EVEREST INDEMNITY INSURANCE COMPANY v. TIM TIGER ENTERPRISES, LLC

NOT FOR PUBLICATION WITHOUT THE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-0

EVEREST INDEMNITY INSURANCE

COMPANY,

Plaintiff-Respondent,

v.

TIM TIGER ENTERPRISES, LLC,

d/b/a TTW MEHANICAL CORP.,

Defendant-Respondent,

and

TRAVELERS PROPERTY CASUALTY

COMPANY OF AMERICA, as subrogee

of BOROUGH OF CLIFFSIDE PARK,

Nominal Defendant-Appellant.

______________________________________________________

December 29, 2016

Argued October 6, 2016 Decided

Before Judges Fisher, Leone and Vernoia.

On appeal from the Superior Court of New Jersey, Law Division, Somerset County, Docket No. L-1187-13.

Frank E. Borowsky, Jr., argued the cause for appellant (Borowsky & Borowsky, LLC, attorneys; Mr. Borowsky, of counsel; Mr. Borowsky and Michael A. Field, on the brief).

Michael J. Smith argued the cause for respondent Everest Indemnity Insurance Company (Stewart Bernstiel Rebar & Smith, attorneys; Mr. Smith and Danielle A. Willard, on the brief).

Respondent Tim Tiger Enterprises, LLC, d/b/a TTW Mechanical Corp. did not file a brief.

PER CURIAM

We are required to wade through a host of procedural complications urged as obstacles to our consideration of whether an injured party's subrogee may seek relief from a tortfeasor's liability insurer regardless of the outcome of litigation between the tortfeasor and its insurer. Finding inessential the procedural circumstances erected by the insurer, we conclude that the subrogee may continue to seek indemnification even though, in this same suit, the insurer obtained rescission of its policy by default.

I

On October 29, 2012, a water tower perched on top of the Cliffside Park Municipal Building collapsed, causing approximately $2,000,000 in property damage. Defendant Travelers Property Casualty Company of America insured Cliffside Park and paid much of the damage in accordance with its policy.

The record before us suggests that a few months prior to the tower's collapse, Cliffside Park contracted with defendant Tim Tiger Enterprises, LLC (TTE) to replace an old water tower on the building's roof. Its contract with Cliffside Park required that TTE maintain liability insurance; TTE obtained such a policy from plaintiff Everest Indemnity Insurance Company.

Following the water tower's collapse, TTE notified Everest, which investigated. Approximately a year later, in September 2013, Everest filed this suit, seeking rescission of its policy on the claim that TTE had misrepresented the scope of the work it performed on the Cliffside Park project. Everest named Travelers, which had compensated Cliffside Park for its loss, as a "nominal" defendant.

Travelers filed a timely answer and counterclaim, which alleged, among other things, that Everest was obligated to indemnify TTE for the sums paid Travelers to Cliffside Park for the damage TTE caused. TTE did not respond to the complaint.

Rather than answer the counterclaim, Everest moved for its dismissal, claiming the counterclaim was an improper "direct action" against an insurer and that Travelers lacked standing to bring such a claim. Prior to the motion's return date, Everest sought Travelers' consent to an adjournment, ostensibly for the purpose of obtaining an additional time to file a reply brief.

Prior to the adjourned return date, however, Everest sought entry of a default judgment against TTE. The court did not schedule or conduct a proof hearing with respect to the equitable claim pursued against TTE but simply, on March 28, 2014, entered a judgment which "rescinded," "extinguished," and declared "void ab initio," the Everest/TTE policy.

On the day default judgment was entered against TTE, the judge also heard oral argument on Everest's motion to dismiss the counterclaim. Everest then argued that Travelers did not have standing "to bring a cause of action against Everest" but acknowledged Travelers could "participate in the litigation" and that Travelers "can show up at hearings" and "conduct discovery." By order entered on April 8, 2014, the judge denied Everest's motion to dismiss Travelers' counterclaim. In a written opinion filed at the same time, the judge quoted 6A J. Moore et al., Moore's Federal Practice, 57.19, in holding that in an action like this, "'from a pragmatic viewpoint, it is quite true that in many of the liability insurance cases, the most real dispute is between the injured third party and the insurance company, not between the injured and an oftentimes impecunious insured." The judge also referred to the late Judge Leonard I. Garth's opinion for the court in Federal Kemper Insurance Co. v. Rauscher, 807 F.2d 345, 355 (3d Cir. 1986), in determining that fairness required that the injured party "should be able to present its case upon the ultimate issues, even if the insured does not choose to participate," because the injured party "has an independent, and not a derivative right, to be heard." In the context of the dispute presented here, the motion judge

[I]t would be anomalous to mandate Travelers['] appearance in this case and subject them to a binding result without an opportunity to assert a defense. Should TTE choose not to defend itself in this action, then the possibility of future recovery for [Cliffside Park] could be foreclosed.

Subsequently, Everest allegedly reneged on an agreement to extend the discovery end date. Notwithstanding the judge's denial of the motion to dismiss the counterclaim, Everest again argued Travelers had no standing to be heard further in the suit. Contrary to the position it took on the motion, Everest argued that the entry of the default judgment against TTE ended the case.

