NEW JERSEY MANUFACTURERS INSURANCE CO. v. FRANCA DILISIO

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-2051-04T32051-04T3

NEW JERSEY MANUFACTURERS

INSURANCE CO.,

Plaintiff-Respondent,

v.

FRANCA DILISIO,

Defendant-Appellant,

and

AA DIAGNOSTIC CENTER, INC.,

Defendant.

_______________________________

 

Argued December 12, 2005 - Decided July 20, 2006

Before Judges Alley, C.S. Fisher and

Yannotti.

On appeal from the Superior Court of New Jersey, Law Division, Morris County, MRS-L-1471-02.

Vincent J. Sanzone, Jr., argued the cause for appellant.

Brian G. Steller argued the cause for respondent (Connell Foley, attorneys; Mr. Steller, of counsel and on the brief; Gregory E. Peterson, on the brief).

PER CURIAM

In this appeal, defendant Franca Dilisio (defendant) seeks our reversal of the denial of her motion to vacate a default judgment entered against her, as well as defendant AA Diagnostic Center Inc. (AA Diagnostic), in the amount of $855,998.70. Because the record on appeal raises grave doubts about the service of original process and other related circumstances, we reverse and remand for an evidentiary hearing.

I

The record on appeal raises significant questions regarding what procedurally occurred at the outset of this lawsuit. Plaintiff New Jersey Manufacturers Insurance Co. (plaintiff) filed a complaint on or about May 2, 2002, which sought relief from defendant, who is a chiropractor, and AA Diagnostic, alleging, among other things, that in numerous ways these defendants unnecessarily or improperly billed plaintiff for chiropractic treatment or allowed unlicensed persons to render such services.

It appears that no summons was issued. Instead, plaintiff submitted a proposed order to show cause at the inception of the suit, apparently assuming that the order to show cause, once entered, would act in lieu of a summons.

The order to show cause, entered on May 8, 2002, granted immediate temporary relief, including (a) a stay of all claims asserted by defendant and AA Diagnostic before the American Arbitration Association (AAA) for personal injury protection (PIP) benefits for services allegedly rendered for plaintiff's insureds; (b) an injunction prohibiting defendant and AA Diagnostic from filing any further PIP arbitration claims against plaintiff; and (c) a prohibition on the enforcement of any arbitration awards or judgments obtained by defendant and AA Diagnostic against plaintiff, with one exception. This order also required that defendants appear on June 21, 2002 and show cause (a) why the temporary restraints should not continue, (b) why defendants should not be compelled to provide certain discovery, and (c) why, if defendants failed to provide that discovery, all claims for PIP benefits asserted against plaintiff either in the AAA or the superior court should not be dismissed.

The record on appeal also indicates that the trial judge entered an unopposed order on June 21, 2002, which (a) directed defendants to provide certain discovery, (b) ordered that, upon defendants' failure to provide this discovery, defendants' PIP claims would be dismissed, and (c) permitted plaintiff to pursue the other demands for relief contained in the complaint in a manner not explained in the order.

Apparently, the discovery mentioned in the May 8, 2002 order and required by the June 21, 2002 order was not provided. As a result, on September 6, 2002, the trial judge dismissed all the PIP claims except the Devereaux matter.

For reasons not at all clarified by the record on appeal, the complaint in this matter was dismissed on July 18, 2003 for lack of prosecution. At the same time, an appeal in this court in the Devereaux matter was pending. We disposed of that appeal on November 7, 2003; a copy of our opinion in that matter is not included within the appendix, but it appears that we remanded the matter to the arbitrator for a hearing. Following a hearing, the arbitrator dismissed the Devereaux claim on March 9, 2004.

The arbitrator's written decision was apparently forwarded by plaintiff's counsel to the trial judge with a request that the complaint in this action be reinstated; it is not clear to us whether or to what extent the pendency of the Devereaux matter had any impact on either the dismissal or request for reinstatement of this action. In any event, on April 28, 2004, plaintiff filed a motion seeking an order restoring its complaint. That motion was granted by an order entered on May 14, 2004, which directed that a proof hearing take place on May 27, 2004. On May 26, 2004, another order was entered which rescheduled the proof hearing for August 16, 2004. A proof hearing took place on the rescheduled date and, on that date, final judgment of default against defendant and AA Diagnostic was also entered.

