On appeal from the Superior Court of New Jersey, Law Division, Essex County, ESX-L-1453-03.
Before Judges Kestin, Alley and Fuentes.
The opinion of the court was delivered by: Alley, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
On February 20, 2003, plaintiff Liberty Mutual Fire Insurance Company filed a complaint seeking a declaratory judgment determining the appropriate allocation of $175,900 in insurance proceeds. This is the amount it had agreed to pay pursuant to a homeowner's insurance policy with fire hazard coverage, under which defendant Brendon Alexander was the named insured, and defendant Fairbanks Capital Corp. was the named mortgagee as the successor in interest to defendant GMAC. Defendant Kramer, Smith, Torres & Valvano was the public adjuster retained by Alexander.
Alexander appeals from the trial court's order that Fairbanks was entitled to $128,081.75 of the proceeds, and Alexander to $47,818.25.
The facts in this case are largely undisputed. Alexander was the mortgagor of a home at 318 North Arlington Avenue in East Orange. Fairbanks was the servicing provider for IMPAC Funding Corporation, which had become the assignee of the mortgage as of March 11, 1998.
As required by the terms of the mortgage, Alexander had maintained homeowners insurance. The policy was issued by Liberty Mutual Insurance Company with a $175,900 policy limit on the dwelling with expanded replacement cost. Fairbanks was named on the declarations page as the sole mortgagee. The mortgage clause provided:"If a mortgagee is named in this policy, any loss payable under Coverage A or B will be paid to the mortgagee and you, as interests appear."
The mortgage provided for the application of insurance proceeds as follows:
Unless Lender and Borrower otherwise agree in writing, insurance proceeds shall be applied to restoration or repair for the Property damaged, if the restoration or repair is economically feasible and Lender's security is not lessened. If the restoration or repair is not economically feasible or Lender's security would be lessened, the insurance proceeds shall be applied to the sums secured by this Security instrument, whether or not then due with any excess paid to Borrower. If Borrower abandons the Property, or does not answer within [thirty] days a notice from Lender that the Insurance carrier has offered to settle a claim, then Lender may collect the insurance proceeds. Lender may use the proceeds to repair or restore the Property or to pay sums secured by the Security Instrument, whether or not then due. The 30-day period will begin when the notice is given.
Unless Lender and Borrower otherwise agree in writing, any application of proceeds to principal shall not extend or postpone the due date of the monthly payments referred to in paragraphs 1 and 2 or change the amount of the payments. If under paragraph twenty-one the Property is acquired by Lender, Borrower's right to any insurance policies and proceeds resulting from damage to the Property prior to the acquisition shall pass to Lender to the extent of the sums secured by this Security Instrument immediately prior to acquisition. [(emphasis added).]
Paragraph twenty-one, which is referred to in the foregoing passage, pertained to Fairbanks's"Acceleration Remedies," including judicial foreclosure.
After Alexander defaulted under the terms of the mortgage and Fairbanks initiated a foreclosure action, the court entered a March 9, 2000 final judgment of foreclosure. The judgment ordered that the property be sold to satisfy Alexander's debt to Fairbanks of $147,530.37,"together with lawful interest thereon to be computed from January 20, 2000, with the Plaintiff's cost to be taxed with lawful interest thereon" and counsel fees of $1,575.
On October 23, 2001, Fairbanks purchased the property at the sheriff's sale for the sum of $100. On November 1, 2001, the court nunc pro tunc denied Alexander's motion to stay the October 23, 2001, sale, but also ordered that his right to redeem be extended for forty-five days until December 17, 2001. Notwithstanding that order, on November 16, 2001, one month prior to the expiration of ...