Maxine A. Reid v. John J. McKeon

• Court: New Jersey Superior Court Appellate Division
• Decided: August 23, 2024
• Docket: A-2519-22
• Status: Unpublished

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-2519-22

MAXINE A. REID, an individual,

Plaintiff-Respondent,

v.

JOHN J. MCKEON, an individual, and JOYCE A. MCKEON, an individual,

Defendants. _____________________________

CURE AUTO INSURANCE COMPANY,

Appellant. _____________________________

Argued April 17, 2024 – Decided August 23, 2024

Before Judges Vernoia and Walcott-Henderson.

On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-1845-14.

Anthony Argiropoulos argued the cause for appellant (Epstein Becker & Green, PC, attorneys; Anthony Argiropoulos, Lauren B. Cooper, Steven T. Passarella, Jr., and Rebecca Porter, of counsel and on the briefs).

Paul R. Garelick argued the cause for respondent (Lombardi and Lombardi, PA, attorneys; Paul R. Garelick, on the brief).

PER CURIAM

This personal-injury action arises out of an automobile accident in which

plaintiff Maxine A. Reid suffered injuries when a vehicle she was driving was

struck by a vehicle driven by defendant John McKeon and owned by defendant

Joyce McKeon. Defendants' auto liability insurance carrier, intervenor CURE

Auto Insurance Company (CURE), appeals from an order entered pursuant to

Rule 4:42-1 directing that CURE pay $100,000 to plaintiff based on the court's

finding CURE is contractually responsible under defendants' auto liability

policy to make payment to plaintiff in satisfaction of a jury verdict rendered in

plaintiff's favor against defendants. Because plaintiff had never filed a

complaint or other pleading asserting a cause of action against CURE, and Rule

4:42-1 does not permit a finding of liability or a damage award on an un-pleaded

claim, we reverse.

On May 10, 2012, plaintiff suffered personal injuries when the vehicle she

was driving was struck from behind by the vehicle driven by John McKeon.

A-2519-22 2 Plaintiff later filed suit against defendants and, at a trial in which defendants

stipulated to liability, a jury returned a $250,000 verdict in plaintiff's favor.

At the time of the accident, defendants had an automobile liability policy

with CURE that had a $100,000 policy limit. An attorney assigned by CURE

represented defendants in the personal-injury action.

Following our affirmance of the jury verdict on defendants' appeal, Reid

v. McKeon, No. A-3493-15 (App. Div. Aug. 21, 2018), defendants sought

CURE's payment to plaintiff of the entire $250,000 judgment. According to

plaintiff, CURE had refused to make any payments toward the judgment in

excess of the $100,000 policy limit despite defendants having notified CURE

prior to trial and the return of the verdict of its obligation to make a good faith

settlement of plaintiff's claims on defendants' behalf in accordance with the

Supreme Court's holding in Rova Farms Resort, Inc. v. Investors Insurance Co.

of America, 65 N.J. 474, 496 (1974), that "an insurer, having contractually

restricted the independent negotiating power of its insured, has a positive

fiduciary duty to take the initiative and attempt to negotiate a settlement within

the policy coverage."

Defendants subsequently filed for bankruptcy under Chapter 7 of the U.S.

Bankruptcy Code and listed their $250,000 obligation to plaintiff under the

A-2519-22 3 personal-injury judgment as a debt from which they sought relief in the

bankruptcy court. As part of the bankruptcy proceeding, special counsel—on

behalf of the bankruptcy trustee—filed a Law Division action asserting a bad-

faith claim against CURE and a legal malpractice claim against the CURE-

assigned counsel who had represented defendants in the personal-injury action.

The parties settled the trustee's Law Division action, stipulating to a "full

dismissal" of the claims in the action in exchange for CURE's payment of

$220,000 into the bankruptcy estate. The bankruptcy court subsequently

directed payment of $111,664.89 to plaintiff from the bankruptcy estate and

entered an order pursuant to 11 U.S.C. § 727 discharging defendants' $250,000

debt to plaintiff under the personal-injury-action judgment.

Following defendants' discharge from the $250,000 personal-injury-

action judgment in the bankruptcy court, plaintiff continued her efforts to

recover additional sums she claimed were due her from CURE under defendants'

policy. For purposes of addressing the issues presented on appeal, we need not

detail plaintiff's efforts and CURE's responses to the same, other than to note

that when the parties could not resolve their differences, plaintiff sought relief

in the personal-injury action, filing a motion to enforce a judgment under Rule

4:42-1 even though CURE had never been a party to that action and no complaint

A-2519-22 4 or other pleading asserting a purported cause of action against CURE had ever

been filed or served in that action.

