COATING, LLC, KANDI JOHNSON, CHRISTOPHER JOHNSON, CHARLES A. CRAWFORD, III, LYNN E. CRAWFORD, ROBERT TODD JORDAN, LANCE PHILIP REDMAN, AND JAMES T. HUSTED, Defendants, and ROSALIE M. JOHNSON and EVERETT E. JOHNSON, Defendants-Appellants.
Mark J. Molz argued the cause for appellants (Law Offices of Mark J. Molz, attorneys; Mr. Molz, on the brief). Stephen W. Barry argued the cause for respondents (Barry, Corrado & Grassi, P.C., attorneys; Mr. Barry, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Hayden and Sumners. On appeal from Superior Court of New Jersey, Law Division, Cape May County, Docket No. L-38-11. Mark J. Molz argued the cause for appellants (Law Offices of Mark J. Molz, attorneys; Mr. Molz, on the brief). Stephen W. Barry argued the cause for respondents (Barry, Corrado & Grassi, P.C., attorneys; Mr. Barry, on the brief). PER CURIAM
Defendants Everett Johnson and Rosalie Johnson appeal from the Special Civil Part orders denying their motion to vacate entry of default and granting final default judgment in the amount of $54,500 entered in favor of plaintiffs Jeffrey Reichle and Dorothy Reichle. Having carefully reviewed the arguments raised in light of the record and applicable law, we affirm.
I.
We discern the following factual and procedural history from the record. On or about February 15, 2005, plaintiffs entered into an agreement for the fabrication and installation of a galvanized fence with Jordan's Ornamental Iron Works (Jordan's Works), which was owned by Johnson's Powder Coating, LLC (Johnson's Powder). The fence was installed at the plaintiffs' Cape May home, and had a final purchase price of $54,500.
A coat of a protective layer of zinc on the iron or steel fence.
A few years after the fence was installed it began to rust and deteriorate. Plaintiffs notified Jordan's Works that the fence was defective because it had not been galvanized. Eventually, Jordan's Works removed and took possession of the fence to fix it; however, it was never fixed or returned to plaintiffs.
On January 14, 2011, plaintiffs filed a complaint in the Special Civil Part against Jordan's Works, Johnson's Powder, and John Does 1-10, for breach of contract, among other causes of actions. Jordan Works and Johnson's Powder failed to file an answer and default was entered against them. Plaintiffs then served Christopher Johnson and his mother, Rosalie Johnson, with deposition notices. Subsequently, Mark J. Molz, an attorney representing Jordan Works and Johnson's Powder, initiated correspondence with plaintiffs seeking to delay the proceedings in an attempt to negotiate a settlement agreement.
Plaintiffs consented to Molz's request to vacate entry of default, on the condition that an answer would be filed. Thus, on February 24, 2012, Molz filed an answer on behalf of Jordan's Works and Johnson's Powder. Plaintiffs subsequently served Molz with interrogatories, a request for production of documents, and deposition notices. When no response to the discovery request was provided, plaintiffs successfully moved on July 30, 2012 to dismiss the answers of Jordan's Works and Johnson's Powder without prejudice.
On December 14, 2012, an order was entered dismissing Jordan's Works' and Johnson's Powder's answers with prejudice because they did not provide discovery and move to reinstate their answers. However, six months later, the business entities filed for Chapter Seven bankruptcy, resulting in a September 23, 2013 order dismissing plaintiffs' claims against them without prejudice.
Plaintiffs later filed a motion with an accompanying certification requesting permission to file a Second Amended Complaint in order to name Rosalie and her husband, Everett Johnson, (collectively, the Johnsons or defendants), as defendants, as well as name other individual defendants. At the motion's oral argument on December 7, 2012, Molz now representing the Johnsons, stated on the record that he had been instructed by them not to take further action to defend the matter. At the conclusion of the hearing, the motion judge granted plaintiffs' request to add the Johnsons as defendants.
We use first names for convenience because there are three defendants with the last name of Johnson and mean no disrespect by this informality.
Defendants Kandi Johnson, Christopher Johnson, Robert Todd Jordan, James Husted, Charles A. Crawford, III, and Lynn E. Crawford (the Crawfords were also referred in the record as Culver) were all dismissed for different reasons and are not parties to this appeal. It is not clear from the record what transpired with the remaining individual defendant, Lance Philip Redmond, who is also not involved with this appeal.
After the Johnsons were served with the second amended complaint, as Molz had forewarned, they failed to file a timely answer or other responsive pleading. Plaintiffs' subsequent request to enter default against defendants was granted on March 15, 2013, with a proof hearing to determine the judgment amount scheduled for May 31, 2013.
Seven days before the proof hearing, defendants filed a motion to vacate the default entry and allow responsive pleadings. Consequently, the proof hearing was adjourned. On June 28, 2013, a different motion judge heard defendants' motion. Rosalie contended that she was unaware she was being sued due to an illness and that she was only an employee of Johnson's Powder. Everett contended that he had absolutely nothing to do with Johnson's Powder. The judge rejected these arguments and in denying the motion made seven factual findings:
1. Proper service was made on all the individuals [d]efendants and they failed to file an [a]nswer in a timely fashion.
2. There were numerous difficulties with discovery in the original matter against the corporate [d]efendants. Suffice it to say, little to no discovery was ever forthcoming from the non-answering litigants.
