NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-3129-23
VASWANI INC.,
Plaintiff-Respondent,
v.
YX1 LOGISTICS, LLC,
Defendant-Appellant. _______________________
Submitted February 4, 2025 – Decided March 6, 2025
Before Judges Sumners and Perez Friscia.
On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-2575-21.
Clark Guldin Attorneys at Law, attorneys for appellant (Jonathan A. Ozarow, of counsel and on the briefs).
The Law Offices of Bruce E. Baldinger, LLC and Robert A. Jones, attorneys for respondent (Bruce E. Baldinger and Robert A. Jones, on the brief).
PER CURIAM In this commercial lease matter, defendant YX1 Logistics, LLC appeals
from a March 27, 2024 Law Division amended final judgment, which was
entered in favor of plaintiff Vaswani, Inc., and dismissed defendant's
counterclaims following a bench trial. Defendant further appeals from the June
7, 2024 trial court order granting plaintiff's motion for reconsideration and
awarding $364,469.46 in damages, including $139,439.85 in damages and
$225,029.61 in counsel fees to plaintiff. Following our review of the parties'
arguments, the record, and the applicable law, we affirm in part, reverse in part,
and remand for further proceedings.
I.
We summarize the evidence adduced during the six-day bench trial as
necessary to resolve the issues raised on appeal. On July 1, 2018, 207 Pond
Middlesex Property, LLC (207 Pond) entered a triple net 1 lease (master lease)
with defendant. Defendant rented 255,000 square feet of commercial office and
warehouse space in Middlesex from 207 Pond. Under provision 12.1 of the
1 "A 'triple net' . . . lease is a lease in which a commercial tenant is responsible for 'maintaining the premises and for paying all utilities, taxes and other charges associated with the property.'" Geringer v. Hartz Mountain Dev. Corp., 388 N.J. Super. 392, 400 n.2 (App. Div. 2006) (quoting N.J. Indus. Props. v. Y.C. & V.L., Inc., 100 N.J. 432, 434 (1985)).
A-3129-23 2 master lease, defendant was "solely responsible for obtaining all certificates and
permits to legally use the [l]eased [p]remises" and was "solely responsible for
the installation of any and all systems required by any City, State[,] or municipal
authority or ordinance(s) for the conduct of its business including but not limited
to any . . . sprinkler system, fire suppression, alarm or exhaust system."
On October 20, 2020, defendant entered a sublease with plaintiff for
37,025 square feet of warehouse and office space (the subleased property) at the
Middlesex property (the building). Plaintiff entered the sublease for the purpose
of assembling and storing custom retail fixtures that it manufactured, designed,
and installed for businesses throughout the country. Plaintiff's Chief Financial
Officer Amit Nihalani executed the sublease with defendant's principal Victor
Kameo. The sublease commenced on October 15, 2020, and terminated on
September 30, 2021, with no renewal option. Under the sublease, plaintiff's
monthly rent was $32,396.85, and it paid a security deposit of two months' rent.
Under provision five of the sublease, plaintiff was only required to pay
the base monthly rent and no "additional expenses." The provision further stated
defendant "was obligated to maintain . . . all major systems such as the heating,
plumbing, and electrical." Article four of the sublease's seventeenth provision
addressed the condition of the premises, stating:
A-3129-23 3 The [l]essee has had the opportunity to inspect the [p]remises and acknowledges with its signature on this lease that the [p]remises are in good condition and comply in all respects with the requirements of this [l]ease. Furthermore, the [l]essor makes no representation or warranty with respect to the condition of the [p]remises or its fitness or availability for any particular use, and the [l]essor shall not be liable for any latent or patent defect therein. Furthermore, the [l]essee represents that [l]essee has inspected the [p]remises and is leasing and will take possession of the [p]remises with all current fixtures present in their "as is" condition as of the date hereof.
After plaintiff took possession in October 2020, it planned deliveries and
moved inventory to the subleased property. On November 12, about a month
after plaintiff's lease commenced, the Middlesex County Fire Marshal's Office
(MCFMO) issued defendant Uniform Fire Code (UFC)2 violations for the
building. When inspecting the building, an assistant fire marshal found ten UFC
violations, including seven related to the adequacy, maintenance, and
performance of the "[f]ire protection [s]ystem" and three violations related to
the obstructed means of egress and storage of combustible materials. He issued
a notice of imminent hazard and an order to take corrective action, which forced
2 N.J.A.C. 5:70-1 to -4.20. The UFC was promulgated pursuant to the New Jersey Uniform Fire Safety Act, N.J.S.A. 52:27D-192 to -213. A-3129-23 4 the building's closure as of 5:00 p.m. on November 12 and prohibited any use
and occupancy.
The assistant fire marshal advised other MCFMO employees in an email
dated November 12 that the fire protection system at the building was
inadequate, and the building was on a "fire watch . . . until the [f]ire [a]larm and
[s]prinkler [s]ystem[s] [we]re repaired, tested, and compliant with the type of
storage." In a later email sent to the Borough of Middlesex's construction
official, the assistant fire marshal stated that the "hazard [was] due to problems
with the [fire] alarm system and sprinkler system. The [b]uilding [would be] on
a fire watch until repairs c[ould] be made. The[re] [was] also [UFC] code
violations in the building for improper storage and blocked egress."
The subleased property's extended closure for almost five months for UFC
violations resulted in this commercial lease dispute. On May 3, 2021, plaintiff
filed an amended complaint asserting claims for: breach of contract; breach of
the warranty of quiet enjoyment and use; Consumer Fraud Act (CFA), N.J.S.A.
