SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION DOCKET NO. A-3884- 21 COOLEST REFRIGERATION, LLC, Plaintiff-Respondent,

v. ZINA'S SALADS, INC., Defendant-Appellant.

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Submitted December 11, 2023

– Decided December 27, 2023 Before Judges Marczyk and Chase. On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L

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- 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).

PER CURIAM Defendant Zina's Salads, Inc. ("Zina's") appeals fr om a May 16, 2022 judgment, subsequent to a bench trial, where the tr ial court determined plaintiff NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court.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 parti es in the case and its use in other cases is limite d. R. 1:36- 3.2 A- 3884

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Coolest Refrigeration, LLC ("Coolest" ) breach ed 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 wholes aler of food products, namely salads and side dishes. In March 2019, Sidh om presented Zina's with an estimate totaling $29,400 for the installation o f two custom walk-in refrigeration units at Zina's warehouse in East Han over. This estimate explicitly outlined the requirement for the units to maintain a target temperature of thirtyfive degrees Fahrenheit, and it expressly acknowled ged the need for the refrigeration units to compensate for products entering at room tempera ture. 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 th e problem, Sidhom sent a customer questionnaire to Zina's Chief Executive Of ficer ("CEO"), Valentin Chelnokov. The questionnaire asked, "Please descri be what is going into the Walk In," to which Chelnokov responded, "hot/warm p roduct 85-90°F, 150003 A- 3884

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lbs a day in 5 lbs tubs[.]" The questionnaire also asked, "How soon should the product get down to target temperature?" to which C helnokov responded, "[four] hours." Sidhom explained the unit would require additio nal equipment to reach target temperature within the specified time. Subsequently, Sidhom provided Zina's with an estima te 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-hors epower 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 suffic ient for the unit to reach target temperature within the specified time. Neve rtheless, 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. Throu ghout September and October, Sidhom contacted Zina's for payment of the final amount. In response, Zina's Chief Financial Officer ("CFO"), A lex Chenakal, informed Sidhom that the cooler still failed to reach the targ et temperature, stating, "Your work is not complete. Please fix it." Sidhom expl ain ed the failure to reach4 A- 3884

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target temperature was due to Zina's decision not t o include the additional capacity as Sidhom recommended. Coolest subsequently initiated suit. Coolest's ame nded complaint alleged breach of contract and unjust enrichment and demanded pa yment of the balance due on the contract plus fees. Zina's answered the complaint and asserted counterclaims for breach of contract, common law fr aud, and consumer fraud

under N.J.S.A. 56:8-1 to -227. Zina's also success fully moved to transfer the

matter to the Law Division. A bench trial began in March 2022. After Sidhom te stified on behalf of plaintiff, Zina's called three witnesses. An HVAC R 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 fin d 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 condens er because he and Chelnokov believed Sidhom should have completed the job as contracted without imposing additional charges.5 A- 3884

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Chenakal also testified to Zina's business losses. He presented a loss of revenue analysis for the summer of 2019 that he pre pared, 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 tempe rature. He testified that in 2021, Zina's gross profits were approximately 27.9% of total revenue. Therefore, he calculated the lost revenue of $887,0 00 would have generated a gross profit of $249,000. He testified it was unne cessary to deduct any fixed

ex penses from the gross profits estimate because the company's administrative, production, and real estate expenses would have alr eady been paid for by existing business. Therefore, according to Chenaka l, the lost gross profits were equal to lost net profits. On May 16, 2022, the court ordered an entry of judg ment 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 C oolest failed to fulfill its contractual obligation to Zina's because the refrig eration system did not work as promised.6 A- 3884

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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 Coo lest. The court found Zina's claim for damages was not supported by adequ ate credible evidence. Specifically, the court found the lost profits anal ysis 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 docum entation, 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 fai led to mitigate its damages by "failing to make other arrangements promptly to complete the installation." On June 3, 2022, Zina's moved for reconsideration a nd 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 iss ues. The court found failing to deduct fixed costs from estimated gross profits was "fundamentally wrong . . . a fundamental principle of accounting and fin ancial analysis that this alleged expert simply missed." The court said any attempt on its part to make an adjustment to the calculated damages would be too s peculative and would involve "pulling numbers out of the air." The court found Zina's had not met its7 A- 3884

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burden to establish the quantity of the loss. The court found Chenakal, as an employee of Zina's, was not an independent witness and "lost all credibility in [the court's] mind when he didn't understand the fu ndamental principle that all, all profits bear some responsibility for being offs et by direct, as well as indirect

costs." The court reiterated there was no evidence Zina's tried, but was unsuccessful, in mitigating damages, and they had d one "very little once they knew they had this fundamental problem . . . ." On appeal, Zina's raises the following points:

POINT I THE TRIAL COURT ERRED IN DENYING [ZINA'S] DAMAGES ON THE BASIS OF CHENAKAL'S EVIDENCE, WHEN IT WAS CLEAR THAT DAMAGES RESULTED FROM [COOLEST'S] BREACH OF CONTRACT.

