MARK P. JIORLE v. EDWARD J. MUPO

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-2390-06T22390-06T2

MARK P. JIORLE, individually

and on behalf of THE MARK P.

JIORLE SELF-DIRECTED INDIVIDUAL

RETIREMENT ACCOUNT, MID-OHIO

SECURITIES, Trustee,

Plaintiff-Respondent/

Cross-Appellant,

v.

EDWARD J. MUPO and CAROL J. MUPO,

Defendants-Appellants/

Cross-Respondents,

and

ANTHONY BILLECI,

Defendant-Cross-Respondent.

________________________________________________________

 

Argued March 11, 2009 - Decided

Before Judges Parrillo, Lihotz and Messano.

On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-591-05.

Arthur J. Timins argued the cause for appellants/cross-respondents (Shiriak & Timins, attorneys; Mr. Timins, on the brief).

J. Llewellyn Mathews argued the cause for respondent/cross-appellant.

Anthony Billeci, cross-respondent, has not filed a brief.

PER CURIAM

Defendant Edward J. Mupo appeals from the judgment entered in favor of plaintiff Mark P. Jiorle following a jury trial. Plaintiff cross-appeals from that portion of the judgment dismissing his complaint against co-defendant Carolyn Mupo. Defendant raises the following issues for our consideration:

I. [THE] JUDGMENT . . . SHOULD BE SET ASIDE SOLELY ON ACCOUNT OF EXTENDED IMPROPER AND PREJUDICIAL TESTIMONY OF PLAINTIFF AND CO-DEFENDANT BILLECI

II. PARTICULARLY WHERE MULTIPLE RELATED ISSUES ARE APPARENT, THE TRIAL JUDGE'S REFUSAL TO INSTRUCT THE JURY AS TO THE EXISTENCE OF A "MARY CARTER" LIKE ARRANGEMENT BETWEEN PLAINTIFF AND CO-DEFENDANT MUST CAUSE THE JUDGMENT . . . TO BE SET ASIDE.

III. VERY RECENT CASE LAW MAKES CLEAR THAT THE TRIAL JUDGE COMMITTED PLAIN ERROR WHEN HE ERRONEOUSLY CHARGED THE JURY THAT THE INTENDED PURPOSE OF PUNITIVE DAMAGES INCLUDES THE DETERRENCE OF "OTHERS."

IV. IN HIS INSTRUCTIONS THE TRIAL JUDGE FAILED TO PROVIDE THE JURY WITH ADEQUATE DIRECTION IN MANY RESPECTS, BUT MOST PARTICULARLY AS TO THE LAW PERTAINING TO IN REM FORELCOSURE AND REDEMPTION. THE RESULT WAS AN INVITATION TO SPECULATION.

V. IF THE VERDICT AGAINST [DEFENDANT] FOR $325,000 IS TO BE CONSTRUED AS DAMAGES IN THE NATURE OF RESTITUTION, IT MUST BE SEEN AS EXCESSIVE BECAUSE $101,300 OF THAT SUM CLEARLY WAS INVESTED IN THE PROJECT.

In his cross-appeal, plaintiff argues:

THE JURY'S FINDING THAT CAROL[YN] MUPO RECEIVED AN IMPROPER PERSONAL BENEFIT AS AN OFFICER OR DIRECTOR OF CMS, BUT THAT HER CONDUCT DID NOT CAUSE DAMAGE TO [PLAINTIFF], IS IRRECONCILABLY INCONSISTENT WITH THE JURY'S FINDINGS AGAINST ED MUPO ON THE SAME ISSUES; THERFORE, THE JUDGMENT IN FAVOR OF CAROL[YN] MUPO SHOULD BE REVERSED AND THIS MATTER REMANDED FOR EITHER: (1) ENTRY OF JUDGMENT AGAINST CAROL[YN] MUPO FOR $107,200, OR (2) FOR A NEW TRIAL, LIMITED TO THE ISSUES OF CAUSATION, COMPENSATORY DAMAGES AND PUNITIVE DAMAGES AGAINST CAROL[YN] MUPO ONLY.

We have considered these arguments in light of the record and applicable legal standards. We reverse the award of punitive damages against defendant, and remand for a new trial on that issue. In all other respects, we affirm.

I.

Plaintiff filed his complaint against defendant and Carolyn alleging fraud, securities fraud, breach of fiduciary duties, and breach of the implied covenant of good faith and fair dealing. Also named as a defendant was Anthony Billeci, against whom plaintiff asserted a single claim for breach of contract. Defendant and Carolyn filed an answer, cross claims, and a counterclaim, alleging that plaintiff's complaint was frivolous, constituted a fraud upon the court, and amounted to an "intentional course of conduct . . . constitut[ing] . . . malicious prosecution." Billeci filed an answer and cross-claims, and discovery ensued.

The testimony at trial revealed that defendant and Carolyn formed Carolyn Mortgage Services, Inc. (CMS) for the sole purpose of acquiring an abandoned warehouse located at 131 Jersey Avenue, New Brunswick (the property). Philip Maenza, an attorney, formed the corporation and maintained its corporate "book," but never issued stock certificates. By all accounts, the formalities of corporate governance were not followed. Defendant served as CMS's president and chief executive officer. Carolyn's status was unclear. Although originally an officer, she claimed that she abdicated that office in favor of plaintiff at some point in time.

In March 2001, CMS acquired the property which was encumbered with an existing mortgage that CMS assumed, and $2,000,000 in real estate tax arrearages. Plaintiff, a self-employed real estate investor, discussed with defendant acquiring an interest in either the property or CMS. Eventually, they agreed that plaintiff would invest $350,000 in CMS and become a fifty percent shareholder in the corporation. However, it was never specified whether defendant and Carolyn would convey some of their shares to plaintiff, or whether CMS would simply issue additional stock.

