author: Goldmann, P. J. A. D. Lewis, J. A. D.

text:
    VITO CAPABIANCO AND JULIA CAPABIANCO, HIS WIFE, PLAINTIFFS-RESPONDENTS, v. JOHN L. BORK AND JOSEPHINE M. BORK, HIS WIFE, AND THE UNITED STATES OF AMERICA, DEFENDANTS-APPELLANTS.
    Superior Court of New Jersey Appellate Division
    Argued January 19, 1970
    Decided February 2, 1970.

      Lewis, J. A. D., dissented.
    Before Judges Golmlahw, Lewis and Matthews.

      Mr. Frank IP. Hook argued the cause for appellants (Mr. Donald B. Jones, attorney).
    Respondents did not file a brief.
   The opinion of the court was delivered by

Goldmann, P. J. A. D.

Plaintiffs brought an action for partition, and defendants counterclaimed for subrogation to the rights of a prior mortgage and for strict foreclosure. Plaintiffs subsequently informed the trial judge that they would not participate in the case or oppose dismissal of their complaint.

The final judgment subrogated defendants to the rights of the First Federal Savings & Loan Ass’n of Clearwater, Florida, under a mortgage dated June 14 and recorded June 16, 1961, thereby entitling them to priority over the rights of plaintiff Vito Capabianco under a judgment he had recovered against one George Fink on September 25, 1961, and also to priority over all rights conveyed to Capabianco by sheriff’s deed dated February 3, 1967 following an execution sale under that judgment, including priority over any dower rights of Mrs. Capabianco. The subrogation granted was in the amount of $10,473.45, with 5J4% interest from March 2, ■ 1966. The judgment declared the interest of defendant Federal National Mortgage Ass’n (FNMA) to be 100% of the debt, its interest being transferred to defendants Bork in proportion to and at the times that their principal payments on the $12,500 mortgage they had given on March 2, 1966, and then held by FNMA, reduced the mortgage principal below $10,473.45. Counterclaimants’ request for strict foreclosure of the 1961 mortgage to which they had been subrogated was denied.

The facts are succinctly set out in the trial judge’s opinion reported in 106 N. J. Super. 429, at 430-432, and because of their length are not repeated here. Reference may also be made to the facts in a prior suit, First Federal Savings & Loan Ass’n of Clearwater, Fla. v. Fink, 99 N. J. Super. 76, 77-81 (Ch. Div. 1968), wherein the substituted plaintiff, assignee of the 1961 mortgage, was held not entitled to summary judgment of foreclosure as against the Capabiancos, and the latter’s motion for summary judgment dismissing the action was granted.

We agree with the trial judge’s determination that FNMA was entitled to be subrogated to the rights of First Federal Savings & Loan Ass’n under the 1961 mortgage, and the Borks to subrogation under that mortgage to the extent of their payments of principal to FNMA.

In denying strict foreclosure the trial judge relied on Sears, Roebuck & Co. v. Camp, 124 N. J. Eq. 403, 118 A. L. R. 762 (E. & A. 1938), and quoted the following:

Yet strict foreclosure is still an appropriate remedy where, in the special circumstances, it will subserve equity and justice. This is particularly the case where, through the customary foreclosure by judicial sale or a conveyance by the mortgagor, the legal and equitable estates have become united in the mortgagee, who is also in possession under his legal title, and some outstanding junior interest has not, by reason of pure inadvertence, not aggravated by bad faith, been barred by the decree. Such is the established practice in this State, [at 409]

There having been no foreclosure judgment, no mortgagee in possession, and no joinder of the legal and equitable estates in either the Borks or FNMA, strict foreclosure was held to be inappropriate and accordingly was denied. This appeal followed.

The text immediately following that quoted by the trial judge from Sears, Roebuck reads:

And it has been held, although it is not necessary to a decision of this case, that it may also be invoked where the mortgage has been given for the entire purchase price, and the value of the land does not exceed the amount of the mortgage. * * [at 109-410]

The settlement sheet at the time when the Borks took title on March 2, '1966 shows that the $12,500 FHA purchase money mortgage which the Borks executed on that date and which was later assigned to FNMA, reflected the full purchase price. It is represented that at the time the Borks took title the property was in a run-down condition, and they agreed to the purchase price because they had need of a dwelling in that price range. The last-quoted language from Sears, Roebuck therefore fits the Borks’ situation.

As Justice Heher said in that case, “strict foreclosure is still an appropriate remedy where, in the special circumstances, it will subserve equity and justice” [at 409]. He also referred to the flexibility of equitable remedies, “their unlimited variety, their adaptability to circumstances, and the natural rules which govern their use” [at 411]. And he appropriately noted,

A lack of precedent, or mere novelty in incident, is no obstacle to the award of equitable relief, if the ease presented is referable to an established head of equity jurisprudence — either of primary right or of remedy merely. Vanderbilt v. Mitchell, 72 N. J. Eq. 910, 14 L. R. A., N. S., 304; Van Duyne v Vreeland, 12 N. J. Eq. 142. And it is an ancient field of equity jurisprudence to relieve against tiie consequences of accident and mistake of fact — not to mention its jurisdiction over equitable titles and interests created by mortgage — where, in the furtherance of justice, that course may be taken without disregard of an equal or superior equity, particularly where one has thereby acquired, at the expense of the complaining party, a legal right which in good conscience he should not retain. * * *

In our view, the circumstances of the present case point to a special equity which calls for strict foreclosure. Yito Capabianco’s judgment was against a George Eink. When George W. Eink and his wife conveyed the premises in July 1963 to the Whale Agency subject to the mortgage they had given in 1961, George W. Eink signed an affidavit that the Capabianeo judgment was not against him but against another of similar name. The Whale Agency conveyed to Yito Doria and his wife, subject to the first mortgage, and by contract of November 18, 1965 they agreed to sell the property to the Borks for $12,500. On January 14, 1966 Eirst Federal Savings & Loan Ass’n of Clearwater, Florida, brought suit to foreclose the 1961 mortgage, joining a Yito Gapabian as defendant, and filed a Us pendens one week later. As noted, the Bork title and the EHA purchase money mortgage were closed March 2, 1966. At the closing reliance was placed on the mentioned Eink affidavit. Incidentally, the lis pendens filed by First Federal gave no indication that Yito Capabianeo had a judgment lien. It was only when the closing attorney, following the Bork closing, sought dismissal of Eirst Federal’s foreclosure action that he for the first time learned of the Capabianeo judgment. It subsequently developed that the affidavit executed by George W. Eink, and which was relied upon at the Whale Agency, Doria and Bork closings, was not true.

Capabianeo would not consent to the dismissal of First Federal’s foreclosure action unless he was paid what was due on his judgment. He has maintained that position; we are informed by counsel that he refused to settle his claim for $700.

At the time of the closing of the Bork title and the EHA mortgage, the closing attorney could have insisted that before the deal went through, First Federal would have to continue with its foreclosure action to judgment and sale. Unless Capabianco redeemed the property by paying the 1961 mortgage, his judgment lien would have been terminated. He stands in no better or worse position if strict foreclosure is granted in this case.

It is only because of the closing attorney’s reliance upon the Fink affidavit that Capabianco has been able to insist upon payment of his judgment. He thus places an obstruction in the way of a sale of the Bork property — an obstruction which can be overcome only by a purchaser being willing to pay a price high enough to get rid of the judgment and let the Borks out whole. Although Capabianco has executed against Mr. Fink’s interest in the property, he can gain little thereby unless Mrs. Fink dies first, title being held by the entirety. That event may lie many years in the future.

There was some suggestion in the course of the argument below that a possible and practical procedure would be to create a situation resulting in a default under the FNMA mortgage, in which ease FNMA could proceed to foreclosure and “get rid” of Capabianco. We agree with Bork counsel’s rejoinder: “I don’t see why a court of equity would require us to do that.” A contrived default is a device which equity should abhor.

In the special circumstances of this case, strict foreclosure is an appropriate remedy subserving both equity and justice. Accordingly, we reverse and remand the matter to the trial court for entry of an amended judgment granting subrogation and strict foreclosure.

Lewis, J. A. D.

(dissenting). With deference to the views expressed in the majority opinion, I vote for affirmance substantially for the reasons set forth in the reported opinion of Judge Lane for the Chancery Division at 106 N. J. Super. 429 (Ch. Div. 1969). See also Patsourakos v. Kolioutos, 132 N. J. Eq. 87, 95 (Ch. 1942), aff’d o. b. 133 N. J. Eq. 37 (E. & A. 1943); Osborne, Mortgages, § 312, p. 905 (1951); 37 Am. Jur., Mortgages, § 530, at 32 (1941); cf. 1 Kocher & Trier, New Jersey Chancery Practice and Precedents, § 984, at 646 (1924).

Although the $12,500 mortgage was for the full purchase price, that transaction was nearly 4)^ years after the judgment of $1176.03 in favor of Capabianeo, against a former owner of the premises, was recorded. The proceedings to foreclose the prior mortgage of $10,600 were never pursued to a judicial sale. The mortgagee was never in possession nor were the legal and equitable estates ever united. In my view the trial court properly distinguished Sears, Roebuck & Co. v. Camp, 124 N. J. Eq. 403, 118 A. L. R. 762 (E. & A. 1938).

I fail to perceive any overriding equity in favor of defendants Bork or the American Title Insurance Company, the real party in interest, who chose to rely upon the false affidavit of Geoge Eink instead of the public records which would have revealed the Capabianeo judgment.

It is significant that Capabianeo filed an answer as a junior lienor in the foreclosure action, and he protested a dismissal thereof unless his judgment was satisfied. Had a foreclosure sale taken place, it is reasonable to assume, since the property was privately sold and financed for $12,500, that the bidding would have produced a surplus in excess of the $10,473.45 then due on the mortgage. Ordinarily a junior-lienor defendant in an action to foreclose a mortgage against multiencumbered premises should have the right to demand a foreclosure sale. See Tischler, “Strict Foreclosure in New Jersey,” 64 N. J. L. J. 141, 146 (1941).

In the instant circumstances, the “harsh remedy” of strict foreclosure should not be invoked against a diligent judgment creditor. I would therefore affirm.


source: Caselaw Access Project

author: Per Curiam.

license: Public Domain

text:
    STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT, v. LAWRENCE BODE, DEFENDANT-APPELLANT.
    Superior Court of New Jersey Appellate Division
    Argued November 17, 1969
    Decided February 3, 1970.

