author: Lane, J. S. C.

text:
    VITO CAPABIANCO AND JULIA CAPABIANCO, HIS WIFE, PLAINTIFFS, v. JOHN L. BORK, JOSEPHINE M. BORK, HIS WIFE, AND FEDERAL NATIONAL MORTGAGE ASSOCIATION, DEFENDANTS.
    Superior Court of New Jersey Chancery Division
    Decided May 26, 1969.

      Mr. Donald I. Bierman for plaintiffs (Messrs. Bierman and Bierman, attorneys, not appearing).

      Mr. Frank W. Eoak for defendants (Mr. Donald B. Jones, attorney).
   Lane, J. S. C.

This is an action for partition with a counterclaim for subrogation to the rights of a prior mortgagee and for strict foreclosure. The facts are not in dispute. The matter is now before the Court on final hearing. The plaintiffs did not press the complaint nor appear at the final hearing, having no objection to whatever disposition to be made by the Court on the counterclaim.

On June 14, 1961 George W. Pink and Jeannette Y. Pink, his wife, acquired title to the premises in question, executing a mortgage to J. I. Kislak Mortgage Corporation (Kislak) to secure payment of a loan of $10,600. This mortgage was subsequently assigned to Pirst Pederal Savings & Loan Association of Clearwater, Plorida (Pirst Pederal).

On September 25, 1961 Yito Capabianco obtained a judgment against a George Pink for $1,100 and $76.03 costs.

The Pinks conveyed the premises on July 23, 1963 to the Whale Agency subject to the 1961 mortgage. At that time George W. Pink signed an affidavit that the judgment of Capabianco on record was not against him but against another of similar name. The Whale Agency conve3red the property to Yito Doria and Rose Doria, his wife, subject to the first mortgage by deed dated August 13, 1963. By contract dated November 18, 1965 the Dorias contracted to sell the premises to the defendants John L. Bork and Josephine Bork for the sum of $12,500. In connection with the purchase Kislak on December 6, 1965 issued to the Borks a commitment for a $12,500 FIIA mortgage.

On January 14, 19C6 the prior mortgagee, First Federal, commenced a suit to foreclose the 1961 mortgage, joining Vito Oapabian as a defendant. A Us pendens was filed January 21, 1966.

The Borks’ title and the FHA purchase money mortgage were closed March 2, 1966, the deed and mortgage being recorded March 4, 1966. At the closing reliance was placed on the Fink affidavit referred to above. On April 1, 1966 this mortgage was assigned to the defendant Federal National Mortgage Association (FNTMA). Out of the proceeds of the present existing $12,500 mortgage, $10,473.45 was used to pay off the 1961 mortgage.

After the Borks’ closing, the closing attorney sought to obtain a dismissal of the foreclosure action. For the first time he became aware of the fact that the Capabianeo judgment had been set up by the foreclosing attorney as a junior lien. The judgment creditor had filed an answer and would not consent to a dismissal of the action unless he was paid the amount of his judgment. It subsequently developed that the affidavit of George W. Fink which was relied upon at the Whale Agency, Doria and Bork closings was not true as to the Capabianeo judgment.

On June 6, 1966 First Federal assigned the 1961 mortgage to the American Title Insurance Company. In the foreclosure action the assignee was substituted as plaintiff. On January 11, 1968 this Court entered an order in the foreclosure action denying the substituted plaintiff’s motion for summary judgment and granting a motion of the defendant Capabianeo dismissing the complaint.

The Capabiancos purchased George W. Fink’s interest at an execution sale under the judgment and obtained a sheriff’s deed dated February 3, 1967 of Fink’s interest in the premises.

The present action was commenced in April 1968 by Vito and Julia Capabianeo for partition against the Borks, the present owners of the property, and EUMA, the holder of the $12,500 mortgage. The defendants counterclaimed seeking subrogation to the rights of Eirst Eederal under the 1961 mortgage (admittedly prior to any interest of the Capabiancos) that was paid off out of the proceeds of the existing $12,500 mortgage, and also seeking strict foreclosure to cut off any interest that the Capabiancos may have.

In the prior suit, First Federal Savings & Loan Ass’n v. Fink et al., 99 N. J. Super. 76 (Ch. Div. 1968), this Court granted the Capabiancos’ motion for summary judgment dismissing the foreclosure action brought by the assignee of Eirst Eederal. In that action the title company, the assignee, had argued that equity should relieve the present mortgagee from the mistake that was made in advancing money to pay off the Eirst Federal mortgage without in some manner obtaining a satisfaction of, or at least a priority to, the Capabianco judgment. The Court held that the cases granting subrogation were inapplicable, stating at 99 N. J. Super. 82:

“Here the substituted plaintiff seeks to foreclose the earlier mortgage which, in fact has been paid in full, there being no default presently existing in the current mortgage.”

The rights of the present mortgagee, FUMA, were not before the Court at that time. The issue of subrogation is now squarely raised by FUMA and the present owners.

In 4 Pomeroy’s Equity Jurisprudence (5th ed. 1941), § 1211, p. 635, the author states:

“Under some circumstances, the payment of the amount due on a mortgage, when made by certain classes of persons, is held in equity to operate as an assignment of the mortgage. By means of the payment, the mortgage is not satisfied and the lien of it destroyed, but equity regards the person making the payment as thereby becoming the owner of the mortgage, at least for some definite purposes, and the mortgage as being kept alive, and the lien thereof as preserved, for his benefit and security. This equitable result follows, although no actual assignment, written or verbal, accompanied the payment, and the securities themselves were not delivered over to the person making payment, and even though a receipt was given ajioabing of the mortgage debt as being fully paid, and sometimes even though the mortgage itself was actually discharged and satisfied of record. This equitable doctrine, which is a particular application of the broad principle of subrogation, is enforced whenever the person making the payment stands in such relations to the premises or to the other parties that Ms interests, recognized either by law or by equity, can only be fully protected and maintained by regarding the transaction as an assignment to him, and the lien of the mortgage as being kept alive, either wholly or in part, for his security and benefit.”

