October 4, 2010
CRESCENT TRADING, LLC, PLAINTIFF,
CHARLES CHERA, STEVEN CHERA, AND ROSEWOOD HOLDING, LLC, DEFENDANTS, AND S&C LEASING OF SOUTH ORANGE, DEFENDANT/THIRD-PARTY PLAINTIFF-APPELLANT/CROSS-RESPONDENT,
ERALP SEMENT, THIRD-PARTY DEFENDANT-RESPONDENT/CROSS-APPELLANT.
S&C LEASING OF SOUTH ORANGE, PLAINTIFF,
CRESCENT TRADING, LLC, DEFENDANT.
On appeal from Superior Court of New Jersey, Law Division, Essex County, Docket Nos. L-8868-05 and LT-20836-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted: March 10, 2010
Before Judges Cuff, C.L. Miniman and Waugh.
Defendant/third-party plaintiff S&C Leasing of South Orange (S&C) appeals from a January 28, 2008, order for judgment in its favor against plaintiff Crescent Trading, LLC (Crescent), and third-party defendant Eralp Sement (Sement) in the amount of $6000 plus fees and costs of $6000, and from a November 7, 2008, amended order for judgment following our remand in the amount of $39,949.64 plus fees and costs of $29,025. Sement, but not Crescent, cross-appeals from the same judgment orders. We affirm in part and reverse and remand in part for further proceedings consistent with this opinion.
On November 4, 2005, Crescent filed a complaint against Charles Chera, Steven Chera, Rosewood Holding, LLC, and S&C in the Law Division, Essex County, under docket number L-8868-05, asserting various causes of action. Among other claims, Crescent sought damages, costs, and attorneys' fees incurred as a result of defendants' alleged breach of a ten-year lease agreement between the parties covering premises located at 127 South Orange Avenue in South Orange (the premises).
On February 14, 2006, S&C filed an answer, counterclaim, and third-party complaint. In the counterclaim, S&C asserted a claim for breach of the lease against Crescent and sought damages, costs, and attorneys' fees. In its third-party complaint, S&C sued Sement pursuant to a Guarantee of Lease he signed and in which he guaranteed the payment of rent by Crescent. S&C sought recovery of damages, costs, and attorneys' fees from Sement. Sement is one of two members of Crescent; the other member is not a party to this suit.
On August 2, 2006, S&C filed a complaint against Crescent in the Special Civil Part under docket number LT-020836-06, seeking to evict Crescent from the premises for nonpayment of rent. The matter was consolidated with Crescent's complaint on September 13, 2006. In the order of consolidation, the judge dismissed all claims asserted by Crescent regarding continued possession of the premises because Crescent had voluntarily relinquished possession.
A bench trial was held on January 7, 8, 9, and 10, 2008. The judge placed her decision on the record on January 10 and entered a judgment on January 28, 2008. In the judgment order, the judge granted S&C's motion for an involuntary dismissal of the Fourth, Fifth, and Sixth Counts as to all defendants and the First, Second, and Third Counts as to defendants Charles and Steven Chera and Rosewood Holdings, LLC. The judge then dismissed the remaining counts against S&C on the merits. Regarding S&C's counterclaim and third-party claim, the judge found that S&C had met its burden of proof on both claims. The judge awarded $6000 in damages and an additional $6000 in attorneys' fees and costs in favor of S&C and against Crescent and Sement.
S&C filed its first notice of appeal on March 13, 2008, in which it challenged the damage award as too small. After a pre-argument conference on April 29, 2008, we entered an order remanding the case to the Law Division, instructing the trial judge to issue a written opinion or memorandum decision setting forth factual findings and conclusions of law regarding the January 28, 2008, order. The Law Division judge filed her decision on August 7, 2008. After setting forth her factual findings and conclusions of law, the judge vacated the $6000 damage award and entered an amended judgment of $39,949.64 in favor of S&C and against Crescent and Sement.
On September 16, 2008, we entered a second order of limited remand, this time instructing the trial judge to issue a written opinion or memorandum decision setting forth factual findings and conclusions of law regarding the award of attorneys' fees to S&C. The Law Division judge filed a written opinion on October 16, 2008, in which she increased the $6000 award of attorneys' fees to $29,025. On November 7, 2008, an amended order for judgment reflecting the increased amounts of damages and attorneys' fees was entered.
