Court Opinion

ID: 2810114
Source: CourtListenerOpinion
Date Created: 2015-06-19 14:12:04.59631+00
Date Added: 2024-06-11T12:47:18.267179
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
                APPROVAL OF THE APPELLATE DIVISION

                                    SUPERIOR COURT OF NEW JERSEY
                                    APPELLATE DIVISION
                                    DOCKET NO. A-2770-13T1

EWING OIL, INC.,

      Plaintiff-Respondent,             APPROVED FOR PUBLICATION

                                              June 19, 2015
v.
                                          APPELLATE DIVISION
JOHN T. BURNETT, INC., HENRY A.
JACKSON and C&H TIRE SERVICE
CENTER, INC.,

      Defendants,

and

ESTATE OF JOHN T. BURNETT,1

     Defendant-Appellant.
_______________________________

          Submitted March 16, 2015 - Decided June 19, 2015

          Before   Judges     Lihotz,   St.     John     and
          Rothstadt.

          On appeal from Superior Court of New Jersey,
          Law Division, Monmouth County, Docket No.
          DJ-154160-12.

          Blumberg & Rosenberg, P.A., attorneys for
          appellant (Henry A. Loeb, on the briefs).

1
     We have modified the caption to reflect the facts of
record. Specifically, John T. Burnett, an original defendant in
this action passed away on August 13, 2012.     His widow, Kathy
Burnett, was appointed executrix of his estate on April 24,
2013. The Estate moved to vacate a foreign judgment entered by
confession against John T. Burnett on December 6, 2013.
            Duane Morris, LLP, attorneys for respondent
            (Christopher L. Soriano, of counsel and on
            the brief).

       The opinion of the court was delivered by

LIHOTZ, P.J.A.D.

       This matter examines the enforceability of a sister-state

judgment entered pursuant to a cognovit provision contained in a

guaranty agreement against individual guarantors of a corporate

debt.    Plaintiff, Ewing Oil Co., Inc., a Maryland Corporation,

sued    John     T.     Burnett,     Inc.       (JTB,     Inc.),     a     New     Jersey

corporation,      for     payment     under      a      supply    agreement.           The

corporate      obligations         were     unconditionally          guaranteed         by

defendants     John     T.   Burnett,     Henry      A.   Jackson,       and   C&H    Tire

Service Center, Inc. (C&H), which collectively operated a retail

gasoline service station with JTB, Inc. in Monmouth County.

       Summary    judgment      was       entered       against    JTB,        Inc.    and

plaintiff confessed judgment against the guarantors (Maryland

judgment).       Thereafter, plaintiff initiated an action in New

Jersey to record the Maryland judgment for purposes of seeking

its enforcement.        New Jersey recorded the judgment by default on

July 24, 2012.

       Burnett's estate (the Estate), through its executrix, moved

to vacate the default judgment against Burnett, pursuant to Rule

4:50-1(d), asserting pre-judgment notice was not waived and the

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judgment's      domestication       in    New   Jersey     violated    due   process.

The    Estate    also    sought    to    collaterally      attack     the    judgment,

maintaining        New   Jersey     had     plenary      authority     to     exercise

jurisdiction over its enforcement, pursuant to the contract's

forum selection clause.

       The Law Division denied the motion and the Estate filed

this   appeal,      reasserting     its    challenges       against    New    Jersey's

recognition of the foreign judgment.                   Following review of the

record and applicable law, we reject these arguments and affirm.

       These facts are found in the motion record and are not

disputed.       On March 18, 2009, plaintiff and JTB, Inc. executed a

ten-year commercial supply agreement (CSA), in which plaintiff

agreed to supply gasoline and other petroleum products to JTB,

Inc.    Burnett solely owned JTB, Inc., and Jackson solely owned

C&H.     Together the two were partners in the gas station in

Monmouth County.

       The   CSA    included      several       provisions    granting       plaintiff

security for JTB, Inc.'s payment.                 Aside from a $20,000 deposit

to be applied against any outstanding sums owed, plaintiff was

granted a security interest in                  any products or equipment it

provided to or installed on the gas station's premises.                           With

respect to the collateral, plaintiff obtained rights of entry

and    repossession       "in     addition      to   all    rights    and     remedies

                                            3                                 A-2770-13T1
available to [plaintiff] as a secured party under the New Jersey

Uniform Commercial Code and as are otherwise available to [it]

at law or in equity."