Travelers moved to extend the discovery end date. The judge denied that motion, however, on grounds quite different from those he earlier espoused; that is, the judge suddenly agreed with Everest's position that Travelers did not have an independent claim against Everest. In denying the motion, the judge held that he could "not see how Travelers may maintain an action to declare rights and responsibilities" to a policy that was rescinded by way of the default judgment.

In light of this sudden change in fortunes, Travelers moved for reconsideration as well as the vacation of the default judgment entered against TTE. While Travelers' reconsideration motion was pending, TTE retained counsel and moved to vacate the default judgment as well. In support, TTE submitted sworn statements based on personal knowledge that, among other things: attacked Everest's claim that the nature of the work in question was misrepresented; claimed TTE was lulled by Everest agents and representatives into believing that this suit concerned a dispute between Everest and Travelers; and professed that service of process was improper. In ruling on TTE's motion without conducting an evidentiary hearing, the judge apparently assessed the affiants' credibility, concluding that "Tim Tiger's attestation that he lacks the ability to understand the documents provided to him seems far-fetched" and that it was not reasonable for Tiger to assert he did not "'know something was wrong' until he received" the default judgment. And, in denying Travelers' reconsideration motion, the judge ruled in a manner diametrically opposed to what he held in denying Everest's motion to dismiss Travelers' counterclaim, rejecting the notion that Travelers had an independent right to seek relief against Everest.

Travelers timely but unsuccessfully sought our leave to appeal. After notifying the trial judge of our November 7, 2014 denial of leave to appeal, Travelers sought guidance as to the status of the trial court proceedings. Even though the judge had previously denied the motion to dismiss Travelers' counterclaim, to which Everest had filed an answer, and even though no order had memorialized an adjudication of either the counterclaim or Everest's claim against Travelers, the judge wrote to counsel on December 11, 2014, advising that the default judgment entered against TTE "serves as a final order"; he opined that "no claims remain."

To dislodge the case from this incongruous circumstance of there being nothing remaining to litigate notwithstanding the appearance of the court's orders, and despite its disagreement with the judge's more recent opinions about its right to seek relief from Everest, Travelers sought finality so it could obtain our intervention by way of an appeal.

Travelers' motion to "settle the record" along those lines set a return date of January 23, 2015. Notwithstanding that notice to Everest of a January 23 return date, the trial judge scheduled the motion for January 9 and granted the motion before receiving Everest's response. Consequently, Everest moved to vacate the January 9, 2015 order and, on February 20, 2015, the January 9 order was vacated; at the same time the judge again opined that the March 28, 2014 default judgment "served as a de facto dismissal of Travelers' defenses and counterclaim." Travelers, however -- one day prior to entry of the February 20, 2015 trial court order -- had filed a notice of appeal,1 apparently out of an abundance of caution motivated by the fact that Rule 1:13-1, upon which Everest had based its motion to vacate the January 9 order, does not toll the time to appeal.

Everest then moved to dismiss the appeal, arguing final judgment had been entered on March 28, 2014, and the notice of appeal, which was filed on February 19, 2015, was wildly out of time. On May 12, 2015, we denied that motion, stating that, "absent an order specifically dismissing Travelers' counterclaim, there was no final order in this case," and declaring that Travelers "may pursue its appeal of the orders listed in its notice of appeal."

Everest thereafter unsuccessfully moved for clarification and this appeal was fully briefed and scheduled for disposition.

II

We turn, first, to the procedural obstacles asserted by Everest in arguing that Travelers' appeal is either untimely or moot. Those arguments are frivolous and without sufficient merit to warrant further discussion in a written opinion. R. 2:11-3(e)(1)(E). We add only the following brief comments.

Everest's contention that Travelers' appeal is untimely is based on its belief that the March 28, 2014 default judgment entered against TTE represented an adjudication of all issues as to all parties, including Travelers. Nothing could be more absurd. After that default judgment was entered, the trial judge denied Everest's motion to dismiss Travelers' counterclaim. Even if later, in hindsight, the judge came to the belief that the disposition of the claims against TTE implicitly or by operation of law fully disposed of Everest's claims against TTE and Travelers' counterclaim against Everest, no order so declared.2 Indeed, it was not until January 9, 2015, that an order was entered that expressed a disposition of all issues as to all parties. Only then did Travelers gain a right to appeal.

As has been said, the court rules "are not simply a minuet scored for lawyers to prance through on pain of losing the dance contest should they trip." Stone v. Old Bridge Twp., 111 N.J. 110, 125 (1988) (Clifford, J., dissenting). The rules are "a means to the end of obtaining just and expeditious determinations between the parties on the ultimate merits." Ragusa v. Lau, 119 N.J. 276, 283-84 (1990). To ensure fairness and clarity in the processing of claims, parties may assume that no right to appeal from a final judgment arises until a trial court has finally disposed of all claims as to all parties. The right to appeal cannot be lost because a trial judge later interprets an earlier order as final when that earlier order gave every appearance of being interlocutory. We reject Everest's contention that Travelers' time to appeal began running when the default judgment against TTE was entered.

