In re Amiel Rest. Partners, LLC

• Decision Date: 16 June 2014
• Docket Number: Case No. 13–23866
• Citation: 510 B.R. 744
• Parties: In re: Amiel Restaurant Partners, LLC, Debtor.
• Court: U.S. Bankruptcy Court — District of New Jersey

510 B.R. 744

In re: Amiel Restaurant Partners, LLC, Debtor.

Case No. 13–23866

United States Bankruptcy Court, D. New Jersey.

Signed June 16, 2014

Timothy P. Neumann, Esq., Broege, Neumann, Fischer & Shaver, LLC, 25 Abe Voorhees Drive, Manasquan, New Jersey 08736, Attorney for Amiel Restaurant Partners, LLC.

Lawrence J. Sharon, Esq., Lebensfeld Sharon & Schwartz P.C., 140 Broad Street, Red Bank, New Jersey 07701, Attorney for Morgan Realty & Development, LLC.

Bunce D. Atkinson, Esq., Atkinson & DeBartolo, The Galleria, 2 Bridge Avenue, Building Two, Third Floor, Red Bank, New Jersey 07701, Special Bankruptcy Counsel to Morgan Realty & Development, LLC.

Office of the United States Trustee, 1 Newark Center, Raymond Boulevard & McCarter Highway, Suite 2100, Newark, New Jersey 07102.

Chapter 11

MEMORANDUM DECISION

MICHAEL B. KAPLAN, U.S.B.J.

I. INTRODUCTION

This matter comes before Court on the motion of Morgan Realty & Development, LLC (“Morgan”), for an Order compelling Amiel Restaurant Partners, LLC (“Debtor”) (i) to release to Morgan insurance proceeds of $358,800, escrowed with Debtor's bankruptcy attorney and derived from Debtor's personalty destroyed by Superstorm Sandy in Fall 2012 at the restaurant premises which the Debtor leases from Morgan; and (ii) to escrow an additional $724,475 for alleged prepetition defaults and construction costs to rebuild the restaurant. For the reasons below, this decision addresses only the first question. Thus, the issue for the Court is whether Morgan had an insurable interest in the Debtor's personalty to entitle Morgan to turnover of the insurance proceeds as an additional insured.¹ The analysis is complicated because much of the case law on insurable interests involves disputes between a claimant and a carrier and not between competing claimants to the same insurance proceeds.

II. JURISDICTION

The Court has jurisdiction over this contested matter under 28 U.S.C. §§ 1334(a) and 157(a) and the Standing Order of the United States District Court dated July 10, 1984, as amended October 17, 2013, referring all bankruptcy cases to the bankruptcy court. This matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(A), (E) and (O). Venue is proper in this court under 28 U.S.C. § 1408. The court issues the following findings of fact and conclusions of law pursuant to Fed. R. Bankr.P. 7052.

III. BACKGROUND

Morgan owns the Channel Club Marina, 33 West Street, Monmouth Beach, New Jersey. On October 20, 2010, Morgan and the Debtor entered into a commercial lease (“Lease”) for the Debtor to lease from Channel Club Marina certain buildings which it operated as a restaurant and a snack bar for a 20–year term with the option for one 5–year renewal (“the Premises”). Rent for the first two years beginning December 1, 2010 was $12,000/month, rising to $13,333/month for years 3 through 5 with percentage increases at each 5–year interval for years 6 through 20; the Debtor also paid CAM charges and a percentage of profits. The Lease required the Debtor to maintain seven types of insurance coverage, including property insurance, and states, in relevant part, as follows:

10. Insurance; Waivers, Subrogation; Indemnity

(a) Insurance. Tenant shall maintain throughout the Term of this Lease the following insurance policies and coverage: ... (ii) fire and extended coverage insurance insuring the Premises against loss or damage by flood, fire, lightning and wind storm, in the full amount of the current replacement value of the Premises, including any alterations therein or thereon; (iii) insurance covering the full value of Tenant's property and improvements, and other property (including property of others) in the Premises;

.... All such policies shall include a waiver by the insurer(s) of the right of subrogation against Landlord, its agents, representatives, and affiliates. Tenant's insurance shall provide primary coverage to Landlord when any policy issued to Landlord provides duplicate or similar coverage, and in such circumstances Landlord's policy will be excess over Tenant's policy. Tenant shall furnish to Landlord certificates of such insurance and such other evidence satisfactory to Landlord of the maintenance of all insurance coverage required hereunder....

(Docket No. 64, Exhibit 1, Lease). The policy prohibited Morgan and the Debtor from filing claims against each other and required the tenant to indemnify and hold the landlord harmless from “(i) any loss arising from any occurrence on the Premises; or (ii) Tenant's failure to perform its obligations under this Lease.” (Docket No. 64, Exhibit I, Lease, ¶¶ 10(b) and (c)). The Lease sets forth the following duties of the Debtor and of Morgan if property damage occurred:

17. Fire or Other Casualty.

(a) Repair Estimate. If the Premises are damaged by fire or other casualty (a “ Casualty”), Tenant shall, within thirty (30) days after such Casualty, deliver to Landlord a good faith estimate (the “ Damage Notice”) of the costs and time needed to repair the damage caused by such Casualty.