    The    CSA   also     contained     the       following    forum   selection

clause:

                This Agreement shall be governed and
           construed in accordance with the laws of the
           State of Maryland and the courts of the
           State of Maryland shall have exclusive
           jurisdiction      over     any    claims    or
           controversies     which    arise   under  this
           Agreement.     However, the courts of the
           [S]tate    of     New    Jersey   shall   have
           jurisdiction     in    connection    with  any
           collection    or    enforcement   action  that
           [plaintiff], at its option, may elect to
           bring. . . .

    Further      assurances      were       included    in    an    accompanying

suretyship contract, executed by the individual and corporate

guarantors (Guaranty).         The scope of the Guaranty was broad and

encompassed all amounts due and owing by JTB, Inc. under the CSA

for "payments, charges, expenses[,] and costs of every kind and

nature"   arising   out   of    or   from    the    CSA.      The   Guaranty   was

executed on the same day as the CSA.

    The   Guaranty      also   contained      a    cognovit   provision,    which

stated:

                3.   Waiver of Notices, Confession of
           Judgment, Jurisdiction.    Without notice to
           Guarantor, [plaintiff] may waive or modify
           any of the terms of the Agreement relating
           to   [JTB,   Inc.]'s    performance   without

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           discharging      or     otherwise      affecting
           Guarantor's        obligations        hereunder.
           Guarantor      waives    demand,      diligence,
           presentment, protest[,] and notice of every
           kind.      Guarantor acknowledges that the
           Agreement is governed by Maryland law and
           establishes Maryland as the appropriate
           jurisdiction for any actions arising out of,
           or relating to, the Agreement.         Guarantor
           also hereby acknowledges, consents[,] and
           agrees that the provisions of this Guaranty
           and the rights of all parties mentioned
           herein shall be governed by the laws of the
           State   of   Maryland   and    interpreted   and
           construed in accordance with such laws, and
           any court of competent jurisdiction of the
           State of Maryland shall have jurisdiction in
           any proceeding instituted to enforce this
           Guaranty and any objections to venue are
           hereby waived.     However, the courts of the
           [S]tate of New Jersey may have jurisdiction
           in connection with any enforcement and/or
           collection action that [plaintiff], at its
           sole option, may elect to bring in that
           state.       GUARANTOR    FURTHER    IRREVOCABLY
           AUTHORIZES AND EMPOWERS ANY ATTORNEY-AT-LAW
           OR   CLERK    OF   ANY   COURT    OF   COMPETENT
           JURISDICTION OF THE STATE OF MARYLAND, OR
           ELSEWHERE, TO APPEAR AT ANY TIME FOR
           GUARANTOR IF ANY ACTION BROUGHT AGAINST
           GUARANTOR ON THIS GUARANTY TO CONFESS OR
           ENTER JUDGMENT AGAINST GUARANTOR FOR HIS
           OBLIGATIONS UNDER THIS GUARANTY, INCLUDING
           COURT COSTS AND REASONABLE ATTORNEYS' FEES.

       JTB, Inc. breached its duties and obligations under the

CSA.    On June 3, 2011, plaintiff issued a notice of default and

termination of the CSA to JTB, Inc. and the guarantors.             The

notice stated $18,205.45 was to be remitted within ten days or

plaintiff would "commence pursuit of available legal remedies."

Neither JTB, Inc. nor the guarantors made payment.       By November

                                  5                           A-2770-13T1
30, 2011, the amount due increased to $225,197.34.                Plaintiff

commenced an action in the Circuit Court for Washington County,

Maryland against JTB, Inc. for the outstanding debt along with

attorney's fees.

      On December 6, 2011, plaintiff obtained a default judgment

against JTB, Inc. for $258,976.94.              The Maryland court also

entered a judgment by confession against Burnett and the other

guarantors on the same day.       Personal post-judgment service of

the confessed judgment was effectuated on Burnett; its entry was

not opposed.

      The Maryland judgment was recorded in New Jersey on July

24,   2012,   under   DJ-154160-12.       On   August   13,   2012,   Burnett

passed away.     His widow was named executrix.          The Estate moved

to vacate entry of the foreign judgment pursuant to Rule 4:50-

1(d), challenging its validity and enforceability.

      Following oral argument, Judge Thomas F. Scully denied the

motion, finding the Maryland judgment was entered in accordance

with Maryland procedure and law; Burnett had a fair opportunity

to challenge the validity of the judgment in Maryland, after its

entry, but failed to timely do so; and, in light of the Full

Faith and Credit clause, New Jersey's recognition of a foreign

judgment, entered pursuant to a valid and enforceable cognovit

                                      6                               A-2770-13T1
provision, did not violate due process.                 An order was entered on

January 29, 2014.        This appeal followed.