On September 24, 2004, defendant moved to vacate the final judgment. That motion was denied on November 19, 2004 and, on December 20, 2004, a motion for reconsideration was denied as being procedurally insufficient. Defendant thereafter filed this appeal.

II

In examining the sufficiency of service of process in this matter, which lies at the heart of defendant's claim that the trial judge should have vacated the default judgment, our attention is directed to both the question of what plaintiff claims to have served, and how and when those papers were served. The trial judge denied defendant's motion to vacate because he concluded that defendant had received and ignored the complaint, as well as the many orders entered in this action, and because he concluded that defendant did not demonstrate that she had a meritorious defense to plaintiff's claims.

We hold that there are uncertainties surrounding plaintiff's attempts to effect service of process which require an evidentiary hearing. Certainly, not every technical defect in the service of process requires examination at an evidentiary hearing. However, here, because the May 8, 2002 order to show cause did not conform to the requirements of R. 4:52-1(b), and because there are factual disputes about whether plaintiff successfully personally served defendant with original process, we conclude that an evidentiary hearing is required to ascertain whether the demands of due process were met.

A

Normally, a plaintiff is obligated to serve a summons, along with a complaint, upon any defendant over which plaintiff seeks to have the court exercise jurisdiction. R. 4:4-2 dictates the content of the summons that must be served. However, our rules do not require that a summons be issued and served in all cases. When a party commences an action with the entry of an order to show cause, no summons need issue so long as the order to show cause contains the language required by R. 4:52-1(b), which states:

If the order to show cause issues upon the filing of the complaint, no summons shall issue in the action if the order contains the name and address of plaintiff's attorney, if any, otherwise plaintiff's address; the time within which defendant shall serve and file an answer upon plaintiff or plaintiff's attorney as provided by these rules; and a notice to defendant that upon failure to so file and serve an answer, judgment by default may be rendered against the defendant for the relief demanded in the complaint. The order shall be served upon defendant together with a copy of the complaint and any supporting affidavits at least 10 days before the return date and in the manner prescribed by R. 4:4-3 and 4:4-4 for service of summons, unless the court orders a shorter or longer time or other manner of service.

As can be seen, this rule merely obviates the need for a summons when an order to show cause contains language which is representative of what a summons must contain. It follows that when an order to show cause fails to contain the language required by R. 4:52-1(b), a summons must issue and be served.

The order to show cause executed by the trial judge on May 8, 2002 does not contain a statement, as required by R. 4:52-1(b), that a default judgment would be entered against defendant if no answer was filed within the time required by the order to show cause. As a result, we must conclude that plaintiff failed to serve defendant with a summons, or its functional equivalent, and thus failed to strictly comply with the requirements of our court rules for securing the court's jurisdiction over defendant.

B

In turning to the second aspect of the challenge to service of process, we observe that R. 4:52-1, which provides guidance when an action is commenced with both the filing of a complaint and an order to show cause, makes no change in the manner of service of original process. A plaintiff, regardless of whether an order to show cause is entered at the commencement of the action, must still comply with the requirements of R. 4:4-3 and R. 4:4-4, as R. 4:52-1(b) expressly states. The only alteration that R. 4:52-1(b) makes with regard to the court's ordinary processes is that the trial judge may alter the time for service of the initial papers in the cause in a reasoned exercise of discretion, a matter which appears unrelated to the issues raised in this appeal.

In turning to the mode and manner of service of process, we observe that there are disputed questions of fact that precluded the denial of defendant's motion to vacate the judgment absent the further clarity available through an evidentiary hearing.

