Court Opinion

ID: 6496455
Source: CourtListenerOpinion
Date Created: 2022-06-29 20:09:39.386648+00
Date Added: 2024-06-11T09:04:59.888508
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE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-3185-20

THE NATURE USA
CORPORATION and KRIEGER
GLOBAL LIMITED,

          Plaintiffs-Respondents,

v.

ZHONGGANG WANG, individually
and as a former officer and director
of THE NATURE USA CORP.,
A&E AMERICA, INC., CABINET
DEPOT, INC., EVERGREEN
CABINETRY, and ZEN
CABINETRY, LLC,

     Defendants-Appellants.
________________________________

                   Submitted June 8, 2022 – Decided June 28, 2022

                   Before Judges Hoffman, Whipple, and Geiger.

                   On appeal from the Superior Court of New Jersey, Law
                   Division, Middlesex County, Docket No. L-4109-17.

                   Susan C. Warnock, attorney for appellants.
            Foley & Lardner, LLP, attorneys for respondents (Anne
            B. Sekel, on the brief).

PER CURIAM

      Defendants Zhonggang Wang (Wang), A&E America, Inc. (A&E),

Cabinet Depot, Inc., Evergreen Cabinetry, and Zen Cabinetry, LLC,

(collectively defendants) appeal from a May 25, 2021 order denying their

motion to dismiss and vacate a judgment for lack of subject matter jurisdiction

given plaintiffs' corporate statuses. The trial court denied the motion because a

three-year delay was not reasonable, and defendants appeal asserting the trial

court erred in failing to consider that subject matter jurisdiction cannot be

waived. We vacate the May 2021 order and remand for a statement of reasons,

which should include analyses of reasonable timeliness under Rule 4:50-2 and

voidness for lack of subject matter jurisdiction under Rule 4:50-1.

      Wang was a director and president of plaintiff, The Nature USA

Corporation (Nature), which sells cabinetry imported from China. Nature was

incorporated in New Jersey on May 28, 2014, when plaintiff Krieger Global

Limited (Krieger) formed a shareholder agreement with defendant A&E to

govern Nature. A&E's board of directors installed Wang as CEO of Nature.

Plaintiffs fired Wang on August 19, 2016.

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      In July 2017, plaintiffs sued Wang, A&E, Cabinet Depot, Evergreen

Cabinetry, Zen Cabinetry, and twenty-five unidentified corporate entities,

pleading various counts of breach of contract, unjust enrichment, action on

account, breach of fiduciary duty, negligence, fraud, trespass to chattels, and

civil conspiracy. Plaintiffs alleged Wang misappropriated over $3 million in

inventory and made over 670 self-dealing sales to companies that he either

directed or owned. The complaint was properly served on all known defendants.

As to corporate status, the complaint specifically said that "Nature US was

incorporated under the laws of the State of New Jersey on or about May 28,

2014."

      All defendants failed to appear to challenge the complaint, and plaintiffs

moved for and secured an entry of default against defendants on March 2, 2018.

The court ordered a plenary hearing for damages in June. The court rescheduled

for July, all known parties received notice, and plaintiffs appeared and presented

evidence. The trial court entered a final default judgment on July 18, 2018, for

$5,741,294.99 plus interest, for which defendants were jointly and severally

liable. The judgment was served on defendants, and the same was docketed for

September 11, 2018. Plaintiffs sought to domesticate the judgment in New York

and served Wang and A&E with notice. Defendants' counsel attended the

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hearing, refused to enter an appearance on the record, and sought an

adjournment.

      In September 2019, defendants moved to vacate the July 2018 default

judgment under Rule 4:50-1 and included a proposed answer to plaintiffs'

complaint and counterclaims claiming excusable neglect under Rule 4:50-1(a)

and exceptional circumstances under Rule 4:50-1(f). The trial court denied the

motion as time barred by Rule 4:50-2 and determined that the motion under

subsections (a) and (f) of Rule 4:50-1 failed on the merits because attorney

carelessness and failing to retain counsel were not excusable neglect.       We

affirmed. Nature USA Corp. v. Wang, No. A-1551-19 (App. Div. Dec. 23, 2020)

(slip op. at 5-6).

      On February 22, 2021, defendants moved to vacate the July 2018 default

judgment as void under Rule 4:50-1(d) because neither Nature nor Krieger was

incorporated or authorized to do business in New Jersey when plaintiffs

commenced the underlying action in July 2017; thus, neither plaintiff had

capacity to bring the claim, and the court lacked subject matter jurisdiction to

decide it. Plaintiffs opposed, asserting various facts to show that Krieger is a

foreign company who has no physical presence or business in New Jersey and

that Nature was reinstated as a New Jersey corporation as of April 2021 .

