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Aly v. E.S. Sutton Realty

May 14, 2003

MOUSTAFA DAKTORY ALY, IBRAHIM IBRAHIM AND AMAD ABDOU, PLAINTIFFS-RESPONDENTS,
v.
E.S. SUTTON REALTY, 2823-34 KENNEDY BOULEVARD ASSOCIATES, DEFENDANTS, AND INSIDER REALTY CORP., DEFENDANT-APPELLANT.
ALMA REALTY CO., AGENT FOR ARCOR FAIR REALTY L.L.C., PLAINTIFF-APPELLANT,
v.
ROBERT HARPER, DEFENDANT-RESPONDENT, AND OCCUPANTS RESIDING IN UNIT 201, 270 HARRISON AVENUE, JERSEY CITY, NEW JERSEY, DEFENDANTS.
DONNA HUGHEN, PLAINTIFF-RESPONDENT,
v.
50 JOURNAL SQUARE ARCADE, INC., DEFENDANT-APPELLANT.
ROBERT N. LEONE, PLAINTIFF-RESPONDENT,
v.
SONJA FESENMAIER D/B/A SCHUYLER GARDEN APARTMENTS, DEFENDANT-APPELLANT.
LUIS RODRIGUEZ, PLAINTIFF-RESPONDENT,
v.
PARC HARRISON CONDO ASSOCIATION, 429 FAIRMONT COURT CONDO ASSOCIATION A/K/A FAIRMOUNT COURT CONDO, ALMA REALTY MANAGEMENT COMPANY, DEFENDANTS-APPELLANTS.



On appeal from the Superior Court of New Jersey, Law Division, Hudson County, L-2526-01, L-3113- 01, L-2876-00, L-5534-01, L-953-01.

Before Judges Pressler, Ciancia and Hoens.

The opinion of the court was delivered by: Hoens, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued February 25, 2003

We granted leave to appeal in these several cases to address the effect to be given to a series of orders of the Commonwealth Court of Pennsylvania staying proceedings against Legion Insurance Co., a Pennsylvania insurance company now in rehabilitation proceedings in that state and staying proceedings against Legion's insureds as well.

Legion Insurance Co. (Legion) is a Pennsylvania insurer which offers commercial general liability insurance coverages (CGL policies) in the State of New Jersey. The parties in these cases include New Jersey business entities insured by Legion CGL policies and persons who allege that they were injured at the premises covered by the policies.

By order dated March 28, 2002, the Commonwealth Court of Pennsylvania granted the petition of Diane Koken, the Insurance Commissioner of the Commonwealth, to formally place Legion into rehabilitation in accordance with the laws of Pennsylvania, 40 P.S. §§221.1-221.63. Koken v. Legion Ins. Co., Docket No. 183 M.D. 2002 (Pa. Commw. Ct. Mar. 28, 2002). That order included the following directive in paragraph 24: a. All court actions, arbitrations and mediations currently or hereafter pending against Legion in the Commonwealth of Pennsylvania or elsewhere are hereby stayed.

b. All court actions, arbitrations and mediations currently or hereafter pending against an insured of Legion in the Commonwealth of Pennsylvania or elsewhere are stayed for ninety (90) days from the effective date of this Order or such additional time as the Rehabilitator may request.

By its terms, therefore, the Pennsylvania order purported to stay all proceedings involving Legion not only in that state, but in every other state, including New Jersey. The ninety-day stay embodied in the initial order expired on June 28, 2002. On that date, the Commonwealth Court issued a supplemental order granting the emergency petition of the Rehabilitator and extending the stay for a further period of ninety days, or until September 27, 2002.

