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New Flyer of America, Inc. v. Mid-Newark

July 6, 2010


On appeal from Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-5323-08.

Per curiam.


Submitted May 10, 2010

Before Judges Lisa, Baxter and Alvarez.

This appeal arises out of a dispute over the return of a $60,000 security deposit on a commercial lease. After vacating the premises at the end of the lease term, New Flyer of America, Inc. (New Flyer) acknowledged that $9100 should be deducted from the security deposit for repairs. The landlord, Mid-Newark, L.P. (Mid-Newark) refused to refund the $50,900 New Flyer requested. New Flyer sued Mid-Newark for that amount. After a bench trial, the judge found that New Flyer was entitled to the $50,900 plus interest of $5705.29, for a total amount of $56,605.29. The judge also found that Mid-Newark breached the implied covenant of good faith and fair dealing in the lease agreement and, based upon that breach, awarded New Flyer counsel fees and costs in the amount of $47,646.02. The court entered final judgment on May 14, 2009 in favor of New Flyer against Mid-Newark for a total of $104,251.31.

Mid-Newark appeals, arguing (1) the judge erred in admitting in evidence New Flyer's email reflecting that the costs of repairs would be $9100, (2) the judge failed to consider Mid-Newark's evidence of photographs of the premises and the written estimates and testimony of Mid-Newark's contractor in awarding New Flyer the return of $50,900 of the security deposit, and (3) the judge erred in awarding attorney's fees to New Flyer. We reject the first two arguments and affirm that portion of the judgment awarding return of a portion of the security deposit plus interest, in the total amount of $56,605.29. We agree with Mid-Newark's third argument and reverse the portion of the judgment awarding counsel fees and costs in the amount of $47,646.02.


New Flyer leased a warehouse in Mid-Newark's building in Jersey City for the purpose of conducting its operations pursuant to a contract with New York City Transit to service and maintain its buses. The lease was dated August 29, 2001. The lease term was for six months, with renewal options. The rent was $30,000 per month, and the security deposit, which New Flyer paid, was $60,000. The security deposit would be returned at the end of the lease term after New Flyer vacated the premises, provided it performed all of its obligations under the lease, which contained the following provision:

On the last day of the term hereof, or on any sooner termination, Lessee shall surrender the Premises to Lessor in the same condition as when received, broom clean, ordinary wear and tear and damage from casualty excepted.

With respect to attorney's fees, the lease provided that "[i]f Lessor brings an action to enforce the terms hereto, the Lessee shall be liable for Lessor's reasonable attorney's fees and costs." The lease contained no corresponding provision obligating the lessor to be liable for the lessee's attorney's fees.

At trial, Alan Farrant, New Flyer's senior customer support manager, testified that at the inception of the lease the walls were bare concrete and the floor had been painted, but the paint was worn. He further said that the office space portion of the premises was dilapidated and needed new paint and new carpet.

New Flyer's tenancy proceeded uneventfully through the original six-month term and was apparently extended multiple times through November 2006. Farrant testified that by November 2006, New Flyer had completed its work with New York City Transit. As November 2006 approached, New Flyer requested a final inspection of the premises to take place on November 28, 2006. According to Farrant, Solomon Gadeh, the owner of Mid-Newark, was supposed to attend a walk-through inspection on November 29, 2006, but neither he nor any representative of Mid-Newark showed up.

Prior to the walk-through date, New Flyer had the floor and offices cleaned by a professional cleaning company. According to Farrant, "other than the holes in the drywall... there was no real damage." On November 30, 2006, New Flyer turned over the keys to Mid-Newark's warehouse manager and vacated the premises.

A series of emails between Gadeh and Farrant followed. On December 4, 2006, Farrant emailed Gadeh seeking to confirm that the premises were left in satisfactory condition, stating that should Gadeh wish to perform a joint inspection he should contact Farrant, and requesting return of the $60,000 security deposit. Gadeh responded on December 6, 2006. He said he had been overseas on the date of the scheduled walk-through. He further said he had a list of "many things that need repairs." However, he continued that he was aware that New Flyer might receive another contract with New York City Transit in February 2007 and might wish to reoccupy the premises, in which case Mid-Newark would "repair the damages without any cost to you." As a "courtesy," Gadeh would ...

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