October 23, 2009
SUPREME SECURITY SYSTEMS INC., PLAINTIFF-APPELLANT,
AARON MEDICAL TRANSPORTATION, INC., AND JOSEPH THOMAS, DEFENDANTS-RESPONDENTS.
On appeal from the Superior Court of New Jersey, Law Division, Special Civil Part, Bergen County, Docket No. DC-27443-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted September 1, 2009
Before Judges Messano and Alvarez.
Plaintiff Supreme Security Systems, Inc. commenced a breach of contract action in 2007 against defendant Aaron Medical Transportation, Inc. Plaintiff amended its complaint in 2008 to name Joseph Thomas, the business owner, individually. The claim was for $12,027.78 in damages and $587.71 in interest, totaling $12,615.49. After a bench trial, the trial judge entered a $200 judgment in favor of plaintiff, which it now appeals. For the reasons that follow, we reverse and remand for a new trial.
Plaintiff is an installer and service provider of closed-circuit-television security systems. The parties' written contract, dated May 31, 2006, provided that plaintiff would lease certain equipment and supply "maintenance services" to defendants, contingent upon a one-time installation charge of $2200 and monthly charges of $188 payable over five years. The security surveillance system would operate on the business premises and off-site, via a monitor situated in defendant's home. Defendants paid $700 when the agreement was signed, the balance of $1500 to be due upon "substantial completion of installation."
On June 22, 2006, the agreement was amended to include a different monitor. The cost of installation was accordingly increased by $300, and the monthly payments increased by $14. On July 18, 2006, the parties again agreed to a further change of equipment, although no adjustment was made to the contract price. Final modifications were made on July 20, 2006, adding a second monitor to the system. The installation charge was increased by another $300 and another $14 was added to the monthly fee.
It was not until September 15, 2006, that the system was operational. Thomas testified that the equipment in his home, intended to monitor the business premises from that remote location, however, never "lasted" for longer than a minute at a time without disconnecting. In his words, "[t]he remote access never got fixed."
In January 2007, defendants paid plaintiff $1158. That same month, as anticipated by the parties from the inception of the contract, defendants moved to a new business location. Prior to the move, Thomas notified plaintiff of the date by which the equipment had to be taken out, as the building was going to be demolished. Thomas assumed the system would be reinstalled at his new address as per the agreement and actually signed a new agreement to that effect. That document was never signed by plaintiff. Plaintiff removed the equipment from the old site but, according to Thomas, then advised him that it could not guarantee that the system would work in the new location.
Plaintiff's bookkeeper testified to the contrary, that defendants were notified that no reinstallation would take place unless past due balances were paid. Because there were not paid, they did not reinstall the equipment. Plaintiff instead billed defendants for the balance due of all installation fees, sales taxes, and five years' worth of monthly charges, a total of $12,027.78. The liquidated damages paragraph of the agreement provided that:
14. Default of Subscriber. In the event of any default by Subscriber, without limiting the rights of Company under this Agreement or at law or equity, Company shall be entitled to retain all payments received and Subscriber shall immediately pay to Company
(a) all payments then due and payable, (b) all charges for labor, material and equipment incurred by Company and (c) eighty percent (80%) of all payments which would be due hereunder for the unexpired term as liquidated damages and not as a penalty; and Company shall have no further obligation to perform under this Agreement. In addition, if any suit or alternative dispute resolution proceeding is instituted and Company is the substantially prevailing party by judgment, award, finding or settlement, Subscriber shall pay directly or reimburse Company for all of its costs and expenses including, without limitation or example, consultants' and professionals' fees and costs including, without limitation or example, reasonable attorneys' fees and costs.
After Thomas refused to pay, the complaint and counterclaim followed.
At trial, Thomas testified that he understood the contract meant that the equipment would belong to him outright at the end of the five-year term, and that it was a lease-purchase agreement. He acknowledged reading the liquidated damages provision of the contract. Defendants nonetheless took the position that plaintiff received full satisfaction under the agreement because it retained the equipment and $1858.
