PENNYMAC CORPORATION v. CATHERINE A. GODFREY

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

PENNYMAC CORPORATION,

Plaintiff-Respondent,

v.

CATHERINE A. GODFREY

(NEE LEWIS) and G. AARON JAMES,

Defendants-Appellants,

and

BANK OF AMERICA, N.A. and FIA

CARD SERVICES, N.A.,

Defendants.

_________________________________________

October 20, 2016

Submitted May 23, 2016 Decided

Before Judges Accurso and Suter.

On appeal from Superior Court of New Jersey, Chancery Division, Monmouth County, Docket No. F-015950-13.

Law Offices of G. Aaron James, attorneys for appellants (Mr. James, of counsel and on the briefs).

Blank Rome L.L.P., attorneys for respondent (Edward W. Chang and Lauren E. O'Donnell, on the brief).

The opinion of the court was delivered by

SUTER, J.S.C. (temporarily assigned)

Defendants Catherine A. Godfrey (n e Lewis) and G. Aaron James (James) appeal the April 24, 2015 order denying their motion to vacate default and the May 28, 2015 entry of a final judgment of foreclosure. We reverse as to Lewis for lack of service. We vacate the entry of the default judgment as to James and remand for reconsideration, consistent with our opinion, whether there is good cause to vacate the default.

On March 26, 2004, Lewis executed a note in the principal amount of $1,000,000 to CitiMortgage, Inc. (Citimortgage) for a property on Locust Point Road in Middletown Township (the property). James was not a signatory to the note. On the same day, Lewis and James executed a non-purchase money mortgage in favor of CitiMortgage. The mortgage was assigned to PennyMac Corp. (PennyMac) in March 2010.

Lewis and James resided at the property until 2006. Lewis then moved to England with the couple's daughter after the parties entered into a negotiated agreement about custody, child support and property. James continued to reside in the property and make the mortgage payments, but the mortgage loan was in default by March 2009.

CitiMortgage filed a foreclosure complaint against Lewis and James in October 2009. James entered into a trial modification plan with CitiMortgage in January 2010. The plan required trial payments, but once the mortgage was assigned to PennyMac in March 2010, James contended PennyMac would not accept his payments and the "escrow balance, last payment and interest rate were all grossly inaccurate." Lewis and James filed a motion to dismiss the foreclosure complaint. The judge who heard the motion ordered a plenary hearing about James's claim the trial plan with CitiMortgage should result in the dismissal of PennyMac's foreclosure. Shortly thereafter PennyMac dismissed the complaint without prejudice.1

PennyMac filed a new foreclosure complaint against Lewis and James on May 10, 2013, based on the March 2009 default on the mortgage. Personal service of the complaint on Lewis and James at the property could not be effected, as the house appeared to be vacant with "no furniture in any of the rooms on the first floor." The summons and complaint were then sent certified and regular mail to Lewis and James at the property, and were signed for on June 19, 2013.

PennyMac amended the foreclosure complaint on November 19, 2013, after a title search revealed other lienholders. Personal service of the amended complaint again was not successful on Lewis or James at the property, but further inquiry, including a postal search and the use of a private investigator who conducted a skip search, all indicated the property was the most recent address for Lewis and James. On January 6, 2014, PennyMac served Lewis and James with the amended complaint by sending it regular and certified mail to the property address. The certified mail was returned as unclaimed, but the regular mail was not returned.

It was not until March 26, 2015 that Lewis and James requested to dismiss the amended complaint and vacate the default that was entered against them on May 28, 2014. The trial judge denied their motions on April 23, 2015, finding service was proper because someone signed for the complaint at the Lewis and James' place of abode in June 2013, and that Lewis and James "probably [were] aware" of the foreclosure because of statutory notices that had been sent in the interim. The court also found Lewis and James had not shown excusable neglect, did not act with due diligence or reasonable prudence, and had not "set forth any meritorious defenses to warrant the vacation of the default." The court found it improper to consider the earlier foreclosure because it was dismissed. A final judgment of foreclosure was entered on May 28, 2015.

Lewis and James raise the following issues on appeal

POINT I THE MOTION JUDGE ERRED IN AFFIRMING DEFAULTS AS TO DEFENDANTS' TENANT, MR. LEWIS AND MRS. G. AARON JAMES AS THERE IS NO DISPUTE AS TO THEIR NONEXISTENCE AND THEREFORE NEITHER SERVICE COULD HAVE BEEN EFFECTED UPON NOR IN PERSONAM JURISDICTION OBTAINED WITH RESPECT TO THESE THREE DEFENDANTS.

POINT II THE MOTION JUDGE ERRED IN AFFIRMING THE DEFAULT AS TO THE SOLE OBLIGOR AND DEFENDANT CATHERINE A. GODFREY (N E LEWIS) AS EVIDENCE CLEARLY DEMONSTRATED THAT HER PLACE OF ABODE WAS NOT THE SUBJECT PROPERTY AND THEREFORE PLAINTIFF FAILED TO SERVED [sic] NOTICE OF PROCESS AND DENIED HER THE RIGHT TO DUE PROCESS.