The record on appeal discloses that plaintiff claims it caused the complaint and proposed order to show cause to be forwarded to defendant and two attorneys, Mark Ruffolo, Esq. and Santiago Orozco, Esq., who were alleged to be her representatives in the matter on May 3, 2002. One of these attorneys responded. In a letter to the trial judge, Ruffolo acknowledged that plaintiff provided his law firm with papers on Friday, May 3, 2002. He claimed also that the papers were served upon Orozco and defendant. He said, however, that he had not been retained by defendant to appear in the matter. Ruffolo informed the judge that while he represented defendant in an AAA matter, he had not been retained or authorized to make an appearance on defendant's behalf in this matter. In fact, Ruffolo never did thereafter appear for defendant in this action. Accordingly, we doubt that Ruffolo's hearsay statements about what defendant said she received are admissible pursuant to N.J.R.E. 803(b)(3), although we do not mean to suggest that his statements might not otherwise be admissible in the evidentiary hearing we now mandate.

Ruffolo further indicated that, while he had telephoned defendant to inform her about these papers, he also urged plaintiff to contact defendant personally and to serve the papers upon the appropriate attorney authorized to represent defendant in this matter.

The record is unclear whether Orozco, the other attorney to whom plaintiff's attorney sent the complaint and order to show cause, ever acknowledged that they were received. In arguing for relief from the default judgment, defense counsel made it a point to emphasize that Orozco was not listed in the New Jersey's Lawyers Diary and is apparently no longer available to explain. As with Ruffolo, the record does not suggest that Orozco ever appeared for defendant in this matter.

Moreover, whether either of these attorneys actually received the papers or ever represented defendant in this matter is largely irrelevant. For service of process to be effective as to defendant, there must be evidence that either of these attorneys was authorized by defendant to accept service of process on her behalf. That is, R. 4:4-4(a)(1) requires personal service upon an individual by delivering the appropriate papers "to the individual personally, or by leaving a copy thereof at the individual's dwelling place or usual place of abode with a competent member of the household of the age of 14 or over then residing therein, or by delivering a copy thereof to a person authorized by appointment or by law to receive service of process on the individual's behalf." Should it be assumed that defendant was an individual proprietor, then service could be effected by delivering the appropriate papers "to the individual . . ., or . . . to a managing or general agent employed by the individual in such business . . . or if service cannot be made in that manner, then by delivering [the papers] to any employee or agent of the individual within the State acting in the discharge of his or her duties in connection with the business." R. 4:4-4(a)(4). And, if we are to assume that the party to be served was a partnership or unincorporated association, then service was to be made in the manner prescribed by R. 4:4-4(a)(1), "on an officer or managing agent or, in the case of a partnership, a general partner." R. 4:4-4(a)(5). Since the record is bereft of any evidence to suggest that either Ruffolo or Orozco was authorized to accept service of process on behalf of defendant in this action, Ruffolo's representations as to what he received have little or no bearing on whether defendant was served with original service of process.

The question to be resolved is whether plaintiff effected service of process on defendant in the manner mandated by R. 4:4-4. In support of her motion to vacate the default judgment, defendant filed a certification asserting that she did not receive personal service of these papers. The judge apparently gave that assertion no weight, but instead appears to have relied upon Ruffolo's hearsay statement and other evidence that might suggest that defendant actually received personal service of the complaint. Certainly, plaintiff did provide some evidence that might support its view about personal service, but defendant's claim that she did not receive the complaint and order to show cause, as well as other papers that may have thereafter been forwarded to her, gave rise to a genuine dispute about the sufficiency of service of process. The factual dispute presented by these conflicting statements could not have been resolved in the absence of an evidentiary hearing and absent the opportunity that such a hearing would afford for the judge's assessment of the credibility of the witnesses.

III

In remanding for an evidentiary hearing, we recognize that any deficiencies in service or in the content of the papers allegedly served on defendant are relevant but not entirely dispositive. Despite statements in earlier cases that a plaintiff's observance of our rules regarding the service of process must be "strictly complied with" and any defects, including the inadequacy of the summons, "are fatal and leave the court without jurisdiction and its judgment void," Driscoll v. Burlington-Bristol Bridge Co., 8 N.J. 433, 493 (1952), we have since come to hold that "not every defect in the manner in which process is served renders the judgment upon which the action is brought void and unenforceable," Rosa v. Araujo, 260 N.J. Super. 458, 462 (App. Div. 1992). As Judge Keefe explained in Rosa, the failure to meet the precise requirements of the rules must be considered in the context of their purpose of ensuring and protecting a defendant's right to due process. Ibid. In this regard, our Supreme Court has held:

"An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections."