S&C filed a second notice of appeal on November 20, 2008, appealing the amended damage award. On December 15, 2008, Sement filed a cross-appeal in which he challenges the judgments entered on January 28 and November 7, 2008. These are the appeals presently before the court.
S&C, a partnership of brothers Charles and Steven Chera, is the owner of the premises in question. After beginning negotiations in September 2004, S&C and Crescent entered into a commercial lease agreement on January 14, 2005. The ten-year lease was to commence on May 1, 2005. Crescent, as the tenant, intended to use the premises as a Quiznos restaurant. Eralp Sement is the president and one of two members of Crescent.
The premises covered approximately 2000 square feet of floor area in a shopping center. Rent was fixed at $4166.66 per month for the first two years; $4500 for years three through five; and $5000 for years six through ten. In pertinent part, the lease provided that Crescent shall, at its sole cost and expense, obtain, prior to the opening for business with the public, any and all permits, licenses, approvals, and/or certificates of occupancy for the lawful operation of its Business, and shall comply with all applicable laws, ordinances, resolutions and codes and all rules and regulations of each and every department, bureau, body or agency, or any governmental or quasi-governmental authority having jurisdiction over the operation, occupancy, maintenance and use of the Demised Premises. If [Crescent] fails, for any reason whatsoever, to obtain all licenses, approvals and/or certificates of occupancy, or permits necessary for the operation of [Crescent's] business, such failure shall not affect [Crescent's] obligations under this Lease. [S&C] shall, at [Crescent's] sole cost and expense, cooperate with [Crescent], when [S&C's] assistance is required by law, in obtaining any item set forth in this Section.... [S&C] represents and warrants that the Demised Premises may be legally occupied for the uses permitted to [Crescent] under this Lease, and that said uses are permitted under applicable zoning laws.
The lease obligated Crescent to "apply for a variance to secure the use of the Premises to operate as a Quiznos restaurant." The lease was also "contingent on... [Crescent's] receipt of all necessary building... permits, and other approvals by the City of South Orange, New Jersey, allowing [Crescent] to construct the Premises for its intended use." The lease further obligated S&C to provide electrical and plumbing to the premises; to install a fire door; and to erect a floor-to-ceiling wall.
In the event of default or breach by Crescent, the lease provided that S&C could terminate Crescent's right to possession. In such an event, Article 22(a) of the lease provided that S&C "shall be entitled to recover from [Crescent] all damages incurred by [S&C] by reason of [Crescent's] default including, but not limited to, the cost of recovering possession of the premises; expenses of reletting[; and] reasonable attorneys' fees." Article 31(q) of the lease further stated:
In the event of any action or proceeding brought by either party against the other under this Lease the prevailing party shall be entitled to recover its expenses and costs, including its attorneys' fees and expert witness fees in such action or proceeding, including costs of appeal, if any, in such amount as the court may adjudge reasonable.
Sement executed a guarantee of the lease, pursuant to which he "guarantee[d], unconditionally at all times, payment of all rentals due under this Lease and the performance of all obligations of [Crescent] under the terms of this Lease." Crescent provided a two-month security deposit and the rent for the first month upon signing the lease.
This controversy arose out of a dispute between the parties as to their respective obligations under the lease. On the date the lease was executed, the properties at 125 South Orange Avenue and 127 South Orange Avenue were set up as one store using both store spaces without division by a floor-to-ceiling wall; thus, the stores would need to be separated before the Quiznos could be operated at 127 South Orange Avenue. The only separation between the two stores was a "knee wall." At this time, Sement believed that the premises were legally subdivided.
Charles Chera believed that the third paragraph of the lease obligated Sement to file for all variances and permits to complete the job. He testified that when the lease was signed, S&C did not have permission to build a wall to physically divide the premises, but everything else to commence building was in place. It was S&C's responsibility to build the wall, and it submitted a building permit application to construct the wall, a bathroom, and a rear fire exit door on January 14, 2005.
