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Bandazian Salons, L.L.C. v. Lor-Yvonne Associates


September 15, 2008


On appeal from Superior Court of New Jersey, Law Division, Special Civil Part, Bergen County, Docket No. DC-16360-05.

Per curiam.


Telephonically Argued August 26, 2008

Before Judges A. A. Rodríguez and Lihotz.

This matter arises from a commercial tenancy dispute. Defendant-landlord Lor-Yvonne Associates appeals from the denial of its motion for an award of attorney's fees, following entry of judgment against plaintiff-tenant Bandazian Salons, L.L.C.

Defendant argues the parties' lease required payment of the attorney's fees incurred in the litigation to enforce the agreement's terms. The trial judge denied defendant's post-judgment motion. This appeal followed.

On June 15, 1999, the parties executed a lease agreement, whereby defendant leased a fully-equipped beauty salon to plaintiff for a term of three years, with an option to renew at the expiration of the initial term. Plaintiff exercised the option and vacated the premises on May 31, 2005.

After plaintiff's departure, defendant discovered plaintiff had altered the premises without authorization, contrary to the lease provisions. Defendant retained plaintiff's $5,000 security deposit. Plaintiff filed a special civil part action to recover $6,462.05, representing its security deposit and overpaid rent. Defendant filed a counterclaim seeking damages of $15,000, consisting of $13,158.05 in repair and restoration costs and $1,841.95 of unpaid rent.*fn1

Following a bench trial,*fn2 defendant was awarded $6,150 for damages to restore the premises and $1,754.28 for past rent. Plaintiff was awarded $1,132 in excess rent paid during the last month of its tenancy.

Defendant filed a post-trial motion for payment of counsel fees incurred in the action. The unopposed motion was denied. The trial court reviewed the motion and stated:

Although the Lease provides for counsel fees and same was set forth in the Complaint of the Landlord/Counterclaimant; there is no record that same was pursued at the time of Trial. Additionally and more importantly; it was the determination and final factual finding of this Court that BOTH the Landlord and the Tenant prevailed on some of their claims; and did not prevail on some of their claims. Therefore, it is the ultimate finding of this Court that neither party fully prevailed on their claims and therefore[,] it would be inequitable to award attorney['s] fees on behalf of the Landlord pursuant to the terms of the Lease.

On appeal, defendant argues the court erred in concluding "that both the Landlord and the Tenant prevailed on some of their claims and did not prevail on some of their claims." Rather, defendant focuses its argument on the fee-shifting clauses of the lease, maintaining that the terms of the lease require an award of attorney's fees.

Generally, "'fee determinations by trial courts will be disturbed only on the rarest of occasions, and then only because of a clear abuse of discretion.'" Packard-Bamberger & Co. v. Collier, 167 N.J. 427, 444 (2001) (quoting Rendine v. Pantzer, 141 N.J. 292, 317 (1995)). Additionally, "a trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference." Manalapan Realty v. Twp. Comm., 140 N.J. 366, 378 (1995); Lobiondo v. O'Callaghan, 357 N.J. Super. 488, 495 (App. Div.), certif. denied, 177 N.J. 224 (2003).

Defendant identifies two lease provisions that purportedly support its claim for an award of counsel fees. First, paragraph 13, which contains the indemnification clause. The paragraph provides the tenant will indemnify the landlord if it is liable for "fines, penalties, cost, suits, proceedings, liabilities, damages, claims and actions" resulting from the tenant's negligence "in connection with the Demised Premises." In such instance, the landlord may recover payment of defense costs including reasonable attorney's fees. The indemnification provision applies solely to claims against the landlord by third parties for injury or damages resulting from acts of the tenant. The clause is inapplicable to the facts presented.

Second, defendant relies on paragraph 25.2. This provision addresses the landlord's rights to terminate the lease and retake possession in the event of the tenant's default as described in paragraph 25.2. It states:

If Landlord elects to terminate Tenant's right to possession of the Dismissed Premises under section 2[5].1*fn3 following an Event of Default, Landlord may re-enter and take possession of the Demised Premises, and Tenant shall be obligated to pay to Landlord as damages upon demand, and Landlord shall be entitled to recover of and from Tenant: (a) all Rent payable to the date of termination of Tenant's right to possession, plus (b) the cost to Landlord of all reasonable legal and other expenses and costs (including attorney's fees) incurred by Landlord in . . . in enforcing any provision of this Lease . . . in making such alterations and repairs in operating and maintaining the Demised Premises. . . .

A default event includes the tenant's failure "to perform or observe any requirement, obligation, agreement, covenant or condition of [the] Lease", which also includes a prohibition against unauthorized alteration of the premises. Thus, the lease provides a contractual basis for defendant's claim.

In analyzing defendant's request, the trial judge stated two bases for denying the motion. First, he commented the request "was not pursued at the time of trial." Defendant argues the lease was in evidence and the claim presented in its complaint. We are not provided with the trial transcript or the court's decision. However, it appears the court failed to state the findings supporting this conclusion. Thus, we are at a loss to understand what proofs were found deficient.

Rule 1:7-4(a) denotes a trial court's obligation to make findings of fact and state conclusions of law "on every motion decided by a written order that is appealable as of right." Without findings relevant to the legal standards, the litigants and the reviewing court "can only speculate about the reasons" for the decision. Rosenberg v. Bunce, 214 N.J. Super. 300, 304 (App. Div. 1986). Our opinions have repeatedly emphasized the importance of a trial judge's responsibility to provide findings and conclusions to assure informed appellate review. Rosenberg, supra, 214 N.J. Super. at 308. "[T]he trial court must state clearly its factual findings and correlate them with the relevant legal conclusions. Curtis v. Finneran, 83 N.J. 563, 570 (1980).

