Arianna Holding Company, LLC v. Raymond R. Doohaluk

• Court: New Jersey Superior Court Appellate Division
• Decided: November 17, 2023
• Docket: A-1313-22
• Status: Unpublished

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court ."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-1313-22

ARIANNA HOLDING COMPANY, LLC,

Plaintiff-Appellant,

v.

RAYMOND R. DOOHALUK and MICHELE A. DOOHALUK, his wife,

Defendants-Respondents. ______________________________

Argued November 1, 2023 – Decided November 17, 2023

Before Judges Firko and Vanek.

On appeal from the Superior Court of New Jersey, Chancery Division, Mercer County, Docket No. F-001885-22.

Elliott J. Almanza argued the cause for appellant (Goldenberg, Mackler, Sayegh, Mintz, Pfeffer, Bonchi & Gill, attorneys; Keith A. Bonchi, of counsel and on the briefs; Elliott J. Almanza, on the briefs). Robert G. Swan argued the cause for respondents (Law Office of Robert G. Swan, LLC, attorneys; Robert G. Swan, on the brief).

PER CURIAM

Plaintiff Arianna Holding Company, LLC appeals from a November 9,

2022 order vacating the entry of a final default judgment of foreclosure of a tax

sale certificate against defendants Raymond and Michele Doohaluk and a

January 3, 2023 order dismissing plaintiff's complaint with prejudice . We

affirm.

We discern the following relevant facts and procedural history from the

record before the trial court. Since 1985, defendants have owned the subject

property located in Hamilton Township. Plaintiff's assignor, Phoenix Funding,

Inc., (Phoenix) purchased a tax sale certificate representing the unpaid 2019 real

estate taxes and sewer charges on the property. In January 2022, Phoenix sent

defendants several notices of intent to foreclose. Defendants did not respond to

the notices or pay the debt.

On March 4, 2022, Phoenix filed a complaint against defendants. On June

9, 2022, an order was entered allowing Arianna Holding Company, LLC to

substitute for Phoenix as plaintiff in the litigation.

A-1313-22 2 On August 25, 2022, a default judgment of foreclosure was entered against

defendants. On September 8, 2022, defendants received a copy in the mail and

then retained an attorney.

On September 23, 2022, defendants filed a motion to vacate the judgment

through their counsel. The moving papers included a certification from

Raymond1 stating that he suffers from multiple medical conditions including an

inoperable brain tumor and multiple sclerosis. Raymond certified he is a thirty-

year insulin-dependent diabetic and has attended innumerable medical

appointments. He has also spent significant time in the hospital and in

rehabilitation centers to relearn speech and motor skills that had been impacted

by his brain tumor. Raymond has continued to receive ongoing treatment for

numerous complications caused by the brain tumor and certified that his mental

condition is "tenuous at best." He also certified to being permanently unable to

function efficiently and "barely able to cope" with daily living. Raymond was

sixty-seven years old at the time he executed his certification.

Raymond stated he did not recall being formally served with legal

documents commencing this litigation. Although both defendants acknowledge

1 Since defendants share a surname, we refer to them individually by their first names for clarity of the record and ease of the reader. By doing so, we intend no disrespect. A-1313-22 3 at some point they received notice, Raymond certified the first time he had

knowledge that the foreclosure proceeding concerned their thirty-seven year

residence was upon receipt of the default judgment on September 8, 2022.

Raymond believed the previous notices pertained to a separate tax foreclosure

action involving his deceased parents' residence.

Raymond certified that at all times defendants had the funds necessary to

pay off the tax sale certificate but they did not receive notice of a final date on

which they had to pay the taxes or a specific amount due. Raymond stated that

defendants offered to pay all amounts necessary to make plaintiff whole should

the default judgment be vacated, including counsel fees.

Plaintiff opposed the motion and asserted that defendants were served

with the complaint along with other notices. According to plaintiff, Michele

signed several certified mailings and the regular mail sent to defendants was not

returned to plaintiff as undeliverable. Both defendants disputed signing for any

certified mail.

Following argument on November 4, 2022, the trial court rendered an oral

decision granting defendants' motion to vacate the final judgment. The court

found defendants were served with the notices regarding this action since the

record established service was accomplished by regular and certified mail.

A-1313-22 4 However, the court found defendants had satisfied their burden to justify

vacating the judgment due to their difficulties in handling daily living caused by

Raymond's medical issues and their confusion between the two pending

foreclosure matters. The court found that the predicates for vacating the default

judgment under Rule 4:50-1(a) and (f) were satisfied.

On November 9, 2022, the trial court memorialized its decision in a

written order which vacated the judgment, gave defendants ten days to pay the

outstanding taxes owed on the property, and directed defendants to reimburse

plaintiff’s counsel fees within twenty-one days. Defendants complied with the

order. On January 3, 2023, the court entered an order of involuntary dismissal

with prejudice pursuant to Rule 4:64-6(b).

