On appeal from Superior Court of New Jersey, Law Division, Burlington County, Docket No. L-1638-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Axelrad and Espinosa.
Plaintiff John DeMasi appeals from an order that granted summary judgment to defendant, Lexington Insurance Company (Lexington), dismissing his complaint, which alleged, inter alia, breach of contract and bad faith.
Plaintiff purchased a single-family home in Burlington in May 2006 for $500,000, sight unseen, knowing that the previous owners had kept fifty dogs in the basement. He purchased the house at the request of his friend, Tony Mutinani, who held a third mortgage on the property. Mutinani had given the prior owners a mortgage so that they could purchase a business that later failed. The bank with the first mortgage was about to foreclose on the property when Mutinani suggested to plaintiff that he purchase it. Plaintiff bought the house with 100% financing, consisting of a first and second mortgage and a home equity loan on a property he owned in Brigantine. Plaintiff never occupied the house. He undertook some renovations and listed the house for sale for $589,000 in August 2006. At the same time, he listed the Brigantine property for sale for $1,550,000.
In December 2006, the house had been vacant for six months and there had been no offers. Plaintiff went to the property on December 18, 2006 to meet a new realtor, Anthony Balboni, so that Balboni could inspect the property and determine a marketing strategy. Balboni stated that plaintiff was at the house when he arrived with his assistant, Linda. They walked in through the front door. Balboni stated that as soon as the door opened, he noticed a musty smell. Plaintiff said that there had been a lot of dogs in the house and they had a lot of problems getting rid of the smell. The walls were "sort of gray with smoke" and, as they walked further in, Balboni realized that there had been a fire when he saw that the carpet on the staircase was all black. Balboni said that plaintiff did not really say anything and remained in the entrance way as he and Linda walked into other areas of the house. Cobwebs were filled with smoke in the ceilings. Balboni saw mice tracks across the smoke on the kitchen floor in front of the sliding glass doors. As Linda and Balboni discussed the situation, plaintiff was just standing there for a while. They told him that he should probably call the police or his insurance company and walked out the front door. Balboni stated that plaintiff said, "very neutrally," that he could not believe what happened. Balboni suggested that they look around back of the house. He observed glass on the deck, an open second floor window that looked like part of it had blown out. They tried to open some of the doors. The sliding glass door did not open. When they walked to the back door that entered the laundry room, Balboni stated that "the dead bolt looked like somebody had twisted the lock mechanism all the way around. It looked like it was pretty damaged[.]" Balboni turned the door knob and it opened freely. Balboni stated that they then had "some conversation" about how a fire could start like this and the police never get called, but said that most of that conversation was between Linda and him. As they returned to the front of the house, he again told plaintiff that he should call the police and the fire department. Plaintiff thanked him and said that he would do so and would be in touch with Balboni.
Plaintiff called the police and his insurance agent after Balboni left to report the damage to the house. An arson investigation was conducted. The State Police Laboratory report stated that gasoline was detected in items found at the property and the area of origin was determined to be the landing at the base of the steps leading to the second floor.
Lexington retained a certified fire investigator to determine the origin and cause of the fire; his conclusions were consistent with that of the State Police Laboratory and he stated further that the cause of the fire was intentional. The inspector reported that, upon inspection of the broken window, it appeared to have been broken prior to the fire from the inside, because there was no soot on the broken glass on the deck. He observed damage on the face of the dead bolt key pad for the rear entry interior door. The investigator reported that the police had not determined how the fire had been extinguished but noted that he observed a spent dry chemical fire extinguisher in the laundry room. Lexington also retained a forensic locksmith to examine the deadbolt lock for evidence of forced entry. The locksmith reported his conclusions that "the dead bolt lock was unlocked at the time damage was inflicted. Damage to the lock is cosmetic; there is no evidence of successful compromise or entry."
Plaintiff submitted to an examination under oath (EUO) by Lexington on May 14, 2008. He was advised at the outset that "if and when an insured makes an intentional misstatement at an examination under oath, that can jeopardize the entire claim of the insurance policy." He admitted to a prior conviction for theft by deception. Plaintiff testified that he had been at the house approximately two weeks earlier and everything had been fine. He testified that all the doors to the house were locked as of December 18, 2008 and that he and the realtor had the only keys.
Plaintiff's individual income tax return for 2006 reflected plaintiff's wages, salaries and tips as zero, taxable interest of $2782 from his investment account, negative capital gain and a negative real estate rental income, resulting in a negative income of $14,000 for 2006. Plaintiff testified that in December 2006, his mortgage and home equity obligations for the Brigantine property and a commercial building in Hammonton were approximately $6950. In addition, he had monthly automobile loan payments of $1807 for a Mercedes, $870 for a Corvette and a Lexus lease of $700. He had a credit card balance of approximately $10,000. He received rental income from the Hammonton property of $2800 per month and had an investment account valued at approximately $100,000. Despite the absence of any cognizable income, plaintiff testified that he was current on all of these obligations in 2006.
Plaintiff testified that he was self-employed in an advertising business, JD Advertising. JD Advertising's corporate tax return for 2006 reflected zero compensation for officers for that year and a total ordinary business income of $11,000. Plaintiff testified that he was compensated through the business by taking expenses. The corporate tax return reported an expense item called check cashing in the amount of $57,900. Plaintiff was vague when questioned about this expense. He speculated that this may have related to his occasionally cashing checks of some clients who needed cash right away but could not answer how this was an expense to him. Plaintiff stated that he could not comment on whether the $57,900 referred to a transaction when a client of his was trying to hide money from his wife:
I don't know if it's referring to that. No, as I said, I really can't comment on that.
I have to really talk to the people who do my books and who prepared the tax return to give you the specifics. [(Emphasis added).]
Plaintiff said that he would speak to the person at H&R Block who prepared the return. Plaintiff was asked further about his check-cashing activities:
Q: So let's just say this client whose trying to hide money from his ex-wife, he has a check written out to him of some kind?
He comes to you, and let's say it's a check for $5,000.
Q: He gives the check and you deposit the check where?
Q: The business bank account or the personal?
A: Business bank account.
Q: Is that listed as income for your company?
A: Yes. And that's probably why they have the line of check cashing. Again, I can't comment definitely, but that's how it would play out.
Q: Is it fair to say that any such transaction is in some manner or other of the person who asks you to cash the check dishonest or illegal?
A: I don't know if I would get into that because with clients typically or people who ask me to do it I don't get into it. I don't feel it's you know, my place.
When asked if he took a fee for cashing the checks, plaintiff stated that he did so rarely, for $20 or $30. Lexington's counsel asked plaintiff "to secure from H&R Block a breakdown of the check cashing fees for '06 indicating the individual[']s names and addresses."
When questioned about the fact that his income tax return stated that the Burlington property was listed as a rental property, allowing for the deduction of mortgage payments, taxes and other expenses, plaintiff again could not explain why H&R Block had listed it as such:
A: I wouldn't be able to answer that question. I gave them all my information.
Q: But did you tell them that it was a rental property?
Q: Well, it was never intended to be a rental property, was it?
Q: You say you don't recall telling them that, but they wouldn't have derived that other than ...