In August 2002, the Commissioner, in her capacity as the Rehabilitator for Legion, petitioned the Pennsylvania court for leave to commence liquidation proceedings, apparently based upon her determination that Legion could not be successfully restored to financial health. That petition was opposed. On September 25, 2002, therefore, the Pennsylvania court entered a further order which scheduled a prehearing conference in connection with a hearing on the petition for the liquidation of Legion for October 4, 2002 and which continued the previously granted stay of all proceedings in Pennsylvania and elsewhere until December 1, 2002. That court issued another order on November 22, 2002, scheduling further proceedings on the petition for liquidation and extending the stay of all proceedings to December 31, 2002. The court entered an additional order on December 27, 2002 which continued the stay until January 31, 2003. At oral argument, we were advised that the stay had been further extended to March 28, 2003 and that the Pennsylvania judge had re-opened the liquidation proceeding to receive further testimony and evidence. We were thereafter advised that the court issued further orders extending the stay until April 30, 2003 and, most recently, until May 31, 2003.

While the procedural history of each of the matters now before us varies somewhat, for purposes of this decision, we regard the procedural posture of the Aly, Hughen, Leone and Rodriquez matters as typical and rely upon our understanding of that history for illustrative purposes. In those matters, applications on behalf of Legion for a stay were made and granted in respect of the first two Pennsylvania stay orders.

As a result, the party insured by Legion, in each case the defendant, was successful in securing a stay of all proceedings in each of those cases, first to June 28, 2002 and then until September 27, 2002. Legion's applications to further extend the stay to December 1, 2002, however, were denied by the trial court, for the reasons expressed in a written decision. *fn1 We granted leave to appeal and a stay pending appeal in these and all similar applications because of the public importance of the issue now before us. For that reason as well we invited the participation of the New Jersey Property-Liability Insurance Guaranty Association (PLIGA) and the New Jersey Commissioner of Banking and Insurance (Commissioner), both of whom filed briefs and participated in oral argument.

Legion, PLIGA and the Commissioner assert that the order of the Pennsylvania court is entitled to full faith and credit on both constitutional and statutory grounds *fn2 requiring it to be honored here without question. In his written opinion, the trial court judge rejected the argument that the orders of the Pennsylvania court are entitled to full faith and credit and held that they are entitled only to deference as a matter of comity, an analysis with which we concur.

While the language used in the full faith and credit clause, U.S. Const. art. IV. § 1, as well as the implementing language of the applicable federal statute, 28 U.S.C.A. § 1738 (1966), is broad, our Supreme Court has not so interpreted it. See City of Philadelphia v. Austin, 86 N.J. 55, 58 (1981). Notwithstanding the apparent breadth of its literal language, our courts have consistently recognized that the clause admits of significant limitations. Among these is the requirement of finality through entry of a judgment by the court of a sister state. Ibid. (citing Milwaukee County v. M. E. White Co., 296 U.S. 268, 276- 77, 56 S. Ct. 229, 233-34, 80 L. Ed. 220, 227-28 (1935)); see, e.g., The Antelope, 23 U.S. 66, 123 (10 Wheat.), 6 L. Ed. 268 (1825)("courts of no country execute the penal laws of another"); Sistare v. Sistare, 218 U.S. 1, 30 S. Ct. 682, 54 L. Ed. 905 (1910), (declining to apply full faith and credit to alimony awards); Alaska Packers Ass'n v. Industrial Accident Comm., 294 U. S. 532, 55 S. Ct. 518, 79 L. Ed. 1044 (1935) (refusing to apply full faith and credit to workers' compensation awards); W.S. Frey Co. v. Heath, 158 N.J. 321, 328 (1999) (refusing to accord full faith and credit to judgment entered in circumstances contrary to our notions of due process). Because not every act of every court is one which is entitled to full faith and credit and because the order of the Pennsylvania Court is interlocutory, we concur with the trial judge in his rejection of the full faith and credit argument.

We note, as well, that this determination is in accord with the decisions of the overwhelming number of courts in other jurisdictions which have considered this issue. E.g., Mantero- Atienza v. Salvador, 807 So. 2d 163, 164 (Fla. Dist. Ct. App. 2002) (honoring stay issued in New York proceedings for insurance rehabilitation); Isermann v. MBL Life Assur. Corp., 231 Wis. 2d 136, 149, 605 N.W.2d 210, 215 (Wis. Ct. App. 1999) (applying comity analysis); In re Noble Trucking Co., 675 So. 2d 356, 359 (Ala. 1996) (declining to overturn ...


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