On certification to the Superior Court, Appellate Division, whose opinion is reported at 153 N.J. Super. 94 (1977).
For reversal and remandment -- Chief Justice Hughes and Justices Sullivan, Pashman, Clifford, Schreiber and Handler. For affirmance -- None. The opinion of the court was delivered by Schreiber, J.
Plaintiff P.R. DeBellis Enterprises, Inc. had purchased a fire insurance policy covering a certain building in Caldwell and instituted this action to collect under that policy when the building was destroyed by a fire. Plaintiff's entitlement to recovery depends on whether it had an insurable interest in the property and, if so, the extent, if any, of its loss.
The trial record consisted of exhibits and the deposition of Paul DeBellis, the owner and president of plaintiff corporation. A virtually undisputed factual picture emerged. On April 19, 1974 the Internal Revenue Service (IRS), possessing a lien on the land and building designated as 271 Bloomfield Ave., Caldwell, conducted an auction to sell the property. The sale was subject to approximately $145,000 of prior liens, one of which exceeded $35,000 for municipal real estate taxes. Plaintiff was the successful bidder at $5,000 and paid a $1,000 deposit. Mr. DeBellis testified that he hoped to be able to shave the amounts due on some of the liens, but, if necessary, he was prepared to pay the full sums.
Upon payment of the balance of the purchase price on May 7, 1974, IRS delivered to plaintiff a Certificate of Sale of Seized Property. The certificate described the real property sold by metes and bounds. All right, title and interest of the prior owners, Parker and Edna Teed, in personal property such as chairs, tables, kitchen equipment, bars and others accessories were transferred to plaintiff. As to the real property, the certificate recited that if the Teeds did not redeem the property within 120 days after the tax sale on April 19, 1974, a quitclaim deed would be issued to plaintiff upon surrender of the certificate. The redemption price was fixed at the amount paid by plaintiff with interest at the rate of 20% per annum.
Plaintiff took possession upon receipt of the certificate. Plaintiff planned to convert the structure for offices. Utilities were put in its name; contractors surveyed the premises; and
prospective tenants visited the building. Plaintiff also purchased a multi-peril insurance policy from defendant for a three-year period commencing May 9, 1974 at a total premium cost of $1,413. The policy afforded public liability and fire insurance protection. The building was insured against direct loss by fire to a limit of $160,000. The amount to be paid was limited "to the extent of the actual cash value of the property at the time of loss" not exceeding the cost of repair or replacement, "nor in any event for more than the interest of the insured." Of the premium cost $1,077 was ascribable to this coverage.
On July 14, 1974 the building was destroyed by fire. By letter dated July 18, 1974, Parker Teed elected to redeem the property and tendered a certified check to plaintiff for $5,264.10, which represented the plaintiff's purchase price of $5,000 plus interest at the rate of 20% per annum for 95 days (April 19 through July 19). Thereupon plaintiff's interest in the property terminated.
Plaintiff instituted this action to compel defendant to pay it for the damage to the building in accordance with terms of the policy. At trial the issues were generally limited to plaintiff's insurable interest and its loss, if any, under the policy. The trial court, after commenting that "quite obviously there is no taint in the transaction," found that the certificate was more like a mortgage than a deed, for the buyer had acquired some of the federal government's lien. The trial court believed the loss should be fixed as of the date of the fire and in its view plaintiff's loss was $5,000 plus premiums representing the difference between cost of insurance for $5,000 and $160,000. However, the trial court considered itself bound by the decision of Flint Frozen Foods, Inc. v. Firemen's Insurance Co., 8 N.J. 606 (1952), in which recovery was disallowed on a fire policy issued to a creditor covering a debtor's property, when, after a fire destroyed that property, the indebtedness was paid. For that reason judgment was entered for the defendant.
The Appellate Division, questioning whether Flint represents a sound economic or insurance result, acknowledged it was bound by Flint and affirmed. 153 N.J. Super. 94 (1977). We granted plaintiff's petition for certification. 75 N.J. 592 (1977).
No one can seriously quarrel with the proposition that plaintiff had an insurable interest in the property when it purchased the policy and at the time of the fire. This is so irrespective of whether plaintiff is considered an owner of or has a ...