Opinion
DOCKET NO. A-2643-12T2
09-11-2014
RIHANNA CORP., RIHANNA RESTAURANT INC., MAHER E. SALEEB, SAM TWAL and HOSSAM MIKAAIL, Plaintiffs-Appellants, v. CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON, Defendant/Third-Party Plaintiff-Respondent, and MAHER MOUSSA, Third-Party Defendant.
Del Vacchio O'Hara, P.C., attorneys for appellants (Patrick C. O'Hara, Jr., of counsel and on the brief). Wright & O'Donnell, P.C., attorneys for respondent (George T. McCool, Jr., on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Lihotz and Maven. On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-4530-11. Del Vacchio O'Hara, P.C., attorneys for appellants (Patrick C. O'Hara, Jr., of counsel and on the brief). Wright & O'Donnell, P.C., attorneys for respondent (George T. McCool, Jr., on the brief). PER CURIAM
Plaintiffs Rihana Corporation, Rihana Restaurant Inc., Maher E. Saleeb, Sam Twal and Hossam Mikaail appeal from two Civil Division orders: a December 21, 2012 order granting defendant Certain Underwriters at Lloyd's of London summary judgment and a January 11, 2013 order denying plaintiffs' motion to amend their complaint. Plaintiffs' declaratory judgment action against defendant sought payment under a certain business owner's insurance policy for an October 3, 2008 fire loss suffered by Rihana Restaurant Inc. Defendant denied coverage, citing a limitation provision of the policy, which precluded suit filed more than one year from the date of loss. On summary judgment, the Law Division judge agreed plaintiffs' claim was properly rejected under the insurance contract and dismissed plaintiffs' complaint. Thereafter, the motion to amend the complaint was denied.
The corporate name appears to be misspelled in the caption. We have chosen to use the spelling in the partners' Sales Agreement. Further, the relationship between Rihana Corporation and Rihana Restaurant Inc. is not clear from this record; we are not told whether these are separate, the same or related entities.
On appeal, plaintiffs maintain the trial judge erred in refusing to relax the contract's one-year limitations period following a disclaimer of coverage. Plaintiffs seek reversal of the order and reinstatement of their action. Following our review of the arguments on appeal, the record and the applicable law, we affirm.
The facts are taken from the summary judgment record. Saleeb, Twal, Mikaail and third-party defendant Maher Moussa agreed to develop and operate a restaurant. Shortly after the June 2006 opening, the partners had a falling out. The four negotiated and executed a Sales Agreement (the agreement) whereby Moussa would purchase his partners' sixty percent interest in the stock of Rihana Restaurant Inc. for $174,000; of which $134,000 was transferred at closing with the balance paid in eighteen monthly installments. The agreement provided the three resigning shareholders would restrictively endorse their shares to Moussa, subject to the agreement's obligations; they would retain a security interest in the inventory and real property owned by the corporation; and Moussa would personally guarantee payment. An unnumbered sentence in the agreement stated, "Also, [MAY TAKE CORP. BACK TO SELLERS IF DEFAULT [sic]]."
Moussa then defaulted on the installment payments. As a result, Saleeb, Twal and Mikaail filed an action for recovery of their interests and possession of the property, as provided in the agreement (Docket No. HUD L-1187-08).
On October 3, 2008, while the litigation was pending, a restaurant fire occurred. The fire originated in the kitchen area on the ground floor and the "west side" of the mezzanine level. Defendant was placed on notice of the fire loss by Moussa as the owner of Rihana Restaurant Inc., the named insured. A representative of Hills Adjustment Bureau (Hills), the third-party adjuster hired by defendant, met with Moussa at the restaurant on October 7, 2008. Moussa executed the adjuster's hand-written statement recording his unsworn answers to specific questions about the fire.
Although the restaurant opened in June 2006, Moussa had only secured the business owner's policy on September 3, 2008.