POINT II

THE TRIAL COURT ERRED IN FINDING THAT CHENAKAL WAS UNQUALIFIED TO GIVE DAMAGES EVIDENCE.

POINT III

THE TRIAL COURT ERRED IN ITS FINDING THAT [ZINA'S] HAD FAILED TO MITIGATE ITS DAMAGES.8 A- 3884

- 21 II. Zina's first argues the court should not have denie d relief for insufficiency of evidence because lost profits damages are, by na ture, always speculative to some extent. Relying on Totaro, Duffy, Cannova & C o. v. Lane, Middleton & Co. 191 N.J. 1 (2007), Zina's argues uncertainty in the amount of damages cannot preclude recovery where it is certain that a breach resulted in loss. Zina's compares its method of estimating damages to that u sed in V.A.L. Floors, Inc. v. Westminster Communities, Inc., 355 N.J. Super. 4 16 (App. Div. 2002), which allowed evidence of prior business to form a reason able basis to estimate lost profits. Zina's argues the estimates put forth by Chenakal for the lost revenues from NetCost and Stop & Shop, along with the profit margins from 2021, provided enough definiteness to permit the court to award damages. Zina's

maintains that even if the failure to reduce the es timated gross profits by fixed costs was an error, that error is "hardly a basis for negat ing the entire amount of lost profit calculated." In response, Coolest emphasizes the court's decisio n rested on the credibility of Chenakal's testimony and analysis, w hich must be respected "but

for a clear case where there is no doubt the trial court erred." Coolest argues "mere opinion" and "mere speculation" are not suffic ient to determine damages.9 A- 3884

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A non-breaching party seeking compensatory damages in a contract action is "obligated to prove, by a preponderance of the e vidence, that the losses it sought to recover were 'a reasonably certain conseq uence of the breach.'" Totaro, 191 N.J. at 15 (quoting Donovan v. Bachstadt , 91 N.J. 434, 445 (1982)). This burden also requires the non-breaching party " to demonstrate the appropriate method for quantifying that loss." Tot aro, 191 N.J. at 15. A trial court may not rely on "wholly speculative" informat ion to determine damages. Pomerantz Paper Corp. v. New Cmty. Corp., 207 N.J. 344, 375 (2011). The cases on which Zina's relies do not support its position. Totaro involved a dispute where an accountant solicited bu siness from a former employer in an established violation of a non-solic itation agreement. 191 N.J. at 17. The Supreme Court reduced the damages award ed by the trial court because the record support ed the loss of only one year's profits, not the three years remaining on the agreement. Ibid. This outc ome undermines Zina's request for this court to award damages despite a l ack of competent, credible evidence and an appropriate method for quantifying them. V.A.L. addressed whether estimates of lost profits were sufficient to survive summary judgment, a determination different from a factfinder's assessment of credibility. 355 N.J. Super. at 419. While the V.A.L. court10 A- 3884

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acknowledged a factfinder is afforded great latitud e to speculate as to the precise amount of damages, estimated lost profits still nee ded to be "based on sound fact and not on mere opinion evidence without factu al support . . . ." Id. at 425 (quoting Rempfer v. Deerfield Packing Corp., 4 N.J. 135, 144 (1950)). Here, the trial court rejected the evidence before it not for imprecision, but for lack of credibility and for Zina's failure to provide the c ourt with a reliable method to

calculate the award. While Zina's is correct that an inability to prove damages with absolute precision does not automatically preclude recovery, it still had an evidentiary burden to meet. Evidence of the damages did not ne ed to be precise, but it did need to be competent and credible. Here, the trial court found the testimony and financial analysis put forward by Chenakal to be flawed, no t based on sufficient underlying data, and not credible. Given the highl y deferential standard

afforded to a trial court's assessment of witness c redibility and evidentiary matters, there is no reason to disturb the trial co urt's conclusion. L.M.F. v. J.A.F., Jr., 421 N.J. Super. 523, 533 (App. Div. 20 11) (citing Rova Farms Resort, Inc. v. Invs. Ins. Co. of Am., 65 N.J. 474, 484 (19 74)).11 A- 3884

