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New Jersey Manufacturers Insurance Company v. Foster

A-2552-05T2 (N.J. Super. App. Div. 2007) (Unpublished)

CONTRACTS; BREACH; ATTORNEY’S FEES — Where a party, under a contract, is entitled to all reasonable attorney’s fees if it successfully prosecutes the contractual breach by the other contracting party, a court may not rewrite the contract such as to award a lesser amount of attorney’s fees without an evidential basis that demonstrates the lesser award is consistent with the reasonable expectations of the contracting parties.

Owners of land were required by a lower court, after a bench trial, to specifically perform their obligations under a contract and sell a parcel of land to a contract purchaser. The owners appealed the ruling respecting specific performance, but lost that appeal in the Appellate Division. Notably, the buyer filed a cross-appeal, challenging an award of counsel fees in its favor in the amount of $55,000, rather than the $89,375.21 it had sought.

The Appellate Division observed that after the lower court ruled that the owner was obligated to convey the property to the buyer, and had violated the contract of sale, the buyer filed an application for attorneys’ fees pursuant to a provision in its contract. While the lower court found that the buyer had established a right to attorney’s fees under the contract, and had concluded that the amount requested by the buyer was reasonable, the court nonetheless determined that equitable considerations required some reduction in the amount of counsel fees to be awarded. Consequently, the lower court reduced the amount of claimed attorneys’ fees by $34,000.

The Appellate Division remarked that a lower court’s award of counsel fees may be challenged only on the basis of a clear abuse of discretion. The Court found it to be an abuse of discretion by the lower court when it reduced the reasonable attorney’s fees claim after concluding that the sellers would not reasonably have anticipated being charged with a fee in this amount in the event that they did not prevail in the litigation. The Court stated that a court should not rewrite a contract to make a different or better deal for a party than the one the party had made for itself. It observed that no evidence was presented of what the sellers expected to pay if they did not prevail in the litigation and if they had been obligated to reimburse the buyer for his counsel fees. Consequently, the conclusions drawn by the lower court about the selling owners’ expectations were speculative. Accordingly, the Appellate Court modified the lower court’s ruling to allow the buyer to recover the full amount of its costs and fees incurred in the connection with the trial.

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