The second reason the court denied defendant's fee application was that defendant had not prevailed on all issues presented and plaintiff had successfully showed it overpaid its rental obligation prior to vacating the premises. The judge concluded, "it would be inequitable to award attorney['s] fees on behalf of the Landlord pursuant to the terms of the Lease."

"New Jersey has a strong policy disfavoring shifting of attorneys' fees," North Bergen Rex Transp., Inc. v. Trailer Leasing Co., 158 N.J. 561, 569 (1999); See McGuire v. City of Jersey City, 125 N.J. 310, 326 (1991), and generally adheres to the notion that "sound judicial administration is best advanced if litigants bear their own counsel fees." Dept. of Envtl. Prot. v. Ventron Corp., 94 N.J. 473, 504 (1983). "Fees may be awarded, however, when a statute, court rule or a contractual agreement provides for them." Mason v. City of Hoboken, 196 N.J. 51, 70 (2008); Satellite Gateway Commc'ns, Inc. v. Musi Dining Car Co., 110 N.J. 280, 285 (1988).

Contrary to the trial court's conclusion, defendant posits it was a "prevailing party" in the litigation, entitled to a fee award. The "phrase 'prevailing party' is a legal term of art that refers to a 'party in whose favor a judgment is rendered.'" Mason, supra, 196 N.J. at 72 (citing Buckhannon Bd. & Care Home v. W. Va. Dept. of Health & Human Res., 532 U.S. 598, 603, 121 S.Ct. 1835, 1839, 149 L.Ed. 2d 855, 862 (2001)) (quoting Black's Law Dictionary 1145 (7th ed. 1999)).

In determining whether defendant prevailed in the litigation, we apply the two-pronged test enunciated in Singer v. State, 95 N.J. 487, 494 cert. denied, 469 U.S. 832, 105 S.Ct. 121, 83 L.Ed. 2d 64 (1984); see also N. Bergen Rex Transp., supra, 158 N.J. at 571 (applying Singer fee-shifting test to commercial contract). First, a causal nexus must exist between the "prevailing party" and the relief obtained. Singer, supra, 95 N.J. at 495. Second, the party's actions must have been necessary and important in obtaining relief. Ibid. Defendant recovered on both its damage claim and unpaid rental claim relying upon the lease terms. Community Realty Mgmt. v. Harris, 155 N.J. 212, 235 (1998). "New Jersey law permits parties to a contract to shift liability for attorney['s] fees." Dare v. Freefall Adventures, 349 N.J. Super. 205, 222 (App. Div.), certif. denied, 174 N.J. 43 (2002). Therefore, defendant was a prevailing party.

However, this alone does not complete the examination. Once the determination is made that defendant is a prevailing party, the court must next evaluate the reasonableness of the attorneys' fees sought. "Courts generally uphold provisions in leases calling for the payment of reasonable attorneys' fees." Community Realty Mgmt., supra, 155 N.J. at 234; Mury v. Tublitz, 151 N.J. Super. 39, 44 (App. Div. 1977). The reasonableness of an attorney's fee request is determined by the court after considering the factors enumerated in Rule 4:42-9(b) and (c).

"[I]f a successful [prevailing party] has achieved only limited relief in comparison to all of the relief sought, the [trial] court must determine whether the expenditure of counsel's time on the entire litigation was reasonable in relation to the actual relief obtained . . . and, if not, reduce the award proportionately." Singer, supra, 95 N.J. at 500; see also Rendine, supra, 141 N.J. at 336 (quoting Hensley v. Eckerhart, 461 U.S. 424, 436, 103 S.Ct. 1933, 1941, 76 L.Ed. 2d 40, 52 (1983)) (stating "'[i]f . . . a [party] has achieved only partial or limited success, the product of hours reasonably expended on the litigation as a whole times a reasonable hourly rate may be an excessive amount. This will be true even where the plaintiff's claims were interrelated, non-frivolous, and raised in good faith'").

[N. Bergen Rex Transp., supra, 158 N.J. at 572 (parallel citations omitted).]

There is no evidence the trial judge engaged in this evaluative process. "Naked conclusions do not satisfy the purpose of [Rule] 1:7-4." Curtis, supra, 83 N.J. at 570. Omission of this factfinding duty is particularly problematic where the decision is discretionary, as is an award of counsel fees as allowed for the enforcement of the parties' contract.

Thus, the order denying the fee request cannot stand. We reverse and remand this matter to the trial judge for full factfinding and assessment of the standards set forth in the Rule to support or deny such an award. Foley, Inc. v. Fevco, Inc., 379 N.J. Super. 574, 588-89 (App. Div. 2005); Barnett & Herenchak, Inc. v. N. J. Dep't of Transp., 276 N.J. Super. 465, 470-73 (App. Div. 1994); Salch v. Salch, 240 N.J. Super. 441, 443 (App. Div. 1990).

One final observation. At argument, the issue of proper service of defendant's motion was raised by the court. On this record we cannot evaluate that issue. On remand, the trial judge is advised to assure effective service of process of defendant's application.

Reversed and remanded in accordance with the provisions of this opinion.

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