Court: New Jersey Superior Court Appellate Division; February 14, 1996; New Jersey; State Appellate Court
Appellants Edward Simonson and Simonson Family Associates, L.P. appeal a final judgment favoring respondent Z Cranbury Associates after an admeasurement hearing linked to a foreclosure judgment. Simonson challenges the enforcement of a release provision in a non-recourse mortgage agreement made with Z Cranbury as part of a property sale. Between 1982 and 1988, Z Cranbury paid Simonson $180,000 for six options to purchase a 249-acre tract and ultimately bought the property for $6,723,891 in 1989, applying prior option payments as a credit. Z Cranbury financed the purchase through a promissory note secured by a ten-year mortgage, which specified that in case of default, Simonson's only remedy was foreclosure, without any deficiency claims. After defaulting on the note, Z Cranbury counterclaimed for the unconditional release of 20.4 acres from the mortgage, citing a provision that allowed for such a release under specific conditions. Simonson argued that Z Cranbury could not obtain the release due to its failure to secure municipal approval for a subdivision, and claimed that Z Cranbury's breach of obligations excused any performance under the release provision. Simonson maintained that the intent of the mortgage was that the release provision could not be enforced while Z Cranbury was in default.
Summary judgment of foreclosure was granted to Simonson based on Z Cranbury's claim of having paid $700,000 for the unconditional right to release 20.4 acres from the mortgage. The motion judge recognized Z Cranbury's right to enforce this release but deemed apportionment of its interest impractical, scheduling a hearing to determine the value of the land. Simonson sought reconsideration, referencing Goldman South Brunswick Partners v. Stern, where it was established that a defaulting mortgagor cannot harm a non-defaulting mortgagee by releasing secured property. The judge, familiar with Goldman, denied the motion, noting the differing equities involved.
Following the motion judge's retirement, a new judge oversaw the valuation trial. Z Cranbury’s Vice President testified that the release provision was included to protect the developer's investment risk, while Simonson's adviser confirmed it was linked to the lack of a specific parcel identified for Z Cranbury's cash payment. The Chancery Judge ruled Z Cranbury was entitled to the value of the land as its right to release accrued before mortgage default. Although Z Cranbury did not receive the specific parcel requested, the judge valued its interest at $480,000, calculated as three times the appraised value of a six-acre lot. After accounting for undisputed charges, Z Cranbury was awarded $463,521.77.
In Goldman, the court ruled against enforcing a release provision for defaulting developers, emphasizing that a mortgagee's obligation to release property is contingent on the mortgagor's compliance with their obligations. The Chancery Judge noted that, unlike Goldman, the mortgage in this case was a bargained exchange allowing Z Cranbury a release without payment. The evidence supported the conclusion that Z Cranbury had an enforceable right under the release provision before defaulting on its obligations.
Simonson contends that the trial judge incorrectly enforced the release provision by rejecting the argument that Z Cranbury failed to meet the condition precedent of subdivision approval. The judge questioned whether Z Cranbury would agree to pay for merely a conditional right. The court emphasized that interpretations of the agreement must honor the parties' intentions and ensure justice, noting that Paragraph 3(A) indicates Z Cranbury's right to obtain a release of 20.4 acres from Simonson's mortgage lien. Conditioning this right would undermine the intention that Z Cranbury recover property equivalent to its initial investment. If the parties had different intentions, they could have explicitly applied Paragraph 3(D) to this acreage. The court's duty is to uphold the contract as written, without altering its terms. The decision is affirmed. During negotiations, Z Cranbury was represented by deceased developer Lawrence Zirinsky. The original complaint was initiated by Edward and Raymond Simonson, with Raymond later transferring his interest to Simonson Family Associates, L.P. The extended option agreement entitles Z Cranbury to a release of acreage based on the cash payment made at closing. Daniel Murphy, an advisor to Simonson, stated that the 20.4-acre provision in the mortgage rider was based on Z Cranbury's $670,000 cash payment. Z Cranbury had filed a subdivision application related to the property, which became moot due to a subsequent foreclosure judgment in favor of Simonson. The court allowed certain testimony under N.J.R.E. 804(b)(6), which was not contested on appeal.
