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Psaros v. Saropoulos

May 20, 2009


On appeal from the Superior Court of New Jersey, Chancery Division, Ocean County, C-95-05.

Per curiam.


Argued April 28, 2009

Before Judges Winkelstein, Gilroy and Chambers.

Plaintiff, Nikolaos Psaros, appeals from two orders of the Chancery Division which, while awarding him compensatory damages for defendant Christos Saropoulos's breach of an asset purchase agreement, nevertheless denied his claim for $100,000 in liquidated damages and for counsel fees. We affirm the order denying plaintiff liquidated damages, but reverse the order denying counsel fees and remand for further proceedings.

The litigation arose out of an asset purchase agreement (the agreement) in which defendant, as the sole member of New Horizon, LLC, sold plaintiff a restaurant business, the Horizon Diner (the Horizon), located on East Bay Avenue in Manahawkin. Plaintiff claimed that defendant violated a restrictive covenant in the agreement, and filed this lawsuit to enforce that covenant and for damages. After denying plaintiff's request for a preliminary restraining order, the trial court conducted a bench trial on January 8, 2008, which disclosed the following facts.*fn2

Plaintiff and defendant have each been in the diner business approximately twenty to twenty-five years. On June 18, 2001, they entered into the agreement for the sale of the Horizon. Both were represented by counsel during negotiations and execution of the agreement. For $650,000, plaintiff acquired the following: equipment, furniture and fixtures for $38,334; good will for $606,666; and a restrictive covenant for $5,000. The restrictive covenant states:

In consideration for payment of the sum of Five Thousand ($5,000.00) Dollars, Seller [defendant] hereby covenants and agrees that neither he, his wife, Dorothy Saropoulos nor his son, Elefterios Saropoulos,*fn3 shall open another diner or restaurant, or engage in any way in the diner, restaurant and/or bar business within a radius of ten (10) miles from the Premises (the "Restricted Area"), for a period beginning from the Closing Date and continuing for a period of twenty (20) years (the "Restrictive Covenant"). Specifically excluded from the Restrictive Covenant is Fred's Beach Haven Diner, 4th & Bay Avenue and Beach Haven, Long Beach Island, New Jersey [of] which the Seller, or its members, may regain ownership interest. This covenant shall lapse in the event Purchaser [plaintiff] defaults under any obligation created under this Agreement and the Exhibits hereto.

In the event of a violation of this provision, Purchaser shall be entitled to recover One Hundred Thousand ($100,000) Dollars as liquidated damages from the Seller and to pursue any remedy at law or at equity in a court of competent jurisdiction.

The agreement also contains a fee-shifting provision, entitling a party who substantially prevails in litigation arising out of the agreement to counsel fees and investigative costs.

Plaintiff expanded the size and seating capacity of the diner and renamed it "Nick's Horizon Diner." In January 2005, four years after the sale of the Horizon, defendant, his wife and two other individuals, formed a company known as 547 L.L.C. The company purchased real property in Barnegat, located four to seven miles from the Horizon. Subsequently, that company leased a portion of the property, consisting of a restaurant formerly known as Boone's Tavern, to Leftor, L.L.C., a company formed by defendant's son and others. The restaurant was renamed Monte's Café and Lounge (Monte's).

Plaintiff subsequently hired Glen Blue, a private investigator, to investigate defendant's involvement in Monte's. Blue obtained Health Department reports identifying defendant as the owner of Monte's; he saw defendant accept a bread delivery at the restaurant; and he saw him open Monte's kitchen. Blue determined that defendant opened Monte's each morning, cooked and accepted deliveries, while defendant's wife operated the restaurant during the afternoon and evening.

Defendant testified that he went to Monte's about three times a week to give his son advice regarding the restaurant.

He admitted that he occasionally cooked at Monte's. He acknowledged that Monte's was within the ten-mile restricted area ...

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