      Before Judges Kilkenny, Labrecque and Leonard.

      Mr. Henry J. Franzoni, Jr., argued the cause for appellant.

      Donald J. Flanagan, Assistant Prosecutor, argued the cause for respondent (Mr. Charles M. Fgan, Jr., Morris County Prosecutor, attorney, on the brief).
   Per Curiam.

Defendant was charged in an indictment with having, on December 1, 1967, unlawfully stolen in the Township of East Hanover one cigarette lighter of the value of $10.97, one package of cigars of the value of $.49, one cigarette lighter of the value of $12.97, and one man’s wrist watch of the value of $7.95, in all of the value of $32.38, being the goods and chattels of Yornado, Inc., contrary to the provisions of N. J. S. A. 2A:119-2.

Defendant was tried before a jury and found guilty. He prosecutes this appeal from the judgment of conviction.

On December 1, 1967, about 4:20 p.m., defendant, a police sergeant with ten years’ experience, was in charge of the desk at the East Hanover police headquarters, when his superior officer, Chief Schuler, entered the room and asked defendant to accompany him to a new building under construction, “for privacy.” They went to this new building, a new police headquarters, to the chief’s office there. After they sat down, the chief said to defendant: “You were seen last night taking something from Two Guys. What did you take?” “Two Guys” is the popularly known name of stores operated by Vornado, Inc. Defendant worked part-time in its East Hanover store at night as a stock clerk.

The chief’s question was undoubtedly prompted by his having received a call at about 5 :30 a.m. at his home from someone connected with “Two Guys” or Vornado.

The chief testified that defendant “broke down a little bit and he told me that he took two cigarette lighters, a pack of cigars and a watch.” In the chief’s words, “I said, ‘What the hell did you do that for?’ He didn’t give me no explanation. So with that I said, ‘We will go back to our old headquarters and I want you to go and bring back that stuff back to me right away.’ ” The Chief testified that defendant, who was working the 4 to 12 shift on this particular day, went outside the old building, to which they had returned, got in a patrol car and went in the direction where defendant lived. He was back within approximately eight minutes and handed the chief the four items. The chief put the articles in an envelope, marked it for identification, and later turned the envelope and contents over to the prosecutor. He identified them at trial. The chief’s testimony was objected to, but the objection was overruled and the four items were received in evidence, over objection. A pretrial motion to suppress this evidence had been denied.

In his appeal defendant advances three points for reversal, viz:

(1) A police officer is entitled to the same constitutional rights under the Fifth Amendment as any other citizen.

(2) The statement of defendant Bode, as testified to by Chief Schuler, was inadmissible since it was involuntarily obtained under circumstances that were fundamentally unfair.

(3) The goods introduced as evidence against defendant were inadmissible since they were the product of an illegal interrogation.

We consider in the foregoing order of submission the validity of those contentions.

I

It may be conceded that a police officer is entitled to the same constitutional rights under the Fifth Amendment as any other citizen. For example, police officers are constitutionally entitled to protection against the use of “coerced confessions” made by them. Garrity v. New Jersey, 385 U. S. 493, 87 S. Ct. 616, 17 L. Ed. 2d 562 (1967). So, too, they may not be compelled to incriminate themselves.

At the same time, under proper circumstances, a police officer may vountarily admit his commission of a crime, as may any other citizen.

In this instant case there was no “coerced confession” by defendant, nor was there any compulsory self-incrimination. In Garrity the police officers were threatened with loss of their jobs if they refused to answer the questions posed. There was a New Jersey statute, N. J. S. A. 2A:81—17.1, providing for forfeiture of office or employment, tenure and pension rights of persons refusing to testify on the ground of self-incrimination. The validity of that statute was not passed upon by our Supreme Court and was deemed unnecessary for consideration in Garrity, supra, 385 U. S. at 496, 87 S. Ct. 616, citing State v. Naglee, 44 N. J. 209, 223 (1965). Garrity and Naglee were limited to a consideration of the voluntariness of the incriminating statements by the police officers.

Defendant argues that his admission to Chief Schuler should have been excluded because he had not been given the warnings required by Miranda v. Arizona, 384 U. S. 436, 86 S. Ct. 1602, 16 L. Ed. 2d 694 (1966), before his making the incriminating statement. The State’s position as to this argument is that defendant was a police officer with ten years of experience and knew the rights of persons accused of criminal acts. It reasons that it cannot be said that dofendant was unaware of his rights because he recited the Miranda warnings as part of his police duties in taking statements from others. The State relies upon Coyote v. United States, 380 F. 2d 305 (10 Cir. 1967), wherein the court stated:

Surely Miranda is not a ritual of words to be recited by rote according to didactic niceties. Wluit Miranda does require is meaningful advice to the unlettered and unlearned in language which he can comprehend and on which he can knowingly act. [at 308]

But Coyote dealt with the sufficiency of the language used in advising defendant of his rights, rather than a total absence of the Miranda warnings, as in this case.

The trial court determined that the Miranda warnings were not necessary in the case of defendant becanse of his long experience as a police officer and his familiarity with the duty (of the police) to give these warnings to others. However, the court in Miranda discussed the many psychological pressures that may affect a person in custody who is being questioned by the police, and the need of a warning to overcome those pressures. A police officer being questioned about his possible involvement in a crime might not, under that emotional stress, be as conscious of all his rights as the same police officer questioning others.

We would prefer to rest our conclusion of admissibility on the ground that defendant’s statement was not made during “a custodial interrogation,” as required under the Miranda rule, thus making Miranda inapplicable herein. Defendant was at police headquarters because he was on duty there, and not because he was in police custody. After the episode with the chief, he resumed his work as desk sergeant until midnight, when his tour of duty ended. lie was not placed under arrest either that day or at any time thereafter. No criminal complaint was ever filed against him. He was suspended the next day pending the filing of disciplinary charges for a departmental hearing. But the charges were not filed or heard because defendant resigned from the police department a week later. Several months thereafter he was indicted. Accordingly, whatever defendant said to the chief of police was not the product of a “custodial interrogation.”

II

The record does not support defendant’s claim that his statement was inadmissible because involuntarily obtained under circumstances that were fundamentally unfair.

On the contrary, Chief Schuler’s interrogation and conduct were more consonant with that of a protector of a fellow-officer, shielding him by talking with him “in privacy,” by making no arrest and keeping him on desk duty for the remainder of the tour, and by making no arrest thereafter or causing any criminal complaint to be filed. It may reasonably be assumed that “well enough” would have been “left alone” by the chief, but for the indictment several months later.

Under the totality of the circumstances, we find no sound basis for defendant’s claim that his statement was “involuntarily obtained” or that the circumstances under which it was given were “fundamentally unfair.”

III

Defendant’s argument that introduction of the goods m evidence was improper, in that they were the product of an illegal interrogation, falls with our disposition of his prior two points. It is true that under Wong Sun v. United States, 371 U. S. 471, 83 S. Ct. 407, 9 L. Ed. 2d 441 (1963), the doctrine of excluding “the fruit of the poisonous tree” applies to physical or verbal evidence obtained from an illegal entry or from an illegally obtained statement. But that doctrine does not apply here because the major premise upon which the conclusion depends has not been established, as noted above. Accordingly, we find no merit in this claim of error.

We note too, in passing, that there were other State’s witnesses who testified to their having personally observed defendant on the night in question, from lookout posts at the store, take the two lighters, cigars and watch and put them in his pocket. Edward Kennedy, general manager, and Harry Hale, security manager, so testified. Kennedy identified the exhibits in court as the type of items he saw defendant take and put in his pocket, having observed him through a pair of field glasses. Kennedy also established in his testimony the respective values of the items. Thus, there was strong direct evidence of defendant’s guilt beyond his own inculpatory admission and delivery of the stolen merchandise to the chief of police.

The judgment of conviction is affirmed.


author: Conford, P. J. A. D. Kolovsky, J. A. D.,

text:
    SOUTHERN JERSEY AIRWAYS, INC., PLAINTIFF-APPELLANT, v. NATIONAL BANK OF SECAUCUS, DEFENDANT-RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Argued October 14, 1969
    Decided January 27, 1970.

      Before Judges Confoed, Collestee and Kolovsky.

      Mr. Isaac C. Ginsburg argued the cause for appellant (Messrs. Weinberg & Ginsburg, attorneys).

      Mr. William B. Berber argued the cause for respondent (Messrs. Kirlcman, Mulligan, Bell & Armstrong, attorneys).
   The opinion of the court was delivered by

Conford, P. J. A. D.

This appeal presents a complex legal problem concerning priority of interest in respect of an aircraft as between the lien of a security agreement thereon held by defendant bank and a statutory possessory lien (N. J. S. A. 2A:44-1 et seq.; L. 1934, c. 121) (hereinafter referred as an “aircraft mechanic’s or artisan’s lien”) for services and materials subsequently furnished to the owner in relation to the aircraft by plaintiff, which is engaged in the business of servicing, supplying and storing aircraft. In particular, we are concerned with the effect of the recording provisions of § 503 of the Eederal Aviation Act of 1958, 49 U. S. C. A. § 1403, as applied to the instant facts.

Defendant bank recorded its security agreement at the office of the Eederal Aviation Agency (FAA) in Oklahoma City pursuant to the federal act; plaintiff did not record its statutory lien until after the bank purported to seize and sell the aircraft (to itself) after default on the loan by the owner. The combination of these facts was held by the Atlantic County Court to warrant entry of summary judgment in favor of the bank declaring its interest in the plane to enjoy priority over that of the aircraft mechanic and awarding the bank possession. Eeliance was had upon Smith v. Eastern Airmotive Corp., 99 N. J. Super. 340 (Ch. Div. 1968). We conclude this was error, and reverse.

