APOLLINE HOLDINGS, LLC VS. ALLIANCE HAND AND PHYSICAL THERAPY, PC (L-3148-18, PASSAIC COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE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-1493-19

APOLLINE HOLDINGS, LLC,

Plaintiff-Respondent,

v.

ALLIANCE HAND &
PHYSICAL THERAPY, PC,
FRANK MUSCARA AND
SONS, INC., FRANK MUSCARA,
PAMELA MUSCARA, and
STEPHANIE FRANKLIN-
COSGROVE,

Defendants-Appellants.

Submitted May 3, 2021 – Decided June 25, 2021

Before Judges Sabatino and Currier.

On appeal from the Superior Court of New Jersey, Law
Division, Passaic County, Docket No. L-3148-18.

The Perkins Firm, LLC, attorneys for appellants (Paul
I. Perkins, on the briefs).

The Law Firm of Robert H. Altshuler, attorneys for
respondent (Robert H. Altshuler, on the brief).
PER CURIAM

After defendants 1 failed to answer the complaint, the trial court entered

default judgment. Six months later, the court denied defendants' motion to

vacate the default judgment under Rule 4:50-1(a). We affirm.

Defendants were tenants in a building owned by plaintiff. During the

landlord/tenant relationship, plaintiff loaned defendants money under a series of

promissory notes. The notes were consolidated in June 2017. Shortly thereafter,

plaintiff sold the building. After defendants failed to pay rent to the new owner,

the successor landlord began eviction proceedings.2 Defendants' attempts to

obtain financing to pay the promissory notes were unsuccessful.

In December 2017, defendants retained Keith McKenna, Esq. to institute

suit, alleging in their complaint that plaintiff misled them regarding the duration

of the lease and made them sign documents under false pretenses. Under the

hybrid retainer, there was a fee cap of $25,000, after which all work would be

1
Frank Muscara is the President of Frank Muscara & Son, Inc. He executed
one of the promissory notes. We refer to him as Muscara. Pamela Muscara, his
wife, is the President of defendant Alliance Hand & Physical Therapy, P.C.
(Alliance). Stephanie Franklin-Cosgrove is the Vice President and Secretary of
Alliance. Pamela and Stephanie executed the other two promissory notes.
2
In a certification, Muscara advised the eviction proceedings were eventually
resolved and as of September 2019, defendants remained as tenants in the
building.
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done on a contingency basis. The retainer stated, "[y]ou agree that the Lawyers

will represent You in an action against Apolline Holdings, LLC with respect to

the Consolidation Agreement for the Promissory Note with Apolline Holdings,

LLC."

On January 24, 2018, McKenna filed suit on behalf of defendants (the

Bergen County action). The record reflects defendants did not pay the $10,000

retainer required under the agreement. McKenna produced numerous emails

sent to defendants attaching invoices and requesting payment for his services.

The Bergen County action was dismissed for lack of prosecution in

August 2018. Defendants claim they were unaware of the dismissal. They did

not move to set aside that dismissal nor do they appeal from that order.

On November 6, 2018, plaintiff served defendants with a complaint and

order to show cause, asserting claims under the promissory notes (the Passaic

County action). On November 14, McKenna sent an email to defendants that

read, "[c]onfirming our discussion, I need you to bring [$9,000] to the office

this week so that I can prepare the opposition material." Two days later,

McKenna sent an email stating, "[w]e have called and sen[t] emails requesting

payment and advising that we will not be filing any opposition until funds are

in hand." Finally, on November 26, 2018, McKenna sent an email that advised:

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 Dear Frank and Pam, I have been reaching out to you
both via email, text and phone to inquire as to the status
of the retention of my firm to file opposition to the
application for the relief. The motion is returnable on
Friday, November 30, 2018. You have not responded
to these efforts. At this time, I will NOT be filing any
opposition material and this shall confirm that I have
not been engaged in connection with the same. If you
would like me to respon[d] on your behalf, please
immediately contact my office to set a time to speak by
phone.

On November 19, 2018, Muscara wrote to plaintiff's attorney informing

him McKenna did not represent defendants in the Passaic County action and that

they were "attempting to get a new attorney." Muscara stated further, "I

understand from reading the documents that an answer is due to be filed with

the court today." He also wrote to Presiding Judge Thomas Brogan in Passaic

County on November 26, 2018 providing the same information.

On November 30, 2018, the court entered an order enjoining and

restraining defendants from disposing of any of the property listed in the security

agreements guaranteeing the promissory notes.

On January 23, 2019, plaintiff filed a notice of request for default.