Plaintiff alleges as errors the following:
POINT I - IN AWARDING PLAINTIFF DAMAGES THE TRIAL COURT ERRED AS A MATTER OF LAW BY:
A) MISCALCULATING THE MONTHLY PAYMENTS DUE AFTER THE SYSTEM BECAME OPERATIONAL;
B) ALLOWING DEFENDANT TO ESSENTIALLY RESCIND THE AGREEMENT BY CHARGING DEFENDANT FOR THE DEPRECIATION OF THE CCTV SYSTEM WHICH CONSTITUTES AN IMPROPER REWRITING OF THE PARTIES' AGREEMENT; AND
C) FAILING TO AWARD THE LIQUIDATED DAMAGES AS ALLOWED BY THE CONTRACT.
In his findings of fact and conclusions of law, the trial judge distinguished between a lease and a loan: "[T]here was testimony for the lease, that I do not find it to be a lease. It clearly says it's a loan. They loaned the equipment [to] him and they took the equipment back." The judge also found that the equipment "didn't really work" until September 15, and further found that defendants owed plaintiff for the ensuing four months at the rate of $208 monthly. He did not articulate his assessment of Thomas's credibility. The trial judge's calculation of damages was not articulated clearly either. He stated:
I multiplied it by four, the actual four months it was working, it came out to be $808. It's an unusual agreement because it [was] mostly... installation and during that installation period of time he did have the use of the equipment even though it didn't work initially, but it did work later on.
So the... total amount based upon what I saw here really is $2500. I'm not sure though actually... and they have all that equipment back. There does not seem to be a charge for uninstalling it, just for installing it. The equipment has to have some value, it should not be totally -- I don't know... how much it was installation, how much it was equipment, but the Court took the $2500 and thought the equipment still has to have a value of $1250 plus the $808 that he should be paying for the servicing of it, which comes out to be $2,058. Credit for the money he's paid.
Based upon all that I find a judgment in favor of the plaintiff for $200 plus costs of Court. That's all the plaintiff has proven to this Court based upon the loan agreement and the Court giving a fair adjustment as to the value of the equipment in their storage area. Judgment for plaintiff, $200.
Findings by a trial judge should be affirmed or supported "by adequate, substantial and credible evidence." Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974). Our function on appeal is limited: "'we do not disturb the factual findings and legal conclusions of the trial judge unless we are convinced that they are so... inconsistent with the competent, relevant and reasonably credible evidence as to offend the interests of justice.'" Ibid. (quoting Fagliarone v. Twp. of No. Bergen, 78 N.J. Super. 154, 155 (App. Div. 1963)). We do not, however, owe deference to "'[a] trial court's interpretation of the law and the legal consequences that flow from established facts." State v. Barrow, 408 N.J. Super. 509, 516-17 (App. Div. 2009) (quoting Manalapan Realty v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)).
In this case, we are not convinced that the trial judge's findings were supported by "competent, relevant or reasonably credible evidence." Rova Farms Resort, Inc., supra, 65 N.J. at 484. We are not convinced that he considered the relevant legal principles in light of the facts both parties presented.
The only reference we can glean from our review of the record to the demand for liquidated damages, for example, is the court's passing mention of a "$9100 invoice for equipment which is either leased, loaned, serviced or maintained but is no longer in possession of the subscriber." The trial judge was obliged to make more complete findings and then assess plaintiff's liquidated damages claim, the most substantial portion of plaintiff's demand for damages. A liquidated damages clause will be enforced if "reasonable" in light of the overall agreement. See Wasserman's, Inc. v. Twp. of Middletown, 137 N.J. 238, 249 (1994). Plaintiff is entitled to have this provision considered by the factfinder, and the necessary determination made as to whether it was reasonable and therefore is due from defendants, or was an unenforceable penalty. In light of our disposition on this contention of error, we do not reach the other points in plaintiff's brief. We vacate the judgment and direct that a new trial be conducted.
Reversed and remanded.
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