3. The defaulting [d]efendants herein were adjoined via an [a]mended [c]omplaint on October 24, 2012. According to the representation of [plaintiff's
counsel], a formal [m]otion to [a]mend was file[d] and heard . . . on December 7, 2012, at which time '[defendants' counsel] actually appeared in person, as he was required to do, and at that time he placed on the record that he had been instructed by his clients not to take further action to defend the matter.
4. Thereafter, a corrected [s]econd [a]mended [c]omplaint was filed with the [c]ourt and a copy delivered to [defendants' counsel].
5. The individual defaulting [d]efendants herein were served on January 6 and 8, 2013, as confirmed by Exhibit N to [plaintiff's counsel's] [c]ertification.
6. On March 15, 2013, a [r]equest to [e]nter a [d]efault as to the four individual [d]efendants was filed with the [c]ourt by [plaintiff's counsel] and thereafter a [p]roof [h]earing scheduled before the undersigned on May 31, 2013.
7. The submissions made by [defendants' counsel], and filed with the Court on May 28, 2013, do not satisfy our Court Rules and fail to set forth any explanation of excusable neglect or a meritorious defense on behalf of his clients.
In so finding, the judge ruled that defendant's submission "fail[ed] to satisfy the requirements of either [Rule] 4:43-3 or [Rule] 4:50-1" and he was "left with no alternative but to deny the [m]otion to [v]acate [d]efault."
After multiple postponements, the proof hearing was held on December 19, 2013. To establish their damages, plaintiffs called Robert Todd Jordan, a former employee of Jordan's Works, as a witness. Jordan testified that he remembered making the plaintiffs' fence. He further explained that fences installed near the shore where plaintiffs lived, required galvanization because without it the salt in the air from the ocean caused deterioration of steel and aluminum. According to Jordan, plaintiffs' fence was not galvanized.
As noted, Jordan was a named defendant. Plaintiffs entered into a stipulation dismissing all claims against him without prejudice.
To counter, defendants called Christopher Johnson, the day-to-day operator of Jordan's Works, who testified that the fence was galvanized. He explained that Jordan's Works was responsible for the defective fence and for those reasons he tried to repair the fence for them. However, he could not repair and return the fence because it was locked in storage once the company went out of business.
As noted, he was also a named defendant. However, he was dismissed with prejudice due to a bankruptcy. --------
At the conclusion of the hearing, the judge rendered an oral decision awarding damages of $54,500 plus costs. On January 23, 2014, the judge entered judgment against defendants. This appeal followed.
II.
On appeal, defendants contend that in denying their motion to vacate the entry of default, the judge abused his discretion by applying the more stringent standard for vacating a default judgment under Rule 4:50-1, rather than the more liberal standard to vacate entry of default pursuant to Rule 4:43-3. Defendants further argue that the judge erred in failing to vacate the default even using the more stringent requirements. Specifically, defendants allege that their failure to appear was excusable because Rosalie was unaware due to her health issues that she was being sued individually. They also claim to have meritorious defenses, a requirement of Rule 4:50-1, because she only acted as an employee of Johnson's Powder, and Everett had absolutely nothing to do with the business in any capacity. We disagree.
In accordance with Rule 4:43-3, a default is vacated upon a mere showing of good cause. New Jersey Mfrs. Ins. Co. v. Prestige Health Group, LLC, 406 N.J. Super. 354, 360 (App. Div. 2009) (citing Bernhardt v. Alden Cafe, 374 N.J. Super. 271, 277 (App. Div. 2005)). "An application to vacate default 'should be viewed with great liberality and every reasonable ground for indulgence is tolerated to the end that a just result is reached.'" N.J. Div. of Youth & Family Servs. v. P.W.R., 410 N.J. Super. 501, 508 (App. Div. 2009) (quoting Marder v. Realty Constr. Co., 84 N.J. Super. 313, 319 (App. Div.), aff'd, 43 N.J. 508 (1964), rev'd on other grounds, 205 N.J. 17 (2011)).
Nonetheless, a trial court's decision to grant or deny a motion to vacate a default will not be disturbed unless we find an abuse of discretion. U.S. Bank Nat. Ass'n v. Guillaume, 209 N.J. 449, 467 (2012) (citing DEG, LLC v. Twp. of Fairfield, 198 N.J. 242, 261 (2009)); Hous. Auth. of Morristown v. Little, 135 N.J. 274, 283 (1994). We find an abuse of discretion when a decision is "'made without a rational explanation, inexplicably departed from established policies, or rested on an impermissible basis.'" Iliadis v. Wal-Mart Stores, Inc., 191 N.J. 88, 123 (2007) (quoting Flagg v. Essex Cnty. Prosecutor, 171 N.J. 561 (2002)).
