On appeal from the Superior Court, Appellate Division.
For reversal and remandment -- Chief Justice Wilentz and Justices Sullivan, Pashman, Clifford, Schreiber, Handler and Pollock. For affirmance -- None. The opinion of the Court was delivered by Pollock, J.
The issue presented on these consolidated appeals is whether an in rem judgment of foreclosure for unpaid real estate taxes deprives the former owners and mortgagees of an insurable interest in the real estate, so that an insurer need not pay under a fire insurance policy when a structure on the real estate is damaged. The trial court granted summary judgment in favor of the insurer, and the Appellate Division affirmed in an unreported opinion, with one judge dissenting. We now reverse and remand for a trial in accordance with this opinion.
These matters involve separate properties in the City of Newark that were damaged by fire after Newark foreclosed real estate tax sale certificates affecting the properties. The New Jersey Insurance Underwriting Association (NJIUA) is an association created by statute to provide fire insurance, particularly in central city areas, to persons who cannot obtain insurance in the normal insurance market. N.J.S.A. 17:37A-1 et seq.
The material facts pertaining to the two properties are substantially identical. With respect to the property at 226 Springfield Avenue, Newark purchased a tax sale certificate on December 4, 1972, which was recorded on April 10, 1973. On June 1, 1973, Alphonso R. Miller purchased from Jerome and Della Rosenberg the stock of Harmitch Corporation, the record owner of the property. Under the terms of the sale, Miller agreed to
issue to Della Rosenberg a note and second mortgage on his home in Newark. In the contract, Miller assumed the responsibility for paying taxes on the property. The contract provided that a second property formerly owned by Harmitch Corporation was "owned by, or in the process of having title thereto taken by, the City of Newark." There was no similar reference to the property at 226 Springfield Avenue. Before the purchase, Miller, as a tenant of the Rosenbergs, conducted a furniture and appliance business; after the closing, he continued that business and collected rent from some tenants of the premises.
Miller applied to NJIUA for fire insurance on December 2, 1974. Miller listed himself as owner (although the owner apparently was Harmitch Corporation) and plaintiff Jerome Rosenberg as mortgagee (although nothing in the record, other than the insurance application, indicates he held a mortgage on 226 Springfield Avenue). However, the casual, even careless, business practices of the parties are not relevant on this appeal.
The right to redeem the property from the tax sale certificate expired on December 4, 1974, two years after the date of the tax sale. The period for redemption has since been reduced from two years to six months. N.J.S.A. 54:5-54. On December 10, 1974, NJIUA issued a fire policy for $30,000 insuring Miller as owner and Rosenberg as mortgagee.
On September 30, 1975, Newark obtained a judgment foreclosing the tax sale certificate. About three weeks later, on October 21, 1975, fire seriously damaged the building. As title holder, Miller submitted a proof of loss in the amount of $18,323.50, an amount that NJIUA subsequently agreed represented the damage to the property. On December 31, 1975, NJIUA advised Miller that it had just learned of the entry of the judgment of foreclosure and that it would not make payment because Miller had no insurable interest.
Miller and Rosenberg claim that they did not receive notice of the proceedings before entry of the judgment of foreclosure, and that their first notice was NJIUA's letter denying payment. At
oral argument, NJIUA contended that, on remand, it could prove that Newark had mailed actual notice of the foreclosure to Miller. After the foreclosure, Newark wrote to Miller stating that it would vacate the judgment in exchange for ...