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North Bergen Rex Transport Inc. v. Trailer Leasing Co.

June 23, 1999


The opinion of the court was delivered by: Coleman, J.

Argued January 21, 1999

On certification to the Superior Court, Appellate Division.

This appeal involves a commercial lease that requires the lessee to pay reasonable attorneys' fees in the event the lessor has to procure legal services to enforce the lease agreement. The critical issue raised is whether a lessor who does not prevail on all of its claims is entitled to 100% of its attorneys' fees plus interest.

The trial court awarded the lessor Trailer Leasing Company (TLC) 100% of its attorneys' fees and 18% interest on those fees. The Appellate Division affirmed the award of attorneys' fees but reversed and remanded with regard to the interest assessed. We granted the lessee's petition for certification. 156 N.J. 388 (1998). We hold that it was improper to award 100% of the attorneys' fees requested and that no prejudgment interest should be awarded on the reasonable attorneys' fees.


In 1992, plaintiff North Bergen Rex Transport, Inc. (Rex) conducted an interstate trucking business, and defendant TLC was in the business of leasing trailers. During that year, Rex submitted a credit application to lease trailers from TLC. The application was approved subject to the personal guarantee of plaintiff Murray Barnett, Rex's sole shareholder.

Between October 1992 and March 1994, TLC leased as many as ninety trailers to Rex. Separate lease documents with identical terms and conditions were executed for each trailer. Pursuant to the lease agreements, TLC sent Rex monthly invoices reflecting the charges for each of the trailers. The leases contained the following two provisions regarding interest and attorneys' fees:

"7. Lessee agrees to pay the rentals to Lessor for the full term as computed on the front of this agreement. There shall be no proration of charges for partial terms. Invoices not paid on time shall carry interest at the rate of 1-1/2% per month from the date due until paid.

24. Lessee shall pay and discharge or promptly reimburse Lessor for all costs, expenses and reasonable attorney's fees, which shall be incurred and expended by Lessor in enforcing the covenants and agreements of this [Lease] whether by the institution of litigation or by the taking of advice of counsel or otherwise." [(Emphasis added).]

In 1993, Rex became delinquent in its lease payments to the extent of $140,000. In an attempt to satisfy that debt, Rex and TLC negotiated a payment plan whereby Rex was required to pay a minimum of $5,000 per week until the obligation was satisfied and to return some of the trailers it had leased from TLC. On or about February 26, 1994, the parties memorialized their agreement in a writing, which stated in pertinent part: "As we discussed[,] the $5000.00 is only a minimum and your cooperation with increasing this weekly check will be appreciated. In addition[,] if your account balance is not steadily reduced, TLC will need to receive a larger commitment from N.B. Rex Transport."

For approximately a month after the parties had memorialized their agreement, Rex paid the weekly installments of $5,000 or more and returned some of the trailers. However, because there were several trailers still retained by Rex, its debt increased. Thus, on March 22, 1994, TLC demanded that plaintiffs pay the entire balance and threatened to sue. Even with the threat of litigation, Rex made only nineteen out of twenty-nine payments between February 25, 1994, and September 9, 1994.

Notwithstanding the fact that Rex was delinquent under the agreement, on March 30, 1994, plaintiffs filed a four-count complaint seeking a declaration of rights pursuant to N.J.S.A. 2A:16-50 to -58 against TLC based on alleged rental and repair overcharges. In their complaint, plaintiffs asserted that they had fully complied with their obligations under the February 1994 agreement.

TLC filed an answer and a counterclaim. The answer referred to the February 1994 agreement as an admission that plaintiffs owed TLC $5,000 weekly installments for delinquent rental and other charges. The counterclaim sought judgment against plaintiffs for the lease delinquencies, interest at the rate of one and one-half percent per month (which translates to eighteen percent annually) for all delinquent charges, costs, expenses, and attorneys' fees incurred.

The parties filed cross-motions for summary judgment. In April 1995, the trial court granted partial summary judgment in favor of TLC in the amount of $100,000. Between August 8 and August 22, 1995, a four-day trial was held on the remaining claims. At the onset of the trial, TLC's base claim was reduced from $211,681.35 to $111,681.35 after a $100,000 payment was made pursuant to the partial summary judgment. Certain adjustments conceded by TLC at the beginning of the trial further reduced the claim to $103,637.92. TLC requested ...

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