THOMAS RICCIARDELLI and CHRISTINA RICCIARDELLI v. PAUL STANZIALE and LOU ANN (LUCILLE)STANZIALE

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1763-08T3

THOMAS RICCIARDELLI and

CHRISTINA RICCIARDELLI,

Plaintiffs-Respondents,

v.

PAUL STANZIALE and

LOU ANN (LUCILLE)STANZIALE,

Defendants-Appellants.

_________________________________

December 7, 2009

Argued October 6, 2009 - Decided

Before Judges Skillman and Gilroy.

On appeal from the Superior Court of New Jersey, Law Division, Cape May County, Docket No. L-274-07.

Dean R. Wittman argued the cause for appellants (Zeller & Wieliczko, LLP, attorneys; Mr. Wittman, on the brief).

Michael K. W. Nolan argued the cause for respondents (Nolan & Associates, LLC, attorneys (John W. O'Brien, of counsel and on the brief; Mr. Nolan, on the brief).

PER CURIAM

Defendants Paul Stanziale and Lou Ann Stanziale appeal from the October 24, 2008 order that denied their motion to vacate a default judgment. Defendants also appeal from the January 3, 2008 order that dismissed a similar motion without prejudice. We reverse and remand.

Plaintiffs Thomas Ricciardelli and Christina Ricciardelli are the owners of a condominium unit at the Trylon Motel Condominium in North Wildwood. Because plaintiffs and defendants had an amicable relationship, plaintiffs permitted defendants to occupy their condominium unit from June 2003 through October 2005. According to plaintiffs, defendants agreed to pay rent for their occupancy, but failed to do so. On May 4, 2007, after a dispute between the parties, plaintiffs filed two actions in the Law Division.

The first action, filed under Docket No. CPM-L-274-07, sought damages against defendants for non-payment of rent, and against Lou Ann Stanziale only for failure to repay a $2,580 personal loan (the rent action). The second action, filed under Docket No. CPM-L-277-07, alleged causes of action in defamation, invasion of privacy, conspiracy, intentional infliction of emotional distress, and intentional interference with business opportunities (the tort action). This latter action, naming Paul Stanziale and an unrelated third-party as defendants, arose out of Paul Stanziale's and the third-party's actions as officer and trustee, respectively, of the Trylon Motel Condominium Association.

On or about May 19, 2007, plaintiffs served defendants with the two complaints. On May 25, 2007, defendants retained counsel to represent them in both actions and paid counsel a $2,500 retainer fee. On counsel's advice, defendants first tendered the complaints to the condominium association's liability insurance carrier for defense. After that carrier denied coverage, defendants tendered the complaints to their homeowners liability insurance carrier, State Farm Fire and Casualty Insurance Company. State Farm undertook to defend the first two counts of the tort action only.

In the interim, on July 19, 2007, plaintiffs proceeded to enter default against defendants on both complaints. On July 24, 2007, unaware that default had been entered, defendants' counsel wrote to plaintiffs' counsel requesting his cooperation by executing a stipulation extending the time to file an answer in both actions. Three days later, plaintiffs' counsel informed defendants' counsel that he would not execute the extensions of time to answer and that his office had already filed for defaults in both matters. On September 25, 2007, plaintiffs obtained a default judgment in the rent action in the amount of $20,580. On December 10, 2007, State Farm's assigned counsel filed a motion seeking to vacate default on the first two counts of the tort action.

On December 24, 2007, defendants filed a cross-motion, seeking to: vacate default in the rent action;1 vacate default on the remaining counts of the tort action not defended by State Farm; and consolidate the two actions. Although the cross-motion was filed under the tort action's docket number, it specifically referenced the rent action in the body of the notice stating that the relief sought included: "[v]acating default and permitting the defendants Paul Stanziale and Lucille Stanziale to file a responsive pleading in the companion case of Thomas Ricciardelli and Christina Ricciardelli v. Paul Stanziale and Lou Ann McPhail a/k/a Lou Ann (Lucille) Stanziale, Docket No. CPM-L-274-07."

On January 3, 2008, the court entered an order, dismissing defendants' cross-motion to vacate default on the counts not defended by State Farm in the tort action, and consolidating the two actions because: the motion was filed untimely; the motion was not accompanied by a proposed form of an order; and defendants were in default as of July 19, 2007. Although the order did not reference defendants' request to vacate the default in the rent action, the parties interpreted the order as denying the cross-motion without prejudice as to all requested relief.