(b) Landlord's and Tenant's Rights. If a material portion of the Premises is damaged by a Casualty not caused by the negligent or intentional acts of Tenant or its employees, such that Tenant is prevented from conducting its business in the Premises in a manner reasonably comparable to that conducted immediately before such Casualty and Tenant estimates that the damage caused thereby cannot be repaired within one hundred eighty (180) days after the Casualty, then Tenant may terminate this Lease by delivering written notice to Landlord of its election to terminate within thirty (30) days after the Damage Notice has been delivered to Landlord. If tenant does not so timely terminate this Lease and provided the Casualty was not caused by the negligent or intentional acts of Tenant or its employees, then Rent for the portion of the Premises rendered untenantable by the damage shall be abated from the date of damage until the completion of the repairs.

(c) Repair Obligation. If Tenant does not elect to terminate this Lease following a Casualty as provided in Section 17(b) above, then Tenant shall, as soon as practicable following the date of such Casualty, commence repairs to the Premises and shall proceed with reasonablediligence to restore the Premises (including any and all Alterations, furniture and equipment that existed therein prior to the Casualty) to the same condition as they existed immediately before such Casualty.

(Docket No. 64, Exhibit 1, Lease). If Debtor defaulted in the payment of rent, paragraph 22 gave Morgan the right of distraint under N.J.S.A. § 2A:33–6 against Debtor's “goods and chattels” (as provided in the statute). Paragraph 23, key to Morgan's claim that it has an insurable interest in Debtor's personalty, defines the premises which the Debtor would ultimately surrender to Morgan:

At the expiration or earlier termination of this Lease, Tenant shall deliver to Landlord the Premises: (i) with all Alterations, additions, improvements, fixtures, trade fixtures, furniture, equipment and other property utilized in connection with the operation of Tenant's restaurant, bars and Pool Snack Bar (which fixtures, trade fixtures, equipment and other such property shall become the sole property of Landlord at such time) in reasonable good repair and condition ...

(Docket No. 64, Exhibit 1, Lease, ¶ 23).

In partial fulfillment of its insurance obligations, Debtor obtained:

(1) a commercial property insurance policy with Lloyd's Underwriters for $1,000,000 building coverage and $300,000/$20,000 replacement cost personal property coverage (for the main building and snack bar) with Morgan named as loss payee (Docket No. 64, Exhibit 5);

(2) a flood insurance policy through Fidelity National Indemnity Insurance Company (“Fidelity”) for $500,000 building and $358,800 personal property coverage with Morgan named as additional insured (Docket No. 64, Exhibit 3); and

(3) an excess building-only flood insurance policy with Lloyd's Underwriters for $481,174 (over the underlying limit of $500,000) with Morgan named as additional insured (Docket No. 64, Exhibit 4).

According to the declaration pages in these exhibits, these policies were effective January 13, 2012 to January 13, 2013. In its certification, Morgan describes itself as “loss payee with respect to each of the insurance claims submitted” even though, as recited above, two of the policies endorsed Morgan as additional insured and one as loss payee (Docket No. 64, George C. cert., ¶ 15).

Hurricane Sandy struck the premises on October 29, 2012. By written notice dated November 23, 2012, Debtor advised Morgan that Debtor would not terminate the Lease and thereby triggered Debtor's obligation to repair the premises under Lease ¶ 17(c). On February 4, 2013, Morgan gave Debtor notice of termination of the Lease. Shortly afterward, Debtor sued Morgan and George Chrysthanopoulos in Superior Court of New Jersey, Chancery Division, General Equity Part (the “State Court Action”), for a declaration that the Lease was not terminated and for other relief, to which Morgan filed a counterclaim. On June 22, 2013, five of the six owners of the Debtor assigned their interests to Joseph Amiel who became the 100% owner of the Debtor. On June 24, 2013, the Debtor, through Mr. Amiel as Managing Member and 100% owner, filed a voluntary Chapter 11 petition in bankruptcy. Mr. Chrysthanopoulos certified that, about the time of the filing, the insurance claims were settled, and the following checks were issued or to be issued:

(1) check for $50,040 issued on the Lloyd's commercial property policy for windstorm damage;

(2) checks for $500,000 (building) and $358,800 (contents) issued on the Fidelity flood insurance policy; and (3) $393,946 is to be issued on the Lloyd's excess flood insurance policy.

(Docket No. 64, George C. cert., ¶ 14) (emphasis added).

On July 10, 2013, the Debtor removed the State Court...