CHRISTINA R. KEMPA v. CANVAS HOUSE ANTIQUES AND DESIGN CENTER, INC
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SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-4719-16T1
CHRISTINA R. KEMPA,
Plaintiff-Respondent,
v.
CANVAS HOUSE ANTIQUES
AND DESIGN CENTER, INC.,
and PERRY FORD,
Defendants-Respondents,
and
CHERYL FORD,
Defendant-Appellant.
______________________________
Submitted April 9, 2018 – Decided May 8, 2018
Before Judges Sabatino and Rose.
On appeal from Superior Court of New Jersey,
Law Division, Ocean County, Docket No. L-3084-
15.
Sinn, Fitzsimmons, Cantoli, Bogan, West &
Steuerman, attorneys for appellant (Raymond D.
Bogan, on the brief).
Sendzik & Sendzik, PC, attorneys for
respondent Christina R. Kempa (Jay C. Sendzik,
on the brief).
PER CURIAM
Defendant Cheryl Ford appeals from a May 18, 2017 Law Division
order denying her motion to vacate default judgment. Having
considered the arguments of the parties and the applicable law,
we reverse and remand the matter to the trial court with
instructions to vacate the default judgment and permit defendant
to file an answer or otherwise respond to plaintiff's complaint.
I.
Defendant and her husband, Perry Ford,1 owned and operated
Canvas House Antiques and Design Center, Inc., an antique shop in
Point Pleasant. Defendant suffered a serious injury in an
accident, rendering her incapable of participating in the
business, and requiring Perry to become its sole operator.
Defendant's personal injury action resulted in a gross settlement
of $1,875,000 to her, and a per quod payment of $125,000 to Perry.
Plaintiff Christina R. Kempa developed a business and
personal relationship with defendant and Perry, having rented
space and sold her wares at Canvas House from 1999 to 2015. Over
time, but prior to settlement of defendant's accident case,
plaintiff allegedly loaned money to Canvas House, defendant and
1
Perry and Canvas House were named as defendants, but are not
parties to this appeal. We use Mr. Ford's first name for clarity.
No disrespect is intended.
2 A-4719-16T1
Perry. Loans totaling $26,896.50 were memorialized in a written
agreement dated October 14 or 15, 2010.2 Plaintiff claims Perry
requested the loans for personal and business purposes, and
promised to pay the loans "in full upon the receipt of
[defendant's] settlement . . . within the next year of the
agreement." Apparently drafted without the assistance of counsel,
the agreement purportedly was signed by plaintiff, Perry, and
defendant. However, defendant denies she signed the document, and
claims her signature was forged.
Plaintiff claims she made additional loans, totaling
$145,176.03, to defendants "based upon their oral agreements to
repay" her. Plaintiff further asserts Perry issued sixteen bad
checks to her totaling $12,630.08 from the Canvas House business
account for her antiques that were sold to customers.
On November 4, 2015, plaintiff filed a complaint in the Law
Division against Perry, Canvas House, and defendant alleging,
among other claims, that they breached the loan agreement by
failing to repay amounts owed. According to the affidavit of
service, defendant was personally served with the complaint on
January 11, 2016. However, on January 31, 2016, defendant sent
2
The first page of the loan agreement is dated October 15, 2010,
but the signature page indicates, "This three page agreement is
dated 10/14/2010."
3 A-4719-16T1
an email to plaintiff's counsel, stating that she had just received
the summons and complaint because it was delivered to her
neighbor's address. After defendants failed to answer, default
was entered on February 24, 2016. On May 3, 2016, pursuant to
Rule 4:43-2, the motion judge entered default judgment, in
plaintiff's favor against all three defendants, in the amount of
$152,250.82.3
Plaintiff sought post-judgment discovery to compel
enforcement of the judgment. Defendant personally accepted
service of the judge's second order for post-judgment discovery
but failed to comply. Plaintiff then moved to find defendant in
contempt of court. After receiving that motion, defendant moved
to vacate default judgment, contending her medical condition and
pending divorce constituted excusable neglect for her failure to
answer the complaint.