The material facts are undisputed. On August 11, 1967 the New York law firm of Saxe, Bacon and Bolán, owner, borrowed $32,500 from defendant bank and executed a note and “security agreement” covering the aircraft in favor of the hank as collateral for the loan. This was recorded with the EAA on October 3, 1967. Thereafter the plane was stored and mantained at plaintiff’s hangar at Bader Eield, Atlantic City. During a period of time in 1968 the owner incurred unpaid charges to plaintiff for storage, repairs, maintenance and fuel amounting to some $4,515. The aircraft remained in plaintiff’s possession. The owner having defaulted on its loan to the hank, the latter on December 9, 1968 appointed a bailiff to take possession of the plane. The bailiff on December 16, 1968 purported to take possession and posted a notice of public sale thereof on the aircraft. On December 30, 1968 the bailiff sold the plane at public sale, and the bank purchased it as the highest bidder. However, plaintiff refused to surrender possession, having physically retained possession at all times, relying upon its statutory aircraft mechanic’s lien. After preliminary legal skirmishes involving a futile attempt by the bank to obtain possession by posting a bond under the New Jersey aircraft mechanic’s lien law, cited above, plaintiff instituted this action to establish its prior interest in the plane. In the interim, on January 8, 1969, plaintiff filed with the EAA a “Notice of Aircraft Lien” on a form apparently of its own devising, the paper containing no signature or acknowledgement by the owner.

Preliminarily, to the extent that recording vel non under the federal act of plaintiff’s lien affects its position on the merits, we agree with the trial court’s conclusion that the recording of that interest by plaintiff, coming after sale by defendant under its security agreement, was too late. But, as will be seen, the absence of a valid filing was not here material.

Plaintiff’s lien claim is founded upon N. J. S. A. 2A:44^1 et seq., which grants a possessory lien for sums due for the storage, maintenance, keeping or repair of aircraft or the furnishing of gasoline, accessories, materials and supplies therefor, in favor of persons engaged in the business of supplying such goods or services. N. J. S. A. 2A :44-2. “The lien shall be superior to all other liens, except liens for taxes, and the operator of such aircraft shall be deemed the agent of any owner, mortgagee, conditional vendor or other lienor thereof for the creation of such superior lien.” Id.

The lien under the cited statute gains emphatic confirmation from the Uniform Commercial Code. Adopted in New Jersey in 1961, effective in 1963 (L. 1961, c. 120) the immediately pertinent code provision (N. J. S. A. 12A:9-310) reads :

When a person in the ordinary course of Ms business furnishes services or materials with respect to goods subject to a security interest, a lien upon goods in the possession of such person given by statute or rule of law for such materials or services takes priority over a perfected security interest unless the lien is statutory and the statute expressly provides otherwise.

Under N. J. S. A. 2A:44-2 and the Code section quoted, taken together, a qualified aircraft mechanic’s lien-holder having possession would clearly take priority over a security interest perfected under Article 9 oE the Code. See New Jersey Study Comment, Note 3, under N. J. S. A. 12A:9-310, p. 472. In other words, apart from the effect of the Federal Aviation Act, plaintiff herein would prevail over defendant under New Jersey law. The here crucial inquiry is whether the recording provisions of the federal act were intended or should be construed to effect a different result.

The present federal statute respecting recordation of titles and security interests in aircraft' stems from § 503 of the Civil Aeronautics Act of 1938, 52 Stat. 1006 (1938) —as of then, 49 U. S. C. A. § 523. After first requiring the registration of all certificates of ownership of aircraft by the Civil Aeronautics Administration (now the Eederal Aviation Agency) it directed the agency to maintain a system for recording “any conveyance which affects the title to, or any interest in, any civil aircraft of the United States.” The statute was superseded in 1958 by the Eederal Aviation Act (now 49 U. S. C. A. § 1403). Its recording provisions here material read:

(a) The Administrator shall establish and maintain a system for the recording of each and all of the following:
(1) Any conveyance which affects the title to, or any interest in, any civil aircraft of the United States;
* * * * * * *
(b) The Administrator shall also record under the system provided for in subsection (a) of this section any release, cancellation, discharge or satisfaction relating to any conveyance or other instrument recorded under said system.
(c) No conveyance or instrument the recording of which is provided for by subsection (a) of this section shall be valid in respect of such aircraft, aircraft engine or engines, propellers, appliances, or spare parts against any person other than the person by whom the conveyance or other instrument is made or given, his heir or devisee, or any person having actual notice thereof, until such conveyance or other instrument is filed for recordation in the office of the Administrator: * * *
(d) Each conveyance or other instrument recorded by means of or under the system provided for in subsection (a) or (b) of this sectiozz shall from the time of its filing for recordation be valid as to all persons without further or other recordation * * *.

Under the act the EAA maintains an office in Oklahoma City both for registration of ownership of aircraft (49 U. S. C. A. § 1401) and for recordation (under § 1403) of conveyances of aircraft and of security ■ instruments therein.

Thorough study of the matter convinces us that Congress did not intend by adoption of the cited recordation procedure necessarily to displace and preempt all state law otherwise applicable bearing upon priorities of lien and title interests in aircraft. Bather it was the intent, in relation to aircraft, to substitute for the multiplicity of state registration or recording systems a single preemptive federal system for registering (1) instruments of title, comparable to state registration of titles to motor vehicles, and recording (2) security documents of the kinds commonly comprehended by state recording laws concerning written consensual security interests affecting personal property. The reason was that the ready mobility of aircraft and their common use across state lines made it cumbersome and burdensome for persons having concern with title to or incumbrances on aircraft to have to record or search in all states or localities which could arguably be claimed to constitute the proper recording situs in relation to the specific owner or incumbrancer of a particular aircraft. See Scott, “'Liens in Aircraft: Priorities,” 25 J. Air L. & Com. 193, 200, 203 (1958); Case Note, 48 Colum. L. Rev. 1248 (19-18). Thus, failure to federally record a recordable instrument would entail the specific consequences declared by § 1403(c), but no other. Federal recording would validate a title or incumbrance as against any claim of invalidity based upon absence of state recording, but would not necessarily create affirmative priority as against competing rights declared by applicable state law.

And so, referring to all the provisions of the federal act in entirety, including that declaring immunity to tort claims in the holder of a security interest, Professor Gilmore’s authoritative text states:

The several provisions summarized above obviously amount to a good deal more than a recording system (like the patent and copyright provisions) but are still a good deal less than a comprehensive coverage of security interests in aircraft; they are much less comprehensive than the Ship Mortgage Act, which goes into great detail on the formal requisites and priorities of ship mortgages and includes sections on foreclosure and on the status of mortgages on foreign flag ships. There is of course no plenary federal power over air transportation comparable to the patent and copyright powers or even to the extention [sic] of the “judicial power of the United States” to admiralty and maritime cases. Here Congress acts under the interstate commerce and the bankruptcy powers — which have, however, become so extensive that there is not likely to be any constitutional challenge to anything Congress has done or may do in the future. A truly comprehensive security statute for aircraft — or indeed a statute covering security interests in transportation equipment of any kind, by air, rail, road and water — would undoubtedly be within the power of Congress to enact; there is, however, little likelihood that such a federal preemption of the field will take place in the near future. [1 Gilmore, Security Interests in Personal Property, § 13.5, at 423 (1965)]

Further,

• Except for the engine and spare parts liens, § 503 is not in any sense a substantive statute. Therefore, it is believed, apart from these substantive provisions, the question of formal requisites, and the operation of the recording system, state law should apply to determine any question arising in connection with a security interest in aircraft. The argument for a federal law solution is even weaker here than under any of the other federal statutes we have so far discussed: § 503 is much less comprehensive than the Ship Mortgage Act and there is not the same federal source of power that could be alleged in favor of a federal solution in the fields of copyright, patent and admiralty law. The eases decided under § 503 all seem to assume that state law is generally applicable and that § 503 is dearly an “interstitial” statute, which goes as far as it goes but no further. [Id., at 426-427]

Striking a similar note is Scott, supra, 25 J. Air L. & Com., at 202, wherein, after discussing the case holding the federal act constitutionally applicable to aircraft used solely in intrastate commerce, the writer says:

Meaning of Section 508 [now § 1403], Accepting the constitutional validity of the section, we are then faced with the more important question — what priority in right is obtained by a security holder through federal recordation? Clearly it is not axiomatic that recordation assures priority as to subsequent lienors, and the statutory language cannot be construed in such a way as to leave the matter free from doubt. The statute merely provides that conveyances or other instruments filed for recordation” shall be valid as to all persons * * It does not speak in positive terms of priority, as does for instance the Ship Mortgage Act of 1920 discussed above.

Most of the decisions having to do with the federal act have been careful to delineate its recording provisions as preemptive and exclusive only in respect of place and requirements of recording and the effect of failure to record a federally recordable conveyance or instrument as to subsequent bona fide purchasers or lienors without notice. Aircraft Investment Corp. v. Pezzani & Reid Equipment Co., 205 F. Supp. 80, 82 (E. D. Mich. 1962) ; American Aviation v. Aviation Insurance Managers, Inc., 244 Ark. 829, 427 S. W. 2d 544, 547 (Sup. Ct. 1968); Blalock v. Brown, 78 Ga. App. 537, 51 S. E. 2d 610, 9 A. L. R. 2d 476 (Ct. App. 1949); State Securities Company v. Aviation Enterprises, Inc., 355 F. 2d 225, 229, 22 A. L. R. 3d 1263 (10 Cir. 1966) ; Marsden v. Southern Flight Service, Inc., 227 F. Supp. 411, 415 (M. D. M. C. 1961); cf. Lochhead v. G. A. C. Finance Corp. of Camelback, 6 Ariz. App. 539, 434 P. 2d 655 (Ct. App. 1968); Curtis v. Carey, 393 S. W. 2d 185, 189 (Tex. Ct. Civ. App. 1965).

The decision by our Chancery Division in Smith v. Eastern Airmotive Corp., supra (on which the trial court relied in the instant ease), defeating a subsequent Mew Jersey aircraft mechanic’s lien as against a prior federally recorded security agreement solely because of the absence of federal recordation of the former (99 N. J. Super., at 353-354), was based on a line of authority following In re Veterans’ Air Express Co., supra (n. 3). There, after a sound holding that the federal act applies to planes used in intrastate as well as interstate flight, the court held a government-owned and federally recorded chattel mortgage to take priority over a subsequent possessory lien of a repairman under a California statute. The opinion did not mention, nor did the result depend upon whether the latter lien was federally recorded, and its rationale is beclouded by allusions to priority of government-owned liens. However, the actual holding on the facts seems partly to depend on an apparent assumption that the federal act is preemptive not alone as to recording requirements but sweepingly as to all substantive title and lien questions pertaining to aircraft. 76 F. Supp., at 688. This approach was pointedly rejected in Aircraft Investment Corp. v. Pezzani & Reid Equipment Co., supra, where Chief Judge Levin said:

Plaintiff suggests that Congress has preempted the entire field of conveyancing of interests in aircraft. This view is erroneous, notwithstanding In re Veterans’ Air Express Company, 76 F. Supp. 684 (D. N. J. 1948), which contains dicta on which plaintiff relies. Congress has said only that until an instrument purporting to convey an interest in an aircraft is recorded, in accordance with the Act, it is void as to third parties without notice. Upon federal recordation, it is valid without further recording. [205 F. Supp., at 82].

