AII1, LLC, ETC. VS. PINNACLE INSURANCE SOLUTIONS, LLC, ETC. (L-7808-14, ESSEX COUNTY AND STATEWIDE) (CONSOLIDATED)

NOT FOR PUBLICATION WITHOUT THE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 NOS. A-2241-17T4
A-2291-17T4
AII1, LLC, as assignee of
AUTOMOTIVE INNOVATIONS,
INCORPORATED,
Plaintiff-Appellant/
Cross-Respondent,
v.
PINNACLE INSURANCE
SOLUTIONS, LLC, d/b/a
PINNACLE RISK SOLUTIONS,
also d/b/a PINNACLE COMPANIES,
Defendant-Respondent/
Cross-Appellant.
_______________________________
Argued May 1, 2019 – Decided July 15, 2019
Motion for reconsideration granted.
Submitted August 19, 2019 - Decided September 6, 2019
Before Judges Accurso, Vernoia and Moynihan.
On appeal from the Superior Court of New Jersey, Law
Division, Essex County, Docket No. L-7808-14.
Thomas S. Howard argued the cause for appellant/
cross-respondent (Gartenberg Howard, LLP, attorneys;
Thomas S. Howard and Michael C. Hughes, on the
briefs).
Diana C. Manning argued the cause for respondent/
cross-appellant (Bressler, Amery & Ross, PC,
attorneys; Diana C. Manning and Benjamin J.
DiLorenzo, on the briefs).
PER CURIAM
In our initial decision in this insurance broker malpractice action, AII1,
LLC v. Pinnacle Insurance Solutions, LLC, A-2241-17 and A-2291-17 (App.
Div. July 15, 2019), we reversed the jury's verdict in favor of plaintiff AII1,
LLC, and dismissed plaintiff's appeal as moot based on a determination that
plaintiff, as an assignee, could not properly prosecute the tort claims asserted in
its complaint. In making the determination, we did not consider plaintiff's
argument that defendant Pinnacle Insurance Solutions, LLC, waived its claim
plaintiff could not prosecute tort claims as an assignee, finding plaintiff had not
raised the argument before the trial court. Id. at 8; see also Nieder v. Royal
Indem. Ins. Co., 62 N.J. 229, 234 (1973).
Plaintiff moved for reconsideration arguing we erred by finding that it
failed to assert at trial that defendant waived the non-assignability issue. The
trial record shows that when defendant moved for an involuntary dismissal
A-2241-17T4
2
asserting plaintiff could not prosecute tort claims as an assignee, plaintiff's
counsel represented to the court he was "prepared to respond" to defendant's
motion, never claimed defendant's argument had been waived, and then
immediately and extensively argued the merits. However, as plaintiff shows in
its reconsideration motion, on the day following argument on defendant's
motion, plaintiff's counsel supplemented his arguments and asserted "the non-
assignability issue . . . would constitute an affirmative defense and there is no
affirmative defense of assignability listed . . . in defendant's answer" and that
the non-assignability issue had been waived.
We note that in plaintiff's brief in opposition to defendant's cross-appeal,
the point heading for its argument that defendant waived the non-assignability
issue included specific but incomplete citations to only two portions of the
record during which the non-assignability issue was addressed by the trial court.
Plaintiff first cited to the transcript of defendant's involuntary dismissal motion
and plaintiff's counsel's argument in opposition on the merits. Plaintiff next
cited to the transcript of defendant's Rule 4:40-1 motion. Neither of the two
records cited by plaintiff included any assertion by its counsel that defendant
waived the non-assignability issue, and plaintiff did not cite to the transcript for
the day following argument on defendant's motion for an involuntary dismissal,
A-2241-17T4
3
when plaintiff's counsel supplemented his argument and asserted defendant
waived the claim that plaintiff could not prosecute tort claims as an assignee.
The Rule governing the contents of an appellate respondent's brief, Rule
2:6-4(a), incorporates the requirements of Rule 2:6-2(a)(6), which provides that
appellate brief point headings must include "the place in the record where the
opinion or ruling in question is located or if the issue was not raised [before the
trial court] a statement indicating that the issue was not raised" before the trial
court. The two citations in the record cited in plaintiff's point heading were
clearly not for the purpose of identifying the place in the record where the court
rendered an opinion or ruling—there are no rulings rendered in the records cited
by plaintiff—and we interpret plaintiff's inclusion of the citations as an earnest
effort to direct this court to the portions of the record during which plaintiff
made the arguments supporting its waiver claim. As noted, however, the
citations were incomplete in that they did not include the portion of the record
during which plaintiff asserted defendant waived the non-assignability issue.
