ROBERT NEDESKI VS. WINFIELD SCOTT CORP. (L-2429-14, UNION COUNTY AND STATEWIDE) ( 2017 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court."
Although it is posted on the internet, this opinion is binding only on the
parties in the case and its use in other cases is limited. R.1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2762-15T2
ROBERT NEDESKI,
Plaintiff-Respondent,
v.
WINFIELD SCOTT CORP.,
Defendant,
and
WINFIELD SCOTT TOWER URBAN
RENEWAL ASSOCIATES, L.P.,
Defendant-Respondent,
and
GIOVANNI SCALZULLI, d/b/a
ENVY NIGHTCLUB,
Defendant-Appellant.
________________________________________________________________
Submitted March 28, 2017 – Decided August 23, 2017
Before Judges Messano and Espinosa.
On appeal from Superior Court of New Jersey,
Law Division, Union County, Docket No. L-2429-
14.
Trenk, DiPasquale, Della Fera & Sodono, PC,
attorneys for appellant (Michele M. Dudas, of
counsel and on the briefs; Franklin Barbosa,
Jr., on the briefs).
Mintz & Geftic, LLC, attorneys for respondent
(Bryan H. Mintz, on the brief).
PER CURIAM
Defendant Giovanni Scalzulli appeals from an order denying
his motion to vacate a default judgment entered against him in
this slip and fall personal injury action. We reverse and remand
for further proceedings.
I.
Rule 4:50-1 "governs an applicant's motion for relief from
default when the case has proceeded to judgment." US Bank Nat'l
Ass'n v. Guillaume, 209 N.J. 449, 466 (2012). The rule permits
a court to
relieve a party . . . from a final judgment
or order for the following reasons: (a)
mistake, inadvertence, surprise, or excusable
neglect; . . . (d) the judgment or order is
void; . . . or (f) any other reason justifying
relief from the operation of the judgment or
order.
[R. 4:50-1.]
"[T]he opening of default judgments should be viewed with
great liberality, and every reasonable ground for indulgence is
tolerated to the end that a just result is reached." Hous. Auth.
of Morristown v. Little, 135 N.J. 274, 283-84 (1994) (alteration
in original) (quoting Marder v. Realty Constr. Co., 84 N.J. Super.
2 A-2762-15T2
313, 319 (App. Div.), aff'd o.b., 43 N.J. 508 (1964)).
Furthermore, "[a]ll doubts . . . should be resolved in favor of
the parties seeking relief." Nowosleska v. Steele, 400 N.J. Super.
297, 303 (App. Div. 2008) (alterations in original) (quoting
Mancini v. EDS ex rel. N.J. Auto Full Ins. Underwriting Ass'n, 132
N.J. 330, 334 (1993)).
II.
The original complaint was filed against Winfield Scott Corp.
d/b/a Envy Night Club (Winfield Scott) and fictitious corporations
in July 2014. It alleged plaintiff was lawfully on property owned,
occupied, operated, or maintained by Winfield Scott when he was
injured due to Winfield Scott's negligence.
In February 2015, an amended complaint was filed, naming the
defendants as "Winfield Scott Corp.; Winfield Scott Tower Urban
Renewal Associates, L.P., and Giovanni Scalzulli d/b/a Envy Night
Club" and fictitious corporations. The amended complaint alleged
that all the defendants owned, occupied, operated or maintained
the property where plaintiff was injured.
According to a lease for the property, Winfield Scott Tower
Urban Renewal Associates, L.P. (Winfield) owns the property; GS
Entertainment Productions, LLC (GS Entertainment) is Winfield's
tenant and operates a nightclub on the property. Scalzulli is the
sole managing member of GS Entertainment and the signatory on the
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lease.
Scalzulli failed to file an answer. Plaintiff moved for
entry of default judgment and his counsel hand-delivered the motion
papers to Scalzulli's office at the property on April 27, 2015.
On May 29, 2015, the court entered a default judgment against
defendants "on the issue of liability" and scheduled a proof
hearing for June 29, 2015. Plaintiff served a copy of the order
on Scalzulli at the property by regular mail on June 2, 2015. In
addition, on June 24, 2015, plaintiff served the notice of the
scheduled proof hearing on Scalzulli at the property via FedEx
overnight mail, which was received and signed for by Scalzulli's
daughter.
Scalzulli did not appear at the proof hearing on June 29,
2015.