The court went on to indicate that the holder of a prior federally recorded chattel mortgage on an aircraft might not be prior in lien to the interest of a purchaser from the chattel mortgagor if certain principles of state law precluding that result were found applicable on the facts when the case should be tried. Expressly citing and following the statement in Pezzani & Reid, supra, as to the limited degree of preemption of the federal act, the court in American Aviation v. Aviation Insurance Managers, supra, stated:

It has previously been pointed out that Congress has preempted the field as far as recordation and registration of aircraft is concerned, but we do not mean to say that Congress has preempted the entire field relating to conveyances of aircraft, for it has been held otherwise * * *, [427 S. W. 2d, at 547; citing Pezzani & Reid, supra].

See also, State Securities Company v. Aviation Enterprises, Inc., supra (355 F. 2d, at 229), emphasizing that the federal act is preemptive only as a recording system and not as to “questions of the validity of * * * title documents, actual notice, good faith purchaser status and the like” which must be resolved under state law.

Squarely assailing both the rationale and holding in Veterans’ Air Express, supra, insofar as it subordinated the subsequent artisan’s possessory lien to the federally recorded chattel mortgage held by the government, Scott, supra, 25 J. Air L. & Com., at 203, writes:

While the court is undoubtedly correct that Congress may establish the priority of its liens with respect to liens asserted by private individuals under state statutes or by virtue of common law, one may seriously question whether it intended to do so in this instance. The purpose of the statute was reportedly to eliminate confusion engendered by a multitude of state recording systems by providing a single basis for constructive notice, not to establish the priority of a recorded security interest over all subsequent claims. The only situation in which priority appears to be determined by operation of the statute is where the security holder has failed to record his interest. Such failure invalidates the conveyance as to innocent third persons. But recordation itself merely validates; it does not grant priority. Certainly there is much respectable authority in this country preferring the lien of the artisan to that of the antecedent holder of a recorded security, either on a theory of implied consent or agency. There is no indication that Congress intended to overrule such authority by passing section 508. [emphasis added]

There is cogent evidence supporting the view that statutory or common-law possessory liens arising in invitum as a matter of law from the doing of work or furnishing of materials, unaccompanied by the execution by the obligor of any document or instrument, were not intended by the draftsmen of the federal recording act to be affected by it in any way: (1) the statutory language describing the recordable interests; (2) the treatment of the federal act by the drafters of Article 9 of the Uniform Commercial Code.

1. We note, preliminarily, that determination of this particular case requires no definitive holding as to whether a New Jersey aircraft mechanic’s lien is recordable under 49 U. S. C. A. § 1403(a). As will be further developed infra, plaintiff’s failure to record in this case, assuming the lien was recordable, should not prejudice it vis-a-vis defendant since the requirement of recording is to give notice for the benefit of those who subsequently contemplate taking an interest in the aircraft, and defendant’s interest here was taken prior to plaintiff’s. However, the statutory description of recordable rights makes it rather dubious that the drafters actually contemplated recordation of such a lien. The operative subparagraph (1) under paragraph (a) of § 1403, in specifying what should be recorded, speaks of “any conveyance * * *.” (Emphasis ours). Paragraph (b) provides for the recordation of releases, discharges, etc. “relating to any conveyance or other instrument recorded under said system.” (Emphasis ours). Thereafter, uniformly in the remainder of § 1403 after paragraph (b) the references are to “conveyance(s) and (or) other instrument (s)”. § 1403(a)(2) calls for the recordation of “any lease, and any mortgage, equipment trust, contract of conditional sale, or other instrument executed for security purposes” covering specifically identified aircraft engines, propellers or other parts.

“Conveyance” is defined in 49 U. S. C. A. § 1301 as “a bill of sale, contract of conditional sale, mortgage, assignment of mortgage, or other instrument affecting title to or interest in, property.” (Emphasis ours) See Marrs v. Barhem, 336 Mass. 416, 146 N. E. 2d 353 (Sup. Jud. Ct. 1957), holding that an attachment of a plane is not a recordable “conveyance or other instrument” affecting title to or interest in an aircraft.

Paragraph (g) authorizes administrative regulations to provide for the endorsement upon certificates of registration or aircraft certificates of information in various specified categories. If the paragraph authorizes regulations further particularizing the kinds of recordable instruments, as to which the language is at best ambiguous, there is no such regulation clearly encompassing a lien like plaintiff’s. The regulations now in effect (quoted in Smith v. Eastern Airmotive Corp., supra (99 N. J. Super., at 352)) expand the statutory definition of recordable conveyances quoted above to include “lease, equipment trust, notice of tax lien or of other lien * * The latter phraseology would seem to contemplate a notice or other written document or instrument at least of a kind regularly employed in the creation or enforcement of a lien, e. g., a tax title certificate. It is, of course, elementary that an administrative regulation must be within the fair contemplation of the delegation of the enabling statute. The statute is confined to “conveyances” and “instruments.”

That the act contemplates a written instrument executed by the obligor or grantor is further evident from the fact that former section 503 (now § 1403(e)) required acknowledgement of the instrument as a prerequisite for recording. While the act was amended in 1966 to eliminate the necessity of acknowledgement except as the Administrator might by regulation prescribe, the fact that acknowledgeable instruments were the only type of security or title instrument contemplated for recordation is evidenced not only by the history of the act but also by the present amendatory regulation (§ 49.13(c)) which, while eliminating the need for acknowledgement, nevertheless states: “The law of the place of delivery of the conveyance determines when a conveyance or other instrument must be acknowledged in order to be valid for the purposes of that place.”

It hardly needs iteration that the New Jersey aircraft mechanic’s lien is not evidenced by any instrument executed by the obligor, thus not one susceptible of acknowledgement by an obligor. There is no requirement in N. J. S. A. 2A:44-1 et, seq. under which anyone, lienor or lienee, need sign any paper for the rise or enforcement of the lien (beyond the posting of a notice of sale by the lienor in connection with satisfaction of the lien by sale).

2. We have observed above that the UCC confirms the paramountey of plaintiff’s lien, considered solely as a matter of New Jersey law. N. J. S. A. 12A:9-310. However, the Code also provides in N. J. S. A. 12Á :9-104 that Article 9 does not apply, inter alia, “to a security interest subject to any statute of the United States such as the Ship Mortgage Act, 1920, to the extent that such statute governs the rights of parties to and third parties affected by transactions in particular types of property; * *

The here pertinent question generated by the foregoing is whether the Code draftsmen contemplated the then Civil Aeronautics Act (in respect of its recordation provisions) as a “statute of the United States” necessarily governing the rights of contesting lienholders of an aircraft, much less those of a mortgagee as against a subsequent mechanic’s lienor in an aircraft, for purposes of section 9-104. The Official Code Comment (N. J. S. A. 12A:9-104, at 339) answers that question in the negative. It states that while proposed legislation then pending in Congress covering all aircraft financing would, if enacted, displace Article 9 in that field, the existing provisions of the Civil Aeronautics Act do not necessarily do so. Such legislation was never enacted. The supersession of the recording provisions of the Civil Aeronautics Act by those of the Eederal Aviation Act in 1958 involved no changes in substance. See 1 Gilmore, op. cit. § 13.5, at p. 422, n. 1. Thus, the draftsmen of the Code join with Gilmore, Scott and Judge Levin in regarding the federal aircraft recording act as something less than a comprehensive preemptive statute controlling substantive priority rights in aircraft to the exclusion of state law.

Proceeding from the foregoing background, we examine the other cases considering the priority status of mechanic’s or artisan’s liens on aircraft. A Wisconsin court held, prior to Veterans’ Air Express, supra, that a prior federally filed chattel mortgage did not constitute notice to a repairman and thus was subordinated to his lien. Anderson v. Triair Associates, Inc., 1949 U. S. Av. R. 440 (Wise. C. C. 1947) (not officially reported). While the technical holding was that federal “recording,” as distinguished from “filing,” took place after commencement of the repairs, and thus did not under the federal act as then constituted confer priority on the mortgagee (at 445), the court thought it inequitable “upon principle” to hold repairmen subject to constructive notice of a distant recording not called for by any state statute when such repairs preserve the value of the property for the benefit of all in interest and are often made under emergency conditions (at 446, 448).

In United States v. United Aircraft Corporation, 80 F. Supp. 52 (D. Conn. 19481, the court held that a federally recorded chattel mortgage did not take precedence over a subsequent artificer’s lien on engines of the aircraft overhauled by it, but only because the recordation did not identify the engines with sufficient particularity. Although the implication is that had there been sufficient specificity in description the mortgagee would have prevailed, the court left open the question as to whether the artisan should have prevailed in any case on the ground that it might have been “the intent of the contracting parties to the mortgage that an artisan’s lien should have priority * * *” (80 F. Supp., at 55). See the comment on this case in Scott, supra, 25 J. Air L. & Com., at 204.

It is noteworthy that the opinion in the United Aircraft ease does not indicate that the artisan recorded its lien with the CAA; yet the court did not undertake to invalidate the lien on that ground, as did the court in the Chancery Division decision of Smith, supra, and the trial court in the present case. Thus, United Aircraft could be argued as authority to the effect that failure of an artificer to record a lien federally (assuming it to be so recordable) does not per se void the lien as to the entirety of competing interests.