      On appeal, the Estate renews the arguments presented before

the   Law   Division,     stating:     (1)    the   absence     of    pre-judgment

notice violates basic due process and cannot be remedied by an

opportunity to a post-judgment hearing;                 (2) pre-judgment notice

rights under the cognovit provision of the surety agreement were

not voluntarily, intelligently, and knowingly waived; and (3)

New Jersey is the only forum with jurisdiction                        to determine

compliance with due process requirements and the enforceability

of the confession of judgment clause, thus allowing the Estate

to      assert   available       meritorious        defenses         against        its

enforcement.

      The issues on appeal require legal determinations, subject

to our de novo review.             In doing so, we do not defer to "'a

trial     court's      interpretation        of   the    law    and     the      legal

consequences     that    flow   from   established        facts.'"      Estate       of

Hanges v. Metro. Prop. & Cas. Ins. Co., 202 N.J. 369, 382 (2010)

(brackets omitted) (quoting Manalapan Realty, L.P. v. Twp. Comm.

of Manalapan, 140 N.J. 366, 378 (1995)).

      Whether    the    Maryland    judgment      may    be   registered      in    New

Jersey implicates the Full Faith and Credit clause of the United

States Constitution, which mandates "Full Faith and Credit shall

                                        7                                     A-2770-13T1
be given in each State to the public Acts, Records, and judicial

Proceedings of every other State."                U.S. Const. art. IV, § 1.

The   clause     requires   a   foreign       judgment   "properly    entered     in

accordance with local procedure is entitled to full faith and

credit in any other state provided . . . the judgment is not

entered in violation of due process of law."                   Sec. Ben. Life

Ins. Co. v. TFS Ins. Agency, Inc., 279 N.J. Super. 419, 424

(App.   Div.)    (citation      and   internal    quotation    marks   omitted),

certif. denied, 141 N.J. 95 (1995).                  See N.J.S.A. 2A:49A-27.

Thus, any judgment properly executed in a foreign state, which

complies with the requirements of the due process clause is

entitled to full faith and credit in New Jersey.                       See In re

Triffin, 151 N.J. 510, 524 (1997).              On the other hand, a foreign

judgment, entered without providing the necessary protections

safeguarded by the Fourteenth Amendment of the United States

Constitution and the fundamental rights clause of Article 1,

paragraph 1 of the New Jersey Constitution, may not be enforced.

See generally, Greenberg v. Kimmelman, 99 N.J. 552, 568 (1985)

("[A]rticle 1, paragraph 1, like the [F]ourteenth [A]mendment,

seeks   to   protect    against       injustice    and    against    the   unequal

treatment of those who should be treated alike.                To this extent,

[A]rticle    1   safeguards      values   like    those    encompassed     by    the

principles of due process and equal protection.").

                                          8                                A-2770-13T1
    When viewed through the prism of due process protections, a

foreign judgment will not be entitled to full faith and credit

in New Jersey if a defendant can demonstrate the forum state

lacked personal or subject matter jurisdiction, Tara Enters.,

Inc. v. Daribar Mgt. Corp., 369 N.J. Super. 45, 56 (App. Div.

2004),    or    if    a     defendant     was       denied    adequate     notice     and    a

reasonable opportunity to be heard.                          Sonntag Reporting Serv.,

Ltd. v. Ciccarelli, 374 N.J. Super. 533, 538 (App. Div. 2005).

"[A]bsent such due process defenses, . . . litigation pursued to

judgment in a sister state is conclusive of the rights of the

parties    in       the    courts   of    every      state     as    though   adjudicated

therein."           Ibid. (citing DeGroot, Kalliel, Traint & Conklin,

P.C. v. Camarota, 169 N.J. Super. 338, 343 (App. Div. 1979)).

See also Arnold, White & Durkee, P.C. v. Gotcha Covered, Inc.,

314 N.J. Super. 190, 201 (App. Div.) (stating New Jersey courts

are "obliged to recognize a foreign money judgment, unless the

defendant       demonstrates        that    the       foreign       jurisdiction     lacked

personal jurisdiction of defendant, the judgment was obtained by

fraud[,]       or    was    entered      contrary      to     due    process"),     certif.

denied, 157 N.J. 543 (1998).