Plaintiff's brief was bereft of the necessary and appropriate citation to the
pertinent portion of the record—the transcript of the day following the
arguments on the merits of defendant's motion for an involuntary dismissal—
showing the basis for its waiver claim. Plaintiff argued at that time defendant
A-2241-17T4
4
waived the non-assignability issue because it was not asserted in defendant's
answer and was raised for the first time at trial. It is a party's "responsibility to
refer us to specific parts of the record to support their argument [on appeal].
They may not discharge that duty by inviting us to search through the record
ourselves." Spinks v. Township of Clinton, 402 N.J. Super. 465, 474 (App. Div.
2008). Plaintiff cited to the trial record supporting its assertion of its waiver
claim for the first time in its reconsideration motion.
In any event, the record plaintiff cited in support of its reconsideration
motion shows it argued defendant waived the non-assignability issue before the
trial court, and defendant does not dispute that what it characterizes as plaintiff's
counsel's "belated[] . . . argument" was sufficient to preserve plaintiff's argument
for appeal. Thus, based on the record and defendant's concession, and given our
preference for deciding issues on the merits, see Galik v. Clara Maass Med. Ctr.,
167 N.J. 341, 356 (2001), we grant plaintiff's reconsideration motion.
We again review the pertinent facts. In July 2013, Automotive
Innovations, Inc., (Automotive), suffered a fire at one of its locations and later
discovered its insurance coverage was inadequate to cover its property losses
and the losses from the interruption of its business. Eight months later, it
executed an Assignment for Benefit of Creditors pursuant to N.J.S.A. 2A:19 -1
A-2241-17T4
5
to -50, assigning its assets to a trustee pursuant to a Chancery Division order.
The court approved the sale and assignment of Automotive's assets to plaintiff,1
including an assignment of a "[p]otential [c]hose in [a]ction" against defendant,
Automotive's insurance broker, "for underinsurance" in an "[u]ndetermined
[a]mount."
In November 2014, plaintiff filed a complaint against defendant asserting
two claims.2 The complaint alleges plaintiff is Automotive's assignee and
asserts the claims in that capacity. In the first count, plaintiff alleged defendant
"fail[ed] to exercise the requisite skill or diligence to ascertain Automotive's
coverage needs and/or to supply the coverage it undertook to supply[,] . . . advise
Automotive of the limitations contained in the [p]olicy[,] . . . familiarize itself
with the coverage . . . and to . . . advise Automotive of the risks associated with
. . . the coverage." Plaintiff asserted that "[d]efendant's omissions, neglect, and
failure[s] constituted professional malpractice that breached the duty it owed to
Automotive as its insurance broker by causing Automotive to have inadequate,
1
Plaintiff was formed by Automotive's president for the purpose of acquiring
Automotive's business.
2
Plaintiff filed its original complaint and then a first amended complaint in
November 2014. We summarize the allegations in the first amended complaint,
which was the operative complaint during the litigation.
A-2241-17T4
6
insufficient, and unsuitable insurance for the fire loss that it suffered." Plaintiff
claimed that "[a]s a result of defendant's breach of duty, Automotive was
uninsured" for losses for its inventory, business interruption and business
personal property.
In the second count, plaintiff alleged defendant was liable for
consequential damages, including the loss of good will, that Automotive
sustained as a result of inadequate business interruption insurance. In its answer
to the complaint, defendant generally denied the allegations. In pertinent part,
defendant's answer also asserted that plaintiff failed to state a claim upon which
relief can be granted. See R. 4:6-2(e).
In May 2017, defendant filed a motion for partial summary judgment
arguing there was insufficient evidence establishing that it breached any duty
related to the amount and adequacy of the business interruption insurance
coverage. Defendant further argued the second count did not assert a cognizable
legal claim because it sought consequential damages based on defendant's
alleged failure to obtain adequate business interruption insurance for
Automotive, the proceeds of which would have funded Automotive's continued
operations following the fire.
A-2241-17T4
7
The court heard argument and, in a written decision, determined the
second count did not assert a cognizable cause of action because in Rider v.
Lynch, the Supreme Court held that "if [a] broker neglects to procure the
coverage, or otherwise fails to act with proper skill and care, he becomes liable
in damages not exceeding the amount of insurance he was employed to effect."