In her motion, which was supported by her counsel's certification, plaintiff

asserted in part that CURE had—at various times following the jury verdict,

defendants' filing of the bankruptcy, and defendants' discharge in bankruptcy—

tendered checks in the amount of $100,000 to plaintiff. Plaintiff claimed the

tendered checks had constituted payment "represent[ing] the liability policy

limits pursuant to" defendants' insurance contract with CURE. Plaintiff

acknowledged she never accepted or cashed any of the checks CURE had sent.

Her counsel's supporting certification asserted that plaintiff and CURE had

"never achieved" a settlement on any claim against the insurance carrier and that

CURE had later taken the position it was "not responsible to pay the contractual

$100,000[] policy limits."

Plaintiff also asserted that the $111,664.89 she had obtained in the

bankruptcy proceeding from the $220,000 CURE had paid to the bankruptcy

estate in settlement of defendants' bad faith and malpractice lawsuit pertained

solely to "the excess verdict that . . . [CURE] would never pay when [it] turned

[its] back[]" on defendants and "was part of an asset in conjunction with the

malpractice matter against the . . . attorney who [had] tried the case" on

A-2519-22 5 defendants' behalf. Thus, plaintiff claimed that irrespective of the settlement of

the bad faith and legal malpractice claims brought against CURE by the

bankruptcy trustee, CURE's settlement of those claims and payment of $220,000

to the bankruptcy estate, and the bankruptcy court's discharge of the $250,000

judgment against defendants, CURE had an independent contractual obligation

under its insurance contract with defendants to pay plaintiff the $100,000 policy

limit. And, although she had never filed a pleading alleging a cause of action

against CURE in the personal-injury action or otherwise, and CURE was not a

defendant in the action and no judgment had been entered against it, plaintiff

sought relief under Rule 4:42-1 for an order enforcing the $250,000 judgment

in the personal-injury action and compelling "the [d]efendants [(i.e., CURE)] to

pay the $100,000[] that" plaintiff claimed "was the admitted responsibility of

[CURE's] coverage in conjunction with the verdict" returned by the jury against

defendants as the insureds.

In response to plaintiff's motion, CURE filed a cross-motion for leave to

file opposition to plaintiff's motion and to intervene in the personal-injury action

"for purposes of opposing" plaintiff's Rule 4:42-1 motion to enforce a purported

judgment against CURE. In its opposition to plaintiff's motion, CURE argued:

plaintiff sought to enforce a judgment that did not exist against CURE ; the

A-2519-22 6 judgment plaintiff had obtained against defendants in the personal-injury action

had been discharged by the bankruptcy court and could no longer support a claim

against CURE; plaintiff had no standing to assert an insurance contract claim

against CURE; and plaintiff improperly sought to circumvent the bankruptcy

code and obtain a double-recovery on the verdict she had obtained against

defendants by seeking to enforce the judgment against CURE after the judgment

had been discharged in the bankruptcy proceeding.

The trial court heard oral argument on the motions and granted CURE's

motion to intervene. The court also granted plaintiff's Rule 4:42-1 motion to

enforce the judgment, ordering CURE to "issue a $100,000[] check representing

their contractual responsibility for the verdict obtained in" the personal-injury

case pursuant to "[Rule] 4:42-1(b)[,](c)." The court determined the resolution

of the bankruptcy trustee's action against CURE resulted in the settlement only

of the bad faith and legal malpractice claims against CURE and defendants' trial

counsel in the personal-injury action. The court sua sponte also considered the

applicability of N.J.S.A. 17:28-2, noting the statute had not been raised by either

plaintiff or CURE.

As acknowledged by the court, in pertinent part, N.J.S.A. 17:28-2

provides as follows:

A-2519-22 7 No policy of insurance against loss or damage resulting from accident to or injury suffered by an employee or other person and for which the person insured is liable, or against loss or damage to property caused by animals or by any vehicle drawn, propelled or operated by any motive power, and for which loss or damage the person insured is liable, shall be issued or delivered in this state by any insurer authorized to do business in this state, unless there is contained within the policy a provision that the insolvency or bankruptcy of the person insured shall not release the insurance carrier from the payment of damages for injury sustained or loss occasioned during the life of the policy, and stating that in case execution against the insured is returned unsatisfied in an action brought by the injured person, or his personal representative in case death results from the accident, because of the insolvency or bankruptcy, then an action may be maintained by the injured person, or his personal representative, against the corporation under the terms of the policy for the amount of the judgment in the action not exceeding the amount of the policy.

[N.J.S.A. 17:28-2 (emphasis added).]

The court reasoned that because plaintiff had been injured and obtained a

judgment, and plaintiff could not collect on the judgment from defendants due

to their bankruptcy, plaintiff was entitled to relief under the statute against

CURE as defendants' automobile liability insurance carrier. The court found

N.J.S.A. 17:28-2 therefore permitted plaintiff to obtain relief directly from

CURE and without any assignment of rights from defendants.