On the same day, the court entered an order granting State Farm's assigned counsel's motion to vacate default as to the first two counts in the tort complaint. That order further directed that:

All counsel in this case (277-07) and in 274-07 are Ordered to personally appear for a [Case] Management Conference on January 18, 2008, at 1:30 p.m. and be prepared to present an agreement on a Mediator as well as a date for Mediation. Counsel shall discuss these matters beforehand and [have] contacted the Mediator & have an appointment for Mediation.

All counsel appeared for the scheduled case management conference. At that conference, defendants' counsel advised the court that plaintiffs' counsel had just informed him that a default judgment had previously been entered in the rent action. After the court confirmed the entry of the judgment, defendants' counsel advised the court that, if the parties could not agree to vacate the judgment by consent, he would file a motion seeking to vacate it.

On January 22, 2008, the court entered an order in the tort action directing the parties to proceed to mediation and that mediation be completed by May 31, 2008; and scheduling a second case management conference for June 6, 2008, with all counsel to appear. The order further provided: "[i]n the event Judgment is vacated by consent or upon Court Order [in] CPM L-274-07 [the rent action,] that case shall also be mediated during the same time frame."

All parties attended mediation on August 25, 2008. On September 29, 2008, after mediation failed, defendants filed a motion seeking to vacate the default judgment, contending that "[t]he plaintiffs have entered default judgment, but have refused consent to vacate [the judgment] despite the good faith delay while the defendants were investigating the possibility of insurance coverage and defense for these matters, some of which claims have, in fact, been covered and a defense provided." As to the merits of plaintiffs' claim, defendants denied owing plaintiffs any monies, contending that plaintiffs brought the rent action because of a dispute concerning condominium association management issues. On October 24, 2008, the court denied defendants' motion, determining not only that they had failed to provide exceptional circumstances justifying the relief requested, but also that the motion had been filed more than one year after entry of the default judgment, contrary to the time prescribed by Rule 4:50-2 for vacating judgments on the grounds of excusable neglect.2

On appeal, defendants argue that the trial court erred in dismissing their first motion because it was filed "within one year of entry of default [judgment] and the errors made within the application constituted excusable neglect." Alternatively, defendants argue that the court erred in denying their second motion because the delay in filing it was not their fault, and the result of denying the motion was "unjust, oppressive and inequitable."

Defendants argue first that the trial court abused its discretion in denying their December 2007 motion, contending that the court should have carried the motion to the next motion day to provide adequate notice to plaintiffs and for defendants to provide the appropriate form of proposed order. Defendants assert that the granting of State Farm's assigned counsel's motion to vacate default in the tort action, while denying their motion in the rent action, was "incongruent and unjust" because both complaints had been filed on the same day and default had been entered in the actions on the same day. We disagree.

The decision to grant or deny a motion to vacate a default judgment is left to the sound discretion of the trial court, and will not be disturbed absent an abuse of discretion. Hous. Auth. of Morristown v. Little, 135 N.J. 274, 283 (1994). "Discretion, however, means legal discretion, 'in the exercise of which the judge must take account of the law applicable to the particular circumstances of the case and be governed accordingly.'" Alves v. Rosenberg, 400 N.J. Super. 553, 562-63 (App. Div. 2008) (quoting State v. Steele, 92 N.J. Super. 498, 507 (App. Div. 1966)). "Obviously, '[i]f the trial judge misconceives the applicable law or misapplies it . . . the exercise of legal discretion lacks a foundation and becomes an arbitrary act.'" Id. at 563 (quoting Steele, supra, 92 N.J. Super. at 507).

Although we might have decided the motion differently, we cannot determine under these facts that the trial court improperly dismissed the motion. A party may file and serve a cross-motion not later than eight days before the return date of the original motion "only if [the cross-motion] relates to the subject matter of the original motion." R. 1:6-3(b). All motions are required to be accompanied by a proposed form of order. R. 1:6-2(a).

Here, the motion was not accompanied by a proposed form of order and, although entitled a cross-motion, that part of the motion seeking to vacate default in the rent action did not relate to the subject matter of the original motion, i.e., vacating default in the tort action. Accordingly, defendants were required to have filed a separate motion in the rent action not later than sixteen days before the return date unless the court had relaxed the time period. R. 1:6-3(a). This they failed to do. Because the cross-motion was dismissed without prejudice to defendants re-filing the motion, we cannot conclude that the trial court abused its discretion.