However, we have noted the "difference between the 'good cause' required to vacate a default under Rule 4:43-3 and 'the more stringent requirements of Rule 4:50-1 for setting aside a default judgment[.]'" N.J. Div. of Youth & Family Servs. v. M.G., 427 N.J. Super. 154, 171 (2012) (quoting O'Connor v. Altus, 67 N.J. 106, 128-29 (1975)). A motion to set aside a default judgment will be granted if the failure to appear or defend was excusable under the circumstances and there is a showing of a meritorious defense. Ibid. "'Excusable neglect' may be found when the default was 'attributable to an honest mistake that is compatible with due diligence or reasonable prudence'". Guillaume, supra, 209 N.J. at 468 (quoting Mancini v. EDS, 132 N.J. 330, 335 (1993)).
Applying these standards, the judge did not abuse his discretion in denying defendant's motion to vacate default. The judge noted that initially there had been a "long and tortured history" between the parties due to defendants' counsel's failure to take action on behalf of defendants in a "timely fashion" and numerous difficulties with discovery. The record supports the judge's conclusion that there was no good cause under Rule 4:43-3 to vacate entry of default for defendants' failure to appear or defend. Rosalie's representation that she did not know she was being sued individually is contradicted by her attorney's statement in court that his clients (the Johnsons) directed him not to take action to defend the lawsuit. Moreover, Everett offered no explanation for not responding to the complaint. Merely asking to vacate default without explanation for not appearing or defending is insufficient under our rules of court even under the less stringent standard governing a motion to vacate entry of default, as opposed to default judgment.
Notwithstanding the absence of a showing of good cause to vacate entry of default, the judge also considered defendants' contention that they had excusable neglect and meritorious defenses as required by Rule 4:50-1 to vacate a default judgment. As noted, the record supports the judge's finding that defendants were aware of the suit but declined to defend themselves. Therefore, the motion judge's finding that defendants "fail[ed] to set forth any explanation of excusable neglect or a meritorious defense[,]" alone, does not evidence that the judge applied the incorrect standard in deciding the motion to vacate default.
We conclude no abuse of discretion was shown in the trial court refusing to vacate the entry of default under Rule 4:43-3. In light of the fact that there was no judgment against defendants at the time of the motion to vacate default, there was no basis to relieve defendants from the judgment under Rule 4:50-1.
Next, we address defendants' challenge to the judgment awarded to plaintiffs at the proof hearing. Defendants argue that the judge abused his discretion when failing to require plaintiffs to establish a prima facie showing as well as the quantum of damages at the proof hearing. Defendants contend that the judge should have sua sponte refused to enter judgment against them and dismissed them from the case in light of their valid defenses. Again, we disagree with defendants.
A proof hearing is a search for the truth. Jugan v. Pollen, 253 N.J. Super. 123, 134 (App. Div. 1992), certif. denied, 138 N.J. 271 (1994). To find truth, our system of jurisprudence utilizes adversarial proceedings. Ibid. "Where the adversarial nature of the proceeding has been thwarted by a party's default, we strip away that party's rights to participate one by one so as not to prejudice the plaintiff and to punish the contumacious party." Ibid. Consequently, a defendant who has defaulted has relinquished the right to present affirmative proofs in the matter. Chakravarti v. Pegasus Consulting Group, Inc., 393 N.J. Super. 203, 210 (App. Div. 2007).
Nevertheless, we found in Morales v. Santiago, 217 N.J. Super. 496 (App. Div. 1987), that justice requires that a plaintiff prove liability where the trial judge concludes that "the evidence, even when viewed indulgently, demonstrates that the defendant is not liable, upon timely motion a default judgment entered on that evidence must be vacated under R. 4:50-1(f)." Id. at 505 (citing Johnson v. Johnson, 92 N.J. Super. 457, 465 (App. Div. 1966)). Even so, the trial judge has the discretion to require proof of liability at the proof hearing, and to what extent proofs are necessary. Chakravarti, supra, 393 N.J. Super. at 210.
Yet, where "a defendant who refuses to cooperate in the discovery process and absents himself voluntarily from trial, there is no doubt that even such a defendant might be granted some limited participation in the trial." Pollen, supra, 253 N.J. Super. at 129. Thus, such a defendant generally retains "the right to challenge a plaintiff's showings in a proof hearing by way of cross-examination and argument". Id. at 211 (citing Pollen, supra, 253 N.J. Super. at 129-31).
Given that defendants' liability was already established through entry of default, we do not find the judge abused his discretion by failing to require plaintiffs to prove defendant's liability at the proof hearing for damages. Moreover, this is not a case where the evidence "even when viewed indulgently, demonstrates that the defendant[s are] not liable[.]" Morales, supra, 217 N.J. Super. at 505. The testimonial evidence presented at the proof hearing provided sufficient factual findings to support the judgment.
Additionally, the judge afforded defendants every appropriate opportunity to challenge plaintiffs' proofs on damages, including cross-examination of plaintiffs' witnesses and calling their own witnesses. Indeed, plaintiffs' and defendants' witnesses agreed that the fence: cost $54,500 to install, had deteriorated, was removed from the property by Jordan's Works, and was never repaired. Defendants presented no evidence suggesting that the judgment amount of $54,500 is not supported by the credible evidence in the record.
Affirmed. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION