On appeal from the Superior Court of New Jersey, Chancery Division, Camden County, Docket No. C-3-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Payne, Simonelli and Hayden.
This matter concerns a contract of sale between plaintiff Ilan Zaken and defendant Camden Gateway, LLC regarding property in Camden, which includes the "Sears" building. There is no dispute that the building was in a deteriorated condition at the time the parties executed the contract, and that the City of Camden is seeking to condemn the property and demolish the building in connection with a redevelopment plan. See In re Project Authorization Under N.J. Register of Historic Places Act, 408 N.J. Super. 540 (App. Div. 2009), certif. denied, 201 N.J. 154 (2010). Plaintiff was an appellant in that case, and thus, was well aware of the building's deplorable condition. He executed the contract on May 16, 2006, to purchase the property "as is" for $2.75 million. Pursuant to paragraph 10(b) of the contract, defendant was "under no duty, express, implied, or otherwise, to make any repairs or improvements in advance of or following the [c]losing."
Pursuant to paragraph 9, plaintiff's obligation to purchase the property was subject to defendant's satisfaction of certain "conditions to closing," "any of which may be waived, in whole or in part, by [plaintiff]." Paragraph 9(f) required defendant to keep the property in substantially the same condition as the date of the contract's execution, "reasonable wear and tear, and loss by casualty . . . excepted." Likewise, paragraph 17(a) required defendant to maintain the property in good condition and repair, "reasonable wear and tear and damage by fire and other casualty excepted."
If a loss by casualty or material damage occurred prior to the closing, paragraph 9(g) permitted plaintiff to (i) terminate [the contract]; (ii) delay Closing for a period not in excess of ninety (90) days to give [defendant] an opportunity to repair the damage caused by the casualty . . . in which case [defendant] shall promptly restore such damage in accordance with plans and specifications approved by [plaintiff], or (iii) accept the Property in its damaged condition and proceed to Closing.
If plaintiff chose option 9(g)(iii), the option required that all proceeds of insurance . . . payable to [defendant] by reason of such damage, [or] destruction, . . . shall be paid or assigned to [plaintiff], and [defendant] shall pay to [plaintiff] or credit against the Purchase Price the amount as determined by an independent insurance adjuster mutually selected by [defendant] and [plaintiff], of any deductible or uninsured loss with respect to such casualty.
Further, if defendant failed to satisfy any condition to closing contained in paragraph 9, paragraph 9(h) specifically permitted plaintiff to either terminate the contract or waive any unsatisfied condition and proceed with the purchase.
Following the contract's execution and prior to the closing, the building was materially damaged by vandalism. On January 8, 2007, plaintiff filed a complaint for specific performance, and for repairs or damages. Defendant filed a counterclaim for breach of contract.
On September 20, 2007, the trial judge ordered the closing to occur within thirty days, and ordered the title company to deposit the net proceeds of the sale with the clerk of the court. The judge also ordered plaintiff to make an election pursuant to paragraph 9 of the contract, and denied his request for an exemption from the doctrine of merger. At the time of this ruling, defendant had not yet notified its insurance carrier about the vandalism.
Plaintiff elected to accept the property in its damaged condition under option 9(g)(iii), and closed on October 18, 2007. Plaintiff did not take an assignment of the insurance proceeds payable to defendant, if any, at the closing. Defendant deposited the net sale proceeds of $1,448,571.91 with the clerk of the court pending resolution of the parties' rights and obligations under the contract.
Plaintiff's insurance adjuster subsequently determined there was an "uninsured loss" in excess of $3.6 million. Defendant's insurance adjuster estimated that it would cost $544,978.99 to reconstruct the building to its pre-vandalism condition. Based on defendant's figures, the judge subsequently reduced the amount to be held by the clerk to $500,000, and released the balance to defendant. We denied plaintiff's motion for leave to appeal and for a stay.
Following the submission of a claim to defendant's insurance company, the insurer determined that defendant's policy covered the loss, declared the building a total loss, and concluded the building's full pre-vandalism fair market value was $150,000. The insurer arrived at this figure by ...