42 N.J. 465, 480 (1964). Thus, the court reasoned that, as a matter of law, the
claimed damages were limited to the amount of the insurance defendant was
tasked to obtain, and there could not be any recovery for consequential damages
for losses proximately caused by the alleged inadequate business interruption
insurance.3 The court entered an order granting defendant summary judgment
on the second count.
The trial on the claim asserted in the first count was conducted over eight
days. At the conclusion of plaintiff's case, defendant moved for an involuntary
dismissal, R. 4:37-2(b), and following the close of all of the evidence, defendant
moved for entry of judgment in its favor, R. 4:40-1. In support of its motion for
an involuntary dismissal, defendant's counsel argued that both the allegations of
3
The court did not address defendant's alternative argument supporting its
summary judgment motion—that the undisputed facts established that defendant
did not provide erroneous advice concerning the adequacy of the business
interruption insurance required or provided under the policy.
A-2241-17T4
8
the complaint and the proofs at trial established that plaintiff asserted its claims
as Automotive's assignee and that the assignment "means that . . . plaintiff . . .
cannot bring this claim against the insurance broker for [Automotive] who was
the named insured under the policy." In support of its later motion for entry of
judgment, defendant reprised the same argument. The court reserved decisions
on both motions4 and, following the jury's verdict, entered an order denying the
motions without making any findings of fact or conclusions of law.
The jury returned a verdict in plaintiff's favor. Defendant moved for
judgment notwithstanding the verdict, R. 4:40-2, arguing in part, again, that
Automotive could not properly assign tort claims against defendant to plai ntiff
prior to judgment and, as a result, plaintiff could not prosecute the tort claims
as Automotive's assignee. The court entered an order denying defendant's
motion, again without offering any findings of fact or conclusions of law
supporting its decision. 5 The court also entered a final judgment stating the jury
4
We remind the court that "it is a better practice . . . to decide" a motion for an
involuntary dismissal under Rule 4:37-2(b) "at the time it is made." Verdicchio
v. Ricca, 179 N.J. 1, 31 n.4 (2004).
5
We review a court's orders, and not its reasoning, Do-Wop Corp. v. City of
Rahway, 168 N.J. 191, 199 (2001), but that does not excuse the trial court's
failure to make findings of fact and conclusions of law supporting its disposition
of three separate dispositive motions in this matter. See R. 1:6-2(f). The making
A-2241-17T4
9
found "defendant breached the standard of care it owed as an insurance broker
for Automotive" and "proximately caused damages to plaintiff in the amount of
$500,000," and awarding damages in that amount to plaintiff.
In A-2241-17, plaintiff appealed from the court's order granting defendant
summary judgment on the second count. In A-2291-17, defendant appealed
from the court's orders denying its motions for involuntary dismissal, for
judgment following the presentation of the evidence and for judgment
notwithstanding the verdict. 6 We consolidated the appeals. Based on our review
of the record in light of the applicable law, we are convinced the court erred by
denying defendant's motions for involuntary dismissal and for judgment
following the presentation of the evidence because Automotive's assignment of
its tort claims against defendant was invalid and, as a result, the complaint failed
of such findings and conclusions is not only required, R. 1:6-2(f), it facilitates
proper appellate review and supports confidence in the judiciary by providing
the court's reasoning for its decisions that the parties deserve and are entitled to
expect. Rather than remand for the court to provide the findings and conclusions
supporting its disposition of the three motions at issue, and further delay the
prompt disposition of this matter owed to the parties, we address the challenged
court orders without the benefit of the court's reasoning because we conclude
that the record supporting the disposition of the motions is undisputed and the
issues presented are questions of law, which we decide de novo. See Manalapan
Realty, LP v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).
6
Plaintiff filed a cross-appeal in A-2291-17, and later requested that the cross-
appeal be withdrawn. We granted the request in a February 6, 2018 order.
A-2241-17T4
10
to state a claim upon which relief can be granted. We therefore reverse the
court's orders denying those motions, as well as the order for the final judgment,
and dismiss as moot plaintiff's appeal of the court's order granting defendant
summary judgment on count two.
As noted, defendant moved for involuntary dismissal, R. 4:37-2(b),
judgment following the presentation of the evidence, R. 4:40-1, and for
judgment notwithstanding the jury's verdict, R. 4:40-2. Each of the motions was
founded on the same contention: plaintiff could not prosecute Automotive's
claims against defendant as a matter of law because an assignment of tort claims
prior to judgment is not permitted under N.J.S.A. 2A:25-1. Plaintiff argues
defendant waived the non-assignability defense because it is an affirmative
defense that was not pleaded in defendant's answer, and was not asserted until
trial.
The issue presented concerns the distinction between the Rule 4:6-2(e)
defense of failure to state a claim and an affirmative defense under Rule 4:5-4
that must be set forth in a responsive pleading. As explained by Judge Pressler
in Buteas v. Raritan Lodge No. 61 F. & A.M., "[t]he distinction between the two
rules is significant" because "[a]n affirmative defense is ordinarily waived if not
pleaded or otherwise timely raised," whereas, "[o]n the other hand, the defense
A-2241-17T4
11
of failure to state a claim upon which relief can be granted is a reserved defense
which may be raised at trial." 248 N.J. Super. 351, 363 (App. Div. 1991).
Indeed, "our Court Rules explicitly state that a request to dismiss for failure to
state a claim 'may be made in any pleading permitted or by motion for summary
judgment or at the trial on the merits,'" Hurwitz v. AHS Hosp. Corp., 438 N.J.
Super. 269, 293 (App. Div. 2014) (quoting R. 4:6-7), and "[t]hus, by its very
terms, Rule 4:6-7 permits a party to raise the defense of a failure to state a claim
as late as trial," ibid.Here, defendant asserted in its answer that the complaint failed to state a
claim upon which relief can be granted and, as expressly permitted under Rule
4:6-7, moved at trial for an involuntary dismissal of the complaint because
plaintiff could not prosecute the tort claim asserted in the complaint as
Automotive's assignee. Plaintiff contends its purported lack of legal authority
to prosecute the tort claims constituted an affirmative defense defendant was
required to expressly assert in its answer under Rule 4:5-4 and otherwise raise
prior to trial. "The line between" an affirmative defense subject to Rule 4:5-4's
requirements and "a defense under [Rule] 4:6-2(e) . . . is not always clearly
defined." Buteas, 248 N.J. Super. at 363. But "[i]t is at least evident that a
[Rule] 4:6-2(e) defense goes to the legal sufficiency of the pleading, ordinarily
A-2241-17T4
12
connoting the failure of the complaint to state either a cognizable cause of action
or all of the elements of a cognizable cause of action." Ibid. For example, in
Buteas, it was noted that a complaint would fail to state a cause of action on
which relief can be granted where the defendant was not a legal entity. Id. at
363-64.
On the other hand, an affirmative defense assumes the legal sufficiency of
a plaintiff's complaint, but is a means of avoiding liability for culpable conduct
based on a defendant's separately pleaded "statement of facts constituting an
avoidance or affirmative defense and not merely by legal conclusion." JB Pool
Mgmt., LLC v. Four Seasons at Smithville Homeowners Ass'n, Inc., 431 N.J.
Super. 233, 250 (App. Div. 2013) (quoting Pressler & Verniero, Current N.J.
Court Rules, cmt. 1 on R. 4:5-4 (2013)); see also Faul v. Dennis, 118 N.J. Super.
338, 342 (Law Div. 1972) ("An affirmative defense generally involves the
introduction of new matter which is not shown by the plaintiff's own proof or
pleading."). An affirmative defense asserts "a matter of avoidance of liability
for culpable conduct for which [a] defendant would have been answerable but
for the particular facts of the transactional relationship between the parties."
Buteas, 248 N.J. Super. at 364.
A-2241-17T4
13
The circumstances here are different than those presented in Cole v. Jersey
City Medical Center, upon which plaintiff relies, where the Court determined
the defendant waived its right to compel arbitration of the plaintiff's claims by
waiting until trial to move to compel the arbitration. 215 N.J. 265, 283 (2013).
In Cole, the Court did not consider a motion to dismiss a complaint under Rule
4:6-2(e) based on a failure to state a claim founded on the insufficiency to the
claim asserted in the complaint. Instead, the Court conducted a fact-sensitive
inquiry concerning circumstances beyond the sufficiency of the pleadings and
determined that, as a result of the defendant's conduct, it waived its right to
compel arbitration. Id. at 280-83.
Here, defendant's motions for an involuntary dismissal, judgment and
judgment notwithstanding the verdict were not founded on the avoidance of
liability based on either the transactional history between it and plaintiff, on an
assumption of the legal sufficiency of the allegations in the complaint or on the
introduction of new matter not shown in plaintiff's pleading. Thus, defendant
did not interpose an affirmative defense.
The motions challenged plaintiff's legal authority to prosecute the tort
claims as alleged on the face of the complaint. Because plaintiff had no legal
authority to prosecute tort claims as an assignee, the complaint, which alleged
A-2241-17T4
14
plaintiff brought the claims as Automotive's assignee, failed to state a claim
upon which relief can be granted. Defendant asserted the defense in its answer
and at trial, as directly authorized by Rule 4:6-7. Hurwitz, 438 N.J. Super. at
293; Buteas, 248 N.J. Super. at 363. We are therefore convinced defendant's
non-assignability defense was properly asserted at trial as expressly permitted
by Rule 4:6-2(e). See also Prickett v. Allard, 126 N.J. Super. 438, 440 (1974)
(holding that where "the bar of the statute of limitations appears on the face of
the complaint," the defense is not waived when it is not separately pleaded and
may be asserted as a failure to state a claim upon which relief can be granted).
We are also not persuaded by plaintiff's claim that the equities require a
finding that defendant waived the non-assignability defense. Plaintiff's
argument ignores that defendant's answer asserted the defense and expressly
reserved the right to move for dismissal on that basis, and that Rule 4:6-7 permits
the filing of such a motion for the first time at trial. Thus, plaintiff was on notice
from the outset that defendant asserted the complaint failed to state a claim upon
which relief can be granted and could have inquired during discovery about the
factual basis supporting that defense, but opted not to. 7 Of course, if plaintiff
7
The record lacks any evidence that plaintiff inquired during discovery as to
the factual basis supporting the asserted defense, and plaintiff makes no claim
A-2241-17T4
15
had made inquiry concerning the factual basis for the defense and determined it
was founded on the non-assignability of Automotive's tort claims, it could have
timely moved to amend its complaint to attempt to remedy any deficiencies in
its pleadings long before trial. Where, as here, plaintiff had notice of the failure
to state a claim defense and the means to obtain the facts supporting the defense
during discovery, but elected not to investigate the factual basis supporting the
defense, it was not inequitable to permit defendant to make a motion based on
the defense as expressly authorized by Rule 4:6-7.
We now address the merits of defendant's argument that the court erred
by denying its motions for an involuntary dismissal and for a judgment at the
conclusion of the presentation of the evidence. As noted, defendant contends
the motions should have been granted because the assignment of Automotive's
claims to plaintiff is invalid. We consider the court's disposition of those
motions on the records extant before the motion court when the motions were
made. Lebron v. Sanchez, 407 N.J. Super. 204, 213 (App. Div. 2009)
defendant failed to disclose the factual basis for the defense in response to any
discovery demands. We therefore are not confronted with an argument that
defendant's failure to provide the facts supporting the asserted defense in
response to discovery demands constitutes a waiver of defendant's right to move
for dismissal at trial on that basis under Rule 4:6-2(e).
A-2241-17T4
16
(explaining that we review a court's decision based solely on the motion record);
see also Ji v. Palmer, 333 N.J. Super. 451, 463-64 (App. Div. 2000).
In our review of orders on a defendant's motions for involuntary dismissal,
R. 4:37-2(b), and for judgment at the close of all of the evidence, R. 4:40-1, we
employ the same standard as the trial court. Filgueiras v. Newark Pub. Sch.,
426 N.J. Super. 449, 455 (App. Div. 2012). We apply the following evidential
standard: "[i]f, accepting as true all the evidence which supports the position of
the party defending against the motion and according him [or her] the benefit of
all inferences which can reasonably and legitimately be deduced therefrom,
reasonable minds could differ, the motion must be denied." Id. at 456 (quoting
Verdicchio, 179 N.J. at 30).
Defendant argues the court erred by denying its motions because
Automotive's assignment of the claims to plaintiff was invalid as a matter of law
and the complaint made clear on its face that plaintiff could not prosecute the
claims on Automotive's behalf. Defendant relies on the well-settled principle
that "[a] tort claim is not subject to assignment prior to judgment," Cherilus v.
Fed. Express, 435 N.J. Super. 172, 178 (App. Div. 2014); see Di Tolvo v. Di
Tolvo, 131 N.J. Super. 72, 79 (App. Div. 1974); see also Nationwide Mut. Ins.
Co. v. Caris, 170 F. Supp. 3d 740, 747 (D.N.J. 2016), and claims plaintiff could
A-2241-17T4
17
not prosecute the claims asserted in the complaint because Automotive could
not lawfully assign those claims to plaintiff.