On July 6, 2015, the court entered a final judgment by default
in favor of plaintiff for $250,000 against defendants Winfield
Scott, Winfield and Scalzulli jointly and severally. Plaintiff
served a copy of the judgment on Scalzulli at the property by
regular mail on July 8, 2015.
Both Winfield and Scalzulli filed motions to vacate the
default judgment. Winfield contended there had been improper
service of the amended complaint and filed an answer and third-
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party complaint against GS Entertainment.1
In his motion to vacate the default judgment, Scalzulli sought
relief under: Rule 4:50-1(a), arguing his default was excused
because he was never served and his meritorious defense was that
he could not be held personally liable for plaintiff's injury
because it occurred in a nightclub owned by GS Entertainment; Rule
4:50-1(d), arguing the judgment was void due to defective service;
and Rule 4:50-1(f), arguing "a $250,000 judgment against an
individual, when the alleged incident occurred at a night
club . . . justif[ied] the relief."
In support, Scalzulli submitted a certification in which he
made a number of factual assertions to support his argument that
he was not properly served. He also stated he was improperly
named as a defendant and had no "personal liability to" plaintiff;
he was "the sole member of" GS Entertainment which operates a
nightclub at the property; and "is not an owner of the [p]roperty,
and is a tenant" of Winfield GS Entertainment.
Plaintiff opposed both motions. The trial court granted
1
In response to the identification of GS Entertainment as a
liable party, plaintiff (1) filed a second amended complaint adding
GS Entertainment as a defendant on December 16, 2015; and (2)
initiated a separate action alleging the same facts against GS
Entertainment on January 6, 2016. On April 4, 2016, the trial
court consolidated the two actions.
5 A-2762-15T2
Winfield's motion, finding Winfield was not properly served
because plaintiff did not serve its registered agent.
The trial court denied Scalzulli's motion. It rejected
Scalzulli's claim he had not been properly served, and found he
had not shown excusable neglect. Although the trial court
recognized Scalzulli "clearly ha[d] a meritorious defense, as he
is an individual and the night club's apparently operated under
an LLC," it found "a meritorious defense [was] not enough" because
it was "satisfied that he was properly served."
In his appeal, Scalzulli argues, in sum, the trial court
abused its discretion under Rules 4:50-1(a), (d), and (f) in
denying his motion to vacate the default judgment because he was
never properly served, he had a meritorious defense, and the result
of him being held personally liable for claims against GS
Entertainment was unjust. Because we agree that relief should
have been granted pursuant to Rule 4:50-1(f), Scalzulli's
remaining arguments require little discussion. R. 2:11-
3(e)(1)(E).
III.
We grant substantial deference to a trial court's decision
on a motion to vacate a default judgment and will only reverse
when the denial "results in a clear abuse of discretion."
Guillaume, supra, 209 N.J. at 467.
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We discern no abuse of discretion in the trial court's
rejection of Scalzulli's arguments that relief was warranted under
subsections (a) and (d) of Rule 4:50-1, which rested on his
disputed and uncorroborated claims regarding ineffective service
and his corresponding claim of excusable neglect.2
Rule 4:50-1(f) "affords relief only when 'truly exceptional
circumstances are present.'" Guillaume, supra, 209 N.J. at 468
(quoting Little, supra, 135 N.J. at 286). It is applied only to
"situations in which, were it not applied, a grave injustice would
occur." Id. at 484 (quoting Little, supra, 135 N.J. at 289). To
this end, courts "focus on equitable considerations in determining
whether the specific circumstances warrant the unique
remedy authorized by the Rule." Little, supra, 135 N.J. at 294.
Although "[n]o categorization can be made of the situations which
would warrant redress under [Rule 4:50-1(f)]," DEG, LLC v. Twp.
of Fairfield, 198 N.J. 242, 269-70 (2009), where exceptional
circumstances are found, the Rule applies "as expansive[ly] as the
2
For the first time on appeal, Scalzulli also argues the judgment
is void under Rule 4:50-1(d) because, due to plaintiff's failure
to "plead or assert any legal theory supporting [his] personal
liability," the default judgment "conflicts with established law"
that a managing member cannot be held personally liable for claims
against an LLC. Although we need not address this issue, see
Guillaume, supra, 209 N.J. at 483, we note that such an error
would not render the default judgment void under Rule 4:50-1(d),
see Hendricks v. A.J. Ross Co., 232 N.J. Super. 243, 248 (App.
Div. (1989).
7 A-2762-15T2
need to achieve equity and justice," Guillaume, supra, 209 N.J.
at 484 (quoting Court Inv. Co. v. Perillo, 48 N.J. 334, 341
(1966)).