    Although          confessed       judgments        are    viewed      with   "judicial

distaste"      in     New   Jersey,      Ledden      v.    Ehnes,    22   N.J.    501,    510

(1956),    constitutional           and    public         policy    challenges      against

                                                9                                   A-2770-13T1
their     enforcement        have     been     advanced           and     found         legally

untenable.        See United Pac. Ins. Co. v. Estate of Lamanna, 181

N.J. Super. 149, 155-56 (Law Div. 1981) ("New Jersey courts have

long recognized foreign judgments by confession and have held

that they are entitled to full faith and credit. . . .                                          No

public policy [in New Jersey] denies recognition to a foreign

judgment by confession.").             Rather, the law is clear: "Entry of

judgment based upon a warrant to confess judgment does not . . .

necessarily       offend     due    process,       as     long    as    the       due   process

requirements of reasonable notice and opportunity to be heard

are knowingly and voluntarily waived."                     Tara Enters., supra, 369

N.J. Super. at 56 (citing Lamanna, supra, 181 N.J. Super. at

156).     See also D.H. Overmyer Co. v. Frick Co., 405 U.S. 174,

187, 92 S. Ct. 775, 783, 31 L. Ed. 2d 124, 135 (1972) (holding

confessed     judgments       are     "not,        [per    se],        violative        of    the

Fourteenth    Amendment        due    process"          protections,         as    reasonable

notice and opportunity to be heard could be waived).

      Maryland Court Rule 2-611 governs confessed judgments in

that state.       The rule provides such judgments "may be entered by

the     circuit    court      clerk    upon        the     filing       of    a     complaint

accompanied       by   the    original        or     a    copy     of     the      instrument

authorizing the confessed judgment and an affidavit specifying

                                          10                                            A-2770-13T1
the   amount   due   and   stating    the   address   of   the       defendant."

Schlossberg v. Citizens Bank, 341 Md. 650, 655-56 (1996).

           Upon entry of a judgment by confession, the
           clerk is required to notify the defendant of
           the entry of judgment and of the deadline
           for filing a motion to "open, modify or
           vacate" the judgment. Md. Rule 2-611(b).

                If the defendant so moves, the circuit
           court must determine whether there is a
           "substantial and sufficient basis for an
           actual controversy as to the merits of the
           action."    Md. Rule 2-611(d).     In other
           words, the court must determine whether the
           defendant has a potentially meritorious
           defense to the confessed judgment complaint.
           The court does not, however, decide the
           merits of the controversy at this stage.
           [PAUL V. NIEMEYER AND LINDA M. SCHUETT,
           Maryland Rules Commentary 466 (4th ed.
           2014)]. If the court finds that a basis for
           a defense exists, the rule requires the
           court to order that the confessed judgment
           be opened, modified, or vacated so that the
           defendant can file a responsive pleading to
           the plaintiff's complaint and the merits can
           be determined. Md. Rule 2-611(d).

           [Id. at 656.]

Applications to open, modify, or vacate entry of default must be

filed within sixty days of service.           See Md. Rule 2-611(d) & 2-

321(b)(1) ("A defendant who is served with an original pleading

outside of the State [of Maryland] but within the United States

shall file an answer within [sixty] days after being served.").

      Further,   Maryland    law     does   not   presuppose     a    waiver   is

valid.   In fact, Maryland Rule 2-611(b) requires the trial court

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to    determine,    among        other      things,    "the   pleadings      and    papers

demonstrate    a    factual           and   legal   basis     for   entitlement         to   a

confessed judgment."

       In this matter, the Estate suggests the motion judge erred

in concluding plaintiff fully complied with Maryland procedures

in entering its judgment against Burnett.                         However, the Estate

does not dispute the same complaint contained separate requests

for judgment against JTB, Inc. and to confess judgment against

the    guarantors.              The    pleading       appended      all    documentation

necessary to identify the rights and responsibilities of the

respective parties.              Plaintiff filed and served its complaint

against    JTB,     Inc.    and       the   other     defendants;     no    response         or

objection was filed.                  Once judgment was entered against the

corporation, plaintiff was free to request relief against the

guarantors.

       The Estate also suggests Burnett's waiver of pre-judgment

notice contained in the Guaranty was uncounseled and, therefore,

uninformed.       We cannot agree.

       There   is    no     statement          of     personal      knowledge      by     the

executrix stating whether Burnett consulted with legal counsel

prior to executing the CSA or Guaranty.                           Plaintiff certified

JTB, Inc. defaulted under the CSA and provided the documents

supporting     entry       of    judgment      against      it.      JTB,    Inc.       never

                                              12                                   A-2770-13T1
challenged   the   action   or   the    relief       sought.       Proof    of   the

Guaranty   and   its   execution   by       Burnett   was    also    provided      to

support judgment under the cognovit provision.