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Nature's corporate charter was revoked on December 16, 2016, for failure to file

two consecutive annual reports with the New Jersey State Treasurer. Krieger

was the majority shareholder of Nature, but a foreign corporation. Krieger is

not registered to do business in New Jersey, but plaintiffs assert that Krieger

was not required to register to file a complaint. Plaintiffs blame Wang for his

failure to maintain Nature's corporate status in 2016, but Nature did not reinstate

its corporate charter until April 1, 2021.

      On May 25, 2021, the court denied defendants' motion to dismiss the

action and vacate the judgment for lack of subject matter jurisdiction, with only

this statement:

            This motion is essentially a motion for reconsideration
            of a final offer that is already [three] years out of time.
            Notwithstanding R. 4:49-2, per R. 4:50-2, the motion
            had to be made within a reasonable time, [three] years
            is not reasonable.

      Defendants appealed and argued that the trial court erred in denying their

motion to vacate because its stated reasons were not sufficient under Rule 1:7-

4(a) and because the court did not consider that subject matter jurisdiction

cannot be waived and can be raised at any time. We agree.

      We review de novo whether a court has subject matter jurisdiction as a

question of law, Beaver v. Magellan Health Servs., Inc., 433 N.J. Super. 430,

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437-38 (App. Div. 2013), but we review the trial court's decision on a motion to

vacate a default judgment for abuse of discretion and accord it "substantial

deference[,]" Deutsche Bank Nat'l Tr. Co. v. Russo, 429 N.J. Super. 91, 98 (App.

Div. 2012) (quoting US Bank Nat'l Ass'n v. Guillaume, 209 N.J. 449, 467

(2012)); see also Hous. Auth. of Morristown v. Little, 135 N.J. 274, 283 (1994);

Carrington Mortg. Servs., LLC v. Moore, 464 N.J. Super. 59, 67 (App. Div.

2020). We will "find[] an abuse of discretion when a decision [was] 'made

without a rational explanation, inexplicably departed from established policies,

or rested on an impermissible basis.'" Guillaume, 209 N.J. at 467-68 (quoting

Iliadis v. Wal-Mart Stores, Inc., 191 N.J. 88, 123 (2007)).

      "When a trial court issues reasons for its decision, it 'must state clearly

[its] factual findings and correlate them with relevant legal conclusions, so that

parties and the appellate courts [are] informed of the rationale underlying th[ose]

conclusion[s].'" Avelino-Catabran v. Catabran, 445 N.J. Super. 574, 594-95

(App. Div. 2016) (alterations in original) (quoting Monte v. Monte, 212 N.J.

Super. 557, 565 (App. Div. 1986)). Without such reasons, a reviewing court

does not know whether the judge's decision is supported by the facts and law or

is the product of arbitrary action resting on an impermissible basis. See Monte,

212 N.J. Super. at 564-65.

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      Because the trial court did not provide a statement of reasons that

addressed the issues raised, we cannot determine whether the court's decision

was an abuse of discretion or an incorrect conclusion of law. See In re Tr.

Agreement Dated Dec. 20, 1961, ex rel. Johnson & Hoffman, Lienhard & Perry,

399 N.J. Super. 237, 253-54 (App. Div. 2006), aff'd, 194 N.J. 276 (2008). Thus,

we are constrained to vacate the May 2021 order and remand for such a

statement of reasons on the reasonable time as it relates to the motion to vacate

for lack of subject matter jurisdiction.

      We acknowledge that defendants could have raised subject matter

jurisdiction issues earlier because of either personal knowledge or public

accessibility to corporate entity statuses.       Nonetheless, subject matter

jurisdiction is critical in providing legitimate judgments, which is why it may

never be waived. See Murray v. Comcast Corp., 457 N.J. Super. 464, 469-70

(App. Div. 2018). An adequate statement of reasons should acknowledge both

timing and merits, which the trial court provided in the previous motion to vacate

the July 2018 judgment and which many trial courts have provided in motions

to vacate on various grounds. We note, however, that the trial court maintains

its discretion in how to provide an adequate statement of reasons. In re Tr.

Agreement Dated Dec. 20, 1961, 399 N.J. Super. at 253.