In 4 Id. § 1212 it is stated, at p. 642:

“Subrogation of lender who tajees new security.—It is frequently held, there being no intervening equities, that one who advances money to discharge a prior lien on real or personal property, and who takes a new mortgage as security, is entitled to subrogation to the prior lien as against the holder of an intervening lien of which the lender was ignorant. However, on various grounds such as negligence in examining the records, the voluntary nature of the loan, and the like, subrogation has been denied in some cases and in some jurisdictions.”

The defendants rely upon Jackson Trust Co. v. Gilkinson, 105 N. J. Eq. 116 (Ch. 1929) and other cases of like holding. In that case the mortgagee sought foreclosure of a mortgage executed at a time when the property was already encumbered by a mortgage and several municipal tax liens. Out of the proceeds of the plaintiff’s mortgage the existing mortgage and the tax liens were paid. Unknown to the closing attorney the mortgagors hal contracted prior to the execution of the plaintiff’s mortgage with a builder to have a garage erected on the property. The builder claimed priority over the plaintiff’s mortgage by reason of his mechanic’s lien claim filed after the execution of the mortgage. At the time of the closing the mortgagors delivered an affidavit which stated that there were no liens or encumbrances against the mortgaged premises other than the existing mortgage and tax liens. The affidavit also recited that the buildings then erected on the mortgaged premises had been erected thereon for a period of more than four months and that no alterations, additions or repairs had been made to the premises within such period. The plaintiff’s attorney in Ms examination of the mortgagors’ title did not cause an inspection to be made of tile premises and failed to ascertain that a garage was in the course of erection. Vice-Chancellor Eallon stated at pp. 119-120:

“The question submitted for my determination herein is whether the complainant should be subrogated to the mortgage lien of the Greenville Heights Building and Loan Association, and the tax lien of the city of Jersey City. The complainant, in my judgment, is entitled to be subrogated to the amount paid by it in satisfaction of the first mortgage lien held by Greenville Heights Building and Loan Association ($7,977.04) and the lien of the city of Jersey City for municipal taxes for the years 1925 and 1926 ($522.96), aggregating $8,500, with interest thereon from the date of complainant’s mortgage. The mortgage lien of The Claremont Bank of Jersey City is subordinate only to complainant’s mortgage. The proofs show that complainant’s mortgage was intended to be a first lien on the mortgaged premises, and therefore the equitable principle of conventional subrogation is applicable, but even though such principle be regarded as inapplicable, I am of the opinion that the complainant is entitled to the benefit of the equitable principle of subrogation. * * *
The principle of subrogation is well recognized in this state. It is urged in behalf of Bahr that complainant was merely a volunteer; it is likewise urged that this court should refuse to award to complainant the right of subrogation because of its failure to ascertain that at the time of the execution and delivery of complainant’s mortgage a garage was being erected upon the mortgaged premises for which said premises might be subject to a mechanics’ lien. While it has been held that as a rule equity will refuse to rectify a mistake which occurred through inexcusable negligence of a party who asks to be relieved from the effect of the mistake, and the act done by mistake is one calculated to induce others to take a course of action which will put them to loss if such mistake is corrected, and it ought to clearly appear that the party asking for relief has been led into the mistake notwithstanding the exercise of due diligence, nevertheless, it has also been held that where, as in the case sub judice, no one is injured by th mistake, and no one has changed his position by reason of the act executed through the influence of the alleged mistake, there is no good reason why the mistake should not be corrected although the highest degree of vigilance has not been exercised. It has been repeatedly held that negligence arising out of the failure of a party to procur proper searches should be considered with reference to the effect on the rights of others.”

See also Hudson County Caledonian Building & Loan Ass’n v. Cole, 128 N. J. Eq. 172 (E. & A. 1940); Camden County Welfare Bd. v. Federal Deposit Ins. Corp., 1 N. J. Super. 532 (Ch. Div. 1948); Cliffside Park, etc., Co. v. Progressive, etc., Inc., 122 N. J. Eq. 109 (Ch. 1937); Home Owners’ Loan Corp. v. Collins, 120 N. J. Eq. 266 (Ch. 1936); Institute Building & Loan Ass’n v. Edwards, 81 N. J. Eq. 359 (Ch. 1913).

Here Capabianeo will not suffer any prejudice if subrogation is allowed to the mortgagee. He was a defendant in the foreclosure action which would probably have proceeded to judgment and sale, when the First Federal mortgage was paid off with funds advanced under the mortgage now held by FNMA. There will be a judgment providing for subrogation of FNMA. Such judgment is, however, of no practical effect until there is a default and a suit to foreclose the $12,500 mortgage.

The Borks also seek subrogation to the extent of their principal payments made to FNMA.

In 4 Pomeroy’s Equity Jurisprudence (5Ih ed. 1941), § 1213, at pages 64tD-645 the author states:

“On the other hand, if payment, of the mortgage debt is made to the mortgagee or other holder of the mortgage, by a party who is himself personally and primarily liable for the debt, who is in any manner and by any means the actual primary debtor, whose duty it is to pay the debt absolutely, and before all others, such payment operates ipso faelo as an end of the mortgage, and the lieu is completely destroyed. The party so paying is not subrogated to the rights of the mortgagee; there is no equitable assignment to him of the mortgage security; even if he should receive a formal assignment, the mortgage could not be thus kept alive, but would be wholly merged and ended. In this description are included the mortgagor himself, so long as he remains the principal debtor, and has not changed his relations by a conveyance, and also the grantee from the mortgagor who has assumed payme,nt of the mortgage debt and thus rendered himself the principal and primary debtor therefor (see § 797). When a grantee has thus become the principal debtor, the mortgagor, as his surety, upon payment, is an equitable assignee of the mortgage, and is subrogated to the mortgagee so far as is necessary to enforce his right of exoneration by the grantee; but it by no means follows that he is an equitable assignee of the mortgage, and entitled to enforce its lien against all subsequent encumbrancers and other parties interested.”

