Davis v. DND/Fidoreo, Inc.

• Decision Date: 24 December 1998
• Citation: 317 N.J. Super. 92,721 A.2d 312
• Parties: John L. DAVIS, Plaintiff-Respondent, v. DND/FIDOREO, INC. and Surrey Downs/Fidoreo, Inc., Defendants-Appellants.
• Court: New Jersey Superior Court

721 A.2d 312

317 N.J. Super. 92

John L. DAVIS, Plaintiff-Respondent, v. DND/FIDOREO, INC. and Surrey Downs/Fidoreo, Inc., Defendants-Appellants.

Superior Court of New Jersey, Appellate Division.

Argued December 1, 1998.

Decided December 24, 1998.

Stuart J. Glick, Newark, for defendants-appellants (Sills, Cummis, Zuckerman, Radin, Tischman, Epstein & Gross, attorneys; Mr. Glick, of counsel; Donna Libretti Cooke and Daniel P. Silberstein, Roseland, on the brief).

Carol S. Harding, Westmont, for plaintiff-respondent (Earp, Cohn & Pendery, attorneys; Ms. Harding and Anne C. Singer, on the brief).

Before Judges KEEFE, EICHEN, and COBURN.

The opinion of the court was delivered by COBURN, J.A.D.

Davis agreed to purchase a condominium development for $1,370,000 and paid a deposit of $137,000. After Davis failed to close title, the deposit was retained, pursuant to the contract, as liquidated damages. Over two years later, Davis filed suit for return of the deposit. A sheriff's officer served defendants by giving copies of the summons and complaint to an assistant manager of the First Union National Bank, defendants' parent company, at a branch office of the bank, which served as the principal office of the subsidiary companies. Apparently, the assistant manager, whose job included receiving subpoenas for the bank, failed to forward the suit papers to the appropriate person. As a result, no answer was filed and Davis obtained a $137,000 default judgment. On learning of the suit, defendants promptly moved to vacate the default judgment under R. 4:50-1(a) and (f). The Law Division judge denied the motion on the grounds that the service of process was valid and there was neither excusable neglect nor any other reason justifying relief from the judgment. Although we agree with the judge's conclusions regarding the validity of the service of process and the absence of excusable neglect, we reverse and remand for further proceedings because there were other reasons requiring vacation of the judgment and because plaintiff's rights can be adequately and fairly protected by an award of counsel fees and costs, plus, if appropriate, the posting of security for any reasonably potential judgment.

I.

In 1993, Davis agreed to purchase a condominium development from defendant DND/Fidoreo, Inc. ("DND"), a subsidiary of First Union National Bank, for $1,370,000. If Davis breached the agreement, DND was entitled to retain the $137,000 deposit as liquidated damages. Davis ignored a time of the essence closing date scheduled for March 29, 1994. After DND had retained the deposit for over two years without objection, Davis filed suit against both defendants, claiming entitlement to the deposit. Davis concedes that there may be meritorious defenses. Before institution of this action, DND was merged into defendant Surrey Downs/Fidoreo, Inc. ("Surrey"), another wholly-owned subsidiary of the bank. Both defendants were created by the bank solely for the purpose of holding and selling property the bank had obtained by foreclosure. On April 14, 1995, the property was sold for $1,900,000.

On July 9, 1996, an Essex County Sheriff's Officer served copies of plaintiff's summons and complaint on Sandra Brown at 550 Broad Street, Newark, the principal office of defendants and a branch office of their parent company, First Union National Bank. The returns of service designated Brown, an assistant manager of the bank, as the "managing agent" of DND and as "other" with respect to Surrey. No answer having been filed, Davis obtained a default judgment on December 17, 1996. Defendants learned of the judgment in April 1997 when they received a notice of deposition in aid of execution. They promptly moved for vacation of the judgment pursuant to R. 4:50-1(a) and (f).

In support of defendants' motion, Sandra Brown certified these facts: when process was served she worked for the bank and had no relationship to the defendants; and although one of her functions as assistant manager of the bank's Special Investigations Department was to respond to "subpoena[s] duces tecum served on the Bank," she could "not recall ever representing [herself] as" the "managing agent" of either defendant. However, she did not deny receiving the process from the sheriff's officer, nor did she even deny telling him that she was the defendants' managing agent. She also did not address what, if anything, she had done with the suit papers.

Surrey's corporate secretary provided a certification noting the merger of defendants in 1995, Brown's lack of relationship to them, and her own lack of knowledge of the lawsuit before she was asked to provide the certification in support of defendants' motion to vacate the judgment.