Typically, Rule 4:50-1(f) relief "is applied 'sparingly, in
exceptional situations' to prevent grave injustice." Nowosleska,
supra, 400 N.J. Super. at 304 (quoting Cmty. Realty Mgmt., Inc.
v. Harris 155 N.J. 212, 237 (1998)). However, judgments obtained
by default are considered to be "more vulnerable to being set
aside." Morales v. Santiago, 217 N.J. Super. 496, 505 (App. Div.
1987). Thus, applications to vacate default judgments are "treated
'indulgently'" and Rule 4:50-1(f) "is applied more liberally" in
this context. Nowosleska, supra, 400 N.J. Super. at 304 (quoting
Mancini, supra, 132 N.J. at 336).
Here, Scalzulli argues the default judgment should be vacated
in the interest of justice under Rule 4:50-1(f) because it is
"fundamentally unfair" to hold him personally liable for claims
against an LLC. He also argues the default judgment should be
vacated because $250,000 "is exorbitant as compared to the actual
injuries suffered by plaintiff" and the trial court "created the
danger of an inconsistent judgment" when it vacated the judgment
against Winfield and not him.
In cases where, as here, the applicant seeks to vacate a
default judgment entered as a result of inexcusable neglect, Rule
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4:50-1(f) may provide relief if "there is at least some doubt as
to whether the defendant was in fact served with process." Davis
v. DND/Fidoreo, Inc., 317 N.J. Super. 92, 100 (App. Div. 1998)
(quoting Goldfarb v. Roeger, 54 N.J. Super. 85, 92 (App. Div.
1959)), certif. denied, 158 N.J. 686 (1999). "In that regard,
even though the neglect was inexcusable, the absence of evidence
establishing willful disregard of the court's process is an
important consideration." Ibid. (citing Mancini, supra, 132 N.J.
at 336).
However, this court has granted Rule 4:50-1(f) relief even
where the inexcusable neglect was willful. In Arrow Manufacturing
Co. v. Levinson, 231 N.J. Super. 527, 529-30 (App. Div. 1989), the
defendant was properly served with a complaint naming him
individually and alleging he failed to respond to a demand notice
on a judgment against a corporation in which he was a shareholder.
After the defendant failed to respond to the complaint and ignored
numerous other communications throughout the litigation, default
judgment was entered against him and he moved to vacate. Id. at
531. The defendant asserted a meritorious defense – that he was
not personally liable for the judgment against his corporation and
did not believe he had to respond to the demand notice – but the
trial court nevertheless denied his motion due to his "various
attempts to evade service of process upon [his corporation] and
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of the demand notice and summons and complaint upon him." Id. at
532. This court reversed and vacated the judgment under
subsections (a) and (f) of Rule 4:50-1, holding that, although
"the devious tactics of [the defendant] may have been the genesis
of the ultimate default judgment entered against him, the sanction
of piercing the corporate veil and entering a judgment against him
individually for the corporate debt was far too severe for that
conduct." Id. at 534.
Here, as in Arrow, although the facts support a finding that
Scalzulli deliberately evaded service of process of the amended
complaint and ignored subsequent notices regarding this
litigation, the default judgment against him has the same effect
that is "far too severe," ibid., of piercing the corporate veil
and entering a judgment against him individually for claims against
GS Entertainment. None of the three complaints alerted him to
this potential peril because they did not plead a basis for
piercing the corporate veil and holding Scalzulli personally
liable for injuries that uncontestably occurred at a nightclub
owned and operated by GS Entertainment. The result of the denial
of his motion allows a judgment to stand that holds him personally
liable when he had no notice of that possible outcome and there
was no legal basis for that result. The grave injustice standard
for relief under Rule 4:50-1(f) was met.
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Although we conclude the default judgment must be vacated,
we note this relief may be conditioned upon appropriate sanctions.
"[J]udges are authorized, in relieving a party from a judgment or
order, to impose 'such terms as are just.'" ATFH Real Prop., LLC
v. Winberry Realty P'ship, 417 N.J. Super. 518, 528 (App. Div.
2010) (quoting R. 4:50-1), certif. denied, 208 N.J. 337 (2011);
see also Arrow, supra, 231 N.J. Super. at 534.
The order denying Scalzulli's motion to vacate default
judgment is reversed and remanded for the trial court to determine
what sanctions, if any, constitute appropriate conditions of
relief. We do not retain jurisdiction.
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