Resolution Trust Corp. v. Associated Gulf Contractors, Inc.

• Decision Date: 31 March 1993
• Citation: Resolution Trust Corp. v. Associated Gulf Contractors, Inc., 622 A.2d 1324, 263 N.J.Super. 332 (N.J. Super. App. Div. 1993)
• Parties: RESOLUTION TRUST CORPORATION, as Receiver for City Savings, Plaintiff-Respondent, v. ASSOCIATED GULF CONTRACTORS, INC. and Mohammed Mizani, Defendants-Appellants.
• Court: New Jersey Superior Court — Appellate Division

Page 332

263 N.J.Super. 332

622 A.2d 1324

RESOLUTION TRUST CORPORATION, as Receiver for City Savings Plaintiff-Respondent, v. ASSOCIATED GULF CONTRACTORS, INC. and Mohammed Mizani Defendants-Appellants.

Superior Court of New Jersey Appellate Division.

Argued Feb. 17, 1993.

Decided March 31, 1993.

David Elving Schwartz, Springfield, for defendant-appellant Mohammed Mizani.

Gregory R. Milne, Red Bank, for plaintiff-respondent Resolution Trust Corp. (Cassidy, Foss & San Filippo, attorneys, Mr. Milne, of counsel and on the brief).

Before Judges MICHELS, BILDER and BAIME.

The opinion of the court was delivered by

MICHELS, P.J.A.D.

Defendants Associated Gulf Contractors, Inc. (Associated Gulf) and Mohammed Mizani (Mizani) appeal from an order of the Law Division denying their motion to vacate a default judgment which had been entered in favor of plaintiff Resolution Trust Corporation (RTC), as receiver for City Savings, in the amount of $1,139,757.97. ¹

Briefly, this action arose from mortgages and promissory notes which had been executed in October of 1987 by Associated Gulf in favor of City Federal Savings Bank, and which had been guaranteed by Mizani. In December of 1989, City Federal Savings Bank was found to be insolvent by the Office of Thrift Supervision (OTS), and the RTC was appointed receiver thereof. In this capacity, the RTC assigned all rights, title and interest in these notes, mortgages and guarantees to City Savings Bank, F.S.B. Shortly thereafter, in September of 1990, the OTS closed City Savings Bank, F.S.B. due to insolvency, and the RTC became the receiver of this institution. The RTC subsequently assigned its rights, title and interest in the aforesaid notes, mortgages and guarantees to City Savings, which was then a newly created federal mutual association. Finally, in January of 1991, the OTS closed City Savings due to its insolvency, and the RTC acquired it as a receiver for the purpose of liquidating its assets. Since Associated Gulf and Mizani had defaulted on their obligations, the RTC, in its position as receiver for City Savings, instituted two separate actions against these defendants; a foreclosure action on the mortgages in the Chancery Division, and this action on the promissory notes in the Law Division.

A default judgment was entered in the Law Division action on September 13, 1991, as a result of defendants' failure to answer, appear or otherwise move with respect to the RTC's complaint. On December 12, 1991, defendants moved to vacate the default judgment. They maintained that there had been no valid service of process effectuated upon them in this matter, and further, that they had valid defenses to the RTC's claims. Judge Arnold in the Law Division denied the motion, basing his decision on Judge Diana's letter opinion in the Chancery Division which had granted the RTC's summary judgment motion in the related mortgage foreclosure action. Judge Arnold adopted Judge Diana's conclusion that defendants had failed to, and were unable to, assert any meritorious defenses to the RTC's claims.

On this appeal, Mizani contends that the trial court erred in failing to vacate the default judgment. Specifically, he maintains that (1) the trial court should not have denied his motion to vacate the default judgment since service of process was defective and, therefore, the trial court lacked personal jurisdiction over him; (2) the reliance by the trial court upon the Chancery Division's decision in the foreclosure action was reversible error and (3) the default judgment should have been vacated as he had meritorious defenses to the RTC's claims. We disagree and affirm.

We are satisfied from our study of the record, and the arguments presented, that the trial court properly exercised its discretion in denying Mizani's motion to vacate the default judgment which had been entered against him. Furthermore, we are convinced that all issues of law raised are clearly without merit. R. 2:11-3(e)(1)(E). Nonetheless, we deem it appropriate to comment with respect to some of Mizani's contentions.