A-2519-22 8 The court also reasoned that because plaintiff had only received

$111,664.89 "pursuant to the bankruptcy proceedings, in full satisfaction of"

defendants' obligations under the $250,000 personal-injury judgment, "CURE is

obligated to tender its payment to plaintiff in satisfaction of its obligations under

[N.J.S.A. 17:28-2] and its contract with the insured." The court therefore

granted "plaintiff's motion to enforce judgment" and directed that CURE tender

defendants' "policy limit[]" of $100,000 "to plaintiff within ten days." The court

found an award of interest and attorney's fees to plaintiff was not warranted.

The court entered a memorializing order. CURE appealed from the court's

order.

We conduct a de novo review of a trial court's determination of a motion

to enforce a judgment under Rule 4:42-1(b) and (c). Gold Tree Spa, Inc. v. PD

Nail Corp., 475 N.J. Super. 240, 245 (App. Div. 2023). We therefore apply the

same standard as the trial court. See, e.g., Templo Fuente De Vida Corp. v. Nat'l

Union Fire Ins. Co. of Pittsburgh, 224 N.J. 189, 199 (2016) (applying the de

novo standard of review to a summary judgment order). "We review issues of

law de novo and accord no deference to the trial judge's [legal]

conclusions . . . ." MTK Food Servs., Inc. v. Sirius Am. Ins. Co., 455 N.J.

Super. 307, 312 (App. Div. 2018).

A-2519-22 9 The court entered the order challenged on appeal pursuant to Rule 4:42-

1(b) and (c). Subsection (b) of the Rule provides that "no judgment or order

shall be signed by the court unless the form thereof has been settled on motion

on notice to all parties affected thereby who are not in default . . . or unless the

written approval of such attorneys or parties to the form thereof is endorsed

thereon." R. 4:42-1(b). Subsection (c) of the Rule provides the procedure for

the settlement of "the form of judgment or order"; that is, the "party proposing

the form of [a] judgment or order" must forward the original "to the judge who

heard the matter" and serve a copy "on every other party not in default," and, if

no written notice of "specific objections" to the order is served within five days

of service of the proposed order, "the judgment or order may be signed in the

judge's discretion." R. 4:42-1(c).

"'Our review of the meaning or scope of a court rule is de novo; we do not

defer to the interpretations of the trial court . . . unless we are persuaded by [its]

reasoning.'" In re Protest of Contract for Retail Pharmacy Design, 257 N.J. 425,

436 (2024) (quoting State v. Tier, 228 N.J. 555, 561 (2017)). We therefore must

consider the Rule's plain language "'and "ascribe to the [words of the rule] their

ordinary meaning and significance . . . and read them in context with related

A-2519-22 10 provisions so as to give sense to the [court rules] as a whole."'" Ibid. (alterations

in original) (quoting DiFiore v. Pezic, 254 N.J. 212, 228 (2023)).

We find no support in the plain language of either Rule 4:42-1(b) or (c)

for the order entered by the court on plaintiff's motion. Subsections (b) and (c)

of Rule 4:42-1 provide only methods for settling forms of judgments and orders.

They do not permit or provide for the enforcement of judgments or orders as

requested in plaintiff's motion and, even if they did, the Rules would have no

application here because there had never been a verdict, judgment, or decision

against CURE in the personal-injury action and, as a result, there was no

judgment or order to enforce against CURE. Moreover, our Rules of Court

otherwise expressly provide for the enforcement of judgments, R. 4:59-1, and

orders, R. 1:10-3, but plaintiff did not seek relief under either of those Rules and

with good reason—as CURE correctly contends, the personal-injury action

record is bereft of any judgment or order entered against CURE that the court

could have enforced.

Rules 4:42-1(b) and (c) also do not provide an independent substantive

basis for the entry of a judgment or order against a non-party to a civil

proceeding. The plain language of the subsections makes clear that they apply

only to the settlement of the form of judgment and orders between the parties to

A-2519-22 11 the litigation, and the process of settling the form on a judgment or order may

only be logically employed following a substantive determination a party is

entitled to a judgment or an order. Thus, the Rules on which plaintiff relied in

support of her motion cannot be logically read to provide the means by which a

court makes a substantive determination a party is entitled to a judgment or

order, but that is what the court erroneously did here. And, plaintiff did not cite

to the motion court—and does not cite on appeal—any case law, statute, or court

rule that authorizes a plaintiff in a personal-injury action to obtain by motion

under Rule 4:42-1 a judgment against a tortfeasor's liability insurance carrier

against which no complaint or pleading asserting a cause of action had ever been

filed or served.