    Moreover, the Guaranty is clearly written and its waiver

provisions   are   boldly   identified,         as    is    the    confession     of

judgment clause.       Importantly, plaintiff's action was based on

the Guaranty, not the terms of its CSA with JTB, Inc.                      See Tara

Enters., supra, 369 N.J. Super. at 59 (holding a guarantee of a

note that contains a cognovit provision alone is insufficient to

permit confession of judgment against the guarantors).                     Further,

the provision contains a succinct statement that Maryland law

governs enforcement and that any attorney so appointed may enter

judgment against the guarantors.

    Maryland law provides:

           an evidentiary hearing to determine whether
           [the] defendant's waiver was voluntarily,
           knowingly, and intelligently made before a
           confessed judgment may be entered by the
           court.    Rather, the burden is on [the]
           defendant in its motion to vacate and in any
           hearing thereon to set forth fully the
           evidence showing either that the alleged
           amount owed had no basis in fact (e.g., was
           miscalculated) or that the agreement was not
           knowingly and voluntarily entered.

           [Atl. Leasing & Fin., Inc. v. IPM Tech.,
           Inc., 885 F.2d 188, 193 (4th Cir. 1989).]

    The Estate has failed to meet this burden.                    After reviewing

all the documents and considering the executor's certification,

                                       13                                  A-2770-13T1
we find no support for concluding Burnett's execution of the

Guaranty was involuntary or unknowing.

    We also reject the Estate's due process challenge.                      The

Maryland   judgment    was    entered    and    plaintiff   served    Burnett,

individually, as mandated by Maryland Rule 2-611(a).                 The post-

judgment process affords additional notice and an opportunity to

challenge the confessed judgment's validity within sixty days of

its entry.     This fully complies with the rigors of due process.

See Tara Enters., supra, 369 N.J. Super. at 56 (recognizing

"[i]n certain contexts . . . a post-judgment hearing may afford

the requisite due process").             Despite the availability of a

constitutionally      valid    post-judgment      procedure    to    challenge

entry of the judgment in Maryland, which could include whether

Burnett's waiver was knowing and voluntary, Burnett did not act

within the permitted sixty-day period.               Thereafter, plaintiff

properly     filed   its     complaint     to   domesticate    the    Maryland

judgment in New Jersey, attaching all requisite documents.

    Contrary to the Estate's contention, a waiver hearing is

not mandated prior to confessing judgment, so long as the waiver

provisions    are    clear    and   unambiguous.      See     Billingsley    v.

Lincoln Nat'l Bank, 271 Md. 683, 693 ("Overmyer cannot be read

to mandate a 'waiver hearing' prior to entry of a confessed

judgment and, insofar as one may be required thereafter, it was

                                      14                              A-2770-13T1
clearly available to [the] appellants at the hearing on their

motion to vacate.       No more is required.").

       In this state action to domesticate the Maryland judgment,

the   Estate   cannot      now   raise   substantive         claims    collaterally

attacking the enforceability of the cognovit provision or its

voluntary acceptance, as these issues could and should have been

presented in the Maryland post-judgment process.                    Sec. Ben. Life

Ins., supra, 279 N.J. Super. at 424.                  Burnett was given notice

of the judgment and had the right to petition the Maryland court

to open, modify, or vacate that judgment if a valid basis to do

so was presented.          See Md. Rule 2-611(d).               For reasons not

disclosed, he chose not to do so.2              Judge Scully's determination

of the validity of Burnett's waiver to pre-judgment notice and

declination to pursue post-judgment process must be upheld.                         Id.

at    426   (barring   a    defendant    from    raising       in     an   action    to

register a judgment "any of the issues that were, could[,] or

should have been litigated in the [foreign] action" resulting in

the judgment).

       Finally, the Estate alleges New Jersey was an express forum

set forth in the CSA, suggesting plaintiff "can neither delimit

New   Jersey's   plenary     jurisdiction       nor    its    availability      as    a

2
   We note this record contains no facts to support the Estate's
claim the Maryland court lacked personal jurisdiction to enter
the judgment against Burnett.

                                         15                                  A-2770-13T1
forum     for   collateral    attack    when    a    foreign    entity    seeks    to

utilize New Jersey's jurisdiction for enforcement."                      The Estate

is incorrect.

       The terms of the parties' agreement designates New Jersey

as    a    supplementary      forum    for      "collection       or   enforcement

action[s]" filed for domestication within its borders.                          As we

noted, review of a domesticated foreign judgment by our courts

is limited to whether the constitutional guarantee of notice and

a    hearing    has   been   satisfied.        See   Sontag,    supra,    374    N.J.

Super.     at    537.        Having    answered       that     question    in     the

affirmative,       we   reiterate      "[t]he       appropriate    forum    for     a

defendant to raise defenses to a claim is in the tribunal where

the judgment was rendered."           Ibid.

       Affirmed.

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