In Crescent City Aviation, Inc. v. Beverly Bank, 139 Ind. App. 669, 219 N. E. 2d 446 (Ind. App. Ct. 1966), the attempted statutory foreclosure of a mechanic’s lien for work and material in repairing an airplane was defeated as against a previously recorded conditional sale contract. Purporting to rely on Veterans’ Air Express, supra, the court asserted that the federal act intended to preserve state “remedies” but only for “those who give notice by filing with the Administrator” (219 N. E. 2d, at 449). It will be recalled that Veterans’ Air Express was not decided on the basis of failure of the (subsequent) artisan to file under the federal act. The Crescent City decision obviously cannot be supported on the “notice” rationale since, as in the instant case, the mechanic’s work and lien came after the creation of the competing interest — there, the conditional sale contract. We are not, moreover, apprised whether Indiana law gave priority to the mechanic’s lien. Finally, the case is distinguishable in that enforcement of the mechanic’s lien involved a foreclosure proceeding and the local filing of an instrument (notice of lien), a factor noted above to be absent as to the statutory lien in the present case.

In Continental Radio Co. v. Continental Bank & Trust Co., 369 S. W. 2d 359 (Tex Civ. App. 1963), a prior-in-time constitutional artisan’s lien was held subordinate to the chattel mortgage of the defendant bank on the aircraft because the bank took its interest without notice of the lien and there was no constructive notice of the artisan’s lien since it was not federally recorded. Although a letter and supporting documents claiming the artisan’s lien were dispatched to the EAA for filing, the court without explanation says: “None of these instruments complied with the [federal] statutory requirements for filing” (at 362). While the opinion abounds in dicta reiterating the discredited theory of total substantive federal preemption bottomed on Veterans’ Air Express (see supra), the express ratio decidendi of the case is that the Texas constitutional artisan’s lien “can only be enforced in equity and no enforcement will lie as against an innocent purchaser,” such as the court regarded the mortgagee in that ease to be. (at 362). Thus, the case is not authority for such a situation, as here, where the aircraft mechanic’s possessory lien is under state law automatically paramount without any recording against any other security interest, past or future.

Finally, defendant cites as a purported artisan-lien precedent the case of International Atlas Services, Inc. v. Twentieth Century Aircraft Co., 251 Cal. App. 2d 434, 59 Cal. Rptr. 495 (D. Ct. App. 1967), cert. den. 389 U. S. 1038, 88 S. Ct. 775, 19 L. Ed. 2d 827 (1968). At the outset, this ease is not actually one involving the priority of an artisan’s lien, as such, although the plaintiff was a maintenance aircraft contractor. The interest asserted by it in that case was one of title to engines of its own which it had temporarily bailed t© the owner of the aircraft by way of maintenance replacement for worn-out engines it had removed for overhaul. The contest was with the prior-in-time conditional vendor of the new aircraft as an entirety, which had federally recorded its interest. The contract of conditional sale required the buyer to replace wornout parts, engines, etc., only with other parts, engines, etc. owned by the buyer free and clear of any encumbrances. 49 U. S. C. A. § 1403(a)(2), as noted above, provides for the recordation of any ¡ílease” etc. of any “specifically identified aircraft engine,” with the same consequences for failure to record as noted above in case of failure to record a recordable “conveyance.” The court held that ■while, as a matter of California law, the plaintiff would have prevailed in its claim to the engines as against the mortgagee, it forfeited its right “under federal law” because of its failure to record federally what the court held constituted its “leases” of the engines to the owner. The opinion embraced completely and uncritically the “total federal preemption” theory stemming from Veterans’ Express Qo. and rejected by the leading commentators and by the draftsmen of the UCC, as observed above.

. ■ It is notable, moreover, that the plaintiff’s interest was •represented by an instrument clearly recordable under the federal act. However, the decision does not lend support to any view that priority in federal recording assures priority as to all subsequent interests regardless of state law, since the engine owner would have been accorded priority had it recorded. What is unjustifiable about the decision, however, is its holding of forfeiture of the owner’s title interest because of absence of recording in a situation where the prevailing prior-in-time conditional vendor obviously did not take its security interest in reliance upon the absence from record of the then nonexistent leases of the engines. The result can be justified, if at all, only on the theory that subsequent checking of the record by the conditional vendor and prompt filing by the “lessor” could have apprised the former .earlier of the breach of the retention-of-title-to-engines provisions of the contract, mentioned above, and enabled earlier remedial action by the vendor against the vendee.

■ On the other hand, we find decisions holding section 1403 .not effective to produce what the court deems a result contra-indicated by local law and policy. The most common .example of this is the case of a retail buyer of an aircraft from a dealer in such products where the dealer has previously incumbered the plane with a recorded lien. Whether the buyer fails to record his purchase at all, or buys and records after the recording of the earlier security interest, .the, buyer consistently prevails against the lienor. Texas National Bank of Houston v. Aufderheide, 235 F. Supp. 599 (E. D. Ark. 1964) ; Northern Ill. Corp. v. Bishop Distributing Co., 284 F. Supp. 121 (W. D. Mich. 1968); Suburban Trust & Savings Bank v. Campbell, 19 Ohio Misc. 74, 250 N. E. 2d 118 (C. P. 1969); cf. Lochhead v. G. A. C. Finance Corp. of Camelback, supra.

In the Aufderheide case the federal court, while recognizing the right of Congress “to legislate in the field of registration of aircraft and to provide for the recordation of liens upon or conveyances of such craft * * *” (235 F. Supp., at 603), nevertheless held that § 1403 had not supplanted the general rule of mortgage law that when a mortgagee consents to the sale of a mortgaged chattel free of lien by the mortgagor, the purchaser takes free of the lien. The court found implied consent on the facts of the case—. that the mortgagee bank knew the mortgagor was a dealer in aircraft and that the prior course of dealing between the parties signalled an implied consent by the lienholder to sale to customers of the obligor free of the lien.

The rationale of Northern Ill. Corp., supra., was basically that of Aufderheide, supra, while the other cases cited are influenced by other factors.

This line of cases is a practical exemplification by federal as well as other courts of the limited effect accorded § 1403 where its literal application would frustrate important state policy embodied in local law.

We return to the specific questions here posed for decision. They are:

(1) Assuming plaintiff’s lien was a federally recordable one (as to which we have above expressed strong doubt), did the failure so to record it invalidate it as against defendant’s security interest?

(2) If question (1) is answered in the negative, does defendant’s interest nevertheless prevail over plaintiff’s lien, by virtue of § 1403, because of its antecedence in creation and the fact of its recordation?

1. We have intimated our view as to this question above in discussion of Crescent City Aviation, Inc. v. Beverly Bank and International Atlas Services Inc. v. Twentieth Century Aircraft Co., both supra, but explain it more fully here. Everything written about § 1403, whatever the disagreement on other aspects of its interpretation, is concordant in the view that it is essentially a constructive notice device, designed to supplant diverse state recording statutes similarly functioning as means of constructively imputing notice to those subsequently dealing with or in relation to the aircraft. As pithily put in Marsden v. Southern Flight Service, Inc., supra, “The purpose of the recording provisions of the act is to protect persons who have dealt on the faith of recorded title or [sic] aircraft and as to whom it would be a fraud to give effect to unrecorded titles to their detriment.” (227 F. Supp., at 415). The legislative history supports this conclusion. Hearings before Committee on Interstate and Foreign Commerce on H. R. 9738, 75th Cong., 3rd Sess., at 405—406 (1938).

In the instant case, recording plaintiff’s lien would have obviously afforded no constructive notice to defendant, which had taken its interest previously, could thus not by search of the record before its investment have found plaintiff’s lien, even if ultimately recorded, and presumably relied only on the absence from record of any earlier titles or liens. Therefore, to destroy plaintiff’s Hew Jersey statutory lien, reinforced by the weight of Code provision N. J. S. A. 12A :9-310, as against this defendant, would senselessly subvert Hew Jersey law without the justification of service of the rationale of the federal act. Such a result could be arrived at only by a blindly literal reading of § 1403 (c), and ignoring its intent and purpose. This we will not do. Alexander v. New Jersey Power & Light Co., 21 N. J. 373, 378-379 (1956). The case would, of course, be different had defendant’s interest followed the creation of the nonrecorded plaintiff’s lien (still assuming recordability of the latter). Blalock v. Brown, Marsden v. Southern Flight Service, Inc., and United States v. United Aircraft, all supra, and Pope v. National Aero Finance Co., 236 Cal. App. 2d 722, 46 Cal Rptr. 233 (D. Ct. App. 1965).

The holding of the County Court, insofar as based on absence of recording of plaintiff’s lien, is erroneous, and the decision in Smith v. Eastern Airmotive Corp., supra, to the same effect is overruled.

2. The answer to this question depends on how one reads the statutory language (§ 1403(d)):

Each conveyance or other instrument recorded * * * under the system provided for in * * * this section shall from the time of its filing for recordation be valid as to all persons without further or other recordation, * * *.

Those of the authorities which have deliberately considered the meaning of this clause have, as fully developed above, concluded that it means no more than what it expressly says: in effect, that recording under the federal act is all the recording necessary to prevent relative invalidity vis-a-vis other interests. The section does not say that such recording per se grants priority as against any other interest. Eor example, it obviously would not ordinarily grant priority against an earlier, federally-recorded interest. Its priority, ordinarily, against later interests, recorded or unrecorded, is consistent with state law which, absent the federal requirement, would generally accord priority to the earlier of two recorded interests (where recording is required by state law). To restate the teaching of Gilmore,

* * ® apart from [certain substantive provisions not here relevant], the question of formal requisites, and the operation of the recording system [under § 1403], state law should apply to determine any question arising in connection with a security interest in aircraft. [1 Gilmore, op. cit., at 426].

Accordingly, as applied to the instant facts, the recording of defendant’s lien does not per se confer priority in interest as against that of plaintiff. The inquiry is remitted to state substantive law, and the latter gives priority to plaintiff’s lien.

To recapitulate: we hold that (1) plaintiff’s failure to record its lien (assuming federal recordability) does not invalidate it as against defendant; (2) federal recording of defendant’s lien did not accord it priority over plaintiff’s, and (3) the relative priorities of the parties must be determined in accordance with state law, which, on the present facts, accords priority to plaintiff’s aircraft mechanic’s possessory lien to the extent noted above.

In a supplemental post-argument brief defendant for the first time argues that if federal law does not here control on priority, the law of New York rather than that of New Jersey applies.