The Borks arc, of course, the principal debtors insofar as FNMA is concerned, but they did not become the actual primary debtors insofar as the prior mortgage was concerned. See 4 Id., § 1212, pp. 637-639, where the author states that the grantee of the mortgagor who takes the property subject to the mortgage and who pays off the mortgage may be subrogated to the rights of the mortgagee. Such rule is based on the fact that the grantee is not the principal debtor.

Here, rather than assuming the 1961 mortgage the Borks arranged to have it paid off from the proceeds of a mortgage that they are obligated to pay. If the Borks had advanced their own money to pay off the 1961 mortgage, they would have been entitled to subrogation vis-a-vis Capabianeo. Elmora and West End, etc., Ass’n v. Dancy, 108 N. J. Eq. 542, 545 (Ch. 1931). When the Borks have satisfied the existing mortgage, they will be entitled to be subrogated to the position of FNMA just as it is entitled to subrogation to the rights of the prior mortgagee.

In support of the prayer for strict foreclosure the defendants rely on Sears, Roebuck & Co. v. Camp, 124 N. J. Eq. 403 (E. & A. 1938), in which case the Court stated at p. 409:

“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 has 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.”

Here, however, there is no mortgagee in possession nor has there been a foreclosure or a conveyance to the mortgagee by a mortgagor. Neither the defendants Bork nor the defendant FNMA have by themselves both the legal and equitable estates. FNMA is a mortgagee who is subrogated to a lien superior to the interest of the Capabiancos. There was not a foreclosure of the prior mortgage. In fact, this Court denied foreclosure to the assignee of that mortgage.

There having been no foreclosure judgment and there having been no other occurrences such as referred to in Sears, Roebuck & Co., strict foreclosure is not appropriate. 4 Pomeroy’s Equity Jurisprudence (oih ed. 1941), § 1227, pp. 680-681; 37 Am. Jur., Mortgages, § 530; cf., Steffel v. Grissler, 129 N. J. Eq. 425 (E. & A. 1941).

It is urged that had the closing attorney at the time of the Boris’ purchase known of the Capabianeo judgment, there would have been no closing. Such assertion is based upon speculation and does not necessarily follow. The sales price might have been renegotiated. If this particular sale had not been consummated, another sale at a higher price might have been made. Nor does it follow that had the foreclosure of the prior mortgage gone to judgment and sale there would not have been a surplus to remain on deposit with the clerk of the court to await the termination of the interest of Mrs. Fink. See Fort Lee Savings & Loan Ass’n v. LiButli, 106 N. J. Super. 211 (App. Div. 1969). It is observed that the real party in interest here is the American Title Insurance Company which had been engaged by Kislak to make the search at the time the Borks purchased. First Federal Savings & Loan Ass’n v. Fink et al., supra, 99 N. J. Super., at p. 79. No special circumstances appear here to indicate that equity and justice would be subserved by the allowance of strict foreclosure. Capabianeo has not been delinquent in pressing his rights nor has he acted in any inequitable manner.

The complaint will be dismissed. There will be a judgment on the counterclaim that FNMA is entitled to subrogation upon any default in its mortgage to the amount of $10,473.45 with interest at 5-%% (rate of prior mortgage) from March 2, 1966 (date the prior mortgage was paid). As the Borks make payments on the existing mortgage their interest will succeed to the interest of FNMA as being prior to the Capabiancos’ interest. Strict foreclosure is denied.


source: Caselaw Access Project

author: Lase, J. S. G.

license: Public Domain

text:
    HOME INSURANCE COMPANY, PLAINTIFF, v. EDWARD RANDOLPH, SAMUEL RANDOLPH, IDA RANDOLPH, NOEL DUNCAN AND FLORENCE DUNCAN, DEFENDANTS.
    Superior Court of New Jersey Chancery Division
    Decided July 17, 1969.

      Mr. James L. Melhuish for plaintiff (Messrs. Schneider & Morgan, attorneys).

      Mr. David Lineii for defendants Edward Randolph, Samuel Randolph and Ida Randolph (Mesrs. Gross, Weissberger & Limit, attorneys).

      Mr. Stephen 0. Carton for defendants Noel Duncan and Florence Duncan (Messrs. Carton, Nary, Witt & Arvanitis, attorneys).
   Lase, J. S. G.

Plaintiff seeks a declaratory judgment of its obligations under an automobile liability insurance policy issued to Samuel and Ida Randolph, rescission of such policy and recovery of monies expended by it in the defense of a suit instituted against Edward Randolph by Noel Duncan and Florence Duncan. The matter is before the court on final hearing.

The automobile liability policy is a “Family Combination Automobile Policy” issued to Samuel and Ida Randolph for the period August 20, 1967 to August 20, 1968. The declarations attached to the policy refer to two “owned automobile [s],” a 1961 Chrysler New Yorker and a 1958 Chevrolet pickup truck. At the time of the issuance of the policy these two vehicles were in fact owned by Samuel Randolph. An accident occurred June 15, 1968 while Edward Randolph, the son of Samuel and Ida Randolph residing in tlieir household, was operating the 1961 Chrysler. Suit was instituted in the Law Division against Edward Randolph alone by Noel Duncan and Florence Duncan to recover damages for personal injuries sustained in the accident.