POINT III THE MOTION JUDGE ERRED IN FINDING THAT PLAINTIFF'S CERTIFICATION OF DILLIGENT [sic] INQUIRY COMPLIED WITH R. 4:4-7 IN REACHING HER DETERMINATION THAT SERVICE UPON GODFREY, G. AARON JAMES, MR. LEWIS AND MRS. G. AARON JAMES WAS PROPER.

POINT IV DEFENDANTS COMPLIED WITH R. 4:43-3 AS THEY FILED A "DISPOSITIVE" MOTION PURSUANT TO R. 4:6-2 CONTEMPORANEOUSLY WITH THEIR REQUEST TO VACATE THE DEFAULT.

POINT V THE MOTION JUDGE ERRED IN HOLDING THAT DEFENDANTS WERE NOT ENTITLED TO HAVE DEFAULTS VACATED DUE TO THEIR FAILURE TO DEMONSTRATE BOTH EXCUSABLE NEGLECT AND MERITORIOUS DEFENSES.

A trial court's decision denying a motion to vacate default will not be disturbed unless this court finds an abuse of discretion has occurred. U.S. Bank N.A. v. Guillaume, 209 N.J.449, 467 (2012). An abuse of discretion "arises when a decision is 'made without a rational explanation, inexplicably departed from established policies, or rested on an impermissible basis.'" Flagg v. Essex Cty. Prosecutor, 171 N.J.561, 571 (2002) (quoting Achacoso-Sanchez v. Immigration and Naturalization Serv., 779 F.2d 1260, 1265 (7th Cir. 1985)).

A showing of good cause is all that is necessary to vacate the entry of a default. SeeR.4:43-3 ("For good cause shown, the court may set aside an entry of default and, if a judgment by default has been entered, may likewise set it aside in accordance with [Rule] 4:50."). The required good cause showing is less stringent than that required by Rule4:50-1 to set aside a default judgment. SeeN.J. Mfrs. Ins. Co. v. Prestige Health Grp., 406 N.J. Super. 354, 360 (App. Div.), certif. denied, 199 N.J.543 (2009).

Good cause can be met by showing that service was not properly effectuated. It is well established that "[t]he requirements of the rules with respect to service of process go to the jurisdiction of the court and must be strictly complied with." Berger v. Paterson Veterans Taxi Serv., 244 N.J. Super. 200, 204 (App. Div. 1990) (quoting Driscoll v. Burlington-Bristol Bridge Co., 8 N.J.433, 493, cert. denied, 344 U.S. 838, 73 S. Ct. 25, 97 L. Ed. 652 (1952)). "'[S]ubstantial deviation from service of process rules' typically makes a judgment void." M & D Assocs. v. Mandara, 366 N.J. Super. 341, 352-53 (App. Div.) (quoting Jameson v. Great Atl. and Pac. Tea Co., 363 N.J. Super. 419, 425 (App. Div. 2003)), certif. denied, 180 N.J.151 (2004).

"The primary method of obtaining in personam jurisdiction over a defendant in this State is by causing the summons and complaint to be personally served[.]" U.S. Bank N.A. v. Curcio, 444 N.J. Super. 94, 105 (App. Div. 2016) (alteration in original) (quoting R.4:4-4(a)). However, in personam jurisdiction also can be obtained by substituted mail service under the circumstances allowed by the Rules. The court lacks jurisdiction to enter a judgment when there is a violation of the rules regarding mailed service of process. SeeSobel v. Long Island Entm't Prods., Inc., 329 N.J. Super. 285, 293 (App. Div. 2000).

In a foreclosure case, service can be obtained by satisfying Rule4:4-3 or Rule4:4-5. Rule4:4-3 applies where "personal service cannot be effected after a reasonable and good faith attempt, which shall be described with specificity in the proof of service required by R.4:4-7". SeeR.4:4-3(a). In that case, "service may be made by mailing a copy of the summons and complaint by registered or certified mail, return receipt requested, to the usual place of abode of the defendant or a person authorized by rule of law to accept service for the defendant." Ibid. However, service by mail is effective only "[i]f it appears by affidavit satisfying the requirements of [Rule] 4:4-5(b) that despite diligent effort and inquiry personal service cannot be made." R.4:4-4(b)(1). Service made by mail without satisfying the affidavit requirement under Rule4:4-4(b)(1) is ineffective and will not support the entry of default, unless the defendant "answers the complaint or otherwise appears in response thereto." R.4:4-4(c). Thus, there must be "a reasonable and good faith attempt" to serve defendant personally and a diligent inquiry to determine their "place of abode" before serving defendant by mail under Rule4:4-3. SeeCurcio, supra, 444 N.J. Super.at 106.