Defendants did not respond to the notice. Thereafter, the court entered final

judgment by default on March 7, 2019 against defendants in the Passaic County

action. Defendants were served with the judgment.

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 On March 28, 2019, Muscara emailed McKenna inquiring about the status

of the Bergen County action. In his response, McKenna mistook defendant for

another attorney who had worked on the matter. McKenna stated, "I have not

heard from those clients nor taken any action on their behalf for sometime [sic].

They did not pay my retainer and fees and decided not to advance the matter.

So I closed my file."

In September 2019, represented by new counsel, defendants moved to

vacate default judgment in the Passaic County case. Defendants contended that

when they retained McKenna in December 2017, they "anticipated" plaintiff

would sue them under the promissory notes, and they expected McKenna to

represent them on "all issues that arose between [them] and [plaintiff]."

Muscara stated he "was shocked when [McKenna] demanded $9000 more to

represent us. We . . . thought the money we had already paid would encompass

anything that arises from our suit." Muscara asserted the language in the retainer

agreement made it clear that McKenna would represent defendants in all matters

regarding the consolidation agreement for the promissory notes.

In addition, Muscara indicated he "had hoped that . . . McKenna would

use [his] case against [plaintiff] to resolve [plaintiff's] case against [him]."

Because he was not apprised the Bergen County case had been dismissed,

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Muscara believed he "had counsel working on a case to fight [plaintiff]" and all

issues would be worked out in his affirmative action.

Plaintiff provided a certification from McKenna in opposition to

defendants' motion to vacate. McKenna asserted: "[t]o be absolutely clear, at

no time did I serve as counsel for any party in this action." He certified that he

was retained by defendants to represent them in the Bergen County action

against plaintiff. McKenna further stated that after the complaint was filed, he

tried to conduct settlement negotiations between the parties for seven or eight

months.

McKenna certified he sent defendants "repeated emails, phone calls, text

messages and requests for payment" for his services. However, according to

McKenna, "[d]efendants were suffering financial difficulties and after bouncing

one check, did not make the payments for fees that were due."

McKenna attached numerous emails evidencing his requests for payment

of his services. The exhibits also included emails from defendants. In an email

sent in May 2018, Muscara wrote, "working on getting the $10,000 together. I

am hoping to have all of it by end of the week. . . ." In June, Muscara offered a

$2000 credit card payment towards "the additional $10,000 deposit you require."

In October, McKenna again requested payment on the outstanding balance on

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the account. Muscara responded: "Hang in there a little longer . . . we should

be good by next week . . . ."

As noted above, defendants were served with the Passaic County action

in November 2018. McKenna received a courtesy copy of the complaint and

order to show cause from plaintiff's counsel. He advised defendants he required

$9000 as payment on the outstanding bill and to oppose the order to show cause.

When there was no response, McKenna told defendants he would not file any

opposition without the requested payment. Then, on November 26, McKenna

sent the letter referred to above advising he would not be filing opposition to the

Passaic County complaint and he was not representing them in that case.

In their motion to vacate default, defendants also contested the amount of

damages in the final judgment. Plaintiff provided the court with certifications

and documentation supporting the court's calculations of damages and the final

judgment amount.

The motion judge denied defendants' motion in an oral decision and

accompanying order on October 29, 2019. The court found plaintiff

"conclusively" demonstrated that defendants knew McKenna was not

representing them in the Passaic County action. Therefore, they could not show

excusable neglect for failing to respond to the complaint. Moreover, there was

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no meritorious defense because defendants acknowledged they had executed the

promissory notes and had not repaid them pursuant to their terms.

On appeal, defendants contend the motion judge erred in denying their

motion to vacate default judgment. They assert they can demonstrate both

excusable neglect and a meritorious defense as required under Rule 4:50-1.

We give substantial deference to a trial court's determination of a motion

to vacate a default judgment and will not reverse "unless it results in a clear

abuse of discretion." U.S. Bank Nat'l Ass'n v. Guillaume, 209 N.J. 449, 467

(2012). An abuse of discretion occurs "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)). We will not interfere with a trial court's exercise

of discretion unless the trial judge has pursued a manifestly unjust course or

prejudiced the substantial rights of a party. U.S. ex rel. U.S. Dept. of Agric. v.

Scurry, 193 N.J. 492, 503 (2008).