Suspicions arose suggesting the fire was intentionally set, based on the extent of the loss, questions regarding the fire's cause and origin, as well as the fact that the property had been uninsured until just months prior to the fire when the application for coverage was filed. Hills recommended defendant retain additional experts to determine the cause and origin of the fire and the amount of loss to furniture and fixtures.
In the action against Moussa, an October 15, 2008 order was filed, providing Saleeb, Twal and Mikaail were "owners of 100% of the stock of Rihana Corp. and . . . entitled to immediately operate the business . . . ." On October 16, 2008, Saleeb and Mikaail called the Jersey City Police Department and reported the restaurant premises had been vandalized. They explained "they had a verbal dispute" with Moussa the day before regarding ownership of the restaurant.
Defendant issued a reservation of rights letter on January 7, 2009. On October 29, 2009, defendant disclaimed coverage of the fire claim because of "concealment, misrepresentation or fraud." The disclaimer letter, sent to Moussa's home address and the business premises, relied on several policy provisions, including "[t]his entire policy shall be void" if at any time "the insured has wilfully concealed or misrepresented any material fact or circumstance concerning this insurance or the subject thereof" and "in case loss occurs . . . [t]he insured, as often as may be reasonably required, shall exhibit to any person designated by the [c]ompany all that remains of any property herein described, and submit to examinations under oath by any person named by this [c]ompany . . . ." Further, defendant explained it disclaimed coverage because Moussa, the owner of the insured restaurant on the date of loss, was required to appear for an examination under oath. However, through counsel, Moussa declined to appear or to cooperate, stating he was being investigated by the Jersey City Police Department in conjunction with the Hudson County Prosecutor's Office for arson of the Rihana Restaurant and would make no statements until the investigation was concluded.
On August 29, 2011, plaintiffs filed their declaratory judgment action, seeking compensation for the October 3, 2008 fire loss (count one) and alleging breach of contract (count two). Following discovery, plaintiffs moved to amend the complaint to include payment for the vandalism loss suffered on October 16, 2008. Defendant filed a separate motion for summary judgment, arguing plaintiffs' action was untimely as the policy's fire coverage endorsement provided: "No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all the requirements of this policy shall have been complied with, and unless commenced with in twelve months next after inception of the loss."
The motion to amend was adjourned pending consideration of the motion for summary judgment. Following argument, the judge granted defendant's motion and dismissed plaintiffs' complaint. Thereafter, a different Law Division judge denied plaintiffs' motion to amend. This appeal ensued.
We review the trial court's summary judgment order de novo, applying the same standard that governs the trial court. W.J.A. v. D.A., 210 N.J. 229, 237 (2012); Lapidoth v. Telcordia Techs., Inc., 420 N.J. Super. 411, 417 (App. Div.), certif. denied, 208 N.J. 600 (2011). Pursuant to Rule 4:46, we "consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). "[W]hen the evidence 'is so one-sided that one party must prevail as a matter of law,' the trial court should not hesitate to grant summary judgment." Ibid. (citation omitted). If no genuinely disputed fact exists, we must decide whether the trial court's ruling on the law, to which we owe no deference, was correct. W.J.A., supra, 210 N.J. at 237-38.
The legal issue presented involves principles of contract interpretation. We consider the issue de novo. Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).
When interpreting a contract, the focus is on "the intention of the parties to the contract as revealed by the language used, taken as an entirety; and, in the quest for the intention, the situation of the parties, the attendant circumstances, and the objects they were thereby striving to attain are necessarily to be regarded." Lederman v. Prudential Life Ins. Co. of Am., 385 N.J. Super. 324, 339 (App. Div.) (citation and internal quotation marks omitted), certif. denied, 188 N.J. 353 (2006). "The polestar of contract construction is to discover the intention of the parties as revealed by the language used by them." Karl's Sales & Serv., Inc. v. Gimbel Bros., 249 N.J. Super. 487, 492 (App. Div.), certif. denied, 127 N.J. 548 (1991). We may not re-write a contract or grant a better deal than that for which the parties expressly bargained. Solondz v. Kornmehl, 317 N.J. Super. 16, 21 (App. Div. 1998).