Under the terms of the insurance policy Edward was insured as a “resident of the same household.” The basis of plaintiff’s position that the policy does not afford coverage to Edward is that on April 2, 1968 title to the automobile was transferred by Samuel to Edward. No money was paid by Edward for the transfer. The reason for the transfer was that the registration had expired and Edward had the money to pay for the renewal. On April 2, 1968 Mrs. Eandolph went to the company’s agent who had written the policy and requested that Edward’s status under the policy be changed because he would be the principal driver of the automobile. She said nothing about the transfer of title. It was not necessary to make any application or to file any forms. No questions were asked to determine if there had been a transfer of title or to determine the circumstances under which Edward was to become the principal operator. The company issued an endorsement the only effect of which was to show the change in premium because the principal operator would be a single male under 25 years of age.

The company takes the position that had it known at the time of the endorsement that Edward was the owner, he would have had to apply for a separate insurance policy. Because he was under 25 years of age and had had at least two moving violations prior to April 2, 1968, he would not have been issued a policy but rather would have had to obtain insurance through the Assigned Eisk Plan which would have entailed a higher premium. It is admitted that had there been no transfer of title Edward was insured under the specific terms of the policy whether or not notice had been given to the insurance company that he would be the principal operator. It is further admitted that the risk to the company with Edward as owner-principal operator was no greater than the risk to the company with Edward being the principal operator of the automobile owned by his parents. By advising the insurance company that Edward was to be the principal operator, Mr. and Mrs. Eandolph incurred a liability for a higher premium which they paid. There is no provision in the policy that would have allowed the company to cancel during the coverage period merely for the reason that Edward was to be the principal driver.

There was no evidence of any fraud on the part of any of the Randolphs. There was no evidence of any attempt to conceal. In fact, their advising the insurance company that Edward was going to be the principal operator indicates a lack of any intent to defraud.

After the transfer of title to Edward he continued as a resident of the household. In general, the use of the Chrysler was the same as it had been before the transfer. All family members used it. It remained the family automobile.

To say the least, the policy is poorly written. Although the plaintiff alleges a breach of warranty, nowhere in the policy is there any warranty of ownership. The policy by its terms insured the 1961 Chrysler. Nowhere does it specifically provide for a loss of coverage upon transfer of title among the family group.

In Merchants Indemnity Corp v. Eggleston, 37 N. J. 114 (1962), the court was concerned with an endorsement to a family automobile policy adding a substitute automobile. The decision was based upon the insurance company’s disclaimer being barred by its conduct; however, the court stated:

“There 1ms been much litigation with respect to ‘ownership’ provisions in automobile liability policies. [Citations omitted] Insurance carriers must be thoroughly aware of (he problem. A statement as to ‘ownership’ may, as here, be but conclusion or opinion upon a factual complex. Alamo Cas. Co. v. William, Reeves & Co., 258 S. W. 2d 211, 214 (Tex Civ. App. 1953). Representations with respect to matters of opinion certify to the truthfulness with which the opinion is held rather than to the validity of the opinion itself. See Shapiro v. Metropolitan Life Ins. Co., 114 At. J. Eq. 378, 381 (B. & A. 1933). It is not difficult to frame questions which will elicit such facts concerning the subject as bear upon the acceptance of the risk. If a carrier is content to ask only for a conclusional statement as to ownership, it should not complain that an untutored insured did not correctly anticipate the view which the highest court of the State might hold. Controversy could be avoided by the use of written applications, plainly worded.
This is not to sey that an intentional fraud will succeed. If an automobile is placed in the name of another to cheat a carrier, of course the culprit will fail. But we agree with the Appellate Division that an intent to defraud must be proved. We are not dealing with a representation contained in an application for insurance or set forth in the policy itself, as to which it has been held that rescission may be had for a material untruth even though the insured was innocent of conscious wrong. See Equitable Life Assurance Society of the United States v. New Horizons, Inc., 28 N. J. 307 (1958). As we have said, the ‘representation’ in the endorsement was not false. Rather we are speaking of the question whether a failure to come forward with facts which were not solicited should entitle a carrier to rescind. In that setting, rescission may be appropriate prior to loss even though the ‘mistake’ be unilateral, i. e., on the part of the carrier, but after loss the status quo cannot be restored. See Green v. Stone, 54 N. 11. Eq. 387, 396 (E. & A. 1896). It is then too late for the insured to buy protection. It would be unjust to visit the loss upon an insured whose good faith is unassailable, and to absolve a carrier which could have asked, but did not, for the facts it regards as material.” (at pp. 123-124; emphasis supplied)

As pointed out above, there is nothing in the policy to alert the policyholder that coverage would be lost by a transfer to a member of the family unit residing in the household. In Harr v. Allstate Insurance Company, 54 N. J. 287 (1969), Justice Hall stated:

“We have stressed, among other things, the aim that average purchasers of insurance are entitled to the broad measure of protection necessary to fulfill their reasonable expectations; that it is the insurer’s burden to obtain, through its representatives, all information pertinent to the risk and the desired coverage before the contract is issued; and that it is likewise its obligation to make policy provisions, especially those relating to coverage, exclusions and vital conditions, plain, clear and prominent to the layman. It is only necessary to list the leading cases. Kievit v. Loyal Protective Life Insurance Company, 34 N. J. 475 (1961); Bauman v. Royal Indemnity Co., 36 N. J. 12 (1961); Merchants Indemnity Corp. v. Eggleston, 37 N. J. 114 (1962); Allen v. Metropolitan Life Insurance Co., 44 N. J. 294 (1965); Gerhardt v. Continental Insurance Cos., 48 N. J. 291 (1966); Cooper v. Government Employees Insurance Co., 51 N. J. 86 (1968); Bowler v. Fidelity & Casualty Co. of New York, 53 N. J. 313 (1969); Lischin v. Nationwide Mutual Insurance Co., 54 N. J. 132 (1969), reversing on dissenting opinion 104 N. J. Super. 525, 527 (App. Div. 1969). See also Portella v. Sonnenberg, 74 N. J. Super. 354 (App. Div. 1962); Muller Fuel Oil Co. v. Insurance Co. of North America, 95 N. J. Super. 564 (App. Div. 1967).” (at p. 304)

Here the automobile was still considered by all of the Randolphs as the family automobile. There was no reason for the Randolphs to suspect that the transfer of title would result in loss of coverage.