Defendants argue the final judgment should be vacated under Rule 4:50-

1(a) for excusable neglect. Our Supreme Court has stated that Rule 4:50-1 is

"designed to reconcile the strong interests in finality of judgments and judicial

efficiency with the equitable notion that courts should have authority to avoid

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an unjust result in any given case." Guillaume, 209 N.J. at 467 (quoting Mancini

v. EDS on Behalf of N.J. Auto. Full Ins. Underwriting Ass'n, 132 N.J. 330, 334

(1993)). However, "[c]ourts should use Rule 4:50-1 sparingly, in exceptional

situations." Hous. Auth. of Town of Morristown v. Little, 135 N.J. 274, 289

(1994).

To vacate a default judgment, the movant "must show that failure to

answer was excusable under the circumstances and that a meritorious defense is

available." Id. at 284.

The excusable neglect doctrine is "intended to provide equitable relief

from oppressive and unjust judgments; it is 'designed to afford a remedy in the

rare situation in which for some equitable reason' a judgment should not be

enforced." Sec'y of State v. GPAK Corp., 95 N.J. Super. 82, 91 (App. Div.

1967). "Carelessness may be excusable when attributable to an honest mistake

that is compatible with due diligence or reasonable prudence." Mancini, 132

N.J. at 335. A defendant is not entitled to relief if the neglect is willful or

calculated. Id. at 336.

Here, defendants contend they demonstrated excusable neglect because

they relied on their attorney to represent them. They assert that when they

signed the hybrid retainer agreement, McKenna told them that the damages they

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would recoup from the Bergen County action would outweigh the amounts owed

on the promissory notes. Additionally, defendants state their understanding of

the retainer agreement was that McKenna would represent them in all matters

connected to the notes.

Defendants' contentions are not supported by the record. The Passaic

County action was a separate litigation. Upon being served with the complaint,

McKenna advised defendants they owed him monies from an unpaid balance in

the prior action and they would have to pay him an additional amount for

representation in the Passaic County matter. When payment was not

forthcoming, McKenna clearly informed defendants he was not representing

them and would not be filing papers in the Passaic County case. Furthermore,

it is evident defendants understood the circumstances as they advised both

plaintiff's counsel and the civil presiding judge in Passaic County that they did

not have representation. And, Muscara referred to the due date for his

responding papers.

The record reflects defendants knew about the Passaic County action

before default judgment was entered and that McKenna was not representing

them in that lawsuit. Also, they do not argue they were unaware of the default

judgment application.

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 Defendants' profession of "shock" regarding McKenna's request for

further payment before he would agree to represent them in the Passaic County

action also lacks merit. As stated, in all of the emails responding to McKenna's

request for payment of the outstanding balance and additional funds, Muscara

promised payment was imminent. At no time did defendants challenge the

outstanding balance or object to any further payments.

We also disagree with defendants' assertion that the language in the

retainer agreement established an understanding that McKenna would be

representing them in all matters regarding the promissory notes. To the

contrary, the express language stated McKenna would represent defendants "in

an action against [plaintiff] with respect to the" promissory notes. (emphasis

added). The retainer agreement and the ensuing correspondence clearly

establish McKenna was retained solely to institute defendants' claims against

plaintiff.

Finally, defendants are sophisticated businesspeople. The Muscaras own

several buildings and Frank Muscara runs a business. His wife, Pamela, is a

physical therapist and operates her own business – Alliance Hand & Physical

Therapy, P.C. – out of several locations. They should have been familiar with

leases, financing, the billing of entities and individuals for their services and

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paying others for services rendered. We are satisfied the motion judge properly

found there was no excusable neglect.

Nor have defendants established a meritorious defense as required under

Marder v. Realty Const. Co., 84 N.J. Super. 313, 318 (App. Div. 1964). They

contend the late fee and default rate contained in the promissory notes is

"exorbitant and unreasonable." Under Metlife Cap. Fin. Corp. v. Wash. Ave.

Assoc., L.P., 159 N.J. 484, 496 (1999), "the party challenging the clause bears

the burden of proving unreasonableness."

Here, defendants do not deny they owe most of the principal, totaling over

$500,000, as well as years of unpaid interest and liquidated late charges. In the

promissory notes executed by defendants, the late fees were defined as

"liquidated damages in lieu of actual damages and not as a penalty." Defendants

agreed to the charges when they executed the notes.

Furthermore, through its managing member, plaintiff presented evidence

that there were no default interest penalties. The interest rate increased by 2%

on two of the notes if they were not paid by the due date. The interest on the

third note did not increase until after July 1, 2022, so that interest rate has not

yet increased. Plaintiff also provided a certification explaining and countering

each of defendants' claims of inaccuracies. We discern no abuse of discretion

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in the court's determination that defendants did not present a meritorious

defense.

Affirmed.

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