Coolest Refrigeration, LLC v. Zina's Salads, Inc.
| Docket Number | A-3884-21 |
| Decision Date | 27 December 2023 |
| Parties | COOLEST REFRIGERATION, LLC, Plaintiff-Respondent, v. ZINA'S SALADS, INC., Defendant-Appellant. |
| Court | New Jersey Superior Court — Appellate Division |
1
COOLEST REFRIGERATION, LLC, Plaintiff-Respondent,
v.
ZINA'S SALADS, INC., Defendant-Appellant.
No. A-3884-21
Superior Court of New Jersey, Appellate Division
December 27, 2023
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.
Submitted December 11, 2023
On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L-1852-20.
Levine DeSantis LLC, attorneys for appellant (Peter L. Nichols, on the briefs).
Shawki & Associates, LLC, attorneys for respondent (Marco Mamdouh Shawki, on the brief).
Before Judges Marczyk and Chase.
PER CURIAM
Defendant Zina's Salads, Inc. ("Zina's") appeals from a May 16, 2022 judgment, subsequent to a bench trial, where the trial court determined plaintiff
Coolest Refrigeration, LLC ("Coolest") breached its contract with Zina's but awarded no damages. We affirm.
I.
We glean these facts from the record. Coolest is a licensed heating, ventilation, air conditioning, and refrigeration ("HVACR") contractor owned by Samuel Sidhom. Zina's is a manufacturer and wholesaler of food products, namely salads and side dishes. In March 2019, Sidhom presented Zina's with an estimate totaling $29,400 for the installation of two custom walk-in refrigeration units at Zina's warehouse in East Hanover. This estimate explicitly outlined the requirement for the units to maintain a target temperature of thirty-five degrees Fahrenheit, and it expressly acknowledged the need for the refrigeration units to compensate for products entering at room temperature. Installation began sometime in the middle of April 2019. In June, an electrician connected the coolers to power.
The parties agree the second cooler was never able to achieve the target temperature. As part of his efforts to diagnose the problem, Sidhom sent a customer questionnaire to Zina's Chief Executive Officer ("CEO"), Valentin Chelnokov. The questionnaire asked, "Please describe what is going into the Walk In," to which Chelnokov responded, "hot/warm product 85-90°F, 15000
lbs a day in 5 lbs tubs[.]" The questionnaire also asked, "How soon should the product get down to target temperature?" to which Chelnokov responded, "[four] hours. "Sidhom explained the unit would require additional equipment to reach target temperature within the specified time.
Subsequently, Sidhom provided Zina's with an estimate to add an additional ten-horsepower condenser to the existing system, which Sidhom offered at half-price. Believing that the original job had not been completed, Zina's opted not to install the additional ten-horsepower condenser, and instead agreed to the addition of a five-horsepower unit at no cost. Sidhom informed Zina's the five-horsepower unit would not be sufficient for the unit to reach target temperature within the specified time. Nevertheless, this additional installation was completed by the end of August.
Zina's made three payments according to the payment schedule on the estimate, but did not pay the final amount due of $6,400. Throughout September and October, Sidhom contacted Zina's for payment of the final amount. In response, Zina's Chief Financial Officer ("CFO"), Alex Chenakal, informed Sidhom that the cooler still failed to reach the target temperature, stating, "Your work is not complete. Please fix it." Sidhom explained the failure to reach
target temperature was due to Zina's decision not to include the additional capacity as Sidhom recommended.
Coolest subsequently initiated suit. Coolest's amended complaint alleged breach of contract and unjust enrichment and demanded payment of the balance due on the contract plus fees. Zina's answered the complaint and asserted counterclaims for breach of contract, common law fraud, and consumer fraud under N.J.S.A. 56:8-1 to -227. Zina's also successfully moved to transfer the matter to the Law Division.
A bench trial began in March 2022. After Sidhom testified on behalf of plaintiff, Zina's called three witnesses. An HVACR expert testified to why the system did not work. CEO Chelnokov testified as to his conversations with Coolest to diagnose and attempt to fix the problem. CFO Chenakal testified when the problems first arose, Zina's did not reach out to any other contractor because, in his experience, it was difficult to find HVACR professionals during the summer when they were in high demand. Further, he testified Zina's did not agree to the installation of the additional condenser because he and Chelnokov believed Sidhom should have completed the job as contracted without imposing additional charges.
Chenakal also testified to Zina's business losses. He presented a loss of revenue analysis for the summer of 2019 that he prepared, estimating $711,000 in lost revenue from one client, Stop &Shop, and $176,000 in lost revenue from another client, NetCost. He supported the NetCost estimate with a letter of intent and supported the Stop &Shop estimate with evidence of a shipment rejected in May 2019 due to incorrect product temperature. He testified that in 2021, Zina's gross profits were approximately 27.9% of total revenue. Therefore, he calculated the lost revenue of $887,000 would have generated a gross profit of $249,000. He testified it was unnecessary to deduct any fixed expenses from the gross profits estimate because the company's administrative, production, and real estate expenses would have already been paid for by existing business. Therefore, according to Chenakal, the lost gross profits were equal to lost net profits.
On May 16, 2022, the court ordered an entry of judgment in Zina's favor on the complaint and count one of the counterclaim and dismissed counts two and three. In its written opinion, the court concluded Coolest failed to fulfill its contractual obligation to Zina's because the refrigeration system did not work as promised.
However, the court also found that while Zina's was relieved of its obligation to pay the outstanding balance of $6,400, it failed to prove its lost profits damages and would receive no award from Coolest. The court found Zina's claim for damages was not supported by adequate credible evidence. Specifically, the court found the lost profits analysis presented by Chenakal could not be used to determine damages. The court noted the purported loss of Stop &Shop business was not supported by any documentation, Chenakal's decision to exclude fixed costs from estimated lost profits was erroneous, and the report did not account for any other clients or the effects of the COVID-19 pandemic on sales. The court also found Zina's failed to mitigate its damages by "failing to make other arrangements promptly to complete the installation."
On June 3, 2022, Zina's moved for reconsideration and amendment of the court's order. On July 29, 2022, the court denied Zina's motion. The court stated Chenakal's testimony raised several credibility issues. The court found failing to deduct fixed costs from estimated gross profits was "fundamentally wrong . . . a fundamental principle of accounting and financial analysis that this alleged expert simply missed." The court said any attempt on its part to make an...
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