CRANER, SATKIN & SCHEER, PC v. EILEEN GILGALLON

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1020-05T11020-05T1

CRANER, SATKIN & SCHEER, PC,

Plaintiff-Respondent,

v.

EILEEN GILGALLON,

Defendant-Appellant.

___________________________________

 

Argued October 4, 2006 - Decided November 28, 2006

Before Judges Payne and Lihotz.

On appeal from the Superior Court of New Jersey, Law Division, Union County, Docket No. L-2704-02.

Eileen Gilgallon argued the cause pro se.

Brian D. Schwartz argued the cause for respondent.

PER CURIAM

Defendant Eileen Gilgallon appeals from the denial of a motion to vacate a judgment entered against her by default on August 30, 2002. We affirm.

Defendant is the president and sole owner of CFS Services, Inc., t/a Consec Security (CFS). Plaintiff provided legal services to CFS from 1997 to 2000. CFS failed to satisfy its payment obligation to plaintiff. On January 27, 2001, plaintiff sent, by first class and certified mail, a pre-action notice advising of the right to request fee arbitration, R. 1:20A-6, accompanied by a statement of all charges claimed due, N.J.S.A. 2A:13-6, to "Ms Eileen Gilgallon, CFS SERVICES. INC. T/A CONSEC SECURITY, P.O. Box 111, Harrison, New Jersey 07029," an address that was previously confirmed by the local postmaster as the corporation's forwarding address. No fee arbitration action was initiated. Plaintiff thereafter sued CFS and obtained a judgment by default on August 29, 2001.

At defendant's request, the court scheduled a hearing on January 25, 2002, to address plaintiff's efforts to enforce its judgment. R. 4:59-1(c). The court sent the scheduling letter to defendant at 135 Watchung Ave., Chatham, New Jersey. Defendant appeared. During that hearing, plaintiff personally served defendant with a writ of execution and a notice of demand to furnish information regarding CFS's assets and debts. N.J.S.A. 2A:17-74 and -75. Plaintiff also asked for defendant's address. Defendant admitted she "picked-up mail" at the above address, although she did not reside at the address. When defendant did not respond to the informational subpoena, plaintiff again sent the writ of execution and a notice of demand to furnish information, by first class and certified mail, to the Chatham address. Defendant again failed to respond.

As authorized by N.J.S.A. 2A:17-74 and -75, plaintiff filed this action against defendant to satisfy the debt owed by CFS as a result of her noncompliance with the informational subpoena. Personal service of the complaint at the Watchung Avenue address was unsuccessful, as the sheriff was advised "defendant [was] not residing at the above address." However, the first class mail was not returned and the certified mail remained unclaimed. When defendant did not answer the complaint, default judgment was entered against defendant on August 30, 2002, in the amount of $58,112.68, along with costs of suit.

On June 6, 2005, defendant filed her motion to vacate the default judgment, R. 4:50-1, alleging ineffective service of the complaint and arguing the judgment must be set aside because plaintiff did not serve the requisite pre-action fee arbitration notice. R. 1:20A-6. The motion judge scheduled the matter for a plenary hearing on the dispute regarding service.

Plaintiff presented the procedures followed to effectuate process. Defendant explained she closed her business, acknowledged her failure to accept the certified mail, and stated she wanted to dispute the bill for legal services rendered. She again challenged the failure of defendant to send the pre-action notice. R. 1:20A-6. Plaintiff maintained a second notice was not required as the complaint was based on N.J.S.A. 2A:17-74 and -75.

The court found defendant received mail at the Chatham address because she responded to the court notice to appear on January 28, 2002, and concluded defendant was properly served with the complaint. The motion judge denied defendant's motion to vacate the default judgment. Defendant's request for reconsideration was also denied on October 7, 2005. Cummings v. Bahr, 295 N.J. Super. 374, 384-85 (App. Div. 1996).

On appeal, defendant limits consideration solely to her position that plaintiff's suit to collect the unpaid legal fees should have been dismissed for failure to issue a pre-action notice identifying the right to pursue fee arbitration. The motion judge did not specifically address this argument when entering her ruling. Because the matter involves a legal conclusion, we assume original jurisdiction. R. 2:10-5.

After examination, we determine Rule 1:20A-6 does not mandate plaintiff give notice to defendant, for a second time, prior to instituting an action under N.J.S.A. 2A:17-74 and -75.

Rule 1:20A-6 prohibits an attorney from filing a lawsuit to recover fees until the expiration of the thirty-day period following notice to a client of the right to proceed with arbitration regarding the legal fees due. Ibid. The Rule also includes a provision stating "this [requirement] shall not prevent a lawyer from instituting any ancillary legal action." Ibid. It is undisputed that a pre-action notice addressed to defendant and CFS was properly sent before plaintiff proceeded with its complaint against CFS. Defendant chose to take no action, allowing the commencement of suit and entry of default judgment.

Defendant's further inaction, after receipt of the informational subpoena, brought into play the statutory provision requiring defendant's response to the informational subpoena, which states: "[a]ny such agent or person who shall neglect or refuse to comply with the provisions of this section shall himself be liable to pay to the execution creditor the amount due on the execution, with costs." N.J.S.A. 2A:17-74 and -75. The suit against defendant was for collection of the unpaid corporate debt, the obligation for which was personally imposed on defendant because of her failure to comply with the statutory requirements of N.J.S.A. 2A:17-74 and -75. The action was thus, an "ancillary legal action" excepted from the requirements of the fee arbitration rule.

This matter differs from Mandelbaum v. General Ins. Co. of Amer., 352 N.J. Super. 118 (App. Div. 2002), cited as authority by defendant. In Mandelbaum, the plaintiff law firm provided litigation services to Cris-Tec Associates, Inc. Later, Cris-Tec assigned its interests to the defendant, which received an award. The plaintiff sued the defendant for the corporation's unpaid legal fees in connection with the initial litigation, as the defendant was Cris-Tec's assignee. Id. at 120. The court ruled the defendant was an entity legally bound to pay the plaintiff's legal fees. Thus a pre-action notice was mandated. Id. at 123. In this matter, defendant was not legally bound in the first instance to pay CFS's legal fees, but became obligated to satisfy an unpaid corporate debt for failure to comply with the statutory obligations imposed by N.J.S.A. 2A:17-74 and -75.

A default judgment, in circumstances such as these, will not be vacated unless the defendant shows circumstances of excusable neglect in failing to answer and presents a meritorious defense. R. 4:50-1(a); Marder v. Realty Constr. Co., 84 N.J. Super. 313, 318 (App. Div. 1964). Applying these tenets, we are satisfied that Judge Dupuis did not err when she declined to reopen the prior order.

Affirmed.

 

N.J.S.A. 2A:17-74 provides:

 
Every agent or person having charge or control of any property of a corporation shall, upon request therefor by any officer having for service a writ of execution against it, furnish to such officer the names of the directors and officers of the corporation, and a schedule of all its property, including debts due or to become due to it so far as he has knowledge thereof.
 
Any such agent or person who shall neglect or refuse to comply with the provisions of this section shall himself be liable to pay to the execution creditor the amount due on the execution, with costs.

[N.J.S.A. 2A:17-74.]

N.J.S.A. 2A:17-75 imposes an obligation on corporate officers "unable to find other property belonging to the corporation liable to execution." The statute requires that agent or person to deliver, in writing, to the creditor holding an execution, any evidences of any debts due the corporation. Personal liability to pay the amount of the execution, with costs, results if the corporate officer neglects or refuses to comply with the statute's requirements.

(continued)

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A-1020-05T1

November 28, 2006