January 6, 2012
MALDEN REAL ESTATE, PLAINTIFF-RESPONDENT,
CYCLE CRAFT, INC., DEFENDANT-APPELLANT.
On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L-2052-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued May 16, 2011
Before Judges A. A. Rodriguez and Grall.
This appeal is from an order and final judgment entered following a bench trial on a complaint filed by plaintiff, Malden Real Estate (Malden), the owner of the Rutgers Village Shopping Center on Route 46 in Parsippany, and a counterclaim filed by its tenant, Cycle Craft, Inc. (Cycle). The judge dismissed Malden's complaint for possession of the leased premises and counts of Cycle's counterclaim alleging unjust enrichment and violation of the New Jersey Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -20, and entered judgment against Cycle on Malden's claim for past due assessments. She also awarded Cycle damages on its allegations of breach of the covenant of good faith and fair dealing and of breach of an order and stipulation of settlement terminating a prior lawsuit between the parties. Cycle appeals and challenges the dismissal of its claims for unjust enrichment and damages under the CFA, and the denial of counsel fess for its successful efforts to enforce the order and stipulation of settlement. We affirm in part and reverse in part.
In March 2002, Cycle purchased its business from a predecessor and assumed the existing lease with Malden. However, in September 2002, pursuant to eminent domain, the State of New Jersey condemned a portion of the shopping center so that the Department of Transportation (DOT) could undertake a project to widen Route 46. The State paid Malden $654,773 in compensation. The project eliminated several parking spaces used by Cycle's business and affected access to the area of the mall directly in front of Cycle's business.
In the first lawsuit, Cycle sued Malden, alleging breach of its lease and seeking damages resulting from the elimination of parking spaces and the deleterious effect on its business caused by the road project. The first litigation ended with an order incorporating determinations made by the judge and a stipulation of settlement in August 2005, which provided that Malden would pay Cycle $15,000 and reduce Cycle's rent by $2000 per month, until the completion of the widening project and re-striping of the shopping center parking lot. After the re-striping was completed, Malden would reduce Cycle's rent by $1500 per month for the duration of the lease term and an additional renewal period.
Despite the settlement, the problems continued. In April 2008, Malden commenced the second litigation by suing Cycle in the Special Civil Part for unpaid rents and common area maintenance (CAM) charges. Cycle counterclaimed, alleging a claim pursuant to the CFA, breach of the terms of the August 2005 order and stipulation of settlement, breach of the implied covenant of good faith and fair dealing, and unjust enrichment.
Following a bench trial, the judge denied Malden's demand for possession of the premises, finding that Malden had breached the terms of the August 2005 order and stipulation of settlement and the implied covenant of good faith and fair dealing. The judge awarded Cycle a retroactive rent abatement, but determined that Cycle owed Malden for unpaid common area charges. The judge dismissed Cycle's CFA claim and unjust enrichment claim. Although Malden may have breached the settlement and lease agreement, the judge reasoned that the trial evidence did not show that there were substantial aggravating circumstances present in such breach. Finally, the judge denied both parties' demands for attorney's fees.
Consumer Fraud Act Claim
Cycle appeals and contends that it proved Malden's CFA violation. Specifically, Cycle argues that Malden's actions, in raising CAM charges from $225 in 2002 to $1300 in 2009, constitute an unconscionable commercial practice in violation of the CFA. Cycle also argues that the evidence adduced at trial, including the increase of CAM charges, the absence of an increase for Malden's other tenants and the rates charged by Malden's snow removal vendor at Malden's other property, establishes a fraudulent act in violation of the CFA. We disagree.
At the outset, we note that there was ample evidence in the record to support the judge's factual findings. Such findings "are considered binding on appeal when supported by adequate, substantial and credible evidence." Sager v. O.A. Peterson Constr. Co., 182 N.J. 156, 164 (2004) (quoting Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974) (internal quotation marks omitted)). We will not disturb a trial court's factual findings unless "they are so wholly unsupportable as to result in a denial of justice." Greenfield v. Dusseault, 60 N.J. Super. 436, 444 (App. Div.), aff'd, o.b., 33 N.J. 78 (1960). We note that Cycle's lease called for payment of charges based on percentage of the leased space, and the pertinent question is whether its charges were assessed in that manner.
On the merits, we note that the CFA is "one of the strongest consumer protection laws in the nation." Cox v. Sears Roebuck & Co., 138 N.J. 2, 15 (1994) (internal quotation marks omitted). Violations of the CFA "can occur as a result of an affirmative act, an omission to act, or a violation of an administrative regulation." Wozniak v. Pennella, 373 N.J. Super. 445, 456 (App. Div. 2004), certif. denied, 185 N.J. 212 (2005).