[O'Connor v. Abraham Altus, 67 N.J. 106, 126 (1975) (quoting Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S. Ct. 652, 657, 94 L. Ed. 865, 873 (1950)).]

Thus, we concluded in Rosa that "[w]here due process has been afforded a litigant, technical violations of the rule concerning service of process do not defeat the court's jurisdiction." 260 N.J. Super. at 463.

The inadequate content of the order to show cause, and the factual disputes and uncertainties regarding whether service of process was effected on defendant, provide significant doubt about plaintiff's compliance with the rigors of due process such that there should be a deeper analysis of defendant's contentions and plaintiff's responses before ultimately determining whether the default judgment should or should not be vacated. These doubts should be resolved after the parties have had a full and fair opportunity to explore the matter at an evidentiary hearing. The trial judge may permit the parties, if he deems it appropriate in the exercise of his sound discretion, to engage in discovery regarding the relevant events.

Based upon the proofs presented at the hearing, the trial judge should determine whether the requirements of due process were met. Again, we do not mean to suggest that technical inadequacies are dispositive; the trial court may still uphold the default judgment, even if technical inadequacies are found, if it can be established that defendant had actual knowledge of the suit, that the absence of the language required by R. 4:52-1(b) in the order to show cause did not prejudice defendant's understanding of what was required of her to contest the action, and that the other procedural complexities, some of which we have commented upon, did not cause confusion to such a point that a reasonable person would be uncertain as to what was required to appear and contest the matter. As to this last aspect, the parties may explore at the evidentiary hearing the procedural events which occurred both before and after entry of the May 8, 2002 order to show cause; indeed, the circumstances presented by the dismissal for lack of prosecution, the action's dormancy for over ten months, and its later reinstatement -- and the extent to which defendant was adequately advised or had knowledge of those events -- should be explored to demonstrate whether the processes that led to the later entry of the default judgment comported with the requirements of due process. In addition, we have observed that the suit at hand directly related to and impacted upon other arbitration proceedings, and at least one other civil action, and that confusion could have been generated by what defendant received or knew about those other proceedings and how that knowledge, or lack of knowledge, impacted upon the reasonableness of defendant's lack of response to this suit. In short, the parties are entitled to explore at the evidentiary hearing whether or to what extent defendant was provided with any pleadings and orders relating to these later proceedings, and whether the confluence of all these procedural events would have made clear -- or confused -- a reasonable person's understanding of what was required to contest this action. See, e.g., Regional Constr. Corp. v. Ray, 364 N.J. Super. 534, 541 (App. Div. 2003). We emphasize that the primary purpose of the evidentiary hearing will be to thoroughly examine and draw conclusions about -- in the words of the famously posed question at the Senate Watergate hearings -- "what did defendant know and when did she know it," and, also, once established, what that knowledge may have meant to a reasonable person. Once these questions are resolved, the trial judge should then consider whether it is fundamentally fair that the default judgment should remain in effect.

We also observe that should the judge determine that the requirements of due process were not met, then the default judgment should be vacated and defendant should be given an opportunity to file a responsive pleading, and the matter should thereafter proceed in the normal course. Contrary to what the trial judge previously held, whether defendant presented a meritorious defense to the complaint in seeking relief from the default judgment is of no moment. As the Supreme Court held in Peralta v. Heights Med. Ctr., Inc., 485 U.S. 80, 86-87, 108 S. Ct. 896, 900, 99 L. Ed. 2d 75, 82 (1998) (quoting Coe v. Armour Fertilizer Works, 237 U.S. 413, 424, 35 S. Ct. 625, 629, 59 L. Ed. 1027, 1032 (1915)), "[w]here a person has been deprived of property in a manner contrary to the most basic tenets of due process, 'it is no answer to say that in his particular case due process of law would have led to the same result because he had no adequate defense upon the merits.'" See also Armstrong v. Manzo, 380 U.S. 545, 552, 85 S. Ct. 1187, 1191, 14 L. Ed. 2d 62, 66-67 (1965) (holding that "[o]nly . . . wip[ing] the slate clean . . . would have restored the petitioner to the position he would have occupied had due process of law been accorded to him in the first place"); Wohlegmuth v. 560 Ocean Club, 302 N.J. Super. 306, 313 (App. Div. 1997). The trial judge's holding to the contrary was mistaken.