If Mrs. Randolph had been asked about ownership, she would have told the company’s agent of the transfer. If the company’s agent was to deal fairly with the insureds, they would have been advised that their son was insured under the existing policy while they still owned the car, but that in all probability, if he were the owner, he could only obtain insurance through the Assigned Risk Plan. Cf., Bowler v. Fidelity & Casualty Co. of New York, 53 N. J. 313, 326 (1969).

There are cases holding that there is no coverage where the named insured has transferred title upon the theory that the named insured no longer has an insurable interest in the automobile. E. g., Bettinger v. Northwestern Nat. Cas. Co., 213 F. 2d 200 (8 Cir. 1951), certiorari denied 348 U. S. 856, 75 S. Ct. 80, 99 L. Ed. 674 (1954); Employers Liability Assur. Corporation v. Sweatt, 95 N. H. 31, 57 A. 2d 157 (Sup. Ct. 1948); Galali v. New Amsterdam Casualty Company, 381 S. W. 2d 5 (Mo. App. 1964). See Annotation 1 A. L. R. 3d 1193 (1965).

Here the named insureds had an insurable interest at the time of the issuance of the policy. Although the automobile was transferred to their son, they retained an insnrahle interest. He was a member of their household. They used the automobile. He used the automobile on their behalf. It is entirely likely that they could have been subjected to suit on the theory that at the time of an accident he was acting as their agent. Cf., Sandler v. New Jersey Realty Title Ins. Co., 36 N. J. 471, 481 (1962).

It is emphasized that the transfer of title resulted in no increase in the risk to the company. Tinder the facts of this case, Iho type of policy with its broad title, the transfer being within the family unit, the use of the automobile as a family automobile remaining the same, the lack of any evidence of fraud, and the failure of the company to inquire as to transfer of title, it is held that the policy afforded coverage to Edward. See Bauman v. Royal Indem. Co., 36 N. J. 12, 21 (1961).

In view of the holding that there is coverage for Edward Randolph, there is no need for the court to discuss whether the company, by undertaking Edward’s defense in the Law Division action, waived its right to disclaim coverage.

There will be a declaratory judgment that plaintiff is obligated to defend Edward Randolph in the suit pending by Noel Duncan and Florence Duncan and to pay any judgment recovered against him in accordance with the terms of the policy. After the accident the company, as part of its attempt to rescind, returned $76 of the premium to the Randolphs. The judgment will provide that it is conditioned upon the $76 being repaid to the company within 20 days. As to the relief sought by plaintiff for rescission and for damages, there will be a judgment dismissing the complaint.


author: Mintz, J. S. C.

text:
    LAWRENCE SMITH, HERMAN ZIEGLER, IRWIN KLEPPER, MARVIN WEINBERGER AND PAUL GOLDMAN, PLAINTIFFS, v. THE TOWNSHIP OF LIVINGSTON, A MUNICIPAL CORPORATION OF THE STATE OF NEW JERSEY, THE PLANNING BOARD OF THE TOWNSHIP OF LIVINGSTON, THE BUILDING INSPECTOR OF THE TOWNSHIP OF LIVINGSTON, N. K. WINSTON CORPORATION OF THE STATE OF NEW YORK, AND LIVINGSTON PROPERTIES CORP., A CORPORATION OF THE STATE OF NEW JERSEY, DEFENDANTS.
    Superior Court of New Jersey Chancery Division
    Decided July 31, 1969.

      Mr. Olive S. Gummis for plaintiffs (Messrs. Gummis, Kent & Radin, attorneys).

      Mr. Louis Borl for defendants Township of Livingston and municipal bodies.

      Mr. Theodore L. Abeles for defendants Livingston Properties Corp. and N. K. Winston Corporation (Messrs. Lum, Biunno é Tompkins, attorneys).
   Mintz, J. S. C.

Defendants N. K. Winston Corporation and Livingston Properties Corp. move for summary judgment on their second counterclaim, third counterclaim and cross-claim. Summary judgment is not sought on the cross-claim to the extent that it incorporates the first counterclaim.

The complaint alleges the following facts. Plaintiffs are property owners and residents in Livingston Township, Essex County. Defendant N. K. Winston Corporation is the proposed developer of a tract of about 58 acres for a shopping center on property owned by defendant Livingston Properties Corp. situate at the intersection of South Orange Avenue and Walnut Street in Livingston Township. On January 27, 1969 plaintiffs and others filed an Initiative petition with the township clerk whereby it is proposed that the governing body of the township adopt an ordinance amending the present zoning ordinance so that the designation of the zone in which the aforesaid property is located would be changed from “D-S” Designed Shopping Center District to “E-L” Office Building and Research Laboratory District.

The initiative petition filed with the township clerk contains 2340 purported signatures. After checking 1400 signatures, the towship clerk certified the ordinance proposed in the petition to the town council since it contained the genuine signatures of qualified voters in excess of 15% of the valid votes cast in the township at the last preceding election for members of the General Assembly. Plaintiffs assert that pursuant to N. J. S. A. 40:69A-191 and 192 they are entitled to have their proposed ordinance passed upon at the next general election.

The complaint also alleges that defendants N. K. Winston Corporation and Livingston Properties Corp. applied to the Livingston Planning Board for approval of their site development plans for the proposed shopping center after the filing of the initiative petition. It is charged that these defendants seek to acquire vested rights before the voters have an opportunity to consider the proposed ordinance. Plaintiffs seek to enjoin the planning board from approving the site plan, and defendants, N. K. Winston Corporation and Livingston Properties Corp. from initiating any work on the contemplated project until the next election.