56:8-1 to -228, violations; and defendant's counsel's negligent and intentional
misrepresentation. After defendant successfully moved to dismiss the CFA and
misrepresentation claims, it filed an answer and counterclaim. Defendant's
A-3129-23 5 counterclaim alleged: breach of contract; promissory estoppel; unjust
enrichment; and frivolous litigation. On August 13, plaintiff filed an answer.
At trial, Nihalani testified plaintiff suffered harm because it could not use
the subleased property and remove its merchandise. He explained that defendant
failed to advise plaintiff on November 12, 2020, that the MCFMO ordered the
building closed. During a phone call on December 2, the assistant fire marshal
told Nihalani that plaintiff's employees had to vacate the subleased property due
to the building's closure for UFC violations. Nihalani immediately contacted
Kameo regarding the subleased property's closure and advised Kameo that the
closure was going to cause "severe disruption [to plaintiff's] business." He
testified plaintiff had to locate "alternative space" "for the goods that were
coming" in because they could no longer be delivered, stored, and assembled at
the subleased property. Further, Nihalani emailed Kameo explaining that
because there were "four containers [of goods] that [plaintiff] c[ould not]
unload," plaintiff was going to be billed "$650 per day, per container in
demurrage charges." While Nihalani had inspected the subleased property for
plaintiff prior to entering the sublease, he acknowledged not investigating the
fire alarm and sprinkler systems.
A-3129-23 6 On December 8, Nihalani emailed Kameo to confirm that plaintiff would
"be back in the warehouse by . . . December 10." On December 10, the assistant
fire marshal still had not lifted the closure order or permitted plaintiff into the
subleased property. That day, Nihalani emailed Kameo and offered to forward
the invoices for the resulting expenses plaintiff was incurring. He also requested
they come to an arrangement on whether plaintiff would "be reimbursed for the
rent, demurrage charges, freight, and labor expenses." Kameo advised Nihalani
that he would address the situation once the MCFMO rescinded the notice of
imminent hazard and permitted plaintiff back into the subleased property.
Nihalani testified he understood from his conversations with Kameo that
defendant was waiving plaintiff's rent obligation under the lease for the time that
"full access to the [subleased] [p]roperty" was denied. He stated that in mid-
February, Kameo offered plaintiff the option to move out. Specifically, Nihalani
testified that Kameo "[t]wice . . . told [plaintiff] just to leave," but plaintiff
remained based on Kameo's assurances that the building would be fixed "in a
timely manner." While the subleased property remained closed, plaintiff
diverted shipments elsewhere and was forced to store materials in other
locations. Plaintiff used alternate warehouse space to continue its business
A-3129-23 7 operations. On March 29, 2021, the assistant fire marshal provided plaintiff
with a one-time exception to remove inventory.
On April 12, after approximately five months, the fire alarm and sprinkler
systems were repaired, and the assistant fire marshal advised Nihalani the notice
of imminent hazard was rescinded. The same day, defendant's counsel sent
plaintiff a notice of default for plaintiff's failure to pay rent, alleging
$161,984.25 in back rent and threatening eviction. In response, plaintiff's
counsel notified defendant that there had been an agreement that defendant
would charge no rent until the parties addressed the subleased property's closure
and plaintiff's damages "in excess of $300,000." Nihalani separately emailed
Kameo a proposed resolution, which Kameo did not accept. The two men later
met on April 20 but failed to reach a resolution.
On April 14, plaintiff began renting another comparable office space at a
higher monthly rent of $35,333.33. On April 20, Nihalani learned the subleased
property did not have a certificate of occupancy (CO). Plaintiff decided it would
vacate the subleased property based on the long-term closure and further
questions surrounding the building. In May, plaintiff learned defendant was
facing eviction for failing to pay rent under the master lease, which Nihalani
believed placed plaintiff's sublease in jeopardy. Nihalani believed he could not
A-3129-23 8 operate as normal from the property without a CO, and Kameo did not obtain a
CO until May 25. Plaintiff vacated the subleased property on June 1 and placed
$194,000 in rental monies accrued under the sublease into escrow.
Nihalani testified that due to the subleased property closure, plaintiff
sustained damages of: $17,618.88 for the "incremental costs of the additional
warehouse"; $64,793.70 for the security deposit; $55,420 for storing
"inventory . . . intended to be stored at" the subleased property but diverted to
third parties; $14,590.75 for the cost of sending "inventory. . . brought in[to
other storage facilities], subsequent to" the subleased property's closure; and
$111,741.06 in lost profits because plaintiff had to store the incoming inventory
meant for the subleased property at its Edison facility, which resulted in the
inability to store customers' materials at the Edison facility. Nihalani explained
that he calculated the $111,741.06 in lost profits by determining the space used
in the Edison facility that would typically have stored customers' items and then
applying a "[fifty] cent per square foot cubic charge" to that space.
On cross-examination, Nihalani testified he calculated the alleged amount
of damages by using relevant data "in . . . [plaintiff's] ERP system." This
calculation used the square footage plaintiff was forced to use at the Edison
facility for the subleased property's diverted goods. He used the stored items
A-3129-23 9 size and dimensions. He also recalled "a situation where . . . [plaintiff] did[ not]
have the ability to service customers" by storing products, but he could not recall
specific details. Nihalani conceded plaintiff did not "actively" market the
Edison facility space because plaintiff realized it could not "take on more
customers." At his deposition, Nihalani addressed plaintiff's alleged damages,
but the parties disputed whether plaintiff had failed to respond to defendant's
discovery requests for documentation of the lost profits.
The construction official testified that he was responsible for performing
building inspections in Middlesex. He recalled that in May 2020, he received
defendant's application for a CO, but he could not recall the applicant's name.
The official inspected the building but did not issue a CO "due to" insufficient
"fire alarm and sprinkler system[s]." The official explained that no CO was
issued for the building until the following year on May 25, 2021.
The assistant fire marshal who inspected the building testified that all
buildings are required to have UFC certificates of inspection at a property's
location. He further stated that certificates are generally issued to the entity
occupying the building. The assistant fire marshal had previously inspected the
building in 2019, finding "[t]here w[ere] [UFC] violations." In 2019, the
assistant fire marshal discovered there were "[f]ire alarm issues, sprinkler
A-3129-23 10 issues," and other concerns. He testified the building's owner, defendant, or
entity in possession of the building should have addressed the UFC violations
during the abatement period. "[D]ue to [his] workload," the assistant fire
marshal did not reinspect the building until November 12, 2020, which resulted
in the issuance of a notice of imminent hazard and closure of the entire building.
On February 17, 2021, the assistant fire marshal granted defendant's request for
an extension to cure the violations. He thereafter granted defendant's request
for a further extension until April 15. The assistant fire marshal confirmed that
on April 12, he rescinded the notice of imminent hazard and "fire watch."
On April 20, after a walk-through inspection, the assistant fire marshal
issued new "violation notices" related to "fire extinguishers," "[c]arbon
monoxide detectors," and "maintain[ing] fire rated construction in another area."
He testified that "the fire alarm control panel" was not located in plaintiff's
subleased space, and there were "sprinkler system controls . . . all over the
building."
During the trial, defendant called plaintiff's Chief Executive Officer Vinay
Vaswani (CEO) to testify. He confirmed that Nihalani's calculated damages for
the "storage [loss] claim" of $111,740.06 were based on lost rental "space within
[plaintiff's Edison] warehouse[,] and it reflect[ed] the lost potential revenue or
A-3129-23 11 sales [for] having to take up that space at [the] warehouse." The CEO had no
knowledge of defendant's discovery requests for "documents related to [its]
temporary storage [damage] claim." Regarding plaintiff's invoices for shipping
charges and other damages, the CEO testified to being unfamiliar with the
invoices as his primary focus was sales and "less so on the operations." He
further testified that "Nihalani [wa]s in charge of most of the interactions"
regarding the subleased property, storage, and shipments. The CEO knew
Nihalani "explore[d] alternative space and . . . tr[ied] to figure out how to
manage" the closure issue because plaintiff did not "have access to" the
subleased property, creating an urgent "challenge."
Kameo testified that the MCFMO never notified him of UFC violations in
2019. He recalled applying for a CO in 2020, but he admitted to only receiving
a CO on May 25, 2021. He maintained the UFC violations were issued directly
to defendant's subleasing tenant Tri State. Kameo acknowledged the violations
related to necessary fire alarm and sprinkler system repairs in addition to the
storage of flammable products. He stated defendant had the initial obligation to
cure the violations but was steadfast in his testimony that the "obligations were
pushed to the . . . . sublease tenant[s]."
A-3129-23 12 Kameo stated that Wynn Global Logistics (Wynn) contacted him after the
closure, claiming ownership of the concerning flammable products located in
Tri State's subleased space. After Wynn had agreed to remove the products but
failed to act, on February 3, 2021, defendant filed an order to show cause and
verified complaint seeking temporary restraints to seek removal of the
flammable products. On March 12, the motion court issued an order requiring
Tri State and Wynn to remove the inventory within thirty days of when the
MCFMO permitted entry into the building. Wynn thereafter removed the
products. Kameo testified that defendant sued Tri State and Wynn and obtained
a judgment against Tri State "somewhere [around] $2,000,000."
Kameo further testified that plaintiff always "had access" to its subleased
property and was never prevented from "tak[ing] things out." Kameo
maintained on cross-examination that the MCFMO order closing the building
was only issued to Tri State. Kameo asserted that there was never a rent
abatement agreement, and Nihalani "never said . . . he [did not] want to pay rent"
after the assistant fire marshal issued the notice of imminent hazard.
Regarding the repairs and responsibility to cure the fire alarm and
sprinkler system violations, Kameo testified the violations were the subtenant's
responsibility, and plaintiff was responsible for its "section" of the building. He
A-3129-23 13 conceded he never contacted plaintiff to request any fire alarm and sprinkler
system repairs or financial contribution for repairs. Kameo admitted to offering
plaintiff a release from the sublease but qualified it was subject to the
negotiation of its rental obligation.