Even if the judge intended that the default judgment constituted a complete adjudication of all the pleaded claims against all the named parties -- a view belied by the oral decision rendered by the judge after entry of the default judgment -- and even if the judge had later described or labeled the default judgment as final, Sonnheim v. State Bd. Of Marriage Counselor Exam'rs, 186 N.J. Super. 1, 4 (App. Div. 1982), finality for appeal purposes could not occur until an order finally disposed of the last of the pleaded claims, Grow Co. v. Chokshi, 403 N.J. Super. 443, 460 (App. Div. 2008). That did not occur until entry of the January 9, 2015 order.

Adding to this action's procedural peculiarities are the facts that the judge vacated the January 9, 2015 order by way of his February 20, 2015 order, but Travelers filed notice of appeal on February 19, 2015. Because the notice of appeal divested the trial court of jurisdiction, R. 2:9-1(a), the February 20, 2015 trial court order was a nullity. And because the January 9, 2015 order disposing of all remaining issues constituted the status of the pleadings when Travelers' notice of appeal was filed, all claims as to all parties had been conclusively disposed of by the trial judge even though he exhibited -- a day later, on February 20 -- a desire to undo that circumstance. In any event, although it appears unnecessary to our consideration of the orders cited in Travelers' notice of appeal, we would grant, if necessary, leave to appeal.

Everest's argument that we should dismiss the appeal on mootness grounds is also without merit. That contention is based on the belief that entry of a default judgment of rescission against TTE negated the basis upon which Travelers' claims against Everest were founded. In other words, Everest contends that Travelers has no legitimate ground for seeking relief against Everest because its claims are based on the Everest/TTE policy and the default judgment voided that policy. That argument, however, goes to the merits of Travelers' claim that it has independent rights to assert against Everest that remain unaffected by TTE's default. In other words, to find the appeal moot we would have to rule on the merits of the issues posed by the appeal.

We, thus, reject the mootness argument and turn to the merits of Travelers' appeal.

III

With the procedural oddities of this case behind us, we conclude that the trial judge was right the first time when he recognized Travelers had an independent right to seek relief against Everest despite whatever occurred in litigation between Everest and TTE. There is no doubt, as our Supreme Court has recognized, that an injured party possesses an interest in a tortfeasor's liability insurance at the "moment" of injury, Dransfield v. Citizens Cas. Co. of N.Y., 5 N.J. 190, 194 (1950); Hanover Ins. Co. v. McKenney, 245 N.J. Super. 282, 287 (Law Div. 1990), that "cannot be foreclosed by litigation or agreement between insurer and insured alone," In re Estate of Gardinier, 40 N.J. 261, 265 (1963). This principle exists, if for no other purpose, then to protect an injured party from collusion between insurer and insured or to prevent an insurer from a windfall that might be generated by a destitute insured's lack of further interest in the litigation.3

In the final analysis, we conclude that Travelers, as Cliffside Park's subrogee, has standing to be heard in this suit and possessed an independent right to pursue by way of its counterclaim the question of whether Everest should be compelled to indemnify TTE for any damages accruing from TTE's negligence regardless of whether TTE has lost by default or has lost interest in litigating with Everest on those matters. Accord Federal Kemper Ins. Co., supra, 807 F.2d at 354-55.4 Whatever the validity of the default judgment against TTE, that judgment adjudicated issues only as between Everest and TTE and could not affect Travelers' independent rights, as subrogee of the injured party, as to Everest's policy.

For these reasons, we: reverse the January 9, 2015 order, which ostensibly memorialized the judge's determination that by operation of law the entry of a default judgment against TTE extinguished Travelers' claims against Everest; reverse the April 25, 2014 order, which denied an extension of the discovery end date; and agree with Travelers that the circumstances warrant the assignment of a different judge for the proceedings to follow. We, therefore, remand for further proceedings in conformity with this opinion and do not retain jurisdiction.

1 In its notice of appeal, Travelers sought our review of the orders entered on March 28, April 25, and August 22, 2014, and January 9, 2015.

2 Trial court orders, not opinions, matter. See, e.g., Bandler v. Melillo, 443 N.J. Super. 203, 210-11 (App. Div. 2015).

3 Travelers' claim for relief from Everest is dependent not only on its defense against Everest's claim of misrepresentation by TTE, but also on an adjudication of TTE's negligence and responsibility for the damages incurred by Cliffside Park that have been paid by Travelers. See, e.g., Ross v. Lowitz, 222 N.J. 494, 512 (2015); Manukas v. Am. Ins. Co., 98 N.J. Super. 522, 524-25 (App. Div. 1968).

4 Consequently, although Travelers plausibly argues that the judge did not liberally indulge TTE's motion to vacate the default judgment as required by a virtual legion of cases, see, e.g., Marder v. Realty Constr. Co., 84 N.J. Super. 313, 319 (App. Div.), aff d, 43 N.J. 508 (1964), that question, which has not been pursued further by TTE, is irrelevant to Travelers' right to seek relief against Everest.