Under the first zoning ordinance passed by the township in 1948 the subject property was zoned as a retail business district. In 1957 it was rezoned as a designed shopping center district and in 1959 again rezoned as an office building and research laboratory district. In 1962 the present sections 8.106 - 8.109 of the Livingston zoning ordinance providing for the “D-S” Designed Shopping Center District were adopted, and the property in question was so zoned. Certain property owners instituted an action in lieu of prerogative writs challenging the validity of this amendment. Judge Labrecque concluded in an opinion dated December 27, 1963 that the zoning of the area as a designed shopping center district was in accordance with a comprehensive plan designed to promote the general welfare of the township.

Concededly, Livingston Township operates under the Eaulkner Act (N. J. S. A. 40:69A-1 et seq.) and is subject to the statutory provisions pertaining to initiative and referendum. N. J. S. A. 40:69A—184 and 185. Defendants N. K. Winston Corporation and Livingston Properties Corp., seeking an adjudication that the plaintiffs’ initiative petition be declared a nullity, predicate their motion for summary judgment on the following grounds:

1. The number of signatures on plaintiffs’ petition is insufficient to meet the requirements of the Faulkner Act (N. J. S. A. 40:694.—184 and 185), unless reliance is placed on the special exception for municipalities in certain counties of the first class added by the Legislature in 1951. This special exception is unconstitutional under the Fourteenth Amendment of the Federal Constitution and Articles I and IV of the New Jersey Constitution because it is discriminatory special legislation without legal or factual justification;

2. The initiative and referendum provisions of the Faulkner Act are inapplicable to zoning ordinances, which can only be amended in the manner provided in the Zoning Act (N. J. 8. A. 40:55-30 et seq.) and further, that failure to so hold would subject these defendants to a deprivation of due process; and

3. Because the ordinance proposed in the petition would repeal the 1962 ordinance creating the “D-S” Designed Shopping Center District and revert the zoning of the property in question to that in effect immediately prior to the adoption of such ordinance, the petition is, in reality, a petition for a referendum on the 1962 ordinance and not an initiative petition. As a petition for a referendum, it is over six years too late, since such petition must be filed within 20 days after final passage and approval of the ordinance in question (N. J. 8. A. 40:694-185).

Initially it may be observed that the effect of the proposed ordinance, if approved in the November election, will be to reinstate the zone to that in effect immediately prior to the adoption of the 1962 ordinance. Such procedure is properly designated as an initiative under N. J. S. A. 40:694.-184, which does not prescribe any time limit within which such an ordinance may be proposed by the voters and adopted at the polls.

Under N. J. S. A. 40 :694.—185 the voters also have the power of referendum, which is the power to approve or reject at the polls any ordinance passed by the council against which a referendum petition has been filed. If, within 20 dajrs after final passage and approval of an ordinance, a petition protesting the passing of such ordinance is filed with the municipal clerk bearing the required number of signatures as therein provided, the ordinance is suspended from taking effect until proceedings are had as provided for in the subsequent sections of the statute. However, the fact that the voters have not exercised their power of referendum within the 20-day period which necessarily suspends the ordinance from taking effect does not preclude the voters at a later date from proposing an ordinance covering the same subject matter by way of initiative. Section 184 of the Faulkner Act does not limit the power of initiative to only those areas of municipal concern which have never been the subject of favorable council action. When there is either a change in the circumstances or in the will of the people, it may be highly desirable to amend a long-standing ordinance. In such a case, when the governing body fails to act, the initiative procedure provided for by section 184 is available to the voters. Hence, I find no merit in the argument that plaintiffs’ petition is in effect one for a referendum and is out of time.

The present Zoning Act, N. J. S. A. 40:55-30 et seq., was enacted in 1948. N. J. S. A. 40:55-35 provides in part that:

“ * •> * n0 amendment or change shall become effective unless the ordinance proposing such amendment or change shall first have been submitted to the planning board, when such board exists, for approval, disapproval or suggestions, and the planning board shall have a reasonable time, not less than thirty days, for consideration and report, and in the case of an unfavorable report by the planning board such amendment shall not become effective except by a favorable vote of two-thirds of the governing body.”

Under the initiative provision of the Faulkner Act, N. J. 8. A. 40:69A-184, the voters may propose "any ordinance and may adopt or reject the same at the polls, such power being known as the initiative.” The cited statutory provisions are in conflict and the resolution of this case depends upon a determination as to which statute is controlling.

In Meridian Development Co. v. Edison Tp., 91 N. J. Super. 370 (Law Div. 1966), the court stated that the initiative and referendum procedure is one of the cornerstones of the fundamental Faulkner Act purpose to encourage citizen interest and participation in municipal affairs, and concluded that the Faulkner Act, being the later enactment, superseded the statutory procedure prescribed in the Zoning Act for the amendment of the zoning ordinances. It held that as between statutes, the later governs according to general principles of statutory construction. The court further stated:

“This decision is warranted on broader grounds. The 1947 Slate Constitution declares in Art. I, par. 2 that: ‘All political power is inherent in the people.’ The members of a municipal council are the temporary repositories of the inherent power of the people. Borough of Leonia v. Borough of Fort Lee, 56 N. J. Super. 135, 144 (App. Div. 1959); see Driscoll v. Burlington-Bristol Bridge Co., 8 N. J. 433, 476 (1952). According to the statutory scheme for zoning ordinance amendments, the planning board, an expert body, may be overruled by a two-thirds vote of the municipal council. The exercise of its expertise is valuable but reversible in the legislative process.
What two-thirds of a municipal governing body may accomplish, the Legislature may entrust to a majority of voters. In democratic elections a majority governs. No limitation on the power of the people, such as a two-thirds majority requirement, is recognized by Constitution or statute. Zoning is familiar to ordinary citizens, not beyond their competence with or without the benefit of a planning board report. * * *” (at pp. 314—315)

With due deference for my learned colleague’s views, I am constrained to differ. While there is a rule that as between two conflicting statutes the latex governs, Two Guys from Harrison, Inc. v. Furman, 32 N. J. 199, 223 (1960), there is also the rule that where there is any conflict between a general and specific statute covering a subject more minutely and definitely, the latter will prevail over the former and will be considered an exception to the general statute. Hackensack Water Co. v. Division of Tax Appeals, 2 N. J. 157, 165 (1949); State, by State Highway Com’r v. Dilley, 48 N. J. 383, 387 (1967).