At the conclusion of the trial, the court reserved decision. In its oral
decision that followed, the court found "the actions of . . . defendant constituted
a breach of contract and [a] breach of the covenant of good faith and fair
dealing." Specifically, it determined plaintiff established defendant breached
the sublease because: the master lease "identifie[d] that the sprinkler systems
and fire alarm systems were defendant's responsibility and not the [sub]tenant's
responsibility"; defendant was required under the sublease to "maintain . . . the
premises in addition to all major systems, such as the heating, plumbing, and
electrical," which included the "fire alarm[s] and the sprinklers"; "the failing
sprinkler and [fire] alarm systems were not maintained and resulted in a
shutdown of the building directly and negatively impacting plaintiff's ability to
conduct its business"; "during the . . . shut[down]," plaintiff could not deliver
"products of any kind . . . into the facility and no . . . work could be
conducted . . . , which was at the very heart of the business model plaintiff had
for use of this [subleased] property"; and "plaintiff had to make alternate
A-3129-23 14 arrangements . . . [for] goods[] with other facilities to cover their business." The
court concluded plaintiff sufficiently established damages, finding "plaintiff
simply did not get the benefit of what [it] bargained for, although [it] intended
and" tried to comply with the sublease terms.
After finding the construction official testified credibly, the court found
he established defendant never obtained a CO in 2020 because "there w[ere] no
[working] fire alarm or sprinkler" systems as required. It also found the assistant
fire marshal's testimony was "credible" and "essential." The assistant fire
marshal established that unabated fire alarm and sprinkler system violations
existed in 2019. The court noted the UFC violations existed when plaintiff took
possession of the building, and "[t]he building . . . did not have a valid New
Jersey [c]ertificate of [i]nspection, even though every property was required to
have one pursuant to the [UFC]." It observed buildings may have multiple
certificates of inspection. The court found it relevant that there was "one
singular [fire alarm system and sprinkler] system for the entire building," and
the assistant fire marshal established the notice of imminent hazard "meant the
entire building was shut down." While the November 12 MCFMO order was
issued to Tri State, the assistant fire marshal had contemporaneously contacted
Kameo to discuss the violations and sent defendant a "list of identical violations
A-3129-23 15 . . . issued." The court also found the assistant fire marshal established that
"Kameo acknowledged it was [defendant's] responsibility to take care of the
repairs and that [it] . . . hired the people to do so."
The court found most of Kameo's testimony was not credible but did not
"discount his testimony in its entirety." The court stated that "his testimony
often contradicted itself or contradicted prior deposition testimony, despite his
attempts to explain or rationalize inconsistencies that the [c]ourt d[id] not find
credible." It noted that while Kameo could not recall a discussion about
forgiving plaintiff's rent, defendant produced no invoices or documents
requesting rent after January 2021. Specifically, the court found Kameo's
testimony regarding the lack of a CO was not credible, because he admitted to
applying for a CO in early 2020 yet never received a CO before entering the
sublease with plaintiff. Further, the court stated Kameo was clearly "aware of
the issues related to the fire alarm and the sprinkler system[s] prior to entering
into the sublease" with plaintiff.
Regarding damages "attributable to the breach by . . . defendant," the court
awarded "$74,646.15," finding: "the amount of $14,000 for temporary storage,"
because invoices showed "for April . . . 2021" "warehousing in the amount of
$7,000 and [for] May 2021 in the amount of $7,000"; "the amount of $5,565.25"
A-3129-23 16 for replacement warehouse storage with Ace Worldwide; and "$55,008.90" for
the loss of space in the Edison facility because plaintiff "could have used it for
other needs." 3 Additionally, the court ordered defendant to return plaintiff's
"security deposit in the amount of $64,793.70" and found plaintiff was "entitled
to attorney's fees."
On May 6, 2024, the court awarded plaintiff counsel fees. 4 Thereafter,
plaintiff successfully moved for reconsideration of the amount of counsel fees
awarded. In granting the motion, the court referenced its prior oral decision and
found it had "only intended to reduce [plaintiff trial counsel's] bill by 15.1 hours.
However, it erroneously subtracted this amount from 54.3 hours, as evidenced
3 We note the sum of the court's awarded damages to plaintiff for costs incurred and lost profits appears to total $74,574.15. It is unclear from the record how the court derived the $74,646.15 total. 4 On appeal, we were not provided the transcript of the court's May 6, 2024 oral decision awarding counsel fees. We note defendant contends the court erroneously found plaintiff was entitled to counsel fees under the sublease, but defendant does not challenge the amount of awarded counsel fees. Therefore, we limit our discussion to the arguments defendant raised on appeal. Issues not briefed on appeal are deemed waived. Pressler & Verniero, Current N.J. Court Rules, cmt. 5 on R. 2:6-2 (2025); In re Gloria T. Mann Revocable Tr., 468 N.J. Super. 160, 180 (App. Div. 2021); Sklodowsky v. Lushis, 417 N.J. Super. 648, 657 (App. Div. 2011) (finding "[a]n issue not briefed on appeal is deemed" abandoned). A-3129-23 17 by the transcript." The court elucidated that the calculation error warranted
reconsideration because:
15.1 hours should have been reduced from the total of 260.75 hours billed to 245.65 hours billed. At $550 an hour this would amount to $135,107.50. The total for [plaintiff co-counsel's] bill ($135,107.50), [plaintiff's counsel]'s bill ($85,935) and the costs and fees ($2,531.11 and $456) is . . . $225,029.61.
On appeal, defendant argues reversal is warranted because the court
erroneously: determined defendant breached the sublease; calculated damages;
and failed to enter judgment in favor of defendant awarding damages for rent
owed from April 12, 2021, through June 30, 2021, plus attorneys' fees.
II.