The note and security agreement were mailed for signature from the bank’s office in Secaucus, New Jersey, to the owners in New York City and signed there by them. The copy of the security agreement furnished us is blank as to place of execution by the bank, but it was inferably signed by the bank officers at Secaucus. The security agreement recites that the plane is to be kept at Bader Field in Atlantic County, New Jersey, and plaintiff’s goods and services were supplied there. Not only was New York law not pleaded or established below, see Evidence Buie 9(2) (a), (3); cf. Graulich Caterer, Inc. v. Hans Holterbosch, Inc., 101 N. J. Super. 61, 67 (App. Div. 1968), and thus not a factor considered in the trial court’s decision, but the present supplemental brief contains no expository argument either supporting the thesis of applicability of New York law in these circumstances or indicating what such law is, if materially contrary in effect to New Jersey law. At trial level, in the original briefs and at the oral argument the issue was debated solely in terms of construction of the federal and New Jersey statutes. In all these circumstances, we ignore the belated argument and assume the applicability of New Jersey law.

The judgment is reversed and the cause remanded for further proceedings not inconsistent with this opinion. No costs.

Kolovsky, J. A. D.,

(concurring) : Since as the foregoing opinion notes,

determination of this particular case requires no definitive holding as to whether a New Jersey aircraft mechanic’s lien is recordable under 49 U. S. C. A. § 1403(a),

in my opinion this court should refrain from expressing any views as to whether under a proper interpretation of the federal statute and such valid regulations as may have been promulgated by the Federal Aviation Agency, such a lien is legally recordable. In fact and in practice, the Federal Aviation Agency has recorded notices of aircraft mechanics’ liens — witness the recording of plaintiff’s “notice of aircraft lien” on January 8, 19G9 as “'Conveyance Number P 50993,” the recording referred to in the foregoing opinion.

The question of whether an aircraft mechanic’s lien is federally recordable is one that should be left for decision to a case in which constructive notice may be a material issue, one involving competing claims between an aircraft mechanic’s lien claimant and a person who has purchased the aircraft or acquired a subsequent interest therein without actual notice of an existing unrecorded mechanic’s lien claim. Constructive notice is of no significance in the case before us which involves a controversy between the holders of a security interest and an aircraft mechanic claiming a lien for services rendered after the security agreement was executed and recorded.

       Plaintiff also claims $4,076.44 for “pilot service” and $1,530 for “trade” (unexplained). The trial court held these items were not lienable under the New Jersey statute cited above. We agree as to the first. The “trade” item will have to be explained and readjudicated on the remand. If it consists, as defendant asserts, of trade balance of rentals as between this plane and others furnished the owner by plaintiff, it is not lienable.

       See also N. J. S. A. 12A :9-104(e), which excludes the application of Chapter 9 of the Code “to a lien given by statute or other rule of law for services or materials except as provided in 12A: 9-310 on priority of such liens.”

        In re Veterans’ Air Express Co., 76 F. Supp. 684, 691 (D. N. J. 1948).

         One may well wonder how an aircraft mechanic’s lienholder in New Jersey could effectively file under the federal act in relation to later lienors. Repair and maintenance obligations are ordinarily incurred over a period of time, but the New Jersey lien is only for such as have actually been incurred at any given time. Would a federal filing, if required at all, made by the mechanic when the work began, protect him against intervening liens as to work done later? Would he have to make repeated filings as the work proceeded? Consider that “notice filing,” as distinguished from “transaction filing,” was hardly known in 193S when the federal act was first enacted (see Official Code Comment, N. J. S. A. 12A :9-402, at 522-523). Of course, as seen, neither notice filing nor transaction filing has ever had any relevancy to the statutory aircraft mechanic’s lien as a matter of New Jersey law.

       The foregoing observation is not affected by the circumstance that N. J. S. A. 12A:9-302(3) exempts from the filing requirements of Article 9 any security interest subject to filing under a federal statute like 49 U. S. C. A. 1403. See New Jersey study comment 3. Thus, defendant’s mortgage did not have to be filed under Article 9.

       The court noted that this conclusion was “consistent” with TJCC 9-307 (N. J. S. A. 12A:9-807) to the effect that a buyer in the ordinary course of business (other than of farm products) takes free of a security interest created by his seller, even though known to the buyer and perfected. (235 F. Supp., at 604).

       While N. J. S. A. 2A :44r-l et seq. and the Code settle for us the public policy question here implicated, justification for the legal implication of authority by the prior lienor for incurrence of subsequent lienable services on the chattel by the owner is indicated by Brown, Law of Personal Property (1936) § 112, p. 484. Other justifications for the result are suggested by Scott, supra, 25 J. Air L. & Com., at 208-11.

       Our own investigation discloses 32 McKinney’s Cons. L. Ann., (New York) Lien Law, § 184, which appears, prima facie, to create a lien on aircraft and other vehicles of substantially similar nature and priority to that under AT. J. S. A. 2A :44-l et seg.


author: Meanor, J. C. C.

text:
    ACADEMY SPIRES, INC., PLAINTIFF, v. GEORGE JONES, DEFENDANT, ACADEMY SPIRES, INC., PLAINTIFF, v. FLORENCE STEVENSON, DEFENDANT, ACADEMY SPIRES, INC., PLAINTIFF, v. KENNETH WILSON, DEFENDANT, ACADEMY SPIRES, INC., PLAINTIFF, v. MARIE THOMAS, DEFENDANT, ACADEMY SPIRES, INC., PLAINTIFF, v. WILLIAM ROBINSON, DEFENDANT, ACADEMY SPIRES, INC., PLAINTIFF, v. KENNETH CHEATHAM, DEFENDANT.
    Superior Court of New Jersey Law Division
    Decided January 22, 1970

      Mr. Norman Malzberg for plaintiff.

      Miss Nadine Taub for defendants (Mr. William Bossmoore of Stavis, Bichardson, Koenigsberg & Bossmoore, attorney).
   Meanor, J. C. C.

(temporarily assigned). This is a motion by defendant tenants under N. J. S. A. 2A:18-60 to remove these six summary actions for possession to the Superior Court for trial. See Master Auto Parts, Inc. v. M. & M. Shoes, Inc., 105 N. J. Super. 49 (App. Div. 1969). It is sought by removal to utilize Superior Court jurisdiction to determine on the merits an asserted defense to the actions which it is claimed the county district court lacks power to hear.

The summary action for possession provided by N. J. S. A. 2A:18-51 et seq. was reviewed in Vineland Shopping Center, Inc. v. DeMarco, 35 N. J. 459 (1961). There is no appeal from a county district court judgment in such a case unless the challenge be on jurisdictional grounds. N. J. S. A. 2A :18-59; Davidson v. Burstein, 10 N. J. Super. 91 (App. Div. 1950). After the transfer, however, a Superior Court judgment is appealable. N. J. S. A. 2A:18-61. Matters determined in a summary action for possession are not res judicata in a subsequent action between landlord and tenant, even over the same subject matter. Vineland Shopping Center, Inc. v. DeMarco, supra, at 462; Van Vlaanderen Machine Co. v. Fox, 95 N. J. L. 40 (Sup. Ct. 1920); Terrill Manor, Inc. v. Kuckel, 94 N. J. Super. 25, 28 (App. Div. 1967).

The grounds upon which a landlord may summarily seek possession are set forth in N. J. S. A. 2A:18-53. The most common ground advanced and the one set forth here is, of course, nonpayment of rent. N. J. S. A. 2A:18-53(b). A landlord who unjustifiably seeks and obtains possession may later be held to respond in damages. N. J. S. A. 2A :18-59; Construction and Renting Corp. v. Stein, 6 N. J. Super. 239 (App. Div. 1950); Lyster v. Berberich, 3 N. J. Super. 78 (App. Div. 1949).

Where the ground upon which possession is sought is nonpayment of rent, the tenant may cause the proceedings to cease because of loss of jurisdiction by payment to the clerk of the county district court, “on or before entry of final judgment," of the amount in which he is in default pins costs of the proceeding. N. J. S. A. 2A:18-55; Saveriano v. Saracco, 97 N. J. Super. 43, 47 (App. Div. 1967). Since under N. J. S. A. 2A:18-57 a warrant for possession may not issue until the expiration of three days after entry of judgment for possession, the tenant as a practical matter has three days in which to pay the amount he is in default in order to remain in possession.

The position of the tenants here is that plaintiff has violated the implied warranty of habitability provided by Reste Realty Corporation v. Cooper, 53 N. J. 444 (1969), and thus there has been at least a partial failure of consideration. Compare Unico v. Owen, 50 N. J. 101 (1967).

Under present practice the'county district court does not permit litigation of the issue of habitability in a summary action for possession. The tenant in default for nonpayment of rent may forestall eviction only by payment of back rent according to the express terms of his lease —■ and this is true even if there has been a material failure of consideration because of the landlord’s breach of his warranty of habitability. The remedy, it is said, for a tenant who wishes to or must remain in possession is to pay in full the amount called for by the lease and then bring an independent action to recover as damages some of the amount so paid, asserting a partial failure of consideration because of a breach of the warranty of habitability. Thus, a tenant victimized by a landlord’s breach of warranty may face the unhappy choice between eviction or payment of money which he does not owe. And a landlord guilty of the most flagrant breach may still evict his tenant or collect in full, and this is true even if the tenant’s money is paid to the clerk of the court, for the latter is obligated to turn such funds over to the landlord “forthwith.” N. J. S. A. 2A:18-55. While it is possible that any wrongs done to the tenant may be righted in a subsequent action for damages, the tenant who remains in possession (perhaps by the press of economic circumstances coupled with the shortage of adequate housing) has at least been deprived during the period of subsequent litigation of the use of money he should not have had to pay, and the landlord unjustifiably enjoys it for the same span of time.

Where the nonpayment of rent is the basis upon which the landlord seeks possession, it is essential that he establish this default. If the tenant contests the assertion of nonpayment, the county district court must try the issue, including ihe merits of any equitable bar raised to aid the tenant in meeting the allegation. Vineland Shopping Center, Inc. v. DeMarco, supra. It is a corollary of this that where the extent of the default is disputed, the county district court is obligated to decide that issue as well. If the landlord is correct in his assertion of the fact of nonpayment but is in error in his claim of the amount owed, determination of the extent of default is essential as a prelude to judgment for possession. This for no other reason than that the tenant is entitled to know the sum he must pay to deprive the court of jurisdiction and to put an end to the proceeding. Cf. Vineland Shopping Center, Inc. v. DeMarco, supra; Carteret Properties v. Variety Donuts, Inc., 49 N. J. 116, 124 (1967).