The court erred by relying on Rule 4:42-1(b) and (c) as the basis for its

entry of a monetary judgment against CURE because CURE was not a party to

the personal-injury action and no pleading asserting a cause of action had ever

been filed against or served on CURE. See N. Haledon Fire Co. No. 1 v.

Borough of N. Haledon, 425 N.J. Super. 615, 628 (App. Div. 2012) (explaining

that "'[j]udgment or orders normally do not bind non-parties'" (quoting In re

A-2519-22 12 Application of Mallon, 232 N.J. Super. 249, 254 n.2 (App. Div. 1989))). 1 The

court therefore deprived CURE of the required notice of plaintiff's purported

cause of action in an appropriate pleading, an opportunity to answer or otherwise

respond to plaintiff's alleged claim after proper service of a pleading, discovery

on the claim, and a trial by jury. In short, by relying on Rule 4:42-1 to support

its entry of a final monetary judgment against non-party CURE, the court

effectively denied CURE all the due process protections that are incorporated in

our Rules of Court for individuals or entities against whom a judgment is sought.

The court's reliance on N.J.S.A. 17:28-2 as a basis for its entry of the

judgment against CURE was also misplaced. The statute does not authorize

entry of a judgment against an insurance carrier in response to a motion, never

mind a Rule 4:42-1 motion to enforce a non-existent judgment or order against

1 We recognize that under limited circumstances, a judgment may be "binding upon non-parties in other matters if their interests have been represented by a party," N. Haledon Fire Co., 425 N.J. Super. at 628-29, but plaintiff did not argue before the trial court and does not argue on appeal that any such circumstances are extant here. See Drinker Biddle & Reath LLP v. N.J. Dep't of L. & Pub. Safety, 421 N.J. Super. 489, 496 n.5 (App. Div. 2011) (explaining an issue not briefed on appeal is deemed abandoned). Moreover, prior to the filing of plaintiff's Rule 4:42-1 motion against CURE, which followed the discharge in bankruptcy of defendants' obligation to pay the $250,000 judgment in the personal-injury action, no direct claim against CURE for payment of policy limits had been filed against CURE in the personal-injury action and, as a result, CURE's interests in opposing the claim had never been represented by any other party. See N. Haledon Fire Co., 425 N.J. Super. at 628-29. A-2519-22 13 the non-party. Rather, the statute's plain language permits an injured person to

maintain an "action" against an insurance carrier under certain defined

circumstances. Under our Rules of Court, "[t]here shall be one form of action

in civil practice to be known as a 'civil action.'" R. 4:2-1. And, "[a] civil action

is commenced by filing a complaint with the court," R. 4:2-2, not a Rule 4:42-1

motion against a non-party.

We do not disagree with the court's finding plaintiff may have a claim

against CURE under the statute, but plaintiff has never commenced an action

against CURE, R. 4:2-1 and -2, and concomitantly has never maintained an

action against CURE under N.J.S.A. 17:28-2. To conclude otherwise and

determine the filing of a Rule 4:42-1 motion constituted maintenance of an

action would deprive insurance carriers of the due process protections prior to

entry of judgment embodied in our Rules of Court. For those reasons, we

interpret the maintenance-of-an-action provision in N.J.S.A. 17:28-2 to require

that an injured party seeking relief from an insurance carrier under the statute

must first file a complaint, R. 4:2-2, and properly serve the pleading in a court

action that is subject to all the procedural requirements, rights, safeguards, and

remedies afforded to the parties to a civil proceeding under our Rules of Court.

A-2519-22 14 The court's order depriving CURE of the action required under N.J.S.A. 17:28-

2 was therefore entered in error.

In their briefs on appeal, the parties argue the merits of plaintiff's claim

that CURE is obligated, as defendants' insurer, to pay the $100,000 policy limit

to plaintiff and CURE's claims which include, but are not limited to, plaintiff

lacks standing to seek the payment and the bankruptcy court's discharge of the

personal-injury-action judgment bars plaintiff's claim against CURE. We offer

no opinion on the merits of plaintiff's claim, CURE's defenses to the claim, or

any other issues pertinent to the merits of plaintiff's claim. We decide only that

the court erred by granting plaintiff's motion to enforce a judgment under Rule

4:42-1 against CURE, a non-party to the personal-injury action in which the

motion was filed and the court entered its order. We do not foreclose plaintiff

from initiating and maintaining an action against CURE based on its claim under

N.J.S.A. 17:28-2 or otherwise, but any such action shall be subject to any and

all defenses that may be interposed by CURE. Again, we offer no opinion on

the merits of such an action and nothing in this opinion shall be construed to the

contrary.

Reversed.

A-2519-22 15