We begin by recognizing the well-established standard of review of an
appeal from a bench trial. We "review a 'trial court's determinations, premised
on the testimony of witnesses and written evidence at a bench trial, in
accordance with a deferential standard.'" Nelson v. Elizabeth Bd. of Educ., 466
N.J. Super. 325, 336 (App. Div. 2021) (quoting D'Agostino v. Maldonado, 216
N.J. 168, 182 (2013)). Ordinarily, "[t]he scope of [our] review of a trial court's
fact-finding function is limited." Seidman v. Clifton Sav. Bank, S.L.A., 205
N.J. 150, 169 (2011) (quoting Cesare v. Cesare, 154 N.J. 394, 411 (1998)).
"[W]e defer to the trial court's credibility determinations, because it ' "hears the
A-3129-23 18 case, sees and observes the witnesses, and hears them testify," affording it "a
better perspective than a reviewing court in evaluating the veracity of a
witness."'" City Council of Orange Twp. v. Edwards, 455 N.J. Super. 261, 272
(App. Div. 2018) (quoting Gnall v. Gnall, 222 N.J. 414, 428 (2015)). We will
"'not disturb the factual findings and legal conclusions of the trial judge' unless
convinced that those findings and conclusions were 'so manifestly unsupported
by or inconsistent with the competent, relevant and reasonably credible evidence
as to offend the interests of justice.'" Allstate Ins. Co. v. Northfield Med. Ctr.,
P.C., 228 N.J. 596, 619 (2017) (quoting Griepenburg v. Township of Ocean, 220
N.J. 239, 254 (2015)).
III.
A.
Defendant first contends the court erred in determining it breached the
sublease with plaintiff. Specifically, defendant argues the court erroneously
determined it "breached an express provision of the [s]ublease," and plaintiff
was prevented from using the subleased space. We disagree. The record
supports the court's findings regarding defendant's breach, which it based on the
sublease's plain language and credibility determinations.
A-3129-23 19 A "lease is a contract . . . which sets forth [the parties'] rights and
obligations to each other in connection with [a] temporary grant of possession
of [one party's] property to [the other party]." Town of Kearny v. Disc. City of
Old Bridge, Inc., 205 N.J. 386, 411 (2011). "It is well-settled that '[c]ourts
enforce contracts "based on the intent of the parties, the express terms of the
contract, surrounding circumstances and the underlying purpose of the
contract."'" Barila v. Bd. of Educ. of Cliffside Park, 241 N.J. 595, 615-16 (2020)
(alteration in original) (quoting In re County of Atlantic, 230 N.J. 237, 254
(2017)). "The court's role is to consider the agreement's terms 'in the context of
the circumstances under which it was written,' 'accord to the language a rational
meaning in keeping with the expressed general purpose[,]' and apply the
agreement accordingly." Accounteks.Net, Inc. v. CKR Law, LLP, 475 N.J.
Super. 493, 504 (App. Div. 2023) (alteration in original) (quoting Conway v.
287 Corp. Ctr. Assocs., 187 N.J. 259, 269 (2006)). "The plain language of the
contract is the cornerstone of the interpretive inquiry; 'when the intent of the
parties is plain and the language is clear and unambiguous, a court must enforce
the agreement as written, unless doing so would lead to an absurd r esult.'"
Barila, 241 N.J. at 616 (quoting Quinn v. Quinn, 225 N.J. 34, 45 (2016)). "We
do not supply terms to contracts that are plain and unambiguous, nor do we make
A-3129-23 20 a better contract for either of the parties than the one which the parties
themselves have created." Barr v. Barr, 418 N.J. Super. 18, 31-32 (App. Div.
2011) (quoting Maglies v. Est. of Guy, 193 N.J. 108, 143 (2007)). "The
interpretation of a contract is generally subject to de novo review." Arbus,
Maybruch & Goode, LLC v. Cogen, 475 N.J. Super. 509, 515 (App. Div. 2023).
Further, "[e]very party to a contract . . . is bound by a duty of good faith
and fair dealing in both the performance and enforcement of the contract."
Wood v. N.J. Mfrs. Ins. Co., 206 N.J. 562, 578 (2011) (quoting Brunswick Hills
Racquet Club, Inc. v. Route 18 Shopping Ctr. Assocs., 182 N.J. 210, 224
(2005)). "The covenant of good faith and fair dealing calls for parties to a
contract to refrain from doing 'anything which will have the effect of destroying
or injuring the right of the other party to receive' the benefits of the contract."
Brunswick Hills, 182 N.J. at 224-25 (quoting Palisades Props., Inc. v. Brunetti,
44 N.J. 117, 130 (1965)). "Although the implied covenant of good faith and fair
dealing cannot override an express term in a contract, a party's performance
under a contract may breach that implied covenant even though that performance
does not violate a pertinent express term." Wade v. Kessler Inst., 172 N.J. 327,
341 (2002) (quoting Wilson v. Amerada Hess Corp., 168 N.J. 236, 244 (2001)).
A-3129-23 21 At the outset, we recognize that under the master lease, defendant was
"solely responsible for the installation" of any "sprinkler system, fire
suppression, alarm or exhaust system." Further, provision five of the sublease
stated that defendant "was obligated to maintain . . . all major systems such as
the heating, plumbing, and electrical." The court correctly determined the
sublease's plain language required defendant to maintain the fire alarm and
sprinkler systems for subtenants, as they were major systems. Therefore, the
sublease, which comported with the master lease, bound defendant to ensure that
the building had operable fire alarm and sprinkler systems for plaintiff's
subleased property.
On November 12, 2020, after the assistant fire marshal found numerous
UFC violations that presented an imminent hazard, he ordered the entire
building closed, precluding plaintiff from using its subleased property. The
court found the assistant fire marshal credibly testified that both the fire alarm
and sprinkler systems were "one singular system for the entire building."
