On appeal from the Superior Court of New Jersey, Law Division, Atlantic County.
Before: Judges Shebell, P.g. Levy and Braithwaite.
The opinion of the court was delivered by: Shebell, P.j.a.d.
On August 18, 1995, plaintiff, First National Bank of Palmerton ("Bank"), filed a complaint in the Law Division seeking a declaratory judgment that defendants, Motor Club of America and Preserver Insurance Company, related companies, were required to defend plaintiff in connection with a lawsuit filed on October 7, 1994, by Keith and Paula Thomas against the Bank and others alleging that Keith was injured when he fell at the Newport Club, an apartment complex in Margate. Thereafter, Keith and Paula Thomas were allowed to intervene in the action.
By orders dated June 21, 1996 and July 18, 1996, plaintiff was granted "partial" summary judgments, which resolved all issues in connection with the action. On October 11, 1996, the Judge entered an order and accompanying memorandum of decision denying defendant's motion for a stay.
The facts appearing of record are that on August 17, 1988, Lar-Bur Corp., its president Alan A. Steinberg, and his wife Joan L. Steinberg, as mortgagors, entered into a mortgage and security agreement with the Bank, as mortgagee, on property known as the Newport Club apartments located in Margate. The agreement provided that, in the event of default, the Bank could take possession of the premises. The agreement required the mortgagors to maintain insurance on the property.
The mortgagors purchased insurance from defendants. The "Business Advantage" insurance policy provided property and liability coverage to "Lar-Bur Corp. Alan Steinberg DBA" as the named insured. Coverage was extended not only to the named insured, but also to additional insureds, including "[a]ny person (other than your employee), or any organization while acting as your real estate manager." The policy was in effect for the period from February 23, 1993 until February 24, 1994. On September 3, 1991, the Bank had filed a complaint in foreclosure because the mortgagors had defaulted in making the required payments. On December 3, 1992, Lar-Bur Corp. filed a voluntary petition in the bankruptcy. According to defendants, the mortgagors failed to disclose either the foreclosure action or bankruptcy petition during the insurance application period.
As a result of the default, the Bank assumed control of the property on January 4, 1994, and its representative, Richard Keenhold of Keenhold Assocs., took over management of the property. Plaintiff and Keenhold had entered into an agreement, dated January 1, 1994, which provided: "Bank hereby appoints Agent as sole and exclusive agent of Bank to lease and manage to [sic] property known as NEWPORT CLUB." In his deposition, Keenhold related that he and plaintiff's vice-president went to the offices of the Newport Club where they met with Tony Steinberg, Alan and Joan Steinberg's son. Keenhold informed Tony he was there to collect the rents and to "reassure" the bank's interests.
Defendants sent to the named insured a notice of cancellation, dated January 13, 1994, stating that the policy would be canceled due to "[l]ack of cooperation from the insured on loss control matters materially affecting insurability of the risk." The notice stated the policy would remain in effect until February 18, 1994. On January 13, 1994, Keith Thomas allegedly fell and injured himself at the Newport Club. He and his wife filed suit against the Newport Club, Keenhold Assocs., the Bank and Alan Steinberg d/b/a Lar-Bur Corp.. Despite the Bank's requests, defendants refused to defend and represent it in that action. Consequently, the Bank brought the present action against defendants.
The motion Judge held that, once plaintiff became mortgagee in possession, it was acting as the owners' real estate manager and thus qualified as an insured under the policy issued by defendants to the owners. In coming to that Conclusion, he analyzed the mortgage and security agreement, the insurance policy, and case law. Under the security agreement, in the event of default the mortgagee was given the right to take possession and assume operation of the property, including leasing, collecting rent, repairing, and maintaining the premises. The agreement further provided that, in the event of a default, the mortgagor would assign to the mortgagee all insurance proceeds and direct the insurance carrier to make payments to the mortgagee. The Judge, observing that the insurance contract allowed the mortgagee to receive loss payments after the commencement of a foreclosure, concluded liability coverage should also be in effect to cover any personal injury claims that might arise.
The Judge explained that, according to case law, a mortgagee in possession of property assumes responsibility for the management and maintenance of the property, receives rents, pays tax, and may even be liable in tort to third parties for negligence. The Judge viewed the duties and responsibilities of a real estate manager as so similar to the duties and responsibilities of a mortgagee in possession "that any reasonable interpretation of the insurance policy would include a mortgagee in possession as a manager of the real estate." Moreover, since this was an insurance contract, the Judge strictly construed it against the insurance company. He determined that, by entering into the mortgage and security agreement, mortgagors designated the mortgagee in possession as their real estate manager. The Judge reasoned that, although the term "real estate manager" was not mentioned in the mortgage and security agreement, the responsibilities of the mortgagee in possession were so analogous to the responsibilities of a real estate manager as to be considered one and the same for purposes of insurance coverage.
Defendants contend that the trial court erred in granting plaintiff's motion for summary judgment before completion of depositions and discovery as required by R. 4:46-5(a). Defendants point out that they had requested the deposition of the plaintiff's vice-president prior to the return date of the summary judgment motion. Plaintiff's attorney, however, had refused to permit the deposition and then moved for summary judgment before the defendants had an opportunity to move to compel the deposition.
Whether plaintiff was a "real estate manager" is to be determined by the language of the mortgage and security agreement, and the language of the insurance policy. Pursuant to the mortgage and security agreement, in the event of a default, the mortgagors consented to plaintiff having the right to take possession and assume operation of the property, and for plaintiff to act in the mortgagors' place. A reasonable interpretation of the insurance policy is that a "real estate manager" would include a mortgagee in possession such as plaintiff. The duties and responsibilities of the parties were set forth in the contract documents, and additional discovery was not necessary because it could not alter those duties and responsibilities. We reject the contention raised at oral argument that additional insurance coverage might have been discovered during the deposition. While this may have resulted, additional insurance should have been pursued by interrogatories. In any event, the existence of additional coverage would not change plaintiff's right to summary judgment on the issue before this court.
When deciding whether a genuine issue of material fact exists to preclude summary judgment, the motion Judge must "consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non- moving party." Brill v. Guardian Life Ins. Co., 142 N.J. 520, 540 (1995); see also Judson v. Peoples Bank & Trust Co., 17 N.J. 67, 74-75 (1954). All favorable inferences must be drawn in favor of the party opposing the motion. Brill, supra, 142 N.J. at 536. The Judge's function is not to weigh the evidence and determine the truth of the matter; rather, it is to ...