Defendants argue next that the trial court should have granted the motion filed on September 29, 2008, pursuant to Rule 4:50-1(a), or in the alternative, under subsection (f).

Rule 4:50-1 provides in part that a court may relieve a party from a default judgment for "(a) mistake, inadvertence, surprise, or excusable neglect; . . . or (f) any other reason justifying relief from the operation of the judgment or order." Rule 4:50-1, however, should be used sparingly, as it was designed to provide relief from judgments in situations where, were it not applied, "a grave injustice would occur." Little, supra, 135 N.J. at 289.

Under Rule 4:50-1(a), a default judgment will not be set aside unless the defendant seeking such relief can demonstrate that his or her failure to answer, or otherwise appear and defend, was somehow excusable, and that he or she has a meritorious defense to either the cause of action or the quantum of damages assessed. Marder v. Realty Constr. Co., 84 N.J. Super. 313, 318 (App. Div.), aff'd, 43 N.J. 508 (1964). "Excusable neglect" has been defined by the Court as carelessness "attributable to an honest mistake that is compatible with due diligence or reasonable prudence." Mancini v. EDS, 132 N.J. 330, 335 (1993). Circumstances constituting excusable neglect are fact-sensitive. See Regional Constr. Corp. v. Ray, 364 N.J. Super. 534, 541 (App. Div. 2003).

A motion to vacate default judgment under subsection (a) of the rule must be made within reasonable time and not more than one year after entry of the judgment. R. 4:50-2. That time period cannot be enlarged by the court. R. 1:3-4(c).

Here, the trial court determined that the second motion was time barred, having been filed more than one year after entry of the judgment. Based on the limited record before it, we cannot conclude that the trial court erred in denying the motion under subsection (a).3 With that said, we now turn to defendants' argument that the court should have granted the motion under subsection (f).

Subsection (f) of the rule permits a court to grant relief upon finding exceptional circumstances. Mancini, supra, 132 N.J. at 336. Under that subsection, "[n]o categorization can be made of the situations which would warrant redress." Court Inv. Co. v. Perillo, 48 N.J. 334, 341 (1966). In fact, "the very essence of (f) is its capacity for relief in exceptional situations. And in such exceptional cases, its boundaries are as expansive as the need to achieve equity and justice." Ibid. Simply stated, "a court should have authority under [subsection (f)] to reopen the judgment where such relief is necessary to achieve a fair and just result." Manning Eng'g., Inc. v. Hudson County Park Comm'n, 74 N.J. 113, 122 (1977).

When considering a motion to vacate a judgment under subsection (f), courts are required "to reconcile the strong interests in the finality of litigation and judicial economy with the equitable notion that justice should be done in every case." Jansson v. Fairleigh Dickenson Univ., 198 N.J. Super. 190, 193 (App. Div. 1985); see also Parker v. Marcus, 281 N.J. Super. 589, 593 (App. Div. 1995), certif. denied, 143 N.J. 324 (1996). In reconciling that tension, absent demonstrable prejudice, "the sins or faults of an errant attorney should not be visited upon his client." Jansson, supra, 198 N.J. at 194. In furtherance of those principles, we have directed that trial courts consider the following factors in determining whether to grant relief: "(1) the extent of the delay in making the application; (2) the underlying reason or cause; (3) the fault or blamelessness of the litigant; and (4) the prejudice that would accrue to the other party." Parker, supra, 281 N.J. Super. at 593.

Considering the first Parker factor, contrary to a motion under subsection (a), a motion under subsection (f) does not have to be filed within one year after entry of judgment, but only within a reasonable time after the judgment's entry. R. 4:50-2. Default judgment was entered on September 25, 2007, and the motion was filed on September 29, 2008. Although defendants' counsel probably should have moved more expeditiously to vacate the judgment after learning of its entry at the January 18, 2008 case management conference, we do not determine that the time lapse in filing the motion was so lengthy as to preclude review under subsection (f). See Jansson, supra, 198 N.J. Super. at 195 (vacating an order dismissing an action three years after entry); see also Parker, supra, 281 N.J. Super. at 593-94 (vacating an order dismissing an action more than two years after entry).

Moreover, Rule 4:43-2 governs the entry of judgment by default. The rule provides in pertinent part that "[w]ithin seven days after receipt of the executed judgment from the court, the proponent of the judgment shall serve a copy thereof on the defaulting defendant as required by R. 1:5-2[,] except that service may be made by ordinary mail alone." R. 4:43-2(c). (Emphasis added).

Here, defendants' counsel advised the court at the January 18, 2008 case management conference that he was only then informed by plaintiffs' counsel that a default judgment had already been entered in the matter. Consistent with that representation is the absence of any references in the procedural histories contained in the parties' briefs or in any documents contained in the parties' appendixes, indicating that plaintiffs had served defendants or their counsel with a copy of the default judgment as required by Rule 4:43-2(c). If so, that is a factor that should have been considered by the trial court in deciding the motion.

Although the second Parker factor, the underlying reason for not timely filing an answer to the complaint, is more problematic, we are satisfied that after defendants have satisfied that factor. The record discloses that after defendants retained counsel, he commenced to inquire as to whether the claims were covered by insurance. In the interim, counsel forwarded to plaintiffs' counsel a letter requesting his cooperation by executing a stipulation extending the time to file an answer in the action. Unbeknownst to defendants' counsel, plaintiffs had already filed for entry of default. Under those limited facts, we cannot conclude that counsel's actions in attempting to ascertain whether insurance coverage was available were unreasonable.

After defendants' counsel learned that default had been entered, he probably should have filed a motion to vacate default at that time. Although counsel did not immediately file the motion, he did not neglect the matter. Defendants' counsel continued to pursue inquiry as to available insurance coverage. That pursuit proved fruitful in part as to the first two counts of the tort action. Counsel filed the December 2007 motion seeking to vacate default; participated in court ordered case management conferences; and defendants participated in mediation at which a global settlement was attempted but failed. After the mediation proved unfruitful, defendants' counsel immediately filed the second motion.

The third factor of Parker leans in favor of defendants. We are satisfied that defendants were not at fault in failing to timely file a responsive answer to the complaint. On service of the complaints, they immediately retained private counsel and paid him a retainer fee, believing that their interests were being defended. Defendants' counsel attempted to obtain cooperation of plaintiffs' counsel in extending time to file an answer, but the request was denied. No evidence exists in the record that defendants' counsel had informed his clients that plaintiffs had moved for entry of default. To accomplish substantial justice, we are satisfied under the facts of this case that the court should not have visited the attorney's mistakes in not timely filing an answer and in not moving more expeditiously to vacate the judgment on defendants. Parker, supra, 281 N.J. Super. at 593; Jansson, supra, 198 N.J. at 195.

Lastly, other than incurring the expense of entering judgment and opposing the motion to vacate, we do not discern any prejudice to plaintiffs. As to those expenses, a court has discretion to condition the vacation of the default judgment on defendants reimbursing plaintiffs for those reasonable fees and costs. Davis v. DND/Fidoreo, Inc., 317 N.J. Super. 92, 102 (App. Div. 1998), certif. denied, 158 N.J. 686 (1999).

We conclude that the Parker factors weigh heavily in favor of vacating the judgment and permitting defendants to defend the rent action on the merits. Accordingly, we reverse and remand to the trial court for further proceedings. On remand, plaintiffs may move for reimbursement of attorneys' fees and costs in entering the default judgment and defending the motion to vacate. Ibid.

Reversed and remanded.

1 Defendants' counsel did not become aware that a default judgment had been entered in the rent action until January 18, 2008.

2 In its memorandum of decision denying the motion, the trial court mistakenly stated that plaintiffs had entered default judgment on July 19, 2007, rather than on September 25, 2007. That mistake, however, would not have affected the court's determination that the motion was filed more than one year after entry of judgment.

3 As later discussed, a question remains concerning whether plaintiffs failed to serve defendants with a copy of the default judgment pursuant to Rule 4:43-1(c) and only informed defendants' counsel of the entry of judgment approximately four months after its entry at the January 18, 2008 conference. If so, one could reasonably argue that, although the court did not possess the authority to enlarge the one-year period for filing of the motion under subsection (a), the court could have equitably determined that the one-year period would not have commenced to run until defendants discovered, or in the exercise of reasonable diligence, should have discovered, that the judgment had been entered against them. See Pressler, Current N.J. Court Rules, comment 1 on R. 4:43-1 (2010) (stating that notice of entry of default judgment under the rule serves the interest of fundamental fairness); see also, Martinez v. Cooper Hosp.-Univ. Med. Ctr., 163 N.J. 45, 51-55 (2000) (applying the discovery rule to prevent the running of the statute of limitations in a medical malpractice action). However, because we conclude that the court should have vacated the judgment under subsection (f), we need not decide the issue.