In particular, defendant claimed the property settlement
agreement, ("PSA") effective March 30, 2016, annexed to her
judgment of divorce, expressly requires Perry to indemnify her for
3
We note our concern regarding the propriety of plaintiff's
aggregate claims against defendant and, consequently, the amount
of damages awarded against defendant, based on plaintiff's
affidavit of amount due and non-military service in support of
entry of default judgment. See R. 4:43-2; R. 1:5-7.
4 A-4719-16T1
claims arising from plaintiff's lawsuit. Paragraph 5.6 of the PSA
provides, in pertinent part, as follows:
Wife shall have no responsibility for any
debts, obligations, taxes, or otherwise for
any liabilities arising out of Canvas House
Antiques (or any successor company), and
husband shall indemnify and hold wife harmless
with respect to same, no matter when said
debts arose. This includes any personal and
or corporate obligations related to Canvas
House Antiques, or husband, whether incurred
during the marriage or after. . . . Husband's
full indemnification of wife in relation to
Canvas House Antiques shall include all
lawsuits filed against Perry Ford, Canvas
House Antiques, and Cheryl Ford (in relation
to Canvas House Antiques), including the
lawsuit originated by Christina Kempa, filed
by Jay C. Sendzik, Esq.
Defendant also asserted several meritorious defenses, including
that her signature was forged on the October 2010 agreement, and
she was not a party to, or responsible for, the oral loans made
to Perry.
Following oral argument, the motion judge rendered an oral
decision on the record on May 12, 2017, denying defendant's motion
to vacate the default judgment. Without elaborating, the judge
found defendant "had notice on multiple occasions of this lawsuit"
and failed to establish excusable neglect or present a meritorious
defense. This appeal followed.
On appeal, defendant renews her argument that the default
judgment should have been vacated, claiming the motion judge
5 A-4719-16T1
erroneously found she failed to establish mistake or excusable
neglect pursuant to Rule 4:50-1(a), and erred in finding she did
not present a meritorious defense to the underlying complaint.
II.
We review an order denying a motion to vacate a default
judgment under the abuse of discretion standard. US Bank Nat'l
Ass'n v. Guillaume,
209 N.J. 449, 467 (2012). Where the trial
court gives insufficient deference to the principles governing the
motion, we must reverse. Davis v. DND/Fidoreo, Inc.,
317 N.J.
Super. 92, 100-01 (App. Div. 1998).
Further, our review of a "motion under Rule 4:50-1 should be
guided by equitable principles." Farrell v. TCI of N. N.J.,
378 N.J. Super. 341, 350 (App. Div. 2005) (citation and internal
quotation marks omitted). Indeed, we generally place a high value
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 v. EDS ex rel. N.J. Auto
Full Ins. Underwriting Ass'n,
132 N.J. 330, 334 (1993) (quoting
Marder v. Realty Constr. Co.,
84 N.J. Super. 313, 319 (App. Div.
1964)).
Although the movant bears the burden of demonstrating that
its failure to answer should be excused and default judgment
6 A-4719-16T1
vacated, Jameson v. Great Atlantic & Pacific Tea Company,
363 N.J.
Super. 419, 425-26 (App. Div. 2003), close issues should be
resolved in the movant's favor. Mancini,
132 N.J. at 334. In the
end, 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) ("Rule 4:50 is instinct with
equitable considerations.").
"In order to achieve relief pursuant to subsection (a) [of
Rule 4:50-1] . . . the defendant must be prepared to 'show that
[1] [her] neglect to answer was excusable under the circumstances
and [2] that [she] has a meritorious defense.'" Dynasty Bldg.
Corp. v. Ackerman,
376 N.J. Super. 280, 285 (App. Div. 2005)
(quoting Marder,
84 N.J. Super. at 318). The categories in
subsection (a), "when read together, as they must be, reveal an
intent by the drafters to encompass situations in which a party,
through no fault of its own, has engaged in erroneous conduct or
reached a mistaken judgment on a material point at issue in the
litigation." DEG, LLC v. Twp. of Fairfield,
198 N.J. 242, 262
(2009)
Mistake is "intended to provide relief from litigation errors
that a party could not have protected against." Id. at 263
(citations and internal quotation marks omitted). Of significance
7 A-4719-16T1
here, the failure to assert a particular claim in litigation is
not the type of mistake contemplated by Rule 4:50-1(a). Ibid.;