The Zoning Act is specific and details the manner in which zoning ordinances may be amended. The procedure requires consideration by the municipal planning board, the opportunity of a property owner to object, and the approval by the governing body. In the event of objection by the property owners involved, a vote of two-thirds of the governing body is required to effect a change in the zoning ordinance, N. J. S. A. 40:55-34, 35. The initiative and referendum provisions in the Eaulkner Act, N. J. S. A. 40:69A-184 and 185, make no specific reference to zoning. Hence, it may be urged that the Zoning Act dealing with the subject matter in specific detail should be deemed an exception to the general language in the Eaulkner Act. There is the further rule of statutory construction that implied repealers are not favored in the law and that the requisite intent will not arise by implication unless the subsequent statute is plainly repugnant to the former and is designed to be a complete substitute for the former. Goff v. Hunt, 6 N. J. 600, 606 (1951).

While under Art. I, par. 2 of the 1947 New Jersey Constitution all political power is inherent in the people, it does not necessarily follow that the voters may propose any ordinance and adopt the same at the polls through the initiative process. In Bucino v. Malone, 12 N. J. 330 (1953), plaintiffs attacked a provision of the Eaulkner Act prohibiting a change in the form of government for a period of years once an optional plan was accepted. Plaintiffs contended that because “all political power is inherent in the people” they have the right at all times to vote on a change of government. In denying this contention the court stated:

“* * * The difficulty with the plaintiffs’ argument in this respect is that this section of the Constitution does not apply to local government, but rather to the State Government only. In New Jersey local government has always been a creation of the Legislature. The people have no inherent right of local self-government beyond the control of the State. * * *” (at p. 345)

The power of referendum is not available to a municipality and its voters under section 185 of the Faulkner Act when that municipality has never adopted any of the optional plans provided for in that act. Wright v. Village of South Orange, 79 N. J. Super. 96 (App. Div. 1963). The right to referendum and initiative in municipal affairs is strictly a statutory and not a constitutional right.

The Court in Meridian, supra, 91 A. J. Super., at p. 315 stated that other states have recognized the voters’ power to adopt zoning ordinances by initiative and referendum, and cited a number of cases in support of this proposition. Examination of the cited cases indicates that only one, Fletcher v. Porter, 203 Cal. App. 2d 313, 21 Cal. Rptr. 452 (D. Ct. App. 1962), dealt with the initiative. The remaining citations support the proposition that the voters do have the power to adopt or amend zoning ordinances by referendum. The cited case of Johnson v. City of Clairemont, 49 Cal. 2d 826, 323 P. 2d 71 (Sup. Ct. 1958), indicates that a distinction may be properly drawn between an initiative and referendum in zoning cases. The court found no objection to the submission of a zoning ordinance to the referendum process since the procedural steps prescribed by the legislature in such a case are taken before the adoption of the zoning ordinance by the governing body. On the other hand, the procedural steps, such as consideration of the proposal by the planning board, will not be fulfilled where a zoning ordinance is adopted by means of an initiative measure. See Hurst v. City of Burlingame, 207 Cal. 134, 277 P. 308 (Sup. Ct. 1929). The California courts make the further distinction between a charter city and a general law city, holding that while an ordinance may be initiated by the electorate in a charter city, the initiative process is not available to the voters in a general law city. Fletcher v. Porter, supra.

Several jurisdictions, for one reason or another, have denied the right ofinitiative or referendum in connection with the adoption of amendments to a zoning ordinance. In City of Scottsdale v. Superior Court, 103 Ariz. 204, 439 P. 2d 290 (Sup. Ct. 1968), the initiative process was not available as a mode for amending a comprehensive zoning plan. The court concluded that such process is in irreconcilable conflict with the due process clause of the U. S. Constitution, 14th Amendment, and the express provisions of the state statute which delegated zoning powers to the governing body of an incorporated city.

In Kelley v. John, 162 Neb. 319, 75 N. W. 2d 713 (Sup. Ct. 1956), the court held that a city ordinance changing a zoning classification of a particular property was an "administrative” act adopted to carry out the purposes of the comprehensive zoning ordinance and was not subject to referendum. In New Jersey the process of effecting a change in zoning is legislative. Wollen v. Borough of Fort Lee, 27 N. J. 408, 422 (1958). However, the court in Kelley in the course of its opinion said:

“* * * To say that administrative determinations are subject to referendum could defeat the very purposes of zoning. The uniformity required in the proper administration of a zoning ordinance could be wholly destroyed by referendum. A single decision by the electors by referendum could well destroy the very purpose of zoning where such decision was in conflict with the general scheme fixing the uses of property in designated areas. * * * It would permit the electors by referendum to change, delay, and defeat the real purposes of the comprehensive zoning ordinance by creating the chaotic situation such ordinance was designed to prevent. * * *” (75 N. W. 2d, at p. 716)

The court further said, referring to the action of the city council:

“* * * If its action may be nullified by a referendum, then the comprehensive master plan becomes a nullity and every change of classification of property made by the city council will be subject to the whims of the electors without regard to the master plan. * *' *”

Kelley is even more persuasive when applied to the initiative process.