We reject plaintiff's assertion that the prohibition against the assignment
of tort claims prior to judgment is inapplicable here because the claims asserted
against defendant were not tort claims, but were instead contract claims. The
assignment of choses in action 8 sounding in contract is expressly authorized by
N.J.S.A. 2A:25-1, which provides, in pertinent part, that "all choses in action
arising on contract shall be assignable." The statute has been "broadly
construed" to allow the assignment of choses in action based on contractual and
quasi-contractual grounds. Kimball Int'l, Inc. v. Northfield Metal Prods., 334
N.J. Super. 596, 612 (App. Div. 2000). For example, in Kimball we determined
that the plaintiff's indemnification claim had been properly assigned because
"[i]ndemnity arises from contract, express or implied," id. at 613 (alteration in
original) (quoting George M. Brewster & Son v. Catalytic Constr. Co., 17 N.J.
20, 28 (1954)), and the "foundation" of the plaintiff's claim was a contract to
8
"A chose in action is a personal right not reduced to possession but recoverable
by a suit at law." In re Estate of Roche, 16 N.J. 579, 595 (1954); see also Black's
Law Dictionary 294 (10th ed. 2014) (defining chose in action as "[a] proprietary
right in personam, such as a debt owed by another person, a share in a joint-
stock company, or a claim for damages in tort" and "[t]he right to bring an action
to recover a debt, money, or thing.").
A-2241-17T4
18
purchase a component part of the chair which caused plaintiff's assignor's
injuries, ibid.Here, plaintiff's complaint does not assert that Automotive and defendant
were parties to any contract, express or implied, or that defendant breached a
contract. The complaint alleges causes of action founded exclusively on the
claim that defendant committed professional malpractice by negligently
advising Automotive about its insurance needs and coverage and failing to
obtain appropriate and necessary coverage for Automotive. In addition, the jury
was instructed by the court solely on principles of negligence pertinent to a
professional malpractice claim, and returned a verdict in accordance with the
court's instructions finding defendant was negligent by deviating from the
standard of care expected of insurance brokers. To be sure, a malpractice claim
against an insurance broker might support contract and tort claims, see Rider,
42 N.J. at 477 (explaining that an insurance broker "is liable in tort or for breach
of contract" by failing to exercise reasonable care in procuring appropriate
insurance coverage for a client), but plaintiff opted to assert only to rt claims
against defendant. Plaintiff alleged "[d]efendant's omissions, neglect, and
failure constituted professional malpractice that breached the duty it owed to
Automotive as its insurance broker," and the jury was neither requested to find
A-2241-17T4
19
nor found defendant breached any purported contract with Automotive; the jury
was asked to determine, and only determine, that defendant was negligent.
N.J.S.A. 2A:25-1 provides no refuge supporting Automotive's assignment of the
claims asserted in the complaint because they are not choses in action arising on
a contract.
Plaintiff argues the prohibition against the assignment of tort claims prior
to judgment is inapplicable because it is, or should be, limited to the assignment
of tort claims involving personal injuries. We are not persuaded.
The prohibition against the assignment of tort claims prior to judgment is
founded on the principle that "[e]xcept when otherwise provided by statute,
nothing is assignable, either at law or in equity, that does not directly or
indirectly involve a right to property." Goldfarb v. Reicher, 112 N.J.L. 413, 414
(Sup. Ct.), aff'd, 113 N.J.L. 399 (E. & A. 1934). Thus, a chose in action
unrelated to a right involving property may only be assigned if authorized by
statute. In Goldfarb, the Court explained that "[i]t is a firmly established rule
that a right of action for personal injuries cannot be made the subject of
assignment before judgment, in the absence of a statutory provision to the
contrary." Ibid. Applying these principles in East Orange Lumber Co. v.
Feiganspan, the court noted that "section 19 of the Practice Act" authorized the
A-2241-17T4
20
assignment of "all choses in action on contract" and held that the absence of any
similar statutory authorization for the assignment of a negligence claim for
damage to personal business property "is sufficient to indicate that the
Legislature did not mean that the same privilege should be had by the assignee
of a chose in action arising out of tort." 120 N.J.L. 410, 412 (Sup. Ct.), aff'd,
124 N.J.L. 127 (E. & A. 1940).
N.J.S.A. 2A:25-1 permits the assignment of certain claims, but does not
authorize the assignment of choses in action arising out of tort and plaintiff cites
to no statute authorizing the assignment of tort claims prior to judgment . We
recently reiterated that "[i]t has always been held that the right to bring an action
in the courts of this state is possessed by the injured person alone, unless the
injured person assigns his [or her] right to someone else which cannot be done
before judgment when the action sounds in tort." Cherilus, 435 N.J. Super. at
178 (quoting U.S. Cas. Co. v. Hyrne, 117 N.J.L. 547, 552 (E. & A. 1937)). And
the assignment of tort claims has uniformly been deemed invalid by courts
applying New Jersey law. See Vill. of Ridgewood v. Shell Oil Co., 289 N.J.