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. Zina's next argues the court, in both its original judgment and its denial of the motion for reconsideration, "strongly suggested that Chenakal was not qualified to testify as to [Zina's] damages because he was an officer of the company and not an independent expert witness." Zi na's points to Totaro and V.A.L. as examples in which parties were permitted to testify as to their own lost profits. Coolest responds the trial court did not, in fact, fi nd Chenakal unqualified to give damages evidence. Coolest notes Chenakal's testimony was admitted over Coolest's objection, raised in limine, which a rgued that expert testimony was necessary. Coolest argues the court's assessme nt of the testimony was "not due to Mr. Chenakal's position, experience or knowl edge, but was solely due to his failure to provide adequate basis for his concl usions." Unless offered as expert s, witnesses may testify only if they have "personal knowledge of the matter." N.J.R.E. 602. A non-expert witness may also offer opinion or inference testimony if the te stimony "(a) is rationally based on the witness' perception; and (b) will assist in understanding the witness' testimony or determining a fact in issue." N.J.R.E. 701. " The fact that a person with personal knowledge of facts relevant to a disp ute may also qualify as an12 A- 3884

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expert in the particular field associated with thos e facts does not convert his or her testimony based on personal knowledge of specif ic facts into expert testimony . . . ." E&H Steel Corp. v. PSEG Fossil, LLC , 455 N.J. Super. 12, 26 (App. Div. 2018). Even though the trial court did refer to Chenakal a s "this alleged expert," Zina's never tendered Chenakal as an expert witness . When denying Coolest's motion in limine, the court allowed Chenakal to tes tify about Zina's business because he had personal knowledge through his work as CFO. The testimony was admitted "subject to [the court's] ruling as to relevance and sufficient basis to the issue." Apart from a sustained objection to hearsay testimony, Coolest

did not raise, and the court did not rule on, any chall enge to Chenakal's testimony as not being adequately based on his own personal knowledge. Chenakal was therefore permitted to testify as a fa ct witness and give lay opinion testimony on the material fact of damages, subject to the requirements of

N.J.R.E. 70 1.

The trial court's assessment of Chenakal's testimon y and financial analysis was clearly an evaluation not of Chenakal's qualifica tions, but of his credibility, which the court found lacking due to errors in the report and Chenakal's "vested

interest in the outcome." This does not mean the c ourt deemed Chenakal13 A- 3884

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unqualified to give either factual or lay opinion t estimony. Indeed, both types of evidence were introduced through his testimony.

IV. Finally, Zina's argues due to the seasonal demands of its business and the scarcity of refrigeration professionals in the summ er, mitigation was not realistic. Zina's argues, Coolest, as the breachin g party, bore the burden of demonstrating it was possible for Zina to mitigate its damages. Coolest emphasizes it offered to install additional equipme nt, which Coolest maintains could have mitigated Zina's damages, but Zina's ref used the offer. An injured party's duty to take reasonable steps to mitigate damages is "well settled." Nelson v. Elizabeth Bd. of Educ., 466 N.J. Super. 325, 344 (App. Div. 2021) (quoting McDonald v. Mianecki, 79 N.J. 2 75, 299 (1979)).

Once a party has reason to know that performance by the other party will not be forthcoming, he is ordinarily expected . . . to take such affirmative steps as ar e appropriate in the circumstances to avoid loss by making substitute arrangements or otherwise . . . . The amount of loss that he could reasonably have avoide d by . . . making substitute arrangements . . . is simp ly subtracted from the amount that would otherwise hav e been recoverable as damages. [Ingraham v. Trowbridge Builders , 297 N.J. Super. 72, 83 (App. Div. 1997) (quoting Restatement (Second) of Conts. , § 350, cmt. b (Am. L. Inst. 1981)).]14 A- 3884

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While an injured party may "urge the [breaching] pa rty to perform[,]" such efforts do not constitute mitigation, but are taken into account to determine the reasonableness of the time actual mitigation begins after a breach is discovered.

Ibid. Whether a non-breaching party made "reasonable effo rts to mitigate its damages [ is ] a question for the trier of fact." State v. Erns t & Young, L.L.P. , 386 N.J. Super. 600, 616 (App. Div. 2006) (citing Ingraham, 297 N.J. Super. at 84) . The breaching party has "the burden of proof . . . as to actual or potential mitigation and the amount thereof." Sandler v. Law n-A-Mat Chem. & Equip. Corp., 141 N.J. Super. 437, 455 (App. Div. 1976) (c iting Roselle v. La Fera Contracting Co., 18 N.J. Super. 19, 28 (Ch. Div. 19 52)). Zina's is correct that as the breaching party, Cool est bore the burden to prove the possibility of mitigation, Zina's failure to mitigate, and the value of any corresponding reduction of damages. However, t he court found factual support for its conclusion through Zina's own evide nce

. Zina's employees testified they took little, if any, action to conta ct other refrigeration professionals during the peak summer months, and they could not i dentify when another professional eventually was contacted. To the exte nt the trial court might have placed the burden of proving the facts of mitigation on Zina' s, that was an error. However, because factual support for the court's co nclusion was introduced by15 A- 3884

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Zina's anyway, and because there are no compensator y damages to be reduced by a purported failure to mitigate, any such error does not rise to an error clearly capable of producing an unjust result. R. 2:10- 2.

Affirmed.