Hendricks v. A.J. Ross Co.,
232 N.J. Super. 243, 248-49 (App. Div.
1989). While the indemnification provision might ultimately
relieve defendant from damages if plaintiff establishes her
claims, it does not exempt defendant from filing an answer, moving
to dismiss, or asserting a cross-claim for indemnification.4 See
DEG, LLC,
198 N.J. at 263.
We are likewise unpersuaded that excusable neglect warrants
vacation of the default judgment. As our Supreme Court has
recognized, "Carelessness may be excusable when attributable to
an honest mistake that is compatible with due diligence or
reasonable prudence." Mancini,
132 N.J. at 335 (citing Baumann
v. Marinaro,
95 N.J. 380, 394 (1984)).
Here, defendant claims the contentious divorce proceedings
with Perry, and her serious medical condition, necessitating
treatment with multiple prescribed medications from numerous
physicians, constitutes excusable neglect. However, in her motion
to vacate default judgment, defendant apparently conceded she was
personally served with the complaint, and received the motion for
4
Our opinion does not, however, preclude defendant from seeking
enforcement against Perry of the indemnification provision in the
Family Part.
8 A-4719-16T1
contempt, and several documents related to the litigation via
regular mail. Thus, the record indicates defendant was aware of
the complaint, but failed to respond.
While we are sympathetic to defendant's medical condition,
that condition did not prevent her from appreciating the
ramifications of litigation, and does not establish excusable
neglect where, as here, she retained counsel in her divorce
proceeding, and negotiated an indemnification provision attempting
to limit her liability in the present litigation. Cf. Bergen-
Eastern Corp. v. Koss,
178 N.J. Super. 42, 45-46 (App. Div. 1981)
(upholding a finding of excusable neglect where an elderly woman
could not mentally appreciate the service of a complaint against
her due to "continuing, serious psychiatric problems").
Although we are not persuaded by defendant's claims of mistake
or excusable neglect, pursuant to Rule 4:50-1(a), there are
substantial indicia of meritorious defenses as to her alleged
liability for the debts, and the calculated amount of the judgment.
We have recognized that even where a defendant's claim of excusable
neglect is weak, judges can use their discretion to vacate the
judgment where the defendant proffers a meritorious defense. See
Siwiec v. Fin. Res., Inc.,
375 N.J. Super. 212, 220 (App. Div.
2005).
9 A-4719-16T1
In Siwiec, we explained "In some circumstances . . . [the]
requirement[ of excusable neglect coupled with a meritorious
defense] may be relaxed in the interests of justice under R[ule]
4:50-1(f)." Id. at 219. That subsection permits vacation of a
final judgment on "any other [grounds] justifying relief from the
operation of the judgment or order." Id. at 219-20 (quoting R.
4:50-1(f)). Although the trial court in Siwiec found the defendant
failed to establish excusable neglect, we "nonetheless vacate[d]
the judgment, because we perceive[d] significant issues concerning
the sufficiency of plaintiffs' proofs." Id. at 218. In
particular, the defendant relied on false assertions that the case
was closed and the complaint dismissed. Id. at 217. For this
reason, we held courts may grant a defendant's application to
vacate a default judgment despite weak proof of excusable neglect.
Id. at 220.
We also applied Rule 4:50-1(f) in Morales v. Santiago,
217 N.J. Super. 496 (App. Div. 1987). There, in a contract dispute
involving the sale of real property, we found serious faults with
the plaintiff's proofs regarding the existence of a binding
contract and damages. Id. at 505. While acknowledging "a
meritorious defense [alone] is ordinarily not a ground for setting
aside a default judgment[,]" we vacated the default judgment
10 A-4719-16T1
because the defendants "suffered a substantial judgment that
appear[ed] to be undeserved on the merits." Ibid.
