Title: Transamerica Ins. Co. v. National Roofing, Inc.

State: new-jersey

Issuer: New Jersey Supreme Court

Document:

108 N.J. 59 (1987) 527 A.2d 864 TRANSAMERICA INSURANCE COMPANY, PLAINTIFF-APPELLANT, v. NATIONAL ROOFING, INC., EAST ORANGE BOARD OF EDUCATION, UNI-PLAN, A NEW JERSEY PARTNERSHIP, CERAMI CONSTRUCTION COMPANY, POLYLITE ROOF DECKS, INC., W.R. GRACE, INC., OLENICK PLUMBING AND HEATING COMPANY, U.S. FIDELITY & GUARANTY CO., RELIANCE INSURANCE COMPANY, CONTINENTAL INSURANCE CO., NORTH RIVER INSURANCE COMPANY, THE AMERICAN INSURANCE CO. AND AMERICAN NATIONAL FIRE, DEFENDANTS, AND ALL WEATHER CRETE, INC., DEFENDANT-RESPONDENT. TRANSAMERICA INSURANCE COMPANY, PLAINTIFF-APPELLANT, v. ALL WEATHER CRETE, INC., DEFENDANT-RESPONDENT, AND EAST ORANGE BOARD OF EDUCATION, UNI-PLAN, A NEW JERSEY PARTNERSHIP, CERAMI CONSTRUCTION COMPANY, NATIONAL ROOFING, INC., POLYLITE ROOF DECKS, INC., W.R. GRACE, INC., OLENICK PLUMBING AND HEATING COMPANY, AND NUMEROUS JOHN DOE INSURANCE COMPANIES PROVIDING GENERAL LIABILITY, COMMERCIAL UMBRELLA LIABILITY AND EXCESS LIABILITY INSURANCE TO ALL WEATHER CRETE, INC. FROM JULY 1, 1975 TO JULY 1, 1983, WHOSE EXACT IDENTITIES ARE YET UNKNOWN, DEFENDANTS. The Supreme Court of New Jersey. Argued January 5, 1987. Decided July 13, 1987. *61 Edmond R. Casey argued the cause for appellant (Ozzard, Rizzolo, Klein, Mauro, Savo & Hogan, attorneys; Edmond R. Casey and Arthur D. Fialk, on the brief). Jay D. Rubenstein argued the cause for respondent (Stern, Steiger, Croland, Tanenbaum & Schielke, attorneys; Jay D. Rubenstein and Thomas Loikith, on the brief). PER CURIAM. In an unreported opinion, the Appellate Division summarized the factual and legal background of this matter: The Appellate Division reasoned that a dismissal for mootness was not one for lack of jurisdiction and, therefore, "was an adjudication on the merits within the meaning of R. 4:37-2(d)." The Court also found that "All Weather Crete was clearly a successful claimant since the reason for the mootness dismissal was that Transamerica finally undertook its defense and indemnification in the underlying suit." We disagree. We granted certification, 104 N.J. 470 (1986), and now modify the judgment of the Appellate Division. We begin by turning to Federal Rule of Civil Procedure 41b, which similarly provides that a dismissal other than for lack of jurisdiction is on the merits.[1] Under that Rule, a dismissal for mootness has been interpreted consistently as not encompassing an adjudication on the merits. See De Volld v. Bailar, 568 F.2d 1162, 1165-66 (5th Cir.1978). The reason is *64 that the jurisdiction of federal courts is limited under article III, section 2 of the United States Constitution to actual "cases or controversies." Thus, in federal cases, dismissal for mootness is considered a dismissal for lack of jurisdiction. Although federal courts do not have jurisdiction over moot cases, the jurisdiction of New Jersey courts is not necessarily so restricted. Even if a matter is technically moot, our courts may retain jurisdiction if to do so is in the public interest, In re Boardwalk Regency Corp. Casino License, 90 N.J. 361, 368 (1982), or if "the litigants' concern with the subject matter evidence[s] a sufficient stake and real adverseness." Crescent Park Tenants Ass'n v. Realty Equities Corp., 58 N.J. 98, 107 (1971). Hence, we begin by accepting the premise that in the New Jersey courts a dismissal for mootness is not necessarily for lack of jurisdiction. We therefore acknowledge that a literal reading of Rule 4:37-2(d) could lead, as it led the Appellate Division, to the conclusion that a dismissal for mootness, not being one for lack of jurisdiction, was an adjudication on the merits. A rule of court, like a statute, however, should