National-Ben Franklin Fire Ins. Co. v. Camden Trust Co.

• Decision Date: 20 February 1956
• Docket Number: No. A--73,NATIONAL-BEN,A--73
• Parties: FRANKLIN FIRE INSURANCE COMPANY, a Pennsylvania corporation, and Mercury Insurance Company, a Minnesota corporation, Plaintiffs-Respondents, v. CAMDEN TRUST COMPANY, a corporation of New Jersey, and Associated Realties Corporation, a corporation of New Jersey, Defendants-Appellants.
• Court: New Jersey Supreme Court

Page 16

21 N.J. 16

120 A.2d 754

NATIONAL-BEN FRANKLIN FIRE INSURANCE COMPANY, a Pennsylvania corporation, and Mercury Insurance Company, a Minnesota corporation, Plaintiffs-Respondents, v. CAMDEN TRUST COMPANY, a corporation of New Jersey, and Associated Realties Corporation, a corporation of New Jersey, Defendants-Appellants.

No. A--73.

Supreme Court of New Jersey.

Argued Jan. 9, 1956.

Decided Feb. 20, 1956.

James N. Butler, Atlantic City, for appellants (Moore, Butler & McGee, Atlantic City, attorneys).

William T. Wachenfeld, Newark, for respondents (Lum, Fairlie & Foster, Newark, attorneys; Vincent P. Biunno, Newark, on the brief).

The opinion of the court was delivered by

JACOBS, J.

The Appellate Division, in an opinion reported at 36 N.J.Super. 249, 115 A.2d 589 (1955), reversed the Chancery Division's judgment which dismissed the plaintiffs' complaint for declaratory relief. We granted certification under R.R. 1:10--2.

The defendant Associated Realties Corporation is the owner of the Million Dollar Pier located at 2100--2114 Boardwalk, Atlantic City, and the defendant Camden Trust Company holds a $601,000 fourth mortgage on the property in trust for bondholders. In 1949 the pier was damaged by fire and thereafter the Trust Company instituted an action in the Law Division against the National-Ben Franklin Fire Insurance Company and the Mercury Insurance Company on fire insurance policies which they had issued naming Associated Realties as assured and the Trust Company as one of the mortgagees. The insurance companies denied liability as to the owner Associated Realties which was not joined as a party in the Trust Company's action. They did not deny liability to the Trust Company as mortgagee but sought subrogation in a form which the Trust Company had rejected. In due course the Law Division found that the insurance companies had the right to subrogation but that such right was not equal with but junior to the mortgagee's or trustee's and that they were 'entitled to be paid their money after the mortgagee or trustee is paid its claim in full'. On July 19, 1951 Judge Woods formally ordered and adjudged that the Trust Company have judgment against the National-Ben Franklin Fire Insurance Company in the sum of $8,133.51 (with interest) and against the Mercury Insurance Company in the sum of $2,623.70 (with interest) and that the insurance companies were entitled to receive an assignment of an interest in the Trust Company's bond and mortgage but that said assignment 'shall be junior in lien and right of collection to the rights' of the Trust Company therein. On February 15, 1952 the Trust Company executed an assignment to the insurance companies which acknowledged receipt of payment from the insurance companies and provided that the assignment was subject to the conditions set forth in the judgment entered in the Law Division.

On October 2, 1954 the insurance companies filed a complaint in the Chancery Division in which they set forth the foregoing facts, claimed that they were entitled 'to the rights and status of bondholders' under the mortgage held by the Camden Trust Company which had refused to recognize them as such, and sought a declaratory judgment. On October 21, 1954 the Trust Company and Associated Realties filed notice that they would apply for an order dismissing the complaint on the grounds that 'the matters and things therein alleged have already been adjudicated by a court of competent jurisdiction, and further, that said complaint shows upon its face no grounds for the relief therein demanded.' An affidavit by Mr. John S. Foster, a member of the firm of attorneys representing the insurance companies, was submitted in opposition to the motion. Mr. Foster stated that he had advised the insurance companies that although their rights were "junior in lien and right of collection" they still had the status and rights of bondholders and that the Trust Company had refused to recognize that they had 'any rights or status at all to enforce or protect their lien on the property as set forth in the assignment.' In passing upon the motion the Chancery Division expressed the view that a declaratory judgment proceeding is ordinarily not maintainable 'where another remedy is at hand'; that the insurance companies were seeking 'a correction, modification, clarification or amendment' of the Law Division judgment; that application for such relief 'should be there made as a step in that cause'; and that since there was 'another adequate remedy available to the plaintiffs as a step in the original cause' the motion to dismiss should be granted. See 33 N.J.Super. 340, 343, 110 A.2d 152, 153 (Ch.Div.1954). In reversing the Chancery Division's dismissal of the complaint, the Appellate Division expressed the view that a declaratory judgment would be as effective 'as any other remedy for the purpose of disposing of the controversy now raised in the Chancery Division action'; and although it recognized that 'usually when a declaratory judgment is sought as to a prior judgment of the Law Division, the declaratory action should be brought in that division,' it noted that here the relief sought was 'primarily equitable' and maintainable in the Chancery Division. See 36 N.J.Super. 249, 255, 115 A.2d 589, 591 (1955).