B. 6 :3-4 forbids joinder of a summary action for possession with any other claim and also precludes the filing of a counterclaim or third-party complaint. The rule must of course, be honored and trial of the issue of habitability in a summary action for possession will do no violence to it. Habitability as an issue in such an action in the county district court is subsidiary to a determination of the exact amount of the tenant’s default for nonpayment of rent. Thus, the issue of habitability need only be litigated with respect to the period during which the landlord claims the tenant to be in default. To permit the tenant to raise the habitability issue with regard to a time period for which it is not claimed he is in default or for which the rent is already paid would be, in effect, to permit a counterclaim, and this B. 6:3-4 forbids. If the tenant wishes to extend the controversy over a period of time not the subject of the landlord’s claim of default, he will have to do so by separate action.

It has been said that to permit habitability to be injected as an issue, even to the limited extent authorized here, would be to flood the county district court with frivolous defenses urged more as a delaying tactic than with any legitimate hope of success. It is doubtful that this is so. It is not easy to assume that litigants will assert and the Bar will perpetuate issues to be tried for impermissible motives. It might be noted that the county district court has discretionary power under N. J. S. A. 2A :42-10.1 and 2A :42-10.6 to delay up to six months the issuance of a warrant for possession. A litigant who has unjustifiably imposed upon the court cannot complain if he later fails to receive the courtesy of a favorable exercise of discretion. Furthermore, proof of broach of the warranty of habitability will not be an easy burden for the tenant to bear. Not every transient inconvenience of living attributable to the condition of the premises will be a legitimate subject of litigation. The warranty is one of habitability and is not a warranty against all inconvenience or discomfort. Reste Realty Corporation v. Cooper, supra, clearly implies that to be actionable the breach must be so substantial as to amount to a constructive eviction. But when the tenant elects to remain in possession the county district court has ample power, when the landlord seeks possession for nonpayment of rent, to offer him the choice between vacating or paying, not what his lease expressly recites but what, in view of the landlord’s breach, ho truly owes. Any dissatisfaction with the result by either party may be remedied by an independent action for damages in which neither side is bound by any determination made in the summary action for possession. Van Vlaanderen Machine Co. v. Fox, supra. A final judgment in a subsequent action for damages is, of course, appealable. See Construction and Renting Corp. v. Stein, supra.

Defendants here apparently desire to expand their contention of lack of habitability to include a time period not encompassed by the landlord’s claim of default for nonpayment of rent. They urge that, in any event, transfer should be ordered so as to permit the broad attack they seek to make upon the habitability of the premises they lease. However, any such suit will almost certainly be within the county district court’s monetary jurisdiction, whether the theory thereof be tort or contract. L. 1969, c. 177 (N. J. S. A. 2A:6-34) : Avon Sheet Metal Co. v. Heritage House Assoc., 107 N. J. Super. 487 (Dist. Ct. 1969). It certainly is no hardship to the tenants to require them to utilize that forum in which to seek redress. What in effect is sought by transfer is to avoid R. 6 :3-4, a motive which certainly does not qualify these cases as “of sufficient importance” to merit transfer under N. J. S. A. 2A:18-60. Master Auto Parts, Inc. v. M. & M. Shoes, Inc., supra, 105 N. J. Super., at 52-53.

Plaintiff relies upon the following dictum from Peters v. Kelly, 98 N. J. Super. 441 (App. Div. 1968) :

Also, we think that under existing law, the alleged nonhabitable condition of the leased premises is not a defense to the landlord’s suit for possession based on nonpayment of rent, [at 444'].

This statement is not apposite. It was issued before Reste destroyed the doctrine of independent covenants, imposed an implied warranty of habitability, and permitted the tenant, upon breach, to elect to vacate or to remain upon payment of the value of the leasehold calculated in light of the breach. The “existing law” mentioned in Peters has changed.

Since the county district court has jurisdiction to consider lack of habitability, as defined in Reste, in a summary action for possession, as a necessary step in determining the accurate amount of a tenant’s default in order to enable him to pay that sum to avoid eviction, there is no basis on which these cases should be transferred. The motion is denied.


author: Kolovsky, J. A. D.

text:
    GAYNA KISH, AN INFANT BY HER GUARDIAN AD LITEM, DOROTHY BONOMOLO, AND DOROTHY BONOMOLO, INDIVIDUALLY, PLAINTIFFS-APPELLANTS, v. MOTOR CLUB OF AMERICA INSURANCE COMPANY, CHARLES E. HARDING, EDWIN M. GORDON AND URANIA GORDON, DEFENDANTS-RESPONDENTS.
    Superior Court of New Jersey Appellate Division
    Argued December 8, 1969
    Decided February 2, 1970.

      Before Judges Cokfoed, Collesteb and Kolovsky.

      Mr. Douglas T. Hague argued the cause for appellants (Mr. Henry M. Spitzer, attorney: Mr. Ronald R. Kogos, on the brief).

      Mr. Jerome 8. Lieb argued the cause for respondent Motor Club of America Insurance Company (Messrs. Lieb, Teich and Berlin, attorneys).
   The opinion of the court was delivered by

Kolovsky, J. A. D.

The infant plaintiff (Kish), while a passenger in an Oldsmobile automobile owned by her and being driven with her permission by defendant Harding, was injured when the automobile collided with that of defendants Gordon.

Defendant Motor Club of America Insurance Company (Motor Club) had theretofore issued a binder for an automobile liability insurance policy describing the Kish (“the owned”) automobile and designating Kish as the named insured. Under Coverage “A” of the policy, Motor Club agrees

To pay on behalf oí the Insured all sums which the insured shall become legally obligated to pay as damages because of:
A. bodily injury, sickness or disease, including death resulting therefrom, hereinafter called “bodily injury”, sustained by any person;
arising out of the ownership, maintenance or use of the owned automobile * *

The policy defines “insured” to mean “a person or organization described under 'Persons Insured.’ ” The “Persons Insured” provision of the policy reads in pertinent part as follows:

The following are insureds under Part 1:
a. with respect to the owned automobile,
(1) the named insured and any resident of the same household,
(2) any other person using such automobile with the permission of the named insured * *

The only other provision of the policy pertinent to the issue here presented is the following appearing among its exclusionary clauses:

This policy does not apply * * * (K) under Coverage A, to death of or injuries to the named insured, or any insured, or the spouse or minor children of the named insured or any insured, whether related by blood or adoption, unless the policy is specifically endorsed to cover the same.

The infant plaintiff and her mother instituted a negligence action against Harding and the Gordons to recover for the injuries sustained by the infant in the collision. Motor Club, retying on exclusion (K) quoted above, denied that any insurance coverage was due Harding with respect to the claim of Kish, the “named insured.” It filed an answer in the negligence action on Harding’s behalf only after he had executed a nonwaiver agreement.

Kish then instituted this action seeking a declaratory judgment that exclusion (K) is invalid and that in any event Motor Club is obligated to afford a defense to Harding and to pay any judgment which Kish may recover against him. On cross-motions for summary judgment the trial judge entered judgment in favor of Motor Club. He ruled that exclusion (K) is valid and a bar to any liability of Motor Club with respect to the Kish claim, citing with approval State Farm Mut. Auto. Ins. Co. v. Cocuzza, 91 N. J. Super. 60 (Ch. Div. 1966), which involved a substantially similar exclusionary clause. Plaintiffs appeal.

We reverse and hold that the exclusion is invalid and may not be applied to deprive Harding of the insurance coverage to which he, as one who was using the automobile with the permission of the named insured, is otherwise entitled under the policy. Selected Risks Ins. Co. v. Zullo, 48 N. J. 362 (1966); Willis v. Security Insurance Group, 53 N. J. 260 (1969), affirming 104 N. J. Super. 410 (Ch. Div. 1968).

The opinions in State Farm Mut. Auto. Ins. Co. v. Cocuzza, supra, and in Capece v. Allstate Ins. Co. v. State Farm, etc., Ins. Co., 88 N. J. Super. 535 (Law Div. 1965), referred to in Cocuzza, were concerned primarily with the interpretation of the exclusionary clauses rather than with their validity. Implicit therein, however, and particularly in the citation of numerous out-of-state cases upholding the effectiveness of such clauses (see Cocuzza, supra, at 63-64; Capece, supra, at 542-544), were determinations that the clauses, although they limited the coverage otherwise granted by the omnibus clauses, were not against public policy (see Gapece, supra, at 541) and should be enforced as written.

The public policy of other states with respect to the question presented, as revealed by the cases cited from their courts, is, however, merely of academic interest in view of the decision of our Supreme Court in Selected Bishs Ins. Go. v. Zullo. There the court held that the public policy of this State with respect to omnibus coverage was to be found in the provisions of the Unsatisfied Claim and Judgment Fund Law, N. J. S. A. 39:6-61 et seq., and the Motor Vehicle Security-Responsibility Law, N. J. S. A. 39:6-23 et seq. Neither Gapece nor Cocuzza had discussed the relevance of those statutes, although the opinion in Cocuzza did note that the policy there involved “was not issued pursuant to the Motor Vehicle Security-Responsibility Law.” 91 N. J. Super., at 61.

In Selected Bishs Ins. Go. v. Zullo, the question posed was the omnibus coverage required to be afforded under an owner’s automobile liability insurance policy issued not as proof of financial responsibility for the purposes of the Motor Vehicle Security-Responsibility Law, N. J. S. A. 39:6-31 and 46 (a), but rather, as in the present case, for the purpose of qualifying the owned automobile as an insured automobile whose owner could thus obtain the advantage of so registering it under the Fund Law.

The court held that in the case of an owner’s policy “there may be no departure from the omnibus coverage described in [N. J. S. A. 39:6-46(a)]” (48 N. J., at 374); that the policy “must have the broad form omnibus coverage set forth in N. J. S. A. 39:6-46(a),” and that “a policy which purports to have a more restrictive omnibus coverage is automatically amended to conform to the statutory standard” (48 N. J., at 373).

N. J. S. A. 39:6-46(a) provides in pertinent part:

The policy shall:
(a) Designate, by explicit description or appropriate reference, all motor vehicles with respect to which coverage is intended to be granted thereby, and insure the insured named therein and any other person using or responsible for the use of any such motor vehicle with the express or implied consent of the insured, against loss from the liability imposed upon the insured or other person by law, for injury to or the death of a person, other than a person who is covered, as respects the injury or death, by any workmen’s compensation law, * * * growing out of the maintenance, use or operation of the motor vehicle in the United States of America.