The trial judge placed significant reliance upon defendant's failure to assert the defenses of lack of personal jurisdiction and the insufficiency of process in a responsive pleading. He held that this warranted a finding that the arguments posed in support of defendant's motion to vacate the default judgment were waived. We disagree. The application of the time constraints in R. 4:6-3 -- which bar the assertion of lack of personal jurisdiction, R. 4:6-2(b), or the insufficiency of process, R. 4:6-2(d), if those defenses are not pursued by motion within 90 days of service of the answer -- should be viewed in the manner we have resolved the contention that defendant's alleged failure to assert a meritorious defense warranted denial of her motion to vacate. If the deficiencies in the service of process amount to a deprivation of due process, the time bar contained in R. 4:6-3 has no application. Only technical deficiencies that do not amount to a violation of defendant's due process rights implicate the procedures contained in R. 4:6-2 and R. 4:6-3. See Rosa, supra, 260 N.J. Super. at 463-64.

IV

Defendant also argues that, even if she should not be freed from her default, she should still be permitted to contest, at an evidentiary hearing, the quantum of damages. In light of our holding in the preceding section of this opinion, we need not presently consider that contention. Instead, we deem it more appropriate to allow the trial judge to consider that question once the issues regarding the sufficiency of service of process and the requirements of due process are resolved.

Reversed and remanded. We do not retain jurisdiction.

 

Although the judgment was entered against both defendant and AA Diagnostic, only defendant moved for relief from the judgment in the trial court and only defendant filed a notice of appeal.

The exception related to an award that had been obtained by defendant and AA Diagnostic which, according to the order to show cause, was then "currently the subject of an Order to Show Cause and Verified Complaint in the matter entitled, Santiago Orozco and Dr. Franca Dilisio a/s/o Delicia Devereaux v. NJM, Passaic County Superior Court, Law Division, Docket No. PAS-L-1834-02" (hereafter "the Devereaux matter").

We acknowledge that the order to show cause contains a deadline for the submission of papers by defendant in opposition to the relief sought by way of the order to show cause, but it does not indicate a date by which an answer to the complaint was required and it does not indicate whether the failure to file an answer to the complaint would result in the entry of a default judgment as required by R. 4:52-1(b).

We observe that defense counsel, during the course of oral argument on the motion to vacate, made reference to plaintiff having attempted to serve a form of summons that he claimed did not meet the requirements of our court rules. It is not clear to us what document defense counsel then referred to, nor does it appear that this document is included within the appendix. We leave the significance and sufficiency of any such document for further examination by the trial judge.

The date referenced by Ruffolo is important in gauging the significance of his statements. As noted earlier, the order to show cause was not entered by the judge until May 8, 2002 -- five days after this alleged service of process occurred. Because it is not only the service of the complaint but also the service of a summons (or an order to show cause containing the terms required by R. 4:52-1(b)) that completes the service of initial process required by the dictates of due process, Ruffolo's comments wane in significance. At best, Ruffolo's statements, if admissible, relate only to defendant's alleged receipt of the complaint. He provided no information regarding if or when defendant received the May 8, 2002 order to show cause, which was intended to act in lieu of a summons.

Again, we observe that whatever binding effect, if any, should attach to Ruffolo's statements, those statements go only so far. Ruffolo was referring only to the papers he received from plaintiff's counsel on May 3, 2002, which could not possibly have included an order to show cause that was not entered until May 8, 2002.

(continued)

(continued)

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A-2051-04T3

July 20, 2006