First Indem. of Am. Ins. Co.
v.
Aventine Edgewater, L.L.C.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISIONApr 11, 2013
DOCKET NO. A-3798-11T2 (N.J. Super. App. Div. Apr. 11, 2013)

DOCKET NO. A-3798-11T2

04-11-2013

FIRST INDEMNITY OF AMERICA INSURANCE COMPANY, Plaintiff-Respondent, v. AVENTINE EDGEWATER, L.L.C., JOHN MAGEE, BURT DORFMAN, MITCH KLEIN, Defendants, and CONRAD RONCATI, JR., Defendant-Appellant.

Law Offices of Charles Shaw, P.C., attorneys for appellant Conrad Roncati, Jr. (Charles Page 2 Shaw, of counsel; Eilish M. McLoughlin, on the brief). Respondent has not filed a brief.


NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

Defendant-Appellant.

Before Judges Yannotti and Harris.

On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket Nos. DJ-258456-11, DC-010853 and VJ-011137-11.

Law Offices of Charles Shaw, P.C., attorneys for appellant Conrad Roncati, Jr. (Charles Shaw, of counsel; Eilish M. McLoughlin, on the brief).

Respondent has not filed a brief. PER CURIAM

Defendant Conrad Roncati, Jr., appeals from a default judgment entered on June 1, 2011, in favor of plaintiff First Indemnity of America Insurance Company, and an order entered on January 13, 2012, denying his motion to vacate the default judgment. We reverse.

In February 2007, plaintiff issued two surety bonds on behalf of Aventine Edgewater, LLC, to the Borough of Edgewater, guaranteeing the completion of certain off-site and on-site improvements to properties in the Borough. In addition, Roncati, Mitchell Klein, Burton I. Dorfman, John Magee and others signed an agreement in which they agreed to indemnify plaintiff from and against all liability and costs that it may incur pursuant to the bonds.

On April 1, 2011, plaintiff filed an action in the Special Civil Part against Aventine, Roncati, Magee, Dorfman, and Klein seeking $7,211 in premiums allegedly due on the surety bonds. Roncati and the other defendants were served on April 12, 2011. Roncati did not file an answer and on June 1, 2011, a default judgment was entered against him. Thereafter, plaintiff commenced enforcement action by issuing an information subpoena to Roncati, but he failed to respond. Accordingly, on September 19, 2011, plaintiff filed a motion in the trial court to enforce litigant's rights, seeking an order requiring Roncati to comply with the information subpoena.

Roncati did not respond to the motion and on October 24, 2011, the court entered an order declaring that Roncati violated plaintiff's rights as a litigant and directing that he respond to the information subpoena within ten days after service of the order. The order additionally stated that if Roncati did not comply with the information subpoena as directed, a warrant would issue for his arrest without further notice. Roncati did not comply with the order and on November 15, 2011, the court entered an order authorizing Roncati's arrest.

On December 7, 2011, Roncati filed a motion to vacate the default judgment and the order for his arrest. In support of that motion, Roncati submitted a certification in which he stated that defendant Klein, Aventine's partner, had cancelled the bond on October 22, 2009. Roncati said that, in light of Klein's action, no further bond premiums were due and owing.

Even so, plaintiff continued to bill defendants for premiums for the period from February 12, 2010, through February 12, 2012. The invoices were sent to Klein's attention at Roncati's business address, and Roncati fowarded the invoices to Klein "so that he could dispense with same." Roncati stated that in 2010, he contacted plaintiff and provided its representative with copies of documents indicating that the bond had been cancelled. He said he believed that the matter had been resolved.

Roncati additionally stated that, even though the bond had been "effectively cancelled" in October 2009, and he had provided plaintiff with evidence of the "cancellation," plaintiff filed this lawsuit seeking bond premiums for 2010 through 2012. Roncati admitted he was served with the complaint. He then retained the services of his sister, an attorney licensed in New Jersey, to "address this matter" with plaintiff.

According to Roncati, his attorney communicated directly with plaintiff's attorney and provided him with the same documents that Roncati had provided directly to plaintiff's representative before the lawsuit was commenced. Roncati said that it was his understanding that the complaint would be dismissed "in light of these proofs."

Roncati stated, however, that plaintiff's counsel began to correspond directly with him, even though he was being represented by counsel. Roncati assumed that his attorney was receiving copies of the documents, but she was not. According to Roncati, his attorney also assumed the complaint had been dismissed.

Roncati stated that he did not receive a copy of the default judgment. He apparently became aware at some point that the matter "was unresolved" and retained another attorney. Roncati's attorney again provided plaintiff with documents showing that the bonds had been cancelled and asked that counsel not execute the arrest warrant. Roncati asserted that plaintiff had improperly obtained the default judgment. He asked the court to vacate the judgment as well as the order for his arrest. Plaintiff opposed the motion.

At the hearing on January 13, 2012, Roncati's attorney argued that the requirements of the bond had been satisfied in 2009, and defendants should not have been charged any additional premiums after that point. In response, plaintiff's counsel argued that, while defendants may have submitted a certificate of occupancy for the improvements issued by the municipality, that was insufficient to release the surety of its obligations on the bonds. Plaintiff's counsel said that the indemnitors' agreement required defendants to furnish a resolution of the municipality releasing the surety of its obligations under the bonds.

Plaintiff's attorney also argued that Roncati had not shown his failure to answer the complaint was due to excusable neglect. Counsel said the complaint had been served upon Roncati and he did not provide any excuse for failing to file an answer, other than stating that he believed his attorney was going to file the answer on his behalf. Plaintiff's counsel agreed not to immediately have the arrest warrant executed because Roncati had deposited $8,000 with his firm to secure payment of the judgment.