Although the declaratory judgment may be traced to Roman law, its development in England during the 19th Century undoubtedly supplied the model for the remedy in this country. Cf. 6 Moore's Federal Practice (2d ed. 1953), 3004; Borchard, Declaratory Judgments (2d ed. 1941), 87 et seq. Declaratory judgment statutes were enacted in Rhode Island as early as 1876 and in Maryland in 1888, but the first really effective enactment in the United States seems to have been our own 1915 statute relating to the Court of Chancery. See L.1915, c. 116, p. 185; Borchard, supra, 132; 1 Anderson, Declaratory Judgments (2d ed. 1951), 25. In 1922 the Commissioners on Uniform State Laws adopted the now wellknown Uniform Declaratory Judgments Act which was later enacted by New Jersey and most of the other states. L.1924, c. 140 (R.S. 2:26--66; N.J.S. 2A:16--50, N.J.S.A.); Note, Developments in the Law--Declaratory Judgments, 62 Harv.L.Rev. 787 (1949). It contained express provision that the court shall have power to declare rights, status and other legal relations 'whether or not further relief is or could be claimed,' and that 'further relief based on a declaratory judgment may be granted whenever necessary or proper.' See N.J.S. 2A:16--52, N.J.S.A.; N.J.S. 2A:16--60, N.J.S.A. It also provided that since it was remedial in nature it was to be 'liberally construed and administered,' although the court was given discretionary power to deny declaratory relief which 'would not terminate the uncertainty or controversy giving rise to the proceeding'. N.J.S. 2A:16--51, N.J.S.A.; N.J.S. 2A:16--61, N.J.S.A.

Despite the sweep of the statutory language the early cases displayed some reluctance to grant declaratory relief where a more traditional remedy was available. Professor Borchard strongly criticized this attitude, suggesting that where a litigant sought milder relief in the form of a declaration that he had been wronged there was no social justification for compelling him to seek more coercive relief such as an injunction, foreclosure or damages; as he put it, 'the willingness to invoke arbitration and declaration of rights instead of hostilities and coercion is a mark of civilization and should be encouraged, not discouraged.' Borchard, supra, 342. See also 1 Anderson, supra, 395. Although many courts accepted Borchard's approach and refused to deny declaratory relief simply because another remedy was available, the New Jersey decisions which were rendered under our former judicial system seemingly adopted a contrary course. See Empire Trust Co. v. Board of Commerce and Navigation, 124 N.J.L. 406, 11 A.2d 752 (Sup.Ct.1940); Provident Mutual Life Ins. Co. v. Unemployment Compensation Commission of New Jersey, 126 N.J.L. 348, 19 A.2d 630 (E. & A.1941); Griffiths v. Griffiths, 142 N.J.Eq. 751, 61 A.2d 249 (E. & A.1948). Cf. 1 Anderson, supra, 385. When the Federal Rules of Civil Procedure were promulgated the issue was effectively disposed of in Rule 57, 28 U.S.C.A., which provided that the existence of another remedy should not bar declaratory relief. See Moore, supra, 3001. Our own practice rules did not deal with the matter until 1955, although in the meantime the Appellate Division had rendered its decision in Utility Blade & Razor Co. v. Donovan, 33 N.J.Super. 566, 111 A.2d 300 (1955). There Judge Clapp, relying upon our recent decision in Carls v. Civil Service Commission of New Jersey, 17 N.J. 215, 111 A.2d 45 (1955), and its approving reference to Borchard, supra, 303, held that declaratory relief is not to be denied simply because other relief is available, although a court might, in the proper exercise of its discretion, deny such relief if it satisfactorily appeared that the other relief would be More effective. Although the Utility Blade & Razor case never reached this court it was shortly followed by our promulgation of R.R. 4:92A (modeled after Federal Rule 57) which is now in effect and reads as follows:

'The procedure for obtaining a declaratory judgment pursuant to N.J.S. 2A:16--50 to 62, inclusive, shall be in accordance with the rules governing civil actions generally, and the right to trial by jury may be demanded under the circumstances and in the manner provided in Rules 4:39 and 4:40. The existence of another adequate remedy does not preclude a judgment for declaratory relief in cases where it is appropriate.'

Since the adoption of the Constitution of 1947 and the establishment of our new court system there fortunately has been but little evidence of any continuing judicial hostility to the use of the declaratory form of relief. See New Jersey Turnpike Authority v. Parsons, 3 N.J. 235, 69...