Super. 181, 195-96 (App. Div. 1996) (finding invalid an assignment of tort
claims for property damages and clean-up costs); Di Tolvo, 131 N.J. Super. at
79 (finding invalid the assignment of tort claim for personal injuries); Berkowitz
A-2241-17T4
21
v. Haigood, 256 N.J. Super. 342, 346 (Law Div. 1992) (explaining a claim for
personal injury damages arising in tort "is not assignable before judgment");
Costanzo v. Costanzo, 248 N.J. Super. 116, 121 (Law Div. 1991) (finding
invalid the assignment of a tort claim for personal injuries); see also Caris, 170
F. Supp. 3d at 747 (finding under New Jersey law that a tort claim for negligence
arising under an alleged failure to properly handle an insurance claim may not
be assigned prior to judgment); Alcman Servs. Corp. v. Bullock, 925 F. Supp.
252, 258 (D.N.J. 1996) (finding legal malpractice claim a tort action that could
not be assigned prior to judgment under New Jersey law); Conopco, Inc. v.
McCreadie, 826 F. Supp. 855, 867 (D.N.J. 1993) (finding that professional
malpractice claims are choses in action arising out of tort and are therefore not
assignable prior to judgment under New Jersey law).
Plaintiff contends we should ignore this well-settled principle because the
prohibition should be limited only to tort claims involving personal injuries. In
Kimball, we noted that "[t]he limitation of the non-assignability rule to personal
injury claims is consistent with the rule in most other jurisdictions which still
maintain some restrictions upon the assignability of claims," but we expressly
found we had "no need to determine whether the prohibition against the
A-2241-17T4
22
assignment of tort claims is limited to personal injury claims, because " the
plaintiff's claim was "contractual in nature." 334 N.J. Super. at 612 n.6.
We find no basis to depart from the longstanding application of the non -
assignability rule to all tort claims. To be sure, the prohibition has been applied
to the assignment of tort claims involving personal injuries. See, e.g., Cherilus,
435 N.J. Super. at 177 (applying prohibition against assignment of tort claims
to personal injury claim); Di Tolvo, 131 N.J. Super. at 79. It has also been
applied to tort claims that do not involve personal injuries. See Vill. of
Ridgewood, 289 N.J. Super. at 195-96 (applying prohibition against assignment
of tort claims to claim for property damage and clean-up costs); E. Orange
Lumber Co., 120 N.J.L. at 413 (applying prohibition against assignment of tort
claims to property damage claim and finding that the rule against the assignment
of tort claims for damages to personal property is "firmly embedded in our
jurisprudence"); see also Caris, 170 F. Supp. 3d at 747 (applying prohibition
against assignment of tort claims to a claim for negligence in the handling of an
insurance claim); Alcman Servs. Corp., 925 F. Supp. at 258 (applying
prohibition against assignment of tort claims to a legal malpractice claim);
Conopco, 826 F. Supp. at 867 (applying prohibition against assignment of tort
claims to a professional malpractice claim). Plaintiff does not cite to any New
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Jersey cases allowing the assignment of tort claims prior to judgment, whether
they be with or without alleged personal injuries. 9
Moreover, the prohibition against the assignment of tort claims is founded
on the principles that actions should be brought only by the injured party and
assignments of claims are barred unless expressly authorized by statute. 10 We
9
In Werrmann v. Aratusa, Ltd., we stated that the "plaintiff could have obtained
an assignment" of a "broker[]-negligence claim . . . and pursued that claim as an
assignee." 266 N.J. Super. 471, 476 (App. Div. 1993). We do not read this
statement as allowing or authorizing the assignment of a tort claim because, as
a matter of fact, there was no assignment of any claims in Werrmann and the
validity of a non-existent assignment was not an issue. In Werrmann, we also
determined that the putative assignee was a third-party beneficiary of a contract
between the putative assignor and the broker. Id. at 476-78. As such, any
assignment of the putative assignor's claims against the broker would have been
choses in action arising in contract and therefore valid under N.J.S.A. 2A:25 -1.