On February 24, 2005, the South Orange Engineering and Zoning Office denied a use permit application made eight days earlier by Sement on behalf of Crescent. On March 17, 2005, S&C sent a letter to Crescent's architect indicating that S&C had begun alterations to the premises and wanted Crescent and Sement to include requests for certain building permits in their application for variances to the South Orange Planning Board.*fn1
Sement resubmitted Crescent's application on April 11, 2005, and obtained approval for a change of use on April 27, 2005; however, he did not obtain the requisite construction permits at this time. Had it not been for the subdivision issue, Crescent would have been able to complete the necessary construction by August or September 2005.
Michael DeNigris, S&C's construction project manager, testified that, throughout the entire process, he attempted to assist Crescent but had frequent trouble communicating with Sement. DeNigris testified that S&C completed its construction in May 2005.
On June 27, 2005, in response to Crescent's request for a building permit, the planning board acknowledged that it would be separating one store into two smaller stores and adding a new front entrance. Crescent would, therefore, need site-plan approval from the planning board to build a new store front before construction permits would be issued. Crescent's application for building permits was thereafter denied because the property was not yet legally divided. Sement testified that he did not try to legally subdivide the property because he had "no right" to subdivide it, and S&C told him it would "take care of it." Based on his conversations with the township, Sement understood "that [he] could not get the construction permits until the property was legally subdivided." After discussions with township officials, S&C apparently believed it had obtained a waiver from the planning board such that Crescent could proceed without planning board approval.
Crescent made a second rent payment in June 2005; however, despite assurances from S&C that the issues would be resolved, Crescent stopped paying rent, and its proportionate share of taxes (22.52%), in July because the space was not subdivided, and it could not move forward with the Quiznos. DeNigris opined that Crescent could have filed its construction permit application at any time after January 15, 2005, but failed to do so until July 2005.
On August 16, 2005, Crescent notified S&C that it was in default on the lease because the rented portion of the building "did not exist in the City records as a separate space from the premises of 123-129 South Orange Avenue." Crescent requested that S&C cure the default within thirty days. DeNigris testified that near the end of September 2005, he informed Sement that Crescent could pick up the necessary building permit from South Orange. On October 6, 2005, S&C sent a letter to the township administrator regarding delays in obtaining approval for a new store entrance. On October 18, 2005, Crescent's attorney sent a second letter to S&C requesting a cure and indicating that Crescent had been informed that South Orange approved the variance request for the premises.
After Crescent filed its complaint on November 4, 2005, the parties negotiated to resolve their issues, and Crescent sent a proposed amendment to the lease to S&C. Sement testified that he first learned of the waiver for construction permits that November and officially got the building permits on December 30, 2005. S&C then changed the locks on the premises in January 2006, locking Crescent out from January to March 2006.
On February 14, 2006, S&C counterclaimed, and in early 2006, S&C gave an eviction notice to Crescent. S&C later filed an eviction complaint on August 2, 2006. The next day, Crescent voluntarily relinquished possession of the premises.
Following the relinquishment, S&C attempted to market the property to prospective tenants. Charles Chera testified that he contacted Jack Harkovey, a real estate broker who had initially brought Sement to S&C. He testified that Harkovey was unsuccessful in his efforts to re-let the premises. Charles then contacted his son, Raymond Chera, also a real estate broker. Raymond suggested that Charles contact Anytime Fitness as a prospective tenant. The lease with Anytime Fitness fell through when South Orange would not allow it to open prior to 6:00 a.m.; there were also parking issues. That lease was to commence in April 2007 for the premises located at "129 South Orange Avenue" containing 4347 square feet. Charles said that if the lease had been signed, the address would have been corrected to 127 South Orange Avenue.
The next potential tenant intended to operate a café on the premises. S&C and Kaif Kafe executed a five-year lease on December 21, 2007, for 127 South Orange Avenue. At the time of trial, Kaif Kafe was the current tenant. The monthly rent for year one was $5568.75; it rose to $5735.81, $5907.94, $6085.13, and $6267.38 per month in years two through five, respectively. According to Charles, S&C did not re-let the premises between January and August 2006 because of the pending lawsuit and because it was not authorized to re-let.
Charles testified that Crescent owed rent at $4166 per month for eight months in 2005, all of 2006, and four months of 2007; $4500 per month for the remaining eight months of 2007; taxes equal to 22.52% of the tax bill of at least $29,100; and insurance payments equal to 22.52% of the premium amount of $7000 for two years. Accounting for credits equaling $16,666 for paid rent and the security deposit, Charles testified that Crescent owed S&C $135,081. S&C's attorney certified that S&C incurred $29,025 in legal fees and $694.99 in expenses.
During trial, Crescent voluntarily withdrew all counts of the complaint against Charles and Steven Chera and Rosewood Holding, leaving S&C as the sole first-party defendant. Crescent also voluntarily withdrew the Fourth and Fifth Counts as to S&C. The judge then granted S&C's motion to dismiss the Sixth Count. At the conclusion of the trial, the judge dismissed Crescent's remaining claims against S&C, finding "no cause for the plaintiff's action as to the defendant." S&C voluntarily withdrew the Second and Third Counts of its counterclaim. The judge then found in favor of S&C on two counts. First, the judge found that Crescent breached the lease agreement. Second, the judge found that Sement breached the guarantee. The trial court then awarded S&C damages of $6000 plus attorneys' fees and costs. These amounts were later amended to $39,949.64 in damages and $29,025 in attorneys' fees. These appeals followed.
Sement contends that the trial judge erred in dismissing Crescent's claims against S&C, in finding that it was in breach of the lease, and in rejecting Crescent's defense that S&C failed to mitigate its damages. The factual findings of the trial judge will not be disturbed on appeal unless we are "convinced that they are so manifestly unsupported by or inconsistent with the competent, relevant and reasonably credible evidence as to offend the interests of justice." Fagliarone v. Twp. of N. Bergen, 78 N.J. Super. 154, 155 (App. Div.), certif. denied, 40 N.J. 221 (1963); see also Metuchen Sav. Bank v. Pierini, 377 N.J. Super. 154, 161 (App. Div. 2005) (stating same). It is not our function to weigh the evidence. Cintrone v. Hertz Truck Leasing & Rental Serv., 45 N.J. 434, 440 (1965). Neither do we "determine the credibility of witnesses, draw inferences and conclusions from the evidence, or resolve conflicts therein." Penpac, Inc. v. Passaic County Utils. Auth., 367 N.J. Super. 487, 507 (App. Div.) (quotation omitted), certif. denied, 180 N.J. 457 (2004). This is so because we are not in a good position to judge credibility and ordinarily should not make new credibility findings. Dolson v. Anastasia, 55 N.J. 2, 7 (1969); Trusky v. Ford Motor Co., 19 N.J. Super. 100, 104 (App. Div. 1952). Rather, our "aim is to determine whether the findings made could reasonably have been reached on sufficient credible evidence present in the record." Sebring Assocs. v. Coyle, 347 N.J. Super. 414, 424 (App. Div.) (quotation omitted), certif. denied, 172 N.J. 355 (2002). While we "will defer to the trial court's factual findings so long as they are supported by sufficient, credible evidence in the record, our review of the trial court's legal conclusions is de novo." 30 River Court E. Urban Renewal Co. v. Capograsso, 383 N.J. Super. 470, 476 (App. Div. 2006) (citing Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 483-84 (1974); Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)).
S&C, on the other hand, contends that the trial judge erred in calculating damages. An award of damages in a non-jury case is reviewed to determine whether the award is supported by adequate, substantial and credible evidence. Curtis v. Finneran, 83 N.J. 563, 565 (1980); Rova Farms, supra, 65 N.J. at 483-84. If the damage award is supported by such evidence, the findings of the trial court are considered binding on appeal, Rova Farms, supra, 65 N.J. at 484, unless they simply have no support in the record, ibid. (quoting Fagliarone, supra, 78 N.J. Super. at 155).
Finally, Crescent urges that the trial judge erred in awarding counsel fees to S&C. An award of counsel fees is a decision that rests within the discretion of the trial judge and is thus reviewed for an abuse of that discretion. Packard-Bamberger & Co. v. Collier, 167 N.J. 427, 443-44 (2001). "'[F]ee determinations by trial courts will be disturbed only on the rarest of occasions, and then only because of a clear abuse of discretion.'" Id. at 444 (quoting Rendine v. Pantzer, 141 N.J. 292, 317 (1995)). A trial court decision will constitute an abuse of discretion where "the 'decision [was] made without a rational explanation, inexplicably departed from established policies, or rested on an impermissible basis.'" United States v. Scurry, 193 N.J. 492, 504 (2008) (quoting Flagg v. Essex County Prosecutor, 171 N.J. 561, 571 (2002)).
We will first address the issues in Sement's cross-appeal from the dismissal of his claims and the judgment on liability and contract damages in favor of S&C. We address these issues first because if the trial court erred in ruling in favor of S&C, as Sement contends, the remaining issues of damages and attorneys' fees would be rendered moot.
In Sement's first point, he alleges that the trial judge abused her discretion by disregarding facts that proved S&C, and not Crescent, breached the lease agreement. Specifically, Sement claims S&C was in breach from the moment the lease was signed because S&C had not obtained planning board approval or a waiver for the site plan. This alleged failure of S&C caused Crescent to be unable to use the premises as intended until the approval was obtained. Furthermore, Sement urges that the letters dated September 8 and October 6, 2005, establish that S&C was obligated to obtain planning board approval. Sement contends that S&C's alleged failure to obtain the permits constituted a breach of the lease. Next, Sement argues that Crescent acted properly in withholding rent payments because S&C was in breach of the lease. Finally, Sement takes issue with several of the trial court's findings, including: Crescent had standing to go before the planning board; Crescent therefore could have obtained planning board approval or a waiver; Crescent did not attempt to rescind the lease; and Charles Chera's testimony was credible.
S&C contends that the trial judge did not abuse her discretion in determining that S&C did not breach the lease and in making certain credibility determinations. S&C argues that it never breached the lease and fulfilled all its lease obligations. S&C next claims that the trial judge did not err in finding that Crescent breached the lease because Crescent did not pay rent, refused to commence work, and never conducted any business at the premises.
Sement replies that S&C's failure to obtain the approvals it was obligated to obtain precluded Crescent from using the premises until S&C satisfied its obligations. Sement argues that he and Crescent presented the trial judge with substantial credible evidence of S&C's obligations and subsequent failures, and the trial judge erred in ruling for S&C and abused its discretion in doing so.
In the trial judge's January 10, 2008, oral decision, she first found that Crescent did not present any evidence at trial establishing that S&C's alleged breach caused it any damage. Specifically, the judge found that "there was no testimony adduced at trial, other than testimony of the plaintiff which was... not corroborative of any expenses that would rise to the level of damages if the [c]court were to find liability on behalf of the defendant."
The judge next found that S&C did not breach the lease because S&C continually cooperated with Crescent to resolve any issues. The court also stated that Crescent never attempted to rescind the lease. The judge also found Charles Chera's testimony to be credible and accepted as true that S&C attempted to contact Crescent and Sement yet they failed to respond. Importantly, the judge determined that "defendants made a good faith effort, not rising to the level of a material breach, to comply with all applicable city codes and ordinances." The judge therefore found "no cause for the plaintiff's action as to the defendant."
Addressing S&C's counterclaims and third-party complaint, the judge ruled that S&C established by a preponderance of the evidence that Crescent materially breached the lease by failing "to follow through with all steps necessary in order to open the franchise." The judge therefore entered judgment in favor of S&C.
To sustain a claim for breach of contract, a party must show the existence of a contract, failure of the other party to perform its contractual obligations, and damages flowing from the breach. Murphy v. Implicito, 392 N.J. Super. 245, 265 (App. Div. 2007) (citation and quotations omitted); Pub. Serv. Enter. Group, Inc. v. Phila. Elec. Co., 722 F. Supp. 184, 219 (D.N.J. 1989); see also Cox v. Sears Roebuck & Co., 138 N.J. 2, 10-11 (1994) (breach-of-contract claims require proof of damages).
Failure of a party to an agreement to perform a contractual obligation constitutes a breach of the contract. Franconia Assocs. v. United States, 536 U.S. 129, 142-43, 122 S.Ct. 1993, 2002, 153 L.Ed. 2d 132, 146 (2002) ("Failure by the promisor to perform at the time indicated for performance in the contract establishes an immediate breach."); Looman Realty Corp. v. Broad St. Nat'l Bank of Trenton, 74 N.J. Super. 71, 85 (App. Div.) (noting that "in law an action for breach of contract is founded upon a mere nonperformance" (citing Alnor Constr. Co. v. Herchet, 10 N.J. 246, 250-51 (1952))), certif. denied, 37 N.J. 520 (1962); Restatement (Second) of Contracts § 235(2) (1979) ("When performance of a duty under a contract is due any non-performance is a breach."). Indeed, when a "lessor or lessee fails to perform a covenant on his part to do or refrain from doing a stipulated thing, the injured party may maintain an action for the breach" of contract. Cohen v. Wozniak, 16 N.J. Super. 510, 512 (Ch. Div. 1951) (citations omitted).
We begin with the judge's factual findings to which we must defer because they are supported by substantial, credible evidence in the record. Fagliarone, supra, 78 N.J. Super. at 155. The judge found that S&C continually cooperated with and contacted Crescent and Sement to resolve any issues. This finding was supported by the testimony of both DeNigris and Charles Chera, who the court found to be credible. The judge also found that S&C made a good faith effort to comply with the applicable city codes and ordinances. This finding was supported by evidence including: S&C's letter dated March 17, 2005; S&C's attempts to obtain a planning board waiver; DeNigris's testimony that in September 2005 he informed Sement that Sement could pick up the necessary permits; and S&C's letter to South Orange dated October 5, 2005.
Based on these factual findings, S&C did not breach the lease. Under the terms of the lease, S&C was obligated to cooperate with Crescent when S&C's assistance was required by law. The factual findings outlined above show that S&C fulfilled this obligation. Moreover, S&C satisfied its building obligations, including construction of the floor-to-ceiling wall and other items. Likewise, S&C did not breach the lease by allegedly failing to obtain certain permits. In fact, S&C secured a building permit in September 2005. We are satisfied that the trial judge's ruling that S&C did not breach the lease agreement is supported by substantial, credible evidence.
Even if one assumes that S&C breached the lease, Crescent presented no proof of any damages flowing from the alleged breach and thus failed to satisfy the third prong of Murphy, supra, 392 N.J. Super. at 265. We also find no error in the trial judge's ruling that Crescent could not recover even if S&C breached the lease, requiring dismissal of Crescent's various claims against S&C.
We also agree with the trial judge that Crescent breached the lease. Crescent was obligated to "obtain... any and all permits... for the lawful operation of its Business" and to "comply with all applicable laws, ordinances, resolutions and codes and all rules and regulations of each and every... governmental or quasi-governmental authority having jurisdiction" over the premises. Crescent clearly failed to meet this obligation when it did not obtain the construction permits until December 30, 2005, despite being able to do so earlier. Crescent was also obligated to pay rent and taxes under the terms of the lease. Crescent clearly failed in this regard as well. While another party's breach may excuse performance on the part of the non-breaching party, such was not the case here as S&C did not breach the agreement. Ross Sys. v. Linden Dari-Delite, Inc., 35 N.J. 329, 341 (1961) (material breach of one party allows non-breaching party to "treat the contract as terminated and refuse to render continued performance"). In short, Crescent failed to meet its obligations under the lease and therefore breached the contract. Ibid.
Finally, Crescent's breach caused S&C damages because S&C was not paid the rent due under the lease terms. The three elements outlined in Murphy, supra, 392 N.J. Super. at 265, for breach of contract are satisfied. The judge's finding that Crescent breached the lease and that Sement was liable pursuant to the personal guarantee are supported by substantial, credible evidence and in accord with applicable law.
In its appeal, S&C argues that the judge properly found that it was entitled to an award of damages but miscalculated the amount of damages in her amended decision dated August 1, 2008. S&C seeks an increase in the award of damages from $39,949.64 to $92,613.64 because the trial judge mistakenly concluded that S&C mitigated its damages and secured a new tenant for the premises in December 2006 rather than December 2007. S&C claims that the proofs at trial were "clear and unrefuted that it was not able to locate a new tenant for the premises until December 2007." According to S&C, this error resulted in the trial court not adding accrued rent for the entirety of the year 2007, thereby erroneously discounting the damages award by $52,664. S&C urges that it is entitled to an increase in the damage award to $92,613.64.
Sement argues that even if the trial judge did not err in finding that Crescent breached the lease, S&C is not entitled to damages because it failed to mitigate. Sement alleges that Charles Chera lied under oath when he testified about his efforts to re-let the premises because the proposed lease with Kaif Kafe was for 129 South Orange Avenue, not 127 South Orange Avenue. Based on this, Sement claims that the judge abused her discretion or plainly erred in finding Chera credible in his attempts to re-let the premises. Our scope of review requires rejection of Sement's argument because on appeal we defer to the trial court's credibility determinations. Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 483-84 (1974).
In the judge's August 7, 2008, decision, she amended her original judgment to award S&C $39,949.64 in damages. She first calculated the total amounts of rent, insurance, and taxes. She commenced her analysis by calculating rent as follows: the last eight months of 2005 at $4166.00 per month, totaling $33,328.00; the twelve months of 2006 at $4166 per month, totaling $49,992.00; the first four months of 2007 at $4166.00 per month, totaling $16,664.00; and the remaining eight months of 2007 at $4500.00 per month, totaling $33,328.00. From this, the judge found the total rent for years 2005-2007 was $135,984.00. She then calculated the insurance premiums owed by Crescent as follows: the insurance premium for August 2005 to August 2006 was $7000; the renewal premium was $7000; and Crescent's proportionate share was 22.52% of these amounts, totaling $3152.80. For taxes, the trial court found that the taxes for 2005 and 2006 were $29,100.00 each year; Crescent's proportionate share was 22.52%, totaling $16,259.44.
Next, the trial judge determined the credits to which Crescent was entitled. For rent, she found that Crescent paid two months of rent and a two-month security deposit, at $4166 per month for a total of $16,664.00. The judge then found that the judge in the tenancy action filed by S&C determined that Crescent owed rent for only November and December in 2005, totaling $8332.00. For 2006, the court found that Crescent was locked out of the premises for three months, entitling Crescent to a credit of $4166.00 per month, totaling $12,498.00. The court noted that Crescent vacated the premises and surrendered the keys in August 2006 and was responsible for the remaining months of 2006. However, the judge concluded that Crescent was not liable for rent during 2007. She found that Crescent was not entitled to any credits for insurance. For taxes, the court determined that Crescent was entitled to a ten-month credit of $546.11 per month for 2005, totaling $5461.10.
Taking into account the amounts owed and credits available, the court found that Crescent owed $29,162.00 in rent, $3152.80 in insurance premiums, and $7645.64 in taxes. The court thus awarded $39,949.64.
"[A] party who breaches a contract is liable for all of the natural and probable consequences of the breach of that contract." Pickett v. Lloyd's, 131 N.J. 457, 474 (1993) (citing Donovan v. Bachstadt, 91 N.J. 434, 444-45 (1982)). Compensatory damages are awarded so that the injured party is put in as good a position as it would have been had performance been rendered as promised. Ibid. (citations and quotations omitted).
A non-breaching party's right to compensatory damages is not absolute; indeed, a party seeking damages for breach of contract has a duty to mitigate its losses. Sommer v. Kridel, 74 N.J. 446, 454 n.3 (1977); see also McGuire v. City of Jersey City, 125 N.J. 310, 320-21 (1991) (holding that we had correctly extended the mitigation rule of Sommer to commercial property leases). In the context of a lease agreement, "[a] landlord has a duty to mitigate damages where [it] seeks to recover rents due from a defaulting tenant." Sommer, supra, 74 N.J. at 457. To recover damages, the landlord must further prove it used "reasonable diligence in attempting to re-let the premises." Ibid.
It is clear from the facts that S&C mitigated its damages by re-leasing the premises to Kaif Kafe on December 21, 2007; it makes no claim for rent thereafter. The earliest S&C could have re-let the premises was August 3, 2006, the day Crescent voluntarily relinquished possession of the premises. S&C thereafter engaged a broker in an attempt to re-let the premises; negotiated with Anytime Fitness; and eventually leased the premises to Kaif Kafe. However, the judge clearly erred in finding that Charles Chera entered a lease agreement with Kaif Kafe in December 2006. That date has no support in the record. The evidence clearly establishes that the lease with Kaif Kafe was executed on December 21, 2007, as the lease includes this date in multiple locations. The judge's factual finding on this point is therefore not entitled to any deference as it is inconsistent with the relevant evidence. Fagliarone, supra, 78 N.J. Super. at 155.
The trial judge correctly found that Crescent was entitled to credit for the rent paid for two months, the two-month security deposit, and the three-month lockout. However, the judge should have found Crescent liable for rent for 2007. There is no dispute in the evidence that S&C attempted to mitigate its damages and was only able to relet the premises on December 21, 2007. The judge made no findings respecting any failure to mitigate nor otherwise explain why she awarded damages for unpaid rent through December 2006. We can only conclude that she made a clerical error. In any event, the evidence clearly requires an award of damages through December 2007, and the judgment must be amended to award unpaid rent for all of 2007.
In his final point, Sement argues that the judge abused her discretion in awarding attorneys' fees to S&C. Sement contends that the judge increased the initial $6000 award of attorneys' fees to $29,025 "without any new evidence" and therefore abused her discretion.
S&C replies that the judge properly awarded attorneys' fees in the full amount sought because the lease permits the recovery of attorneys' fees in the event of default or breach by Crescent. S&C specifically points to Articles 22(a) and 31(q) to support its conclusion. S&C also notes that Sement did not challenge the award of attorneys' fees before filing this appeal. S&C concludes that the judge did not abuse her discretion because the lease expressly allows for recovery of counsel fees.
In her decision after the first remand, the judge awarded attorneys' fees of $29,025 to S&C. She found that the parties "negotiated and added the fee-shifting provision into the contract" and that the lease was not unconscionable. Based on the express language of Article 31(q) and applicable case law, she found that an award of attorneys' fees to S&C was justified.
Long adhering to the so-called American Rule that a prevailing party is not entitled to recovery of attorneys' fees, New Jersey generally disfavors the shifting of fees. N. Bergen Rex Transp., Inc. v. Trailer Leasing Co., 158 N.J. 561, 569 (1999) (citations omitted). Nonetheless, a prevailing party can recover attorneys' fees if expressly provided for by contract. Packard-Bamberger & Co., supra, 167 N.J. at 440 (citing State, Dep't of Envtl. Prot. v. Ventron Corp., 94 N.J. 473, 504 (1983)). Although Rule 4:42-9(a) does not include contracts within its eight exceptions under which attorneys' fees may be awarded, the rule does not preclude parties from agreeing to fee-shifting provisions, and a party may be contractually obligated to pay attorneys' fees. Satellite Gateway Commc'ns, Inc. v. Musi Dining Car Co., 110 N.J. 280, 285-86 (1988) (citations omitted). Contractual fee-shifting provisions are strictly construed. Kellam Assocs., Inc. v. Angel Projects, LLC, 357 N.J. Super. 132, 138 (App. Div. 2003) (citing McGuire, supra, 125 N.J. at 326-27).
Article 31(q) of the lease permits S&C to recover its attorneys' fees here. Article 31(q) is very clear that in any action brought by either party against the other party under the lease, the prevailing party is entitled to recover its expenses and costs, including attorneys' fees. Permitting S&C to recover attorneys' fees pursuant to Article 31(q) was not an abuse of discretion on the part of the trial court. Indeed, the court based its decision on the various Supreme Court decisions discussed above, and in doing so, the court rendered its decision with a rational explanation and on a permissible basis.
Sement did not challenge the quantum of fees before the trial judge and may not do so here without raising an issue respecting a matter of public concern or an issue affecting the jurisdiction of the court. Alan J. Cornblatt, P.A. v. Barow, 153 N.J. 218, 230 (1998); Nieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973). In any event, nothing about the quantum of the award is plainly erroneous and we are satisfied that the trial judge did not abuse her discretion in making the award. Scurry, supra, 193 N.J. at 504.
Affirmed in part, reversed in part and remanded for entry of an amended judgment in the amount of $92,613.64 nunc pro tunc to January 28, 2008.