RACEWAY REALTY, LLC VS. JOHN PAFTINOSÂ (L-7896-10, MIDDLESEX COUNTY AND STATEWIDE), A-1982-14T4

Background

John and Christina Paftinos owned gas-station real property (Edison property) and leased it to Raceway Realty (Realty) under a rider that included a first-refusal clause (Paragraph 32) allowing Realty to match any bona fide purchase offer, except intra-family or affiliated-company transfers.
The Paftinos obtained a mortgage from New Millennium Bank, later sold to Peter Camamis; defaults and complex loans followed, including a $350,000 promissory arrangement with Raceway Petroleum (affiliated with Realty) that reduced rent when unpaid.
In March 2010 the Paftinos entered agreements with Camamis; title to the Edison property was conveyed to 1501 NJ State Highway One, LLC (1501) in June 2010; by operation of the agreements Camamis ultimately obtained 100% ownership of 1501, extinguishing the Paftinos’ interest.
Realty sued, alleging the transfer violated Paragraph 32. Defendants repeatedly failed to comply with discovery orders; default was entered and final default judgment (Jan. 26, 2012) ordered transfer of the property to Realty and awarded attorneys’ fees and costs. A later proof hearing fixed fair market value at $1,105,130.57 as of Jan. 24, 2012.
The Appellate Division affirmed liability and foreclosure of defendants’ interest, upheld the valuation and reconsideration decision, but reversed the attorneys’ fees award and remanded for proper findings because the fee application and trial-court findings were inadequate.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the transfer to 1501 (and Camamis’s acquisition) breached Paragraph 32 first-refusal	Realty: transfer to 1501 eliminated Paftinos’ interest and was not an exempt affiliated transfer; Paragraph 32 was breached and default judgment proper	Defendants: transfer fell within Paragraph 32 exceptions (intra-family/affiliated companies) or was allowed by other lease provisions; certification for default was inaccurate	Held: Breach of Paragraph 32; transfer to 1501/Camamis extinguished Realty’s first-refusal protection; default judgment not an abuse of discretion given discovery violations and record evidence
Whether the court abused discretion in entering default for discovery violations and procedural failures	Realty: severe sanctions appropriate because defendants repeatedly failed to comply with discovery and court orders	Defendants: discovery failures excusable or attributable to prior counsel; default too extreme	Held: No abuse of discretion; discovery misconduct and repeated noncompliance justified dismissal/default under governing standards
Whether the court properly ordered and conducted a proof hearing to determine fair market value rather than accepting the $680,000 distressed sale figure	Realty: should be entitled to price paid to bank ($680,000) as the bona fide offer	Defendants: bank sale was not a bona fide market indication; fair market value must be determined by hearing	Held: Court properly ordered hearing; bank purchase was a distressed sale and not dispositive; judge’s factual valuation decision upheld
Whether the trial court properly awarded attorneys’ fees in the default judgment	Realty: sought contractual/fees for defending against vacatur and for obtaining default judgment; provided aggregate fee affidavits	Defendants: fee request overbroad, not sufficiently itemized, and judge failed to make required lodestar findings	Held: Fee award reversed and remanded — trial court failed to make required findings, did not adequately itemize compensable work or fix lodestar; remand for proper findings/proceedings

Key Cases Cited

DEG, LLC v. Twp. of Fairfield, 198 N.J. 242 (N.J. 2009) (standard for appellate review of trial-court discretion)
Hous. Auth. of Morristown v. Little, 135 N.J. 274 (N.J. 1994) (trial-court discretion review principles)
Fastenberg v. Prudential Ins. Co., 309 N.J. Super. 415 (App. Div. 1998) (contract interpretation is a legal question reviewed de novo)
Nester v. O'Donnell, 301 N.J. Super. 198 (App. Div. 1997) (plain-meaning rule for contract terms)
Packard-Bamberger & Co. v. Collier, 167 N.J. 427 (N.J. 2001) (attorney-fee awards rest within trial-court discretion; contractual fee principles)
Litton Indus., Inc. v. IMO Indus., Inc., 200 N.J. 372 (N.J. 2009) (lodestar method and causal relation for fee awards)
Furst v. Einstein Moomjy, Inc., 182 N.J. 1 (N.J. 2004) (courts must determine reasonable hours and rates; trial-court findings required)
Heimbach v. Mueller, 229 N.J. Super. 17 (App. Div. 1988) (proof requirement against defaulting defendant for liability)
Zaman v. Felton, 219 N.J. 199 (N.J. 2014) (issues not raised below generally not considered on appeal)