On appeal, plaintiffs suggest the judge, in granting defendant's motion for summary judgment, ignored "material facts [that] were important in this case." They argue relaxation of the policy's lawsuit limitation is warranted because of these facts and because defendant did not suffer appreciable prejudice by the delay in initiating the action.
To support their position to excuse the delay in filing, plaintiffs argue they changed counsel, and their efforts to obtain copies of the policy and the file were thwarted. Plaintiffs also argue they had no knowledge of the policy's terms and believed substitute counsel acted diligently, filing the action once the documentation was obtained. As to the lack of prejudice, plaintiffs point out defendant was immediately notified of the fire and plaintiffs fully cooperated with all aspects of defendant's investigation, submitted to an examination under oath and supplied any requested documents. Finally, plaintiffs cite Price v. N.J. Mfrs. Ins. Co., 182 N.J. 519, 521 (2005), contending, as they did before the trial judge, that the failure to file the lawsuit within the one-year time period was "a technical violation" and argue, as a matter of equity, defendant's statute of limitations defense should not bar suit. We find these arguments unavailing.
The suit limitation clause in the policy mirrors the standard contract provisions required to be included in every New Jersey fire insurance policy by N.J.S.A. 17:36-5.20. See Weinberg v. Dinger, 106 N.J. 469 (1987) (holding the statute specifically requires "[e]very fire insurance policy shall contain certain standard provisions which shall be in the words and in the order" as set forth in the statute). "The primary purpose of the statute of limitations is to provide defendants a fair opportunity to defend and to prevent plaintiffs from litigating stale claims." W.V. Pangborne & Co. v. N.J. Dep't of Transp., 116 N.J. 543, 563 (1989) (citing Ochs v. Fed. Ins. Co., 90 N.J. 108, 112 (1982); O'Keeffe v. Snyder, 83 N.J. 478, 490-91 (1980)).
Mitigating considerations have ameliorated the harsh effects of mechanical operation. In fact, the statute has been interpreted to allow suits filed within twelve months from receipt of the insurer's denial of the claim, rather than the date of loss. Matos v. Farmers Mut. Fire Ins. Co., 399 N.J. Super. 219, 223 (App. Div. 2008). In this way, the phrase "inception of the loss" as used in N.J.S.A. 17:36-5.20 is construed "to allow the period of limitation to run from the date of the casualty but to toll it from the time an insured gives notice until liability is formally declined." Peloso v. Hartford Fire Ins. Co., 56 N.J. 514, 521 (1970).
Further, the Supreme Court has clearly stated equitable considerations allow flexibility in the applications of the limitations period. In Negron v. Llarena, 156 N.J. 296 (1998), the Court declined to dismiss a state court action filed after the applicable limitations period had run because the plaintiff had previously filed a timely suit in federal court against the same defendants. Id. at 306-07. Recognizing the application of the doctrine of equitable tolling based on substantial compliance, the Court rejected application of a statute of limitations defense because the statute's application should "depend[] on statutory interpretation focusing on legislative intent and purpose." Id. at 304.
Subsequent cases reaffirm the purpose of the Legislature's adoption of the standard limitations period did not intend application to serve as a "sword" to bar a suit when "misconduct prevents a claimant from filing within the limitation period." Freeman v. State, 34 7 N.J. Super. 11, 31 (App. Div.), certif. denied, 172 N.J. 178 (2002). Therefore, a "defendant's conduct is relevant to the availability of a statute of limitations defense." The Court recognized tolling is a fair and responsible result, because the "[u]nswerving 'mechanistic' application of statutes of limitations would at times inflict obvious and unnecessary harm upon individual plaintiffs without advancing [the] legislative purposes." Galligan v. Westfield Ctr. Serv., Inc., 82 N.J. 188, 192 (1980).