On appeal, plaintiff argues that the trial court erred in vacating the default

judgment under Rule 4:50-1(a) based upon excusable neglect and Rule 4:50-1(f)

exceptional circumstances. Plaintiff further asserts the court erred in granting

defendants equitable relief based on "unclean hands" because they

misrepresented their knowledge of the foreclosure proceedings to the court.

N.J.S.A. 54:5-87 allows the filing of an application to vacate a judgment

entered in an action to foreclose the right of redemption within three months

from entry of the judgment. BV001 REO Blocker, LLC v. 53 W. Somerset St.

A-1313-22 5 Props., LLC, 467 N.J. Super. 117, 128 (App. Div. 2021) ("We have

interpreted N.J.S.A. 54:5-87 to permit relief from judgment, within three

months, for any reason enumerated in Rule 4:50-1. . . ."). Defendants' motion

to vacate the default judgment was filed on September 25, 2022, within the three

month statutory deadline.

We review a motion to vacate a final judgment for abuse of discretion.

U.S. Bank Nat'l Ass'n v. Guillaume, 209 N.J. 449, 467 (2012). A trial court's

determination under Rule 4:50-1 "warrants substantial deference, and should not

be reversed unless it results in a clear abuse of discretion." Ibid. "The Court

finds an abuse of discretion when a decision is 'made without a rational

explanation, inexplicably departed from established policies, or rested on an

impermissible basis.'" Id. at 467-68 (quoting Iliadis v. Wal-Mart Stores, Inc.,

191 N.J. 88, 123 (2007)).

"A motion to vacate default judgment implicates two oft-competing goals:

resolving disputes on the merits, and providing finality and stability to

judgments." BV001, 467 N.J. Super. at 123. In order to balance these goals,

the court must approach opening default judgments "with great liberality, and

every reasonable ground for indulgence is tolerated to the end that a just result

A-1313-22 6 is reached." Marder v. Realty Constr. Co., 84 N.J. Super. 313, 319 (App. Div.

1964).

To achieve this end, the burden to prove the right to relief rests with the

movant, "[a]ll doubts, however, should be resolved in favor of the parties

seeking relief." Mancini v. EDS ex rel. N.J. Auto. Full Ins. Underwriting Ass'n,

132 N.J. 330, 334 (1993). "Ultimately, 'equitable principles' 'should . . . guide[]'

a court's decision to vacate a default judgment." BV001, 467 N.J. Super. at 124

(alteration in original) (quoting Hous. Auth. of Morristown v. Little, 135 N.J.

274, 283 (1994)).

After a careful review of the record and applicable law, we conclude that

the trial court's order vacating the default judgment of foreclosure was not an

abuse of discretion. Rule 4:50-1(a) allows for relief from a judgment where

there is "mistake, inadvertence, surprise, or excusable neglect." We have

defined excusable neglect as "a situation where the default was 'attributable to

an honest mistake that is compatible with due diligence or reasonable

prudence.'" Romero v. Gold Star Distrib., LLC, 468 N.J. Super. 274, 298 (App.

Div. 2021) (quoting U.S. Bank, 209 N.J. at 468).

In granting relief to defendants, the trial court relied upon our decision in

Bergen-Eastern Corp. v. Koss, 178 N.J. Super. 42 (App. Div. 1981). In Bergen-

A-1313-22 7 Eastern, a final judgment was entered which precluded the defendant's right of

redemption and vested fee simple title in the plaintiff. Id. at 44. The defendant

was a seventy-four-year-old widow who had a history of psychiatric problems

with several hospitalizations for mental illness. Id. at 45. The trial judge did

not find the defendant was incompetent but concluded the defendant's inaction

was the result of inadvertence, mistake or excusable neglect because she failed

to understand the importance of the foreclosure action. Id. at 46. The trial judge

entered an order vacating the judgment on the condition that the defendant pay

the outstanding balance. Ibid. On appeal, we affirmed and determined the trial

court did not abuse its discretion in finding excusable neglect under these

circumstances pursuant to Rule 4:50-1(a). Ibid.

Likewise, the trial court here concluded the standard of excusable neglect

under Rule 4:50-1(a) was satisfied without finding that the proofs established

Raymond was incompetent. Plaintiff mistakenly concludes the trial court's

finding of excusable neglect was improper since defendants did not offer expert

opinion that Raymond was incompetent. See, e.g., In re Conroy, 98 N.J. 321,

382-83 (1985) (establishing that the inability to "understand the information

conveyed" due to a medical condition is an example of incompetence under the

A-1313-22 8 law). We disagree and reject plaintiff's argument that the trial court abused its

discretion in relying on our prior decision in Bergen-Eastern.

Other decisions of this court support the trial court's determination that

defendants' neglect was excusable under the circumstances. See Tradesmens

Nat'l Bank & Tr. Co. v. Cummings, 38 N.J. Super. 1, 5 (App. Div. 1955). In

Tradesmens, the seventy-seven-year-old defendant was mourning his wife's

death and helping his son recover from brain surgery when he was served with

the plaintiff's complaint. Id. at 4. The defendant did not file an answer since he

thought that the complaint pertained to other tax foreclosure matters against his

real estate business and his mind was preoccupied with personal challenges.

Ibid. We concluded that the trial court did not abuse its discretion by finding

excusable neglect sufficient to vacate the default judgment based upon the

multitude of tax foreclosure documents received coupled with the defendant's

mental state. Id. at 5.

Similar to the circumstances before us in Tradesmens, defendants here

were juggling multiple health issues as well as other tax foreclosure

proceedings. Plaintiff did not oppose the facts set forth in Raymond's

certification with any contrary proofs, and submitted at oral argument before the

trial court that its position would not be altered if medical records substantiating

A-1313-22 9 Raymond's condition were provided. Plaintiff has not established acceptance of

Raymond's unopposed certification was so offensive to the interests of justice

that we are compelled to set aside the trial court's discretionary determination. 2

We also conclude that the trial court did not abuse its discretion in

granting defendants relief under Rule 4:50-1(f). Subsection (f) allows a

judgment to be vacated for "any other reason justifying relief from the operation

of the judgment or order" when exceptional circumstances are present.

Baumann v. Marinaro, 95 N.J. 380, 394 (1984). "Our courts have long adhered

to the view that subsection (f)'s boundaries 'are as expansive as the need to

achieve equity and justice.'" Ridge at Back Brook, LLC v. Klenert, 437 N.J.

Super. 90, 98 (App. Div. 2014) (quoting Court Inv. Co. v. Perillo, 48 N.J. 334,

341 (1966)). In BV001, we reversed and remanded a trial court order denying

the defendant's request to vacate under Rule 4:50-1(f), finding the trial court

2 Plaintiff does not oppose defendants' assertion that they had the funds to pay the balance owed on the tax sale certificate and did in fact make the payment immediately after the default judgment was vacated and does not argue that there is no meritorious defense to the foreclosure action as required to obtain relief under Rule 4:50-1(a). See Hous. Auth. of Morristown, 135 N.J. at 284; BV001, 467 N.J. Super. at 125 n. 3 (stating that the requirement of a meritorious defense ensures that there will be a different outcome achieved by vacating the default, and that "[c]ertainly, redemption would change the result otherwise achieved by default").

A-1313-22 10 "discounted the equitable principles that favor granting the motion, mistakenly

concluding that if defendant lacked a defense to the tax sale or the right to

foreclose, defendant was not entitled to relief from the judgment and to a chance

to redeem." BV001, 467 N.J. Super. at 124, 130.

The extraordinary circumstances in the motion record before the trial

court are a sufficient basis for application of Rule 4:50-1(f). The record

establishes that defendants owned and lived in the property for nearly thirty-

seven years, and that a unique combination of medical issues and confusion over

two separate foreclosure proceedings in the same general time frame warranted

equitable relief.

Defendants' promptness in moving for relief after receipt of the judgment

also supports their request. "The competing goal of promoting finality does not

loom so large when the ink has barely dried on the final judgment. At that early

stage, 'a plaintiff's expectations regarding the legitimacy of the judgment and

the court's interest in the finality of judgments are at their nadir.'" BV001, 467

N.J. Super. at 127 (quoting Reg'l Constr. Corp. v. Ray, 364 N.J. Super. 534, 545

(App. Div. 2003)).

We reject plaintiff's assertion that defendants are not entitled to equitable

relief because they come to the court with "unclean hands." Plaintiff argues

A-1313-22 11 defendants' assertions that they confused the two properties facing foreclosure

are specious since the complaints were docketed under different captions,

prosecuted by different firms, were finalized on different dates, and contained a

header bearing the property address. We conclude, under the liberal standard

governing this application, the trial court did not abuse its discretion in accepting

Raymond's certification setting forth his substantial medical issues and resulting

difficulty coping with daily life caused defendants to be confused about the

notices from the two foreclosure proceedings.

The trial court's entry of the order of involuntary dismissal was consistent

with New Jersey law. Rule 4:64-6(b) requires that the complaint be dismissed

after the property has been fully redeemed. The trial court's decision to

condition vacating the judgment on full redemption and payment of plaintiff's

counsel fees and costs was proper based upon defendants' voluntary submission

and our prior decisions. See Reg'l Constr., 364 N.J. Super. at 543. Neither party

has raised an argument that the payment terms were contrary to law. 3 The

3 We have considered the recent decision of the Supreme Court of the United States in Tyler v. Hennepin Cnty., 598 U.S. 631, 635-36 (2023), where the Court addressed the constitutionality of redemption of certain tax sale certificates. The constitutional analysis in Tyler relates to the value assigned to the tax sale certificate under the Takings Clause and is not applicable to the facts of this case. Ibid.

A-1313-22 12 involuntary dismissal with prejudice was statutorily required since defendants

fully redeemed the property after the default judgment was vacated.

Affirmed.

A-1313-22 13