In Zullo the insurance policy, after defining “persons insured” with respect to the owned automobile to include “any other person using such automobile with the permission of the named insured” (in substance the statutory language), added the proviso, “provided his actual operation or (if he is not operating) his other actual use thereof is within the scope of such permission.” The proviso was held ineffective and “the policies * * * deemed amended to contain omnibus coverage no less broad than that of the statute.” 48 N. J., at 373.

In Willis v. Security Ins. Group, the policy contained an omnibus clause in the statutory form but by endorsement “specifically exclude [d] from its omnibus clause individuals driving the insured’s car with his permission where such persons have available valid and collectible insurance under their own policies with the minimum limits of $10,000/ $20,000.” 104 N. J. Super., at 412. The trial court, in an opinion which was adopted by the Supreme Court, held the endorsement invalid because

N. J. S. A. 39:6-46(a) specifically requires that a policy shall “insure the insured named therein and any other person using or responsible for the use of any such motor vehicle with the express or implied consent of the insured, * * (104 N. J. Super, at 415; emphasis added)

The principle embodied in Zullo and Willis mandates the conclusion that exclusion (K) is invalid and that the policy is to be deemed amended to delete it. To give effect to exclusion (K) would be to deprive Harding, a person using the automobile with the consent of the named insured, of the coverage which the statute says he is to have and to compel him to expend his own funds in defense of the Kish action and in payment of any judgment that Kish may recover against him, or, if he be without adequate financial resources, to impose the obligation of defending him and paying the judgment entered against him on the Unsatisfied Claim and Judgment Eund.

Under N. J. S. A. 39:6-46 (a) the policy must afford Harding insurance “against loss from the liability imposed * * * [upon him] by law, for injury to or death of a person, other than a person who is covered, as respects the injury or death, by any workmen’s compensation law.” (Emphasis added). The italicized words, “a person,” include Kish, who admittedly is not “covered, as respects the injury * * * by any workmen’s compensation law.”

In a supplemental memorandum, Motor Club contends that if exclusion (K) is ruled ineffective, then its liability under the policy should be limited “to $10,000 per person, $20,000 per occasion and $5,000 property damage,” the minimum limits mentioned in N. J. S. A. 39:6-31 and 46.

The contention was not advanced by Motor Club either in its answer, in its argument on the motions for summary judgment, or in its original brief filed in this court. The failure to raise the issue in the trial court would justify our refusing to consider it on appeal. Reynolds Offset Co., Inc. v. Summer, 58 N. J. Super. 542, 548 (App. Div. 1959).

Nevertheless, we have considered it and conclude that it lacks merit. The fact that a provision which Motor Club inserted in its policy in an attempt to limit the omnibus coverage called for by N. J. S. A. 39:6-46 (a) has been adjudged invalid affords no justification for relieving it from the monetary limits of coverage it has stipulated in its policy.

Motor Club purports to find support for its contention in the following paragraph of N. J. S. A. 39 :6-46,

This section shall not be construed as preventing the insurance carrier from granting any lawful coverage in excess of or in addition to the coverage herein provided for, nor from embodying in the policy any agreement, provision or stipulation not contrary to the provisions of this chapter and not otherwise contrary to law,

arguing that the omnibus coverage required by N. J. S. A. 39:6-46 (a) applies only to the minimum limits referred to in N. J. S. A. 39:6-31 and 39:6-46, $10,000 for injury or death of one person, $30,000 for one accident resulting in injury or death of more than one person, and $5,000 for damage to property.

We do not agree. N. J. S. A. 39:6-46(a), in specifying the scope of the omnibus coverage to be afforded by an owner’s policy, makes no distinction between a policy containing the minimum statutory limits and one embodying higher limits. In either case, a provision limiting the broad omnibus coverage called for by N. J. S. A. 39:6-46 (a) would be contrary to law.

Providing minimum statutory limits helps effectuate the public policy of assuring that “financially responsible persons [are] available to meet the claims of persons wrongfully injured in automobile accidents.” Zullo, 48 N. J., at 371. But as the court pointed out in Willis, the Supreme Court in Zullo did not stop with a condemnation of omnibus clause limitations which obstruct that public policy:

Were this as far as the court went in Zullo, the limitation of coverage under the omnibus clause in the instant case might well be upheld. For a ruling in favor of Security would in no way deprive persons wrongfully injured from having “financially responsible persons available,” nor would they go uncompensated. Indeed, Security’s omnibus clause only disclaimed coverage if the permitted driver was covered under his own policy, and then only to the limits of that coverage. However, in ruling that the limited omnibus clause in Zullo was invalid, the court went much further than a mere statement of policy. It emphasized the point that this policy dictated that “there may be no departure from the omnibus coverage described in section 46 of the Security-Responsibility Act, * * (at p. 374)

The court further stated:

“A policy * * * must have the broad form omnibus coverage sat forth in N. J. S. A. 39:6-46 (a). A policy which purports to have a more restrictive omnibus coverage is automatically amended to conform to the statutory standard.” (at p. 373). (104 AT. J. Super., at 415)

Contrary to what Motor Club further argues, State Farm Mut. Auto. Ins. Co. v. Wall, 92 N. J. Super. 92 (App. Div. 1966), does not support its claim that its obligation here should be limited to the minimum statutory limits.

Wall involved a policy deemed to be one submitted as proof of financial responsibility under the Motor Vehicle Security-Besponsibility Law because Wall’s license had theretofore been revoked. See N. J. S. A. 39:6-31; Steliga v. Metropolitan Casualty Ins. Co., 113 N. J. L. 101 (Sup. Ct. 1934), aff’d o.b. 114 N. J. L. 156 (E. & A. 1935). In case of such a policy, as distinguished from a policy issued to qualify one as the owner of an insured automobile under the Eund Law, the insurer’s normal right to rescind for misrepresentation or to defend against liability thereunder because of the insured’s breach of the conditions of the policy is subjected to a statutory limitation in favor of persons injured by the negligent operation of the automobile although it is not so limited in favor of the defaulting insured. With respect to such injured persons, the statute, N. J. S. A. 39:6-48(a), limits the right of the insurer to so rescind or defend to so much of the policy limits as exceeds the statutory minimums. Wall, supra, at 103-104.

That statute has no pertinence to this case, which involves neither a policy issued pursuant to N. J. S. A. 39:6-31 nor any misrepresentation or breach of condition by the insured, but only an adjudication that the insurer’s attempt to limit the omnibus coverage of the policy is legally ineffective.

The judgment is reversed and the cause remanded to the trial court for entry of a judgment declaring that the policy affords liability insurance coverage to Harding with respect to Kish’s claim to the limits therein provided.


text:
    WILLIAM BAUER, AN INCOMPETENT BY HIS GUARDIAN AD LITEM, RONALD R. BAUER, PLAINTIFF-APPELLANT, v. ALEX T. GRIFFIN, DEFENDANT-RESPONDENT.
    Superior Court of New Jersey Appellate Division
    Argued January 19, 1970
    Decided February 2, 1970.
    Before Judges Kilkenny, Labrecque and Leonaed.

      Mr. Michael A. Cohan argued the cause for appellant (Mr. Edwin A. Xolodziej, attorney).

      Mr. William T. McElroy argued the case for respondent (Messrs. Pindar, McElroy, Connell, Foley & Geiser, attorneys) .
   Per Curiam.

Plaintiff William Bauer, an incompetent, by his guardian ad litem, Ronald R. Bauer, appeals from the denial of his motion, pursuant to R. B. 4:62-2 [now B. 4:50-1 to 4:50-3], to vacate a judgment approving the “friendly” settlement of a suit by his then guardian (his father) for personal injuries sustained by him when he was struck by an automobile driven by defendant on October 6, 1962. William was 16 years old when the accident occurred, and the suit for his injuries and his parents’ per quod damages was instituted on February 5, 1963.

Following the pretrial conference and entry of the pretrial order, and after the case had been assigned to a weekly call, negotiations for settlement culminated in an offer of $125,000, $65,000 to be allocated to the infant plaintiff and the balance of $60,000 to his parents. The settlement was approved at a hearing held on August 20, 1963, pursuant to B. B. 4:56A [now B. 4:4T-1 to 4:44-3]. At that time the infant plaintiff was still hospitalized and in a coma, the hospital bills then amounting to $30,000 and continuing at the rate of $100 per day. The facts surrounding the making and approval of the settlement are fully detailed in the opinion below and need not be repeated here.

The reasons for reversal now advanced in behalf of the incompetent were fully considered by Judge Fritz in the Law Division. We affirm, substantially for the reasons set forth in his reported opinion. Bauer v. Griffin, 104 N. J. Super. 530 (Law Div. 1969).

There can be no question but that, in the present clear light of hindsight, a delay until the present in the settlement of his case would have been of much greater benefit to William — as well as to his parents who were, and continued thereafter to be, responsible for his care. Carried to its logical conclusion, the argument made in his behalf would inhibit settlement in any case until every uncertainty as to prognosis was resolved. Plaintiff would even condemn all friendly settlements on the ground that only adversary proceedings are adequately geared to the protection of the interests of infant or incompetent litigants. However, had William’s ease been tried at the time, instead of settled, there would have been no certainty that the resultant verdict, had it been in his favor, would have any more adequately compensated him for his injuries. Regardless of how the case was disposed of, the same uncertainty regarding prognosis would have remained.

Not every settlement justifies the expectations of the parties. The very uncertainty as to what the future holds is frequently the motivating factor in inducing the parties to eliminate, by settlement, the element of risk involved in most lawsuits. In the ease of infants, the trial judge must also be satisfied as to the fairness of the proposed settlement. In the eyes of the trial judge here, based upon the medical evidence before him (whose accuracy is not disputed), the settlement was a fair one. His decision is to be judged as of the time it was made. Merely because, had the decision been ours, we would have done otherwise affords no ground for vacating the judgment. Even were the settlement to be renegotiated today there would still be no certainty that a substantially larger figure would be adequate to meet William’s future needs. We find no abuse of discretion in the denial of the motion to vacate.

By reason of the foregoing, it becomes unnecessary to consider whether the judgment in favor of William may be set aside without disturbing the judgment in favor of his parents, and without tendering the return of the amount paid to his guardian.

Affirmed. No costs.