Plaintiff had no ability to control or address the inoperable systems from its
subleased property. As the court found, defendant knew the fire alarm and
sprinkler systems were inoperable given that the construction official did not
grant Kameo's CO application in early 2020 due to the insufficient "fire alarm
A-3129-23 22 and sprinkler system[s] . . . in the building." The record amply supports the
court's finding that defendant knowingly failed to maintain operable fire alarm
and sprinkler systems, which was a breach of the sublease resulting in plaintiff's
total inability to use the subleased property.
The record also supports the court's finding that after the MCFMO issued
the notice of imminent hazard, the entire building was closed from November
12, 2020, through April 12, 2021. This closure prohibited plaintiff from entering
and using the subleased property for its intended purpose for approximately five
months. Additionally, the CO was not issued until May 25, 2021. Plaintiff
vacated the subleased property on June 1. Thus, defendant's breach
constructively evicted plaintiff from the subleased property for an extended
period. "In the event of a 'breach of a material term of an agreement, the non-
breaching party is relieved of is obligations under the agreement.'" Roach v.
BM Motoring, LLC, 228 N.J. 163, 174 (2017) (quoting Nolan v. Lee Ho, 120
N.J. 465, 472 (1990)). The court's determination that defendant's breach
excused plaintiff from the terms of the sublease is supported by credible
evidence in the record.
"What amounts to a constructive eviction is a question of fact."
Gottdiener v. Mailhot, 179 N.J. Super. 286, 293 (App. Div. 1981). A
A-3129-23 23 constructive eviction occurs when a landlord's "act or omission . . . renders the
premises substantially unsuitable for the purpose for which they are leased, or
which seriously interferes with the beneficial enjoyment of the premises." Reste
Realty Corp. v. Cooper, 53 N.J. 444, 457 (1969). Upon a constructive eviction,
a tenant may be authorized to vacate the premises without further liability to pay
rent under the lease. See id. at 459-60. A finding of "constructive eviction . . .
must be based upon a substantial breach of the tenant's right to the quiet
enjoyment of the leased premises." JS Props., L.L.C. v. Brown & Filson, Inc.,
389 N.J. Super. 542, 548 (App. Div. 2006). "[A] tenant who declares the
landlord in breach of a covenant of quiet enjoyment . . . need not vacate but must
vacate if it seeks to terminate the lease and avoid further rent payments. " Harel
Assocs. v. Cooper Healthcare Pro. Servs., Inc., 271 N.J. Super. 405, 408 (App.
Div. 1994).
We are unpersuaded by defendant's argument that it did not breach the
sublease, because article seventeen of the sublease expressly provided no
"warranty with respect to the condition of the" subleased property and that
plaintiff assumed possession of the subleased property in "'as is' condition."
While Nihalani undeniably inspected the subleased property, defendant fails to
cite authority for its contention that plaintiff was required to do "due diligence"
A-3129-23 24 on the fire alarm and sprinkler systems located throughout the entire building.
The court correctly found plaintiff was precluded from its intended use under
the sublease.
We also reject defendant's argument that plaintiff's "window to vacate the
[p]remises and/or claim a constructive eviction expired on April 12, 2021."
Providing deference to the court's factual findings, we discern no error in the
court's conclusion that plaintiff timely sought to terminate the sublease and
vacate the subleased property. The court reasoned: the parties attempted
negotiations immediately after defendant served the April default notice;
plaintiff deposited the total disputed rent in escrow; and plaintiff "filed this case
by the end of April 2021." Notably, Kameo admitted to offering plaintiff the
option to leave the building subject to a resolution on the issue of back rent. The
court's finding that plaintiff timely notified defendant of its sublease termination
after defendant's breach of the sublease is well supported by substantial, credible
evidence in the record. See 160 W. Broadway Assocs. LP v. 1 Mem'l Drive,
LLC, 466 N.J. Super. 600, 610 (App. Div. 2021) ("[W]e do not disturb the
factual findings . . . of the trial judge unless we are convinced that they are so
manifestly unsupported by or inconsistent with the competent, relevant[,] and
A-3129-23 25 reasonably credible evidence as to offend the interests of justice . . . ." (quoting
Seidman, 205 N.J. at 169 (internal quotation marks omitted))).
We also reject defendant's argument that the court erred in its evidentiary
rulings regarding Wynn's and Tri State's sublease responsibilities. As defendant
acknowledged, plaintiff had requested documents regarding these entities during
discovery, but defendant directed plaintiff to "documents available through
eCourts." In response to plaintiff's request, defendant specifically referenced
publicly available records, which is not the equivalent of providing available
documents in discovery.
"[T]he decision to admit or exclude evidence is one firmly entrusted to the
trial court's discretion." Rodriguez v. Wal-Mart Stores, Inc., 237 N.J. 36, 57
(2019) (quoting Est. of Hanges v. Metro. Prop. & Cas. Ins. Co., 202 N.J. 369,
383-84 (2010)). Evidentiary decisions will be upheld "if they are supported by
adequate, substantial and credible evidence on the record." Est. of Hanges, 202
N.J. at 384 (quoting MacKinnon v. MacKinnon, 191 N.J. 240, 253-54 (2007))
(internal quotation marks omitted). We discern no error in the court's exclusion
of evidence regarding Wynn and Tri State. Regardless of the court's evidentiary
decision, we note defendant's proffered evidence regarding Wynn's and Tri
State's alleged responsibility for the flammable products does not negate
A-3129-23 26 defendant's obligation to maintain operable fire alarm and sprinkler systems
under plaintiff's sublease. As the court correctly noted, the majority of the
assistant fire marshal's ten UFC violations pertained to the systems' operation,
not the flammable goods located in Tri State's subleased premises.