Richard Niemiec, an attorney employed by the bank, certified in entirely general terms that as a result of the bank's merger with First Fidelity Bank on January 1, 1996, the bank "experienced a major re-engineering and restructuring of its operations that was felt in all branches across the country, including the branch located at 550 Broad Street...." He also certified, "To date, we still have not found the original summons and complaint that plaintiff allegedly served upon Sandra Brown in July 1996."

II.

Service of process was proper in this case. Defendants' technical arguments to the contrary overlook a basic proposition enunciated by the United States Supreme Court. The only constitutional requirement of service of process is "notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections." Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 657, 94 L.Ed. 865, 873 (1950). Our Supreme Court, after endorsing that proposition in O'Connor v. Altus, 67 N.J. 106, 126-27, 335 A.2d 545 (1975), went on to approve of these more specific propositions. Delivery of process need not be accomplished during a face-to-face meeting with the person upon whom service is to be effected; it is sufficient if the sheriff's officer serves a person whom he can reasonably expect will deliver the process to the appropriate person. Id. at 127-28, 335 A.2d 545.

The O'Connor Court also looked with favor on this two-pronged test for the validity of service on a representative:

[T]he representative [served] should be so integrated with the organization that he will know what to do with the papers and that he or she should stand in a position as to render it fair, reasonable and just to imply the authority to receive service.

[Id. at 128, 335 A.2d 545.]

In its use of the word "representative," the O'Connor Court might be understood to have been referring only to an employee of the company being served. However, in Trustees of the Local 478 Trucking and Allied Industries Pension Fund v. Baron Holding Corp., 224 N.J.Super. 485, 540 A.2d 1307 (App.Div.1988), we read O'Connor more broadly. The sheriff's officer served a receptionist employed by Baron Motor Carriers with process directed to Baron Holding Corporation, its landlord. Id. at 489, 540 A.2d 1307. Both entities were closely held family corporations located in the same building. Id. at 487, 540 A.2d 1307. The receptionist had indicated to the officer that she was authorized to accept service. Id. at 489, 540 A.2d 1307. We said:

In this case, the [sheriff's officer] did not have "to imply" that [the receptionist] had authority to receive service. The unrebutted proof shows that [she] represented to the deputy that she was authorized to accept service. Also, the office was that of Baron, Jr., who was also president of Baron Holding. Proper service ... was made upon the corporation ....

[Id. at 490, 540 A.2d 1307.]

Corporations, being entities that should expect to be sued from time to time, have an obligation to institute procedures within their organization for receiving and responding to law suits. Cf. Mancini v. EDS ex rel. New Jersey Auto. Full Ins. Underwriting Assoc., 132 N.J. 330, 335-36, 625 A.2d 484 (1993). In the instant case, the defendants failed to prove that they had any such procedures in place on the date of service. As wholly-owned subsidiaries of the bank in whose office they were located, they should not be allowed to complain of service made at that address, on an assistant bank manager, who regularly receives subpoenas duces tecum for the bank and who represents that she is authorized to receive service as the subsidiaries' managing agent. We note in this regard that Brown's certification that she could not recall telling a sheriff's officer that she was managing agent of the defendants is not a denial of the contrary report in the return of service.

In sum, we are satisfied that under the circumstances of this case the notice given was reasonably calculated to advise defendants of the pendency of the action. Furthermore, defendants have never sought a dismissal of the action, the appropriate relief when there is a claim of improper service. See Baron Holding Corp., supra, 224 N.J.Super. at 488, 540 A.2d 1307. Therefore, we turn to defendants' primary claim that the judge erred in denying their motion to vacate the default judgment.

III.

A motion to vacate a default judgment "should be viewed with great liberality, and every reasonable ground for indulgence is tolerated to the end that a just result is reached." Marder v. Realty Constr. Co., 84 N.J.Super. 313, 319, 202 A.2d 175 (App.Div.), aff'd, 43 N.J. 508, 205 A.2d 744 (1964). Although the decision is generally left in the sound discretion of the trial court, that court must recognize that "[a]ll doubts ... should be resolved in favor of the parties seeking relief." Mancini, supra, 132 N.J. at 334, 625 A.2d 484 (citing Arrow Mfg. Co. v. Levinson, 231 N.J.Super. 527, 534, 555 A.2d 1165 (App. Div.1989)). Defendants claimed they were entitled to relief from the judgment because of excusable neglect, R. 4:50-1(a)...