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Ilan Zaken v. Camden Gateway


October 20, 2011


On appeal from the Superior Court of New Jersey, Chancery Division, Camden County, Docket No. C-3-07.

Per curiam.


Argued October 4, 2011

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 subtracting the land's value, $2.6 million, from the $2.75 million purchase price.

Plaintiff did not dispute the insurer's decision to declare the building a total loss rather than repair it, and provided no evidence that the building's pre-vandalism fair market value exceeded $150,000. Plaintiff received $150,000, and still owns the land and building. However, he maintained that he is also entitled to the "uninsured loss," which, along with the deductible, has to be determined by an independent insurance adjuster.

Defendant filed a motion for summary judgment, which the judge granted. Following her detailed review of the entire contract, the judge concluded that it was an "as is" contract, the terms were "definite and certain," it was "clear" and "unequivocal" that plaintiff could either terminate the contract if defendant failed to satisfy any conditions to closing or waive them and proceed to closing, and plaintiff's damages were limited under paragraph 9(g)(iii) to the insurance proceeds payable to defendant. The judge also found that the $150,000 represented plaintiff's full damages, and the doctrine of merger applied, except as to plaintiff's right to the insurance proceeds, which survived the closing. This appeal followed.

On appeal, plaintiff contends, in part, that the judge erred because: (1) the "as is" provision of the contract did not alleviate defendant's responsibility for damages occurring prior to closing; (2) the contract expressly provided for payment or credit against the purchase price for damages caused by a casualty prior to the closing, regardless of whether there was insurance coverage; and (3) the doctrine of merger does not apply to defendant's obligation under paragraph 17 to maintain the property in good condition and repair. Plaintiff is wrong in all respects.

The construction of a written contract is usually a legal question for the court, suitable for disposition on summary judgment, unless there is ambiguity or the need for parol evidence to aid in interpretation. Driscoll Constr. Co. v. State of N.J., Dep't of Transp., 371 N.J. Super. 304, 313-14 (App. Div. 2004) (citations omitted). In interpreting a contract, the court's aim is to determine the parties' intention, revealed by the language used, the relations of the parties, the attendant circumstances, and the objects the parties were trying to attain. Id. at 313 (citing Onderdonk v. Presbyterian Homes of N.J., 85 N.J. 171, 184 (1981)). It is not the court's function to make a better contract for the parties than the one the parties made for themselves. Kotkin v. Aronson, 175 N.J. 453, 455 (2003) (citing Kampf v. Franklin Life Ins. Co., 33 N.J. 36, 43 (1960)). If the contract's terms are clear, it must be enforced as written. Graziano v. Grant, 326 N.J. Super. 328, 342 (App. Div. 1999).

We review a trial court's interpretation and construction of a contract de novo. Fastenberg v. Prudential Ins. Co., 309 N.J. Super. 415, 420 (App. Div. 1998). Based on our de novo review, we are satisfied that the contract is clear and unambiguous. It clearly provides that plaintiff purchased the property "as is," and defendant had no duty to maintain the property or make any repairs if the property suffered a loss by casualty or was materially damaged prior to the closing. If such loss or damage occurred, the contract limited plaintiff's remedy to either terminating the contract, giving defendant ninety days to repair the damage, or accepting the property in its damaged condition and proceeding to closing. By choosing the third option, plaintiff waived all conditions to closing and any other obligation defendant may have had under the contract, and purchased the property "as is."

Further, because the loss was fully insured, the contract limited plaintiff's damages to the insurance proceeds payable to defendant plus the deductible. There is no deductible here because the building was declared a total loss and $150,000 is its full pre-vandalism fair market value. Plaintiff received payment in full for the building, and he still owns it and the land, which is worth $2.6 million. He, thus, has been made whole.

Finally, the doctrine of merger applies. "[I]n real estate transactions, all warranties and representations made in connection with a sale, unless specifically reserved to hold over after the passage of title, are merged into the deed." Andreychak v. Lent, 257 N.J. Super. 69, 72 (App. Div. 1992). "'[T]he acceptance of a deed for lands is to be deemed prima facie full execution of an executory contract to convey, unless the contract contains a covenant collateral to the deed.'" Ibid. (quoting Caparrelli v. Rolling Greens, Inc., 39 N.J. 585, 590-91 (1963)). In determining whether a covenant is collateral, "[i]t is the intention of the parties which is to be given effect, as the doctrine of merger is simply a rule of presumed intention." Deerhurst Estates v. Meadow Homes, Inc., 64 N.J. Super. 134, 143 (App. Div. 1960), certif. denied, 34 N.J. 66 (1961).

Except for plaintiff's right to payment or an assignment of defendant's insurance proceeds, the contract contained no collateral provisions, and no conditions that the parties intended to survive the closing. Plaintiff waived all conditions to closing and purchased the property "as is." His acceptance of the deed and the $150,000 terminated the parties' rights and obligations under the contract.



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