For these reasons, we affirm the court's finding that defendant breached
plaintiff's sublease.
B.
Defendant next contends the court's award of damages to plaintiff is
unsupported and calculated in error. While defendant challenges the total
award, it specifically argues the court's award of "$55,008.90" for plaintiff's lost
profits stemming from its inability to use space at its Edison facility "was based
solely upon purported agreements with undisclosed companies to rent out
space." Defendant posits plaintiff failed to produce "documents and information
in support of this claim."
"Under contract law, a party who breaches a contract is liable for all of
the natural and probable consequences of the breach of that contract." Totaro,
Duffy, Cannova and Co. v. Lane, Middleton & Co., 191 N.J. 1, 13 (2007)
(quoting Pickett v. Lloyd's, 131 N.J. 457, 474 (1993)). Although a non-
breaching party need not demonstrate "the exact amount of the loss," "the loss
A-3129-23 27 must be a reasonably certain consequence of the breach." Litton Indus., Inc. v.
IMO Indus., Inc., 200 N.J. 372, 409 (2011) (quoting Totaro, 191 N.J. at 14).
"[U]nder New Jersey law, '[l]ost profits may be recoverable if they can be
established with a "reasonable degree of certainty,"' but '[a]nticipated profits
that are remote, uncertain or speculative . . . are not recoverable.'" Schwartz v.
Menas, 251 N.J. 556, 576 (2022) (second and third alteration in original)
(quoting Passaic Valley Sewerage Comm'rs v. St. Paul Fire & Marine Ins. Co.,
206 N.J. 596, 609-10 (2011)); see also Totaro, 191 N.J. at 14 (noting "[p]roof of
damages need not be done with exactitude . . . [and that] [i]t is therefore
sufficient that the plaintiff prove damages with such certainty as the nature of
the case may permit, laying a foundation which will enable the trier of the facts
to make a fair and reasonable estimate" (first alteration in original) (quoting
Lane v. Oil Delivery, 216 N.J. Super. 413, 420 (App. Div. 1987))). "It is well-
settled that parties injured by a breach of contract have a common law obligation
to take reasonable steps to mitigate their damages." State v. Ernst & Young,
L.L.P., 386 N.J. Super. 600, 617-18 (App. Div. 2006) (footnote omitted) (citing
McDonald v. Mianecki, 79 N.J. 275, 299 (1979)). "Damages will not be
recovered to the extent that the injured party could have avoided his losses
through reasonable efforts without undue risk, burden or humiliation." Sean
A-3129-23 28 Wood, L.L.C. v. Hegarty Grp., Inc., 422 N.J. Super. 500, 519 (App. Div. 2011)
(quoting Ernst & Young, L.L.P., 386 N.J. Super. at 618) (internal quotation
marks omitted).
These principles guide our review. After determining defendant's breach
resulted in plaintiff's inability to use the subleased property for almost five
months, the court found plaintiff was permitted to terminate the lease, excused
from paying rent, and entitled to damages for costs and lost profits "attributable
to defendant's breach." The court specifically awarded $14,000 for temporary
storage costs based on Nihalani's credible testimony and admitted warehousing
invoices memorializing the charges. Nihalani had testified that plaintiff
subleased the property for business expansion and had planned inventory
shipments to the subleased property. Notably, the court referenced plaintiff's
exhibit P-46 and found the invoices for April 2021 and May 2021 demonstrated
plaintiff's "use of temporary storage trailers" and "warehousing." The court also
awarded $5,565.25 for "replacement warehouse space" as a "combination
[of] . . . testimony and . . . invoices" proved. The court found plaintiff's exhibit
"P-47 show[ed] damages" related to the incurred storage costs.
We note that defendant's failure to provide a complete record on appeal of
the evidence the court referenced in its findings hampered, to a degree, our
A-3129-23 29 review of these awarded damages. See R. 2:5-4(a) (stating in relevant part that
"[t]he record on appeal shall consist of all papers on file in the court or
courts . . . , with all entries as to matters made on the records of such courts");
see also R. 2:6-1(a)(1)(I) (providing that the appendix must contain parts of the
record "essential to the proper consideration of the issues"). As we afford
deference to the court's factual findings, which specifically referenced exhibits,
we affirm the damages awarded of "$14,000 for temporary storage" and
"$5,565.25" for "replacement warehouse space with Ace [Worldwide]." See
Soc'y Hill Condo. Ass'n v. Soc'y Hill Assocs., 347 N.J. Super. 163, 177-78 (App.
Div. 2002) (concluding that "[w]ithout the necessary documents . . . . [the court]
ha[s] no alternative but to affirm").
However, we are constrained to reverse the court's award of $55,008.90
for plaintiff's lost profits from the use of its Edison facility because the court's
decision is bereft of factual findings as to how it arrived at that amount.
"[A]ppellate review can be impeded when" a trial court fails to "state its factual
findings and conclusions of law on the record as required by Rule 1:7-4(a)."