The trial court placed its decision on the record. The court stated without elaboration that there was no basis to set aside the default judgment. The court noted that plaintiff's counsel had agreed to refrain from executing the arrest warrant or acting on the judgment for forty-five days to give the parties time in which to resolve the dispute. The court accordingly entered an order dated January 13, 2012, denying Roncati's motion.

Roncati thereafter filed a motion for reconsideration. In support of that motion, Roncati's attorney submitted a certification in which she asserted that, while the court had denied the earlier motion because Roncati could not produce the municipality's resolution accepting the improvements and releasing the surety of its obligations, the bonds did not require such a resolution. Counsel said that the municipality's certificate of occupancy was sufficient to release the surety of its obligations and therefore plaintiff should not have charged defendants the additional premiums. Counsel asserted that, for this reason, the court should reconsider its earlier decision.

The trial court decided the motion on the papers and entered an order dated March 2, 2012, denying reconsideration. On the order, the court wrote that there was no proof that the municipality had discharged or released the surety from its obligations on the bonds. This appeal followed.

Roncati argues that the trial court erred by refusing to vacate the default judgment. He contends that he established that his failure to answer was due to excusable neglect, and he presented a meritorious defense to plaintiff's claim.

A motion to set aside a default judgment 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 v. EDS, 132 N.J. 330, 334 (1993) (quoting Marder v. Realty Constr. Co., 84 N.J. Super. 313, 319 (App. Div.), aff'd, 43 N.J. 508 (1964)). The decision to grant or deny such a motion is committed to the sound discretion of the trial court, and the court's order will not be disturbed on appeal unless the court has mistakenly exercised its discretion. Ibid. (citing Court Inv. Co. v. Perillo, 48 N.J. 334, 341 (1966)).

Rule 4:50-1(a) permits a court to relieve a party from a judgment for "mistake, inadvertence, surprise or excusable neglect[.]" A defendant who seeks to set aside a default judgment due to excusable neglect must show that the failure to answer "'was excusable under the circumstances and that he has a meritorious defense.'" Mancini, supra, 132 N.J. at 334 (quoting Marder, supra, 84 N.J. Super. at 318). "Carelessness may be excusable when attributable to an honest mistake that is compatible with due diligence or reasonable prudence." Id. at 335 (citing Bauman v. Marinaro, 95 N.J. 380, 392 (1984); Tradesman Nat'l Bank & Trust Co. v. Cummings, 38 N.J. Super. 1, 5 (App. Div. 1955)).

In his certification, Roncati conceded that he was served with plaintiff's complaint and he stated that he thereafter retained an attorney to represent him in this case. Roncati said he provided his attorney with documents, which he claimed showed that plaintiff had erroneously charged defendants with premiums after the surety bonds were cancelled. Roncati believed that, with this information, the matter would be resolved and the complaint dismissed.

Roncati later learned that the matter has not been resolved and his attorney had not filed an answer. By that time, however, the default judgment had already been entered. Roncati established that he acted with due diligence in retaining an attorney and reasonably believed his attorney would amicably resolve the matter. We are therefore convinced that Roncati established excusable neglect for failing to answer the complaint.

We are also convinced that Roncati established a potentially meritorious defense. As we noted previously, Roncati insists that Aventine cancelled the bonds in October 2009, thereby relieving Roncati and the other indemnitors of any liability for additional bond premiums. In support of this claim, Roncati cited a letter dated October 22, 2009, from Klein to Mid-Atlantic Surety, LLC, which stated in pertinent part:

Please be advised that on October 20, 2009 Aventine Edgewater, LLC received a final Certificate of Occupancy from the Borough of Edgewater for the construction work completed at 280 Old River Road. As such, all site work has now been complete[d] and approved by the municipality.
Pursuant to our developers agreement with the Borough of Edgewater, our bond requirement is now lifted. Please consider this notification along with the attached Certificate of Occupancy [as] notice of cancellation.


The surety bonds issued by plaintiff both state in pertinent part:

This bond shall remain in full force and effect until such time as all improvements covered by the bond have been approved or accepted by resolution of the municipal governing body, except that in those instances where some of the improvements are approved or accepted by resolution of the governing body upon certification of the municipal engineer, partial release from the bond shall be granted in accordance with N.J.S.A. 40:55D-53. The amount of the bond remaining shall be sufficient to secure provision of the improvements not yet approved; provided, however, that the municipality may require that 30 percent of the amount of the bond be retained to ensure completion of all improvements.
This bond shall remain in full force and effect until released by resolution of the municipal governing body.


Thus, the bonds have two provisions pertaining to cancellation. On the one hand, the bonds state that they remain in full force and effect until the covered improvements are "approved or accepted by resolution of the municipal governing body." On the other hand, the bonds state that they remain in full force and effect "until released by resolution of the municipal governing body."

Roncati claims that the municipality "approved or accepted" the improvements when it issued the certificate of occupancy for the properties. He contends that, under the circumstances, a resolution of the municipal governing body was not required for cancellation of the bond. In view of the differing provisions in the bonds pertaining to cancellation, Roncati's contention that plaintiff erred by continuing to charge additional bond premiums after the October 2009 cancellation notice may have merit. The trial court erred by concluding otherwise.

Reversed and remanded for further proceedings in conformity with this opinion. We do not retain jurisdiction.

I hereby certify that the foregoing is a true copy of the original on file in my office

I hereby certify that the foregoing is a true copy of the original on file in my office.

CLERK OF THE APPELIATE DIVISION