10
Plaintiff argues the prohibition against the assignment of tort claims should be
limited to personal injury actions because the prohibition is intended to "prevent
unscrupulous strangers to an occurrence from preying on the deprived circumstances
of an injured person," Kimball, 334 N.J. Super. at 611 (quoting Caldwell v. Ogden
Sea Transp., Inc., 618 F.2d 1037, 1048 (4th Cir. 1980)), and that principle has no
application where, as here, Automotive and defendant engaged in a commercial
transaction for the purchase of insurance. Plaintiff views the policies underpinning
the prohibition too narrowly; there are other policy considerations supporting
application of the prohibition in a commercial setting. For example, in Alcman
Services Corp., the court found that the assignment of a legal malpractice claim was
invalid in part because the contrary conclusion "would lead to baseless and excessive
legal malpractice claims and would undermine the personal confidence that must
exist between lawyers and clients." 925 F. Supp. at 258. In other words, the court
found there was a valid policy supporting the prohibition against the assignment of
a tort claim that did not involve personal injuries. In any event, the weighing of the
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presume the Legislature was fully aware of those principles when it adopted
N.J.S.A. 2A:25-1,11 see Farmers Mut. Fire Ins. Co. of Salem v. N.J. Prop.–
Liability Ins. Guar. Ass'n, 215 N.J. 522, 543 (2013) ("The Legislature is
presumed to be aware of the decisional law of this State."), and the Legislature
nonetheless elected to exclude choses in action in tort from those for which
assignments are authorized. We cannot expand the statutory authority to assign
claims beyond that expressly allowed by the Legislature. See DiNapoli v. Bd.
of Educ. of Verona, 434 N.J. Super. 233, 238 (App. Div. 2014) ("Courts are not
permitted to . . . 'presume that the Legislature intended something other than
that expressed by way of the plain language.'" (quoting O'Connell v. State, 171
pertinent policies is for the Legislature and it has determined that tort claims are not
included amongst those that may be assigned prior to judgment. If it were otherwise,
N.J.S.A. 2A:25-1 would include choses in action arising in tort amongst those that
may be assigned.
11
New Jersey statutes have never authorized the assignment of choses in action
arising in tort. An 1898 statute permitted the assignment of "choses in action
arising on contracts" and other designated claims but did not authorize the
assignment of tort claims. L. 1898, c. 228, § 38. The statute was modified in
1903, but did not authorize the assignment of tort claims. L. 1903, c. 247, §§ 19,
20. In 1937, the statute was codified with modifications not pertinent here in
R.S. 2:41-1. L. 1937, c. 188. In 1951, the Legislature repealed and replaced
Title 2 with Title 2A. L. 1951, c. 344. As part of that revision, N.J.S.A. 2A:25-
1 replaced R.S. 2:41-1, see L. 1951, c. 344, § 3, but, as noted, N.J.S.A. 2A:25-1
does not authorize the assignment of choses in action arising in tort.
A-2241-17T4
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N.J. 484, 488 (2002))). As noted many years ago in response to a similar claim
that the non-assignability rule should be limited only to certain tort claims,
If the present case were one of novel impression in this
jurisdiction, there would seem to be little reason for the
present rule that an assignee of a chose in action for
injury to personal property cannot sue thereon, but the
rule being so firmly embedded in our jurisprudence it
will be necessary for the [L]egislature, if it sees fit, to
alter the same.
[E. Orange Lumber Co., 120 N.J.L. at 413.]
The assignment of the tort claims asserted in plaintiff's complaint against
defendant was invalid. The court erred in finding otherwise in its denial of
defendant's motions for involuntary dismissal and for judgment after the
presentation of all of the evidence. We reverse the court's orders denying those
motions, conclude the matter should not have been submitted to the jury for its
determination, vacate the jury's verdict and reverse the court's order for final
judgment. Because the court should have granted the motions for judgment in
defendant's favor prior to submission of the matter for the jury's determination,
we also reverse the court's order denying defendant's motion for judgment
notwithstanding the verdict. Our conclusion renders moot plaintiff's appeal of
the court's order granting defendant partial summary judgment on the claim for
A-2241-17T4
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consequential damages in count two, and we do not consider the merits of the
claim.
In A-2291-17, reversed as to the court's orders denying defendant's
motions for involuntary judgment, R. 4:37-2(b), for judgment following the
presentation of the evidence, R. 4:40-1, and for judgment notwithstanding the
verdict, R. 4:40-2, and the court's order for final judgment.
In A-2241-17, dismissed as moot.
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