Nevertheless, it remains "the insured's burden to bring the claim within the basic terms of the policy." Sears Roebuck and Co. v. Nat'l Union Fire Ins. Co., 340 N.J. Super. 223, 234 (App. Div.) (citation and internal quotation marks omitted), certif. denied, 169 N.J. 608 (2001). Accordingly, consideration of whether the delay caused prejudice to the insurer is also required. See Cooper v. Gov't Emps. Ins. Co., 51 N.J. 86, 94 (1968) (rejecting strict enforcement of the limitation period because the insurer had not suffered "appreciable prejudice" to justify a forfeiture of coverage).
Assuming the suit limitation is tolled in this matter because of defendant's delayed notification of the decision to deny coverage, we note plaintiffs' complaint was not initiated within one year after being informed coverage was disclaimed. Plaintiffs inexplicably waited nearly two years after the claim was rejected, which was nearly three years after the fire, to file this action. We find no basis in the record justifying application of the suit limitation period should be relaxed.
Plaintiffs identify no action by defendant interfering with their filing. Rather, plaintiffs' contentions focus on delay attributed to the attorney first engaged to represent them. Plaintiffs suggest counsel's foot dragging when asked to surrender the file to substituted counsel precluded their filing. The file was made available on November 23, 2010 but not retrieved until surrendered in December 2010. Suit was not filed for another eight months. Thereafter, plaintiffs' conduct is not compatible with diligence and these reasons do not justify application of equitable tolling.
We also reject as unavailing plaintiffs' suggestion they were unaware of the limitations provision of the policy. The policy clause is not a special contractual clause specific to this policy; rather it is a standard clause mandated to be included in every New Jersey fire insurance policy by N.J.S.A. 17:36-5.20. Plaintiffs claimed ignorance does not justify its delayed action in response to well-established law. See Barlow v. United States, 32 U.S. (7 Pet.) 404, 411, 8 L. Ed. 728, 731 (1833) (noting the "common maxim, familiar to all minds, that ignorance of the law will not excuse any person, either civilly or criminally"). See also D.D. v. Univ. of Med. & Dentistry of N.J., 213 N.J. 130, 156 (2013) ("[W]e cannot agree that an attorney's inattention to a file, or even ignorance of the law, equates with extraordinary circumstances for tort claims purposes.").
Furthermore, the record is clear defendant's denial of coverage was based on the lack of cooperation by Moussa, who was the sole owner and held sole possession and control of Rihana Restaurant Inc., the named insured on the policy, at the time the fire occurred. Defendant knew Moussa was being investigated for suspected arson, which would not be a covered event under the policy, and Moussa failed to meet his contractual obligation to appear for an examination under oath to explore his knowledge of events preventing defendant's efforts to verify the fire's cause.
Following our examination of the facts and circumstances presented, we do not agree with plaintiffs that equity demands tolling of the suit limitation provisions beyond the one-year period once coverage was denied. We also find unfounded plaintiffs' claimed reliance on the two-year limitation period for suits regarding claims to personal property. The clause requires filing within two years of the claimed loss; here, the suit was filed nearly three years after the fire and the vandalism.
We decline to discuss plaintiffs' assertions that the vandalism claims set forth in their motion to amend the complaint must be considered timely filed.
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After upholding the summary judgment dismissal of plaintiffs' complaint, we reject as lacking merit the arguments of error challenging the denial of plaintiffs' motion to amend their complaint. R. 2:11-3(e)(1)(E). Suffice it to say, the motion for leave to amend was denied "in light of the factual situation existing at the time [the] motion [wa]s made." Interchange State Bank v. Rinaldi, 303 N.J. Super. 239, 256 (App. Div. 1997) (citing Fisher v. Yates, 270 N.J. Super. 458, 467 (App. Div. 1994)). "[C]ourts are free to refuse leave to amend when the newly asserted claim is not sustainable as a matter of law," as the underlying complaint was dismissed. Id. at 256-57 (citation and internal quotation marks omitted). As we have not interfered with the summary judgment dismissal, this order also remains unaltered.
Affirmed.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION