On appeal from Superior Court of New Jersey, Law Division, Essex County, Docket No. L-145-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Wefing, Payne and Baxter.
Plaintiff sued defendant for breach of contract and breach of the covenant of good faith and fair dealing. After a nine- day bench trial, the trial court found for plaintiff and awarded him damages of $181,876.75, with pre-judgment interest of $67,051.89, for a total judgment of $248,928.64. Plaintiff has appealed, contending that the manner in which the trial court calculated his damages was erroneous. Defendant has not cross-appealed from the finding of liability. After reviewing the record in light of the contentions advanced on appeal, we affirm.
The dispute between the parties arises out of an attempted real estate transaction that was never consummated. Defendant owned a 2.78-acre parcel of land on Passaic Avenue in Fairfield, and on January 18, 2001, plaintiff signed a contract to buy this land for $1,220,000. He intended to erect a building of approximately 32,000 square feet in which he would house his business, Electronic Office Systems (EOS), which was engaged in the sales and service of office equipment, and lease the remaining space to other tenants. His projected cost for construction was $3.6 million. This was plaintiff's first venture into real estate development.
As part of his due diligence leading up to closing, plaintiff had the land examined with respect to its environmental qualities and learned that it was significantly contaminated. Defendant had a similar examination performed, with similar results. After a period of negotiation, in July 2001, the parties signed an amendment to their contract under which defendant undertook responsibility for the environmental cleanup of the land in return for plaintiff's agreement not to terminate the contract for any reason other than a default by defendant. The contract amendment was drafted by defendant's attorneys and signed by both parties.
Once defendant was involved in the remediation process, it learned that the extent of the contamination was significantly greater than it had anticipated and that its costs, as a consequence, would be far greater than it had expected, approaching almost $600,000. Based upon this discovery, defendant informed plaintiff in May 2002 that it was terminating the contract.
In 2002, plaintiff filed suit, alleging breach and seeking damages. For reasons that are not apparent from the record, the matter was not reached for trial until 2009. We limit our description of the evidence presented at trial to that dealing with damages, since that is the only issue presented on appeal.*fn1
Plaintiff presented one witness with respect to his damage claim, Frank D. Tinari, Ph.D., an economist. Defendant presented two witnesses on damages, Robert McNerney, a real estate appraiser, whose professional designations included both an M.A.I. and S.R.A.,*fn2 and Conrad Druker, C.P.A. Dr. Tinari's expert report set plaintiff's total economic loss as a result of defendant's breach at $2,186,371. Mr. McNerney, on the other hand, set plaintiff's lost profits at $98,000.
Initially, at the conclusion of trial, the trial court found for plaintiff and awarded damages of $484,671, which included damages for both lost profits and for out-of-pocket damages. Defendant argued that plaintiff was not entitled to both forms of damages. The trial court agreed and, turning to plaintiff, inquired which remedy he chose. Not surprisingly, plaintiff elected to receive the higher amount which, under the trial court's methodology, was out-of-pocket expenses. Plaintiff has appealed, arguing that the trial court incorrectly rejected its theory of damages.
Before proceeding to an analysis of the competing theories, we note that we reject defendant's argument that the appeal is moot in light of plaintiff's election of out-of-pocket damages. Plaintiff did not, contrary to defendant's contention, waive anything by responding to the trial court's query; he certainly did not waive his right to argue that the trial court erred as a matter of law in calculating his damages.
Clearly, Tinari and McNerney approached the question of plaintiff's damages from different perspectives. Tinari included the following elements in his calculation of plaintiff's lost profits: the net cash flow he would have realized from leases with third-party tenants and with EOS, plaintiff's own company; litigation costs; the net cash flow loss he incurred from relocating EOS to another site; costs for what he termed management diversion, that is, the time plaintiff had to spend on this dispute that he would have been able to direct to more productive activities; and recoverable interest.
Tinari totaled these losses in excess of $2 million. Tinari admitted on cross-examination that he did not include in his calculations the capital cost of completing the project or investigate whether plaintiff or EOS had the financial ability to complete the project with assets on hand or to secure any necessary ...