It is well settled that the resolution of a motion to vacate a final judgment is a matter that lies within the sound discretion of the trial court. Hodgson v. Applegate, 31 N.J. 29, 37, 155 A.2d 97 (1959); Shammas v. Shammas, 9 N.J. 321, 328, 88 A.2d 204 (1952); Matter of Adoption of Indian Child, 219 N.J.Super. 28, 42, 529 A.2d 1009 (App.Div.1987), aff'd, 111 N.J. 155, 543 A.2d 925 (1988); Marder v. Realty Construction Co., 84 N.J.Super. 313, 318, 202 A.2d 175 (App.Div.), aff'd, 43 N.J. 508, 205 A.2d 744 (1964). Moreover, a trial court's decision on such a motion is not to be disturbed unless there has been a clear abuse of its discretion. Greenberg v. Owens, 31 N.J. 402, 405, 157 A.2d 689 (1960); Hodgson v. Applegate, supra, 31 N.J. at 37, 155 A.2d 97; Marder v. Realty Construction Co., supra, 84 N.J.Super. at 318, 202 A.2d 175.

Within the specific context of a default judgment, it has been noted that an application to vacate such a judgment is to be "viewed with great liberality, and every reasonable ground for indulgence is [to be] tolerated to the end that a just result is reached." Marder v. Realty Construction Co., supra, 84 N.J.Super. at 319, 202 A.2d 175. However, even under this rather accommodating standard, it is well settled that a default judgment is not to be set aside unless the defendant seeking such relief can demonstrate that his failure to answer or otherwise appear and defend was somehow excusable, and further, that he has a meritorious defense to either the cause of action or the quantum of damages assessed. Id. at 318, 202 A.2d 175. See O'Connor v. Abraham Altus, 67 N.J. 106, 128- 335 A.2d 545 (1975); Local 478 v. Baron Holding Corp., 224 N.J.Super. 485, 488-89, 540 A.2d 1307 (App.Div.1988); Olympic Indus. Park v. P.L., Inc., 208 N.J.Super. 577, 581, 506 A.2d 770 (App.Div.), certif. denied, 104 N.J. 453, 517 A.2d 440 (1986); Bank of New Jersey v. Pulini, 194 N.J.Super. 163, 165-66, 476 A.2d 797 (App.Div.1984).

With these settled principles firmly intact, we can now consider Mizani's contentions that excusable neglect and meritorious defenses were present in this matter, thus warranting the vacation of the default judgment.

I.

Mizani first contends that his failure to answer, appear or otherwise move as to the RTC's complaint was excusable because service of process was defective. Based on this assertion, Mizani maintains essentially that he was not obligated to respond to the complaint, and that the trial court lacked personal jurisdiction over him. Mizani claims that he was never personally served in the Law Division action, or made aware that it was separate and apart from the related foreclosure action in the Chancery Division. This matter was not specifically addressed by the trial court in its decision denying defendant's motion. However, close examination of it reveals that it is entirely lacking in merit.

Service of process in the civil context is governed by R. 4:4-4. In pertinent part, this rule provides:

Service of summons, writs and complaints shall be made as follows:

(a) Individuals Generally.

(1) Personal Service. Upon an individual other than a minor under 14 years of age or an incompetent person, by delivering a copy of the summons and complaint to the individual personally; or by leaving a copy thereof at the dwelling house or usual place of abode with a competent member of the household of the age of 14 years or over then residing therein.... [Emphasis added].

Here, Mizani was served with a summons and complaint on two separate occasions. He was personally served on July 11, 1991, and previously, he had been served on May 3, 1991, when the relevant papers were left with his resident housekeeper at his usual place of abode. Regarding the July 11, 1991 service, Mizani argues that he was unaware that such service upon him involved the Law Division action. However, he admits, in almost the same breath, that he may have been confused and "thought that the note complaint was an extra copy [of the foreclosure complaint in the Chancery Division] and accidentally discarded it." Clearly, under such circumstances, it cannot be said that Mizani's neglect in failing to respond to the RTC's complaint was excusable. His assertions with regard to the July 11, 1991 service, if believed, merely demonstrate his own laxity and carelessness. There is no question that he was personally served on this date. Indeed, he does not contest this. The claim that Mizani may have mistaken the note complaint for something else is a completely bald assertion, and, in any event, in no way affects the validity of the service which unquestionably took place.

Beyond this, Mizani's contention that the May 3, 1991 service upon him was defective is also without merit. The sheriff's return regarding this service reflects that Mizani was served at his usual place of abode by leaving a copy of the relevant papers with Ms. Carmen Turceos, Mizani's resident housekeeper. Mizani does not contest that such service took place; instead he contends essentially that it was improper to leave the papers with Ms. Turceos.

While the case law in this area is quite sparse, the express terms of the modern version of R. 4:4-4(a)(1) are clearly dispositive. Prior to its amendment in 1971 and 1972, R.R. 4:4-4(a) was the governing rule in this context, and it required service to be made upon a competent member of the "family" in order to be effective. Under that rule, we declined to express an opinion as to whether a housekeeper who was residing in a prospective defendant's household would be considered a member of that person's "family" and thus, a valid recipient of service of process. Ammond v. Lafayette, 63 N.J.Super. 86, 89, 163 A.2d 721 (App.Div.1960).

However, under the present version of the rule, there can be little question that service upon such a person is valid and permissible. In 1971, ...