not be read literally when such a reading defies logic and leads to a result that is contrary to its purposes. See Piscataway Township Bd. of Educ. v. Caffiero, 86 N.J. 308, 317 (1981); see also Westinghouse Elec. Corp. v. Board of Review, 25 N.J. 221, 227 (1957) (courts not limited to reading statute literally). A dismissal for mootness by definition is not an adjudication on the merits. Because there has been no actual adjudication, such a dismissal is more like one for lack of jurisdiction than one after a trial on the merits. When a court dismisses a matter as moot, it has found there is nothing to adjudicate. In the present case, the trial court believed its dismissal with prejudice was not on the merits, stating "[t]here is no adjudication on the merits." As a result, the trial court declined to decide whether the Transamerica policy covered the claims against All Weather Crete. *65 Additionally, Transamerica's defense of All Weather Crete in the underlying action, as well as its payment of All Weather Crete's share of the settlement, was with a full reservation of Transamerica's rights under the policy. Thus, Transamerica did not concede coverage. Because the trial court did not reach an adjudication on the merits, All Weather Crete cannot be considered a successful claimant. Consequently, we modify the judgment of the Appellate Division and remand the matter to the Law Division. The ultimate issue on remand is whether counsel for All Weather Crete is entitled to counsel fees and, if so, the appropriate amount of those fees. To resolve that issue, the court must first determine whether Transamerica's policy covered the damages claimed by East Orange. The burden will be on Transamerica to prove that the damages claimed by East Orange fell within an exclusion to the policy. See, e.g., Galbraith v. Hartford Fire Ins. Co., 464 F.2d 225 (3d Cir.1972) (carrier bears burden of proving loss falls within exclusion in policy); Aetna Ins. Co. v. Weiss, 174 N.J. Super. 292, 296 (App.Div.) (burden on insurer to demonstrate no coverage because of exclusion), certif. denied, 85 N.J. 127 (1980). To some extent, requiring determination of coverage in order to determine the insured's entitlement to counsel fees from the insurer is a case of "the tail wagging the dog." Nonetheless, we fail to perceive how that entitlement can be determined without first resolving the question of coverage. See Appleman, Insurance Law and Practice (J. Appleman ed.) § 14533 at 378. Confronted with the unresolved question of counsel fees, therefore, the trial court should not have dismissed the insured's counterclaim. On remand, we encourage the trial court and counsel to devise a practical procedure that will resolve the coverage issue as economically and efficiently as possible. If the court finds that Transamerica's policy afforded coverage, All Weather Crete would be a successful claimant under Rule 4:42-9(a)(6), and the court, in the exercise of its discretion, may determine the appropriateness and amount of any counsel fees to be awarded. *66 Kistler v. New Jersey Mfrs. Ins. Co., 172 N.J. Super. 324, 329 (App.Div. 1980). The judgment of the Appellate Division is modified to include a determination of the question of coverage, and the matter is remanded to the Law Division. For modification and remandment Chief Justice WILENTZ and Justices HANDLER, POLLOCK, O'HERN, GARIBALDI and STEIN 6. Opposed None. [1] Federal Rule 41b provides: Unless the court in its order for dismissal otherwise specifies, a dismissal under this subdivision and any dismissal not provided for in this rule, other than a dismissal for lack of jurisdiction, for improper venue, or for failure to join a party under Rule 19, operates as an adjudication upon the merits.