SAVVAS PARNEROS v. CA-RI HOME IMPROVEMENTS

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

SAVVAS PARNEROS AND

KATHLEEN PARNEROS,

Plaintiffs-Respondents,

v.

CA-RI HOME IMPROVEMENTS AND

RICHARD KULESA,

Defendants-Appellants.

__________________________________

July 2, 2015

Submitted1 March 17, 2015 Decided

Before Judges Haas and Higbee.

On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-6947-12.

Denbeaux and Denbeaux, attorneys for appellants (Joshua W. Denbeaux, on the brief).

Schiffman, Abraham, Kaufman & Ritter, P.C., attorneys for respondents (Daniel S. Eichhorn, on the brief).

PER CURIAM

The trial court denied defendants CA-RI Home Improvements and Richard Kulesa's motion to vacate a default judgment. Mindful that applications to vacate default judgments should be viewed with indulgence, we reverse because (1) defendants set forth circumstances that demonstrate excusable neglect; (2) defendants claim meritorious defenses; and (3) plaintiffs would suffer no irreparable prejudice if the judgment was vacated.

Plaintiffs, Savvas and Kathleen Parneros, retained defendants to make various improvements to their house. Unhappy with the work product, plaintiffs filed a complaint against defendants primarily for breach of contract and negligence, on September 11, 2012. Among other things, plaintiffs alleged that defendants' work was never completed and that some of the finished projects were defective. Plaintiffs also alleged that defendants violated numerous provisions of the New Jersey Administrative Code governing home-improvement work, thereby committing consumer fraud.

On November 16, 2012, plaintiffs filed a request for entry of default against defendants and, on November 21, 2012, default was entered against defendants by the clerk of the court. On February 11, 2013, the trial judge entered an order granting default judgment against defendants in the amount of $193,255.49, which included treble damages for consumer fraud violations. On December 6, 2013, the judge granted plaintiffs' motion to enforce litigants' rights, and ordered defendants to submit answers to plaintiffs' information subpoenas.

On December 11, 2013, defendants filed a motion to vacate the default judgment, which included a request for oral argument. Defendant Kulesa, owner of CA-RI Home Improvements, certified that upon being served with the complaint, he immediately turned it over to his attorney, believing his counsel would handle the matter. He argues that there was a miscommunication between the law firm and defendants, which resulted in a failure to respond to the complaint. Defense counsel's certification parallels that of Kusela. Defense counsel asserted that due to a miscommunication, the law firm did not understand it had been retained.

Defendants also argued that they had a meritorious defense. They asserted that plaintiffs still owed them money for the improvements, which should be set off against any damage award; that any defects in the work were corrected; and that they had completed the improvements they had been retained to make.

On January 31, 2014, the judge denied defendants' motion to vacate the default judgment. The court found no excusable neglect because defendants did not exercise due diligence or reasonable prudence in answering the complaint or responding to the notices of default filed by plaintiffs. Given its finding of no excusable neglect, the court found it unnecessary to consider whether defendants presented a claimed meritorious defense. This appeal followed.

Here, defendants argue the default judgment should have been vacated under Rule4:50-1(a) because defendants' neglect in answering the complaint was excusable; and Rule4:50-1(f) because enforcing the judgment would be unjust, oppressive, and inequitable. We find the trial court mistakenly exercised its discretion in rejecting defendants' claim of excusable neglect under Rule4:50-1(a), particularly in light of the possible merit of defendants' alleged defenses regarding damages. Thus, we reverse on those grounds, and shall not address defendants' remaining issues raised on appeal.

Under Rule4:50-1, the decision of whether to grant such a motion is "left to the sound discretion of the trial court, and will not be disturbed absent an abuse of discretion." Mancini v. EDS, 132 N.J. 330, 334 (1993) (citation omitted). However, where the trial court gives insufficient deference to the principles governing the motion, an appellate court must reverse. Davis v. DND/Fidoreo, Inc., 317 N.J. Super. 92, 100-01 (App. Div. 1998), certif. denied, 158 N.J.686 (1999).

A motion to vacate default judgment implicates two often competing goals: the desire to resolve disputes on the merits, and the need to efficiently resolve cases and provide finality and stability to judgments. "The rule is designed to reconcile the strong interests in finality of judgments and judicial efficiency with the equitable notion that courts should have authority to avoid an unjust result in any given case." Manning Eng'g, Inc. v. Hudson County Park Comm'n., 74 N.J.113, 120 (1977); seealsoHodgson v. Applegate, 31 N.J.29, 43 (1959) (interest in finality must be balanced with the goal of doing justice in the case); Nowosleska v. Steele, 400 N.J. Super. 297, 303 (App. Div. 2008)(stating that courts have liberally exercised power to vacate default judgment "in order that cases may be decided on the merits").

In balancing these two goals, we favor the party seeking relief, because of the high value we place on deciding cases on the merits. "A court should view 'the opening of default judgments . . . with great liberality,' and should tolerate 'every reasonable ground for indulgence . . . to the end that a just result is reached.'" Mancini,supra, 132 N.J.at 334 (quoting Marder v. Realty Constr. Co., 84 N.J. Super. 313, 319 (App. Div.), aff d, 43 N.J.508 (1964)). Close issues should be resolved in the movant's favor, and "[a]ll doubts . . . should be resolved in favor of the parties seeking relief." Ibid.(citing Arrow Mfg. Co. v. Levinson, 231 N.J. Super. 527, 534 (App. Div. 1989)). That is so because of the importance we attach to securing a decision on the merits. Davis, supra, 317 N.J. Super.at 100-01 (stating that doubts should be resolved in favor the applicant in order to secure a trial upon the merits). At bottom, the decision whether to grant or deny a motion to vacate a default judgment must be guided by equitable considerations. Prof'l Stone, Stucco & Siding Applicators, Inc. v. Carter, 409 N.J. Super.64, 68 (App. Div. 2009).

A motion to vacate on the ground of excusable neglect must be brought "within a reasonable time," but not later than one year after judgment. R.4:50-2. Although not expressly included in the Rule, it is well-settled that a defendant claiming excusable neglect must also demonstrate that he or she has a meritorious defense. Marder, supra, 84 N.J. Super.at 318. The decision requires a fact-sensitive analysis, taking into account the totality of all of the circumstances.

Applying the foregoing principles, we hold that defendants did present cognizable evidence of an acceptable excuse for their failure to contest the complaint. Defendants have also presented meritorious defenses based upon the limited record before us. Under the third consideration, whether there will be substantial prejudice to the plaintiff, we find that any prejudice in this case is limited to the costs incurred by plaintiffs in having to proceed to judgment, including the post-judgment motions and this appeal.

Rule4:50-1 authorizes the court to condition an order vacating default judgment "upon such terms as are just." Relief awarded under this aspect of the rule must be "reasonably proportionate to the prejudice suffered by plaintiff." Regional Constr. Corp. v. Ray, 364 N.J. Super. 534, 543(App. Div. 2003). A court may compel a defendant seeking to vacate default to reimburse the plaintiff for the fees and costs "in pursuit of the default judgment or in responding to the motion to vacate."

We see no prejudice to plaintiffs that cannot be remedied pursuant to the court's power to condition its decision "upon such terms as are just." R.4:50-1. On remand, the trial court may therefore consider the imposition of an appropriate sanction for any costs unnecessarily incurred by plaintiffs.

We therefore reverse the order denying defendants' motionto vacate the default judgment, and remand for further proceedings consistent with this opinion.

Reversed and remanded. We do not retain jurisdiction.

1 This matter originally appeared on the calendar for oral argument, but it was waived by the parties.