Lakhani v. Patel, 479 N.J. Super. 291, 297-98 (App. Div. 2024); see also R. 1:7-
4(a) (requiring trial courts to make sufficient "find[ings] [of] . . . facts and state
[their] conclusions of law"). A "trial [court] is required to 'state clearly its
A-3129-23 30 factual findings and correlate them with the relevant legal conclusions.'" Gnall,
222 N.J. at 428 (quoting Curtis v. Finneran, 83 N.J. 563, 570 (1980)). "Naked
conclusions do not satisfy the purpose of [Rule] 1:7-4." Rutgers Univ. Student
Assembly (RUSA) v. Middlesex Cnty. Bd. of Elections, 438 N.J. Super. 93, 107
(App. Div. 2014) (alteration in original) (quoting Curtis, 83 N.J. at 570).
Plaintiff claimed $111,740.06 in lost profits from its inability to store
third-party items at the Edison facility, and Nihalani testified to the loss based
on a spreadsheet he created from plaintiff's ERP system. While the court
referenced Nihalani's spreadsheet, exhibit "D-23B," regarding the "damages
sought related to the additional use of space at" the Edison facility, the court
awarded $55,008.90 without explaining how it determined the amount. The
court stated that "if this space had been available and not used for this purpose,
plaintiff could have used it" and that the damages were "reasonably supported
by the testimony from December 2020 through May 2021." A review of the
court's statements and exhibit D-23B fails to provide a sufficient factual
foundation for the court's award. Stated another way, the court's bare
conclusions are insufficient to support how it derived the amount.
For these reasons, we remand for the court to provide its factual findings
and legal conclusions regarding plaintiff's damages demonstrated within a
A-3129-23 31 reasonable degree of certainty related to lost profits from having to use its
Edison facility to store materials intended for the subleased property. We leave
to the sound discretion of the court to reexamine its award of lost profit damages
and express no opinion as to the ultimate outcome.
C.
Regarding the court's award of counsel fees, defendant argues that
plaintiff "was not successful in enforcing any [s]ublease term" and "[wa]s not
entitled to any award of attorneys' fees[,] as the [s]ublease's express language
d[id] not permit any such recovery." Defendant contends the court's finding that
plaintiff was entitled to counsel fees under the sublease warrants reversal, but
its merits brief does not specifically challenge the amount of counsel fees
awarded pursuant to Rule 4:42-9(b).
The court found plaintiff was entitled to counsel fees under the sublease
and awarded $225,029.61 in its June 7, 2024 order. Article thirteen of the
sublease states, "In the event any legal action has to be instituted to enforce any
terms or provisions under this [l]ease, then the prevailing party in said action
shall be entitled to recover a reasonable attorney's fee in addition to all costs of
said action." The sublease therefore entitled plaintiff to counsel fees for
prevailing on its breach of contract claim against defendant.
A-3129-23 32 We recognize that a reviewing court should only disturb a court's
determination of fees when the award "was based on irrelevant or inappropriate
factors, or amounts to a clear error in judgment." Hansen v. Rite Aid Corp., 253
N.J 191, 212 (2023) (quoting Garmeaux v. DNV Concepts, Inc., 448 N.J. Super.
148, 156 (App. Div. 2016)). "[F]ee determinations are discretionary decisions
by trial courts," which "we . . . rarely disturb" absent "clear error of law." JHC
Indus. Servs., LLC v. Centurion Cos., Inc., 469 N.J. Super. 306, 312 (App. Div.
2021); accord Packard Bamberger & Cos. v. Collier, 167 N.J. 427, 444 (2001).
As we have already discerned no error in the court's finding that defendant
breached the sublease and that plaintiff established a quantum of damages, the
court's awarding of counsel fees to plaintiff was appropriate given the plain
language of article thirteen of the sublease.
Again, we recognize defendant did not challenge the court's findings
pursuant to Rule 4:42-9(b) or the amount of fees awarded. However, because
we are remanding for the court to make specific findings regarding plaintiff's
lost profits damages, and the court may adjust the award, it must also consider
the reasonableness of the counsel fee award in light of any change of damages
awarded. Thus, if the court's total judgment amount of damages is different on
remand, it is charged to revisit the reasonableness of the court's counsel fee
A-3129-23 33 award pursuant to Rule 4:42-9(b). Specifically, under Rule of Professional
Conduct 1.5(a)(4), the court shall address "the amount involved and the results
obtained." Further, the court is charged to address any other appropriate factors.
A party seeking attorneys' fees must establish reasonableness under the factors.
See Seigelstein v. Shrewsbury Motors, Inc., 464 N.J. Super. 393, 405 (App. Div.
2020). Regardless of the source authorizing fee-shifting, the same
reasonableness test governs. See Litton Indus., Inc., 200 N.J. at 386 (quoting
Furst v. Einstein Moomjy, Inc., 182 N.J. 1, 21-22 (2004)). It is within the sound
discretion of the court to reexamine its award of counsel fees and decrease the
amount if warranted based on a change in the amount of damages awarded for
lost profits. Again, we express no opinion as to the ultimate outcome.
Finally, we conclude defendant's additional contentions that the judgment
should be vacated, and it should be awarded damages for plaintiff's breach of
the sublease for not paying $84,231.76 in rent are without merit, as the judgment
is based on findings of fact that are adequately supported by the record. R. 2:11-
3(e)(1)(A). To the extent not addressed, defendant's remaining contentions lack
sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
A-3129-23 34 Affirmed in part, reversed in part, and remanded. We do not retain
jurisdiction.
A-3129-23 35