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      Rule 4:50-1 offers several grounds for relief from final judgment on a

motion to vacate, including subsection (a)'s relief for excusable neglect and

subsection (d)'s relief when a judgment or order is void. All motions to vacate

under Rule 4:50-1 must be filed within a "reasonable time," R. 4:50-2, regardless

of the motion's grounds. See Citibank, N.A. v. Russo, 334 N.J. Super. 346, 353

(App. Div. 2000). Under Rule 4:43-3, where a default judgment has been

entered, the court may set the judgment aside "in accordance with Rule 4:50[;]"

thus, within a "reasonable time," R. 4:50-2. "[I]f a judgment is void and,

therefore, unenforceable, it is a particularly worthy candidate for relief, provided

that the time lapse between the entry of the judgment and the motion to vacate

the judgment has not been unreasonable and an innocent third party's rights have

not intervened." Coryell, LLC v. Curry, 391 N.J. Super. 72, 80 (App. Div.

2006).

      The trial court's two sentences did not make any reasonability of timing

findings under Rule 4:50-2. Moreover, the statement did not address any fact

or law relating to subject matter jurisdiction, including whether Krieger's status

as a foreign corporation or Nature's retroactive incorporation status in New

Jersey provide jurisdiction in this case. Finally, it failed to acknowledge the

relationship between Rule 4:50-2 and Rule 4:50-1. The trial court, on remand,

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shall provide an analysis of Rule 4:50-2 under the totality of the circumstances,

which connects to whether the court can vacate under Rule 4:50-1(d) for

voidness on jurisdictional grounds. See Romero v. Gold Star Distrib., LLC, 468

N.J. Super. 274 (App. Div. 2021).

                   Rule 4:50-2 provides the time frame within
            which a motion seeking relief under Rule 4:50-1 must
            be filed. The rule states "[t]he motion shall be made
            within a reasonable time . . . ." R. 4:50-2 . . . . [A]
            reasonable time is determined based upon the totality
            of the circumstances . . . .

                  ....

                  [Romero did] not involve a defendant who was
            unaware of the pending litigation, of a request to enter
            default, or of entry of a judgment and an amended
            judgment. It also [did] not involve a defendant who
            was deprived of an opportunity to defend. . . .

                  Even if the original judgment was defective
            because of an improper or partially named defendant,
            [defendant] had to file a motion to vacate it within a
            reasonable time. . . . [T]he lapse of 359 days after
            [defendant] learned of the matter was not reasonable
            under the totality of the circumstances in this case. . . .

            [Ibid. at 296-97 (citations omitted) (first and second
            alterations in original).]

      Despite finding the lapse unreasonable, in Romero we followed with a

separate discussion of Rule 4:50-1(a)'s excusable neglect standard and the

applicable facts, finding no abuse of discretion in the motion court finding no

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                                        9
excusable neglect. Id. at 297-99. Finally, in Romero we addressed Rule 4:50-

1(d) separately, agreeing with the motion court that defendant did not show

improper service, id. at 299; thus, "because service of process gave sufficient

notice to defendant of the lawsuit, the judgment [was] not void, and the motion

court properly denied defendant's request for relief under Rule 4:50-1(d)[.]" Id.

at 301. In its summary, however, the court only noted that it affirmed the denial

of the motion to vacate under Rule 4:50-1(d) and did not note the untimeliness.

See id. at 305.

      Even before Romero, courts made it clear that raising a jurisdictional

issue, like service of process, will not necessarily warrant vacating a judgment .

M&D Assocs. v. Mandara, 366 N.J. Super. 341, 351-52 (App. Div. 2004).

Moreover, finding a judgment void for any reason will not necessarily warrant

vacating the judgment. See Citibank v. Russo, 334 N.J. Super. at 353 (finding

that "[e]ven if a judgment is void (and [the court was] satisfied for the reasons

previously stated that the default judgment against defendant was not void), a

motion to vacate the judgment still must be 'made within a reasonable time.' R.

4:50-2.").

      M&D Associates' two-part analysis noted that "defendants ultimately

challenge[d] the service, which [was] a jurisdictional issue, but the right to

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                                       10
attack the judgment on [that] basis nevertheless may be waived if not brought

within a reasonable time." 366 N.J. Super. at 351-52. The M&D Associates

court first found the motion was brought within a reasonable time "under the

circumstances," then considered voidness for improper service as to each

defendant. Id. at 352-56. This two-part analysis was later applied differently in

Romero, which first found an unreasonable delay but continued into analyses of

excusable neglect and voidness, before it ultimately affirmed denial of the

motion to vacate because the judgment was not void. 468 N.J. Super. at 296 -

97, 299-301, 305.

      Thus, we vacate the May 2021 order and remand for a more robust

statement of reasons, wherein the trial court must state findings and conclusions

as to the totality of the circumstances for reasonable timing for these defendants

to bring a motion to vacate for lack of subject matter jurisdiction.

      Vacated and remanded. We do not retain jurisdiction.

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