A "dwelling place or usual place of abode" includes a person's permanent home, even if he or she is temporarily staying elsewhere. SeeMissell v. Hayes, 84 N.J.L.196, 196-97 (Sup. Ct. 1913), aff'd, 86 N.J.L.348 (E. & A. 1914); Warfield v. Fischer, 94 N.J. Super. 142, 146-47 (Law Div. 1967) (finding that defendant who was studying in Germany and did not return regularly to parental home in New Jersey did not maintain his "usual place of abode" in the State).

For actions affecting specific property, Rule4:4-5 provides other methods of service to obtain in rem or quasi in rem jurisdiction if a defendant, after diligent inquiry, cannot be served within the State. This may involve personal service outside the State, service by mail "as prescribed by [Rule] 4:4-4(b)(1)(C)" or service by publication. SeeR.4:4-5(a)(1)-(3). Reference by Rule4:4-5 to Rule4:4-4(b)(1)(C) means service by "mailing a copy of the summons and complaint by registered or certified mail, return receipt requested, and, simultaneously, by ordinary mail to: (1) a competent individual of the age of 14 or over, addressed to the individual's dwelling house or usual place of abode[.]" Thus, similar to Rule4:4-3, mailed service under Rule4:4-5 also requires sending it to defendant's "usual place of abode."

It is against this background that we analyze this appeal. We are satisfied that service of the summons and complaint was made properly with respect to James but not Lewis. Starting with James, service was proper under Rule4:4-3 because the record supported the good faith and reasonable efforts made by PennyMac in first attempting personal service upon James and then in mailing a copy of both the complaint and amended complaint to the property address. James admitted that he lived at the property. There was proof the certified mail was received by someone at the property on June 19, 2013. Subsequently, the amended complaint was served by regular and certified mail. The certified mail was unclaimed, but the regular mail apparently was not returned. We are satisfied that PennyMac made a diligent inquiry to find James, and actually served him at the property where he resided by mailing a copy of the complaint and amended complaint to that address.

We reject the trial court's finding that service was properly made on Lewis. PennyMac did not dispute James's claim that since 2006, Lewis resided in London. When the first foreclosure was filed, CitiMortgage had information from a neighbor that Lewis was out of the country. Lewis's residence in London was acknowledged by her counsel and James at the May 2012 motion to dismiss hearing. Because Lewis did not reside in the country, her place of abode was not the subject property, making application of Rule4:4-3 erroneous. Mailed service under Rule4:4-5 also was improper because that Rule incorporated the "place of abode" requirement for mailed service. Although Rule4:4-5 permits other methods to serve a defendant who is out of the country or cannot be found, those methods were not utilized here. PennyMac should have conformed its efforts to make service under Rule4:4-5 accordingly. Because service of the complaint and amended complaint were not properly made on Lewis, the default and final judgment with respect to her are void. SeeM & D Assocs., supra, 366 N.J. Super.at 352-54.

James appeals the order that denied his motion to vacate default. James raised issues about how the trial modification was handled after the mortgage was assigned to PennyMac. The trial court denied James's application with minimal analysis.

In Arias v. Elite Mortg. Grp., Inc., 439 N.J. Super. 273, 279 (App. Div. 2015) (internal citations omitted), we described a trial plan under HAMP as

"a unilateral offer," pursuant to which the bank promised to give plaintiffs a loan modification, if and only if plaintiffs complied fully and timely with their obligations under the TPP, including making all payments timely and providing documentation establishing that the financial representations they made to the bank in applying for the TPP were accurate when made and continued to be accurate.

In Miller v. Bank of Am., 439 N.J. Super.540, 549 (App. Div.), certif. denied, 221 N.J.567 (2015), we concluded that

when the issuance of a loan modification agreement is explicitly made contingent upon the evaluation and satisfaction of all prescribed conditions precedent within a TPP, including the evaluation and timely satisfaction of all financial disclosures and obligations, the declination of a lender to present a loan modification agreement may be actionable.

The trial court understandably undertook no analysis of the actual merits of the issues about the trial plan raised by James, but should have considered whether his arguments constituted good cause in light of the existing case law in order to determine whether to vacate default. We remand that issue to the trial court for appropriate consideration.

After carefully reviewing the record and the applicable legal principles, we conclude that Lewis and James's further arguments, particularly those regarding the fictitious defendants, are without sufficient merit to warrant discussion in a written opinion. R.2:11-3(e)(1)(E).

Reversed as to defendant Lewis because of lack of service. The final judgment is vacated as to defendant James and we remand for reconsideration, consistent with our opinion, whether there is good cause to vacate the default. The trial court shall conduct a case management conference in thirty days. We do not retain jurisdiction.

1 PennyMac had been substituted in as plaintiff by this point in the litigation.