We reiterate, as we did in Morales, that "a judgment may be
vacated [pursuant to Rule 4:50-1(f)] only in exceptional cases,"
but "the boundaries of that subsection . . . 'are as expansive as
the need to achieve equity and justice.'" Id. at 504 (quoting
Court Inv. Co. v. Perillo,
48 N.J. 334, 341 (1966)). Further, the
"usual deference that we must pay to a trial judge's determination
of a[] R[ule] 4:50-1 motion is less compelling . . . where[, as
here,] the judge made no findings to explain the reasons why he
denied the motion."5 Ibid.
In the present case, defendant raises numerous affirmative
defenses, including the statute of frauds,
N.J.S.A. 25:1-5 to -
16, and forgery.
Initially, defendant claims the statute of frauds protects
her from liability tied to the oral loan agreements, which
comprised more than $100,000 of the $152,250.82 judgment.6 See
N.J.S.A. 25:1-15 ("A promise to be liable for the obligation of
another person, in order to be enforceable, shall be in a writing
5
Although the motion judge’s oral ruling was thin on analysis,
because we are vacating his order, we see no point in remanding
for a statement of reasons.
6
Defendant collaterally argues she was not party to the oral loans
and thus is not liable to plaintiff.
11 A-4719-16T1
signed by the person assuming the liability or by that person's
agent.").
In her complaint, plaintiff contends "Perry and [defendant],
personally, and on behalf of Canvas House, promised to repay all
loans in full." The record indicates that none of plaintiff's
checks or bank transfers representing the loan proceeds was payable
to defendant. With the exception of one check, all checks were
payable to "Canvas House Antiques." The remaining check was
payable to an attorney, with a notation in the memo line
indicating: "Perry Ford: Divorce Retainer."7 Plaintiff's claim
that defendant is personally responsible as the guarantor of
Perry's oral debts, in excess of $100,000, appears to be a proper
subject of
N.J.S.A. 25:1-15, although we do not resolve that
question here conclusively.
Further, in Delaware Valley Wholesale Florist, Inc. v.
Addalia,
349 N.J. Super. 228, 232-33 (App. Div. 2002), we held
that forgery constituted a meritorious defense. That case
concerned a guaranty of corporate indebtedness where the defendant
7 Section 8.1 of the PSA provides, in pertinent part: "each party
shall be solely responsible for his or her legal . . . fees
incurred in connection with the negotiation and execution of this
Agreement and obtaining a Judgment of Divorce." We do not
understand how plaintiff could have appropriately certified, by
referencing the check, that defendant owed plaintiff money for her
ex-husband's counsel fees.
12 A-4719-16T1
claimed her signature on the guaranty was forged. Id. at 229.
The defendant failed to answer the complaint and an arbitration
award was entered in plaintiff's favor. Id. at 230. The defendant
moved to set aside the award, but the trial court denied her
motion. Ibid. Ultimately, the defendant's former husband admitted
to signing defendant's name on the document, but claimed he did
so with her permission. Ibid. While the judgment in Addalia
arose from the defendant's failure to appear at the arbitration,
we analogized that situation to a "judgment [on] . . . a motion
to vacate[, which] 'should be viewed with great liberality, and
every reasonable ground for indulgence is tolerated to the end
that a just result is reached.'" Id. at 232 (citations omitted).
Thus, we concluded the defendant's forgery claim was a "meritorious
defense worthy of judicial determination." Id. at 233.
Here, defendant asserts her signature on the separate
signature page of the October 15, 2010 loan agreement was forged.
In support, she notes the first page of the agreement explicitly
states "[t]his agreement is between: Christina Kempa . . . and
Perry Ford." Defendant is not identified as a party to the
agreement. Although in Addalia the former husband admitted to
forging the defendant's signature, and there is no such admission
here, the forgery determination is an issue for the trier of fact.
13 A-4719-16T1
In sum, we find the trial court mistakenly exercised its
discretion in denying defendant's motion where, as here, she has
asserted meritorious defenses. Accordingly, we reverse and remand
the matter to the trial court. On remand, the trial court shall
enter an order vacating the final judgment, solely as to defendant,
forthwith. Defendant may then file a responsive pleading within
fourteen days, and the trial court shall conduct a case management
conference within thirty days to set an appropriate discovery
schedule.
Reversed and remanded for proceedings consistent with this
opinion. We do not retain jurisdiction.
14 A-4719-16T1
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