In Bird v. Sorenson, 16 Utah 2d 1, 394 P. 2d 808 (Sup. Ct. 1964), the court, as in Kelley, supra, stated that the enactment of an ordinance carrying out the planning commission’s recommendation that classification of certain property be changed from residential to commercial use was an administrative act and therefore the adopted ordinance was not subject to referendum. It noted that if each change in a zoning classification were to be submitted to a vote of the electorate, any master plan would be rendered inoperative. In an earlier case, Dewey v. Doxey-Layton Realty Co., 3 Utah 2d 1, 277 P. 2d 805 (Sup. Ct. 1954), the same court arrived at the same conclusion but for different reasons. In Dewey the court approvingly referred to Hurst v. City of Burlingame, supra, for the proposition that the constitutionally reserved power of initiative does not apply to a zoning ordinance. It hold that the Legislature delegated the power to zone to legislative bodies of municipalities so that the need for a comprehensive plan might be met, and provided means for the protection of private property through notice and public hearings. Thus, when plaintiffs sought to initiate rezoning within the city without complying with the zoning statute, they were in effect attacking collaterally the very statute under which they claimed their power to zone. The legislative body of the city could not zone without complying with the procedural process afforded by the statute. Eor the same reason, the court concluded that the electors of the city cannot by-pass those provisions of the statute as long as the zoning statute remains in force.

In State ex rel. Powers v. Donohue, 368 S. W. 2d 432 (Mo. Sup. Ct. 1963), the court held that the initiative process was not available as a method of amending the comprehensive county zoning ordinance. There, as here, plaintiffs sought by the initiative procedure in effect to repeal the provisions of an amendatory zoning ordinance enacted in accordance with the provisions of the charter. The court concluded that the hearing and other procedures required and followed in adopting the original amendment would be similarly required in the enactment of an ordinance which would repeal the original amendment. See also Baum v. City of St. Louis, 343 Mo. 738, 123 S. W. 2d 48 (Sup. Ct. 1938), for the proposition that those proposing an ordinance are required to adhere to the same procedural requirements imposed upon the legislative bodies.

Secondary authorities support the view that the initiative process is not available to the electorate in connection with a proposed rezoning of the municipality since there would be no compliance with the provisions of the zoning statute as to notice and public hearings, and that the property owners will not be permitted by this means to by-pass the zoning statute. 8A McQuillin, Municipal Corporations, § 25.246, p. 168 (1965) ; 42 Am. Jur. 2d § 9, at pp. 658-659.

As already noted, the Zoning Act, N. J. S. A. 40 :55-30 et seq., sets forth a detailed procedure, mandatory in nature, covering both the substance of zoning ordinances and their method of passage. N. J. S. A. 40 :55-31 requires the governing body to use its discretion in how most suitably to enact zoning districting and all other accessory matters. Before an initial zoning ordinance can be considered, a planning board must make a preliminary report, hold public hearings and make a final report. N. J. S. A. 40:55-33. No zoning ordinance may be adopted or amended until after public hearing by the governing body at which parties in interest and citzens shall have an opportunity to he heard. N. J. S. A. 40 :55-34. N. J. S. A. 40:55-35 requires amendments to the zoning ordinance to be first submitted to the planning board for approval, disapproval or suggestions. In the case of an unfavorable report by the planning board, such amendment does not become effective except by a favorable vote of two-thirds of the governing body. If 20% of the property owners within the district protest against such proposed change, such change may not become effective except by the favorable vote of two-thirds of the members of the governing body.

I am of the view that the Zoning Act, N. J. S. A. 40 :55-30 et seq., constitutes an exclusive grant of legislative power to the governing bodies of the respective municipalities preventing the voters from exercising the power of initiative. The Legislature, in enacting section 184 of the Faulkner Act, did not intend to impliedly supersede the specific procedure for amending a zoning ordinance prescribed in the Zoning Act. A contrary conclusion would disregard the valuable expertise of the planning board, and permit the electorate to defeat the beneficent purpose of the comprehensive zoning ordinance. Some support for this view may be inferred from Wollen v. Borough of Fort Lee, supra, 27 N. J., at p. 422; Campbell v. Borough of Hillsdale, 12 N. J. Super. 182, 185, 186 (App. Div. 1951); Yanow v. Seven Oaks Park, Inc., 18 N. J. Super. 411 (Ch. Div. 1952), reversed on other grounds 11 N. J. 341 (1953).

In reaching this conclusion I am mindful of the fact that N. J. S. A. 40:69A—184 specifically provides that the voters of any municipality may propose “any ordinance”. However, “any ordinance” does not mean “all ordinances”. In Cuprowski v. Jersey City, 101 N. J. Super. 15 (Law Div. 1968), affirmed o.b. 103 N. J. Super 217 (App. Div. 1968), the court stated that when the Legislature referred to initiative or referendum, it did not intend to include resolutions or ordinances of an executive or administrative nature. See also McCrink v. Town of West Orange, 85 N. J. Super. 86 (App. Div. 1964), and Snow v. Bell, 105 N. J. Super. 484 (Ch. Div. 1969). It seems unlikely that the Legislature intended the possible frustration of comprehensive zoning through the initiative process.

The constitutional question is indeed formidable. However, it is settled law that a constitutional issue will not be resolved unless absolutely imperative in the disposition of the litigation. State v. Salerno, 27 N. J. 289, 296 (1958); Ahto v. Weaver, 39 N. J. 418 (1963). In view of my determination that a zoning amendment may not be accomplished by the initiative process, it is unnecessary to resolve the constitutional challenge to N. J. 8. A. 40 :69JL-184 and 185.

The motion for summary judgment is granted.