It is settled that "[t]he CFA is applicable to the landlord/tenant relationship." Ibid. (citing 49 Prospect Street Tenants Ass'n v. Sheva Gardens, Inc., 227 N.J. Super. 449, 468 (App. Div. 1988); 316 49 St. Assoc. v. Galvez, 269 N.J. Super. 481, 491 (App. Div. 1994)). However, in this case, we agree with the judge that it does not apply. This is because "a breach of warranty, or any breach of contract, is not per se unfair or unconscionable . . . and a breach of warranty alone does not violate a consumer protection statute." Cox, supra, 138 N.J. at 18 (quoting D'Ercole Sales, Inc. v. Fruehauf Corp., 206 N.J. Super. 11, 23 (App. Div. 1985) (internal quotation marks omitted)). In Cox, Justice Clifford, writing for the court, explained:
Because any breach of warranty or contract is unfair to the non-breaching party, the law permits that party to recoup remedial damages in an action on the contract; however, by providing that a court should treble those damages and should award attorneys' fees and costs, the Legislature must have intended that substantial aggravating circumstances be present in addition to the breach. DiNicola v. Watchung Furniture's Country Manor, 232 N.J. Super. 69, 72 (App. Div.) (finding that breach of warranty in supplying defective furniture and denying that defect existed was not unconscionable), certif. denied, 117 N.J. 126 (1989); D'Ercole Sales, supra, 206 N.J. Super. at 31 (holding that breach of warranty for malfunctioning tow truck and refusal to repair was not unconscionable practice). [Cox, supra, 138 N.J. at 18.]
Thus, here, given the findings by the judge that no aggravating circumstances existed in the breach of the settlement agreement and lease, we reject Cycle's contention. The judge's legal analysis is sound. The CFA does not apply.
Cycle also contends that it "should be awarded its attorneys' fees incurred to enforce the settlement order pursuant to R[ule] 1:10-3," because it succeeded in enforcing the terms of the settlement agreement and because the judge found that Malden breached the agreement and the implied covenant of good faith and fair dealing.
Rule 1:10-3 provides in part that "[t]he court in its discretion may make an allowance for counsel fees to be paid by any party to the action to a party accorded relief under this rule." "[T]his rule provision allowing for attorney's fees recognizes that as a matter of fundamental fairness, a party who willfully fails to comply with an order or judgment entitling his adversary to litigant's rights is properly chargeable with his adversary's enforcement expenses." Pressler & Verniero, Current N.J. Court Rules, comment 4.4.5 on R. 1:10-3 (2012).
"The threshold issue in determining whether an attorneys' fee award is reasonable is whether the party seeking the fee prevailed in the litigation." N. Bergen Rex Transp. v. Trailer Leasing Co., 158 N.J. 561, 570 (1999) (citing Singer v. State, 95 N.J. 487, 494, cert. denied, 469 U.S. 832, 105 S. Ct. 121, 83 L. Ed. 2d 64 (1984)). The Court in Singer adopted a two-prong test to determine the prevailing party in a civil suit. 95 N.J. at 494 (citing Nadeau v. Helgemoe, 581 F.2d 275 (1st Cir. 1978)). First, "[a] party must demonstrate that his lawsuit was causally related to securing the relief obtained; a fee award is justified if plaintiffs' efforts are a 'necessary and important' factor in obtaining the relief." Ibid. (quoting Nadeau, supra, 581 F.2d at 280). The second prong is fulfilled when a party "establish[es] that the relief granted had some basis in law." Ibid. "[A] party can be considered 'prevailing'. . . even though the disposition of the case does not include a final judgment entered in plaintiff's favor, provided plaintiff has 'won substantially the relief originally sought in her [or his] complaint.'" Id. at 495 (second alteration in original) (quoting Maher v. Gagne, 448 U.S. 122, 127, 100 S.Ct. 2570, 2576, 65 L. Ed. 2d 653, 658 (1980)).
Here, although Cycle was required to pay Malden the balance of the CAM charges it withheld, Cycle prevailed on its claimed breach of the order and stipulation of settlement and therefore should be considered the prevailing party on that claim. The judge's award of $17,000 in overcharged rent to offset the unpaid CAM charges supports Cycle's argument. In applying the first prong of the Singer test, Cycle's assertion of the counterclaim was necessary to enforce the terms of the settlement agreement and to secure relief from Malden's excessive rent charges. Moreover, Cycle meets the second prong of the test because the judge granted the relief of rent abatement to Cycle pursuant to the settlement agreement. In addition, the judge found that Malden did not act in good faith in attempting to remedy the traffic issues caused by the construction project. Therefore, Cycle is entitled to recover reasonable attorney's fees incurred solely in the effort to enforce its rights pursuant to the settlement order. On remand, the court should determine that amount.
Summarizing, we affirm the decision that the CFA does not apply to Cycle's claim of breach of contract. However, we reverse the denial of counsel fees and remand for a determination of the amount of fees to be paid by Malden to Cycle.
Affirmed in part, and reversed and remanded in part.
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