Beginning in the fall of 2002, Maenza arranged for monies to be sent from plaintiff's IRA custodian, Mid-Ohio Securities, to his attorney trust account. Between October 2002 and February 2003, pursuant to defendant's direction, Maenza disbursed $325,000 he had received from plaintiff. He wrote checks totaling $101,300 on "various dates" to "various contractors for property clean up and professionals for fees." Maenza also wrote checks for the balance of the monies, $223,700, to defendant, Carolyn, their children, and Mupo Financial Services, Inc., a company controlled by defendant and his wife. Plaintiff testified that he never knew about, and did not authorize, these personal disbursements.

Plaintiff initially made his investment solely upon oral representations from defendant. Eventually, however, on March 4, 2003, the stock sale was memorialized in an agreement signed by defendant and Carolyn, acknowledging their receipt of $325,000 from plaintiff in return for "[fifty percent] of the stock of [CMS] free and clear of any claims."

Contemporaneous with these events, defendant sought a buyer for the property. His negotiations centered upon Billeci, the owner of Shore Pride Wholesale Meat, Inc. (Shore Pride), a New York-based company formed solely to obtain a lease to the warehouse on the property. Plaintiff was aware that the City of New Brunswick (the City) had commenced an in rem tax foreclosure action, and that it was willing to forbear prosecution, provided CMS and Shore Pride developed the property in accordance within certain timeframes. The forbearance agreement was memorialized in writing on September 30, 2002. The City agreed to delay its foreclosure action to allow CMS, as owner, and Shore Pride, as developer, to "remediate and develop" the property. Under its terms, however, the forbearance agreement would terminate if the "performance" deadlines were not met.

In October 2002, defendant, Carolyn, plaintiff, and Shore Pride, executed a stock transfer agreement by which 100% of CMS stock would be transferred to Shore Pride for the purchase price of $2,000,000. The agreement was contingent upon Shore Pride securing financing from the New Jersey Economic Development Authority (EDA), and, in the event that was not obtained, the "contract [was] deemed null and void and the parties [had] no further liability to each other." Shore Pride submitted an application to the EDA and was granted preliminary approval.

On February 3, 2003, the City issued a notice of default to CMS and Shore Pride because no applications had been filed with the planning board or any regulatory agencies as required under the forbearance agreement. Shore Pride's counsel, Anthony Vignuolo, notified defendant and Billeci of the urgency of the situation. On April 25, 2003, the City moved forward on its foreclosure action and obtained a final judgment of foreclosure by default. Despite this development, Vignuolo testified that the City was interested in seeing the property privately developed and continued discussions with defendant and Shore Pride, intimating that it might accept less than $2,000,000 to discharge the tax lien. The City's designated counsel, William Hamilton, also testified that there was a "very small" opportunity to resurrect the deal. On May 15, 2003, Vignuolo sent defendant and Billeci a letter advising them that since the City now owned the property, they would need "to qualify as a developer of the property in order to avoid a public auction[.]" He urged them "to act quickly."

Plaintiff testified that none of this was ever conveyed to him despite his daily conversations with defendant. Instead, defendant repeatedly assured him that things were moving forward smoothly. Defendant later told plaintiff that he had never received any default notice from the City. Plaintiff contended that had he known about the need to raise cash to keep the deal alive, he would have secured it from his father, Anthony Jiorle. The elder Jiorle testified that he was capable of raising sufficient money to stave off the foreclosure, that he was familiar with the plans for the property, and that he thought it was a good investment.

In late May 2003, the City declared the property "blighted" in anticipation of its inclusion within a redevelopment area. On August 27, 2003, Shore Pride requested that it be named the developer of the property, submitting to the City's planning department architectural plans, a survey, and copies of its loan application to EDA. The City conditioned any consideration of Shore Pride as a potential developer upon its payment of property taxes from March 29, 2003 to December 31, 2003, a total of $27,097.44. The parties could not reach an agreement, and by early 2004, the potential for a deal collapsed. Shore Pride was never considered again as a possible developer of the property. Plaintiff claimed that he was unaware of Shore Pride's efforts to have itself named as developer of the property, and that defendant never disclosed these events to him.

Defendant testified that plaintiff was aware of Shore Pride's default as early as March or April 2003. Both he and Maenza testified that there was a meeting held with plaintiff where the parties discussed how they could get Billeci to move more expeditiously. Defendant contended that he and Carolyn breached no obligation or fiduciary duty to plaintiff because pursuant to the stock transfer agreement, plaintiff's investment was the purchase price for fifty percent of his and Carolyn's interest in CMS. Thus, the disbursements he authorized Maenza to make were legitimate.

After the close of all evidence, but before summations, plaintiff and Billeci reached a settlement. While he received no payment, plaintiff released Billeci from any individual liability, and agreed that any judgment he might obtain against either Billeci or Shore Pride would be "entered" solely against the corporate entity. Defendant's counsel requested that the jury be told of the settlement, but the judge refused.

Ultimately, the jury concluded that defendant had committed fraud, breached his fiduciary duty as an officer of CMS, and had obtained improper personal benefits in that capacity. It awarded plaintiff damages of $223,000 on the fraud and improper personal benefits counts, and $325,000 on the breach of fiduciary obligations count. As to Carolyn, the jury found in favor of plaintiff that she had obtained improper personal benefits in her capacity as an officer or director of CMS, but that her conduct did not cause plaintiff any damages. As to Billeci, the jury found no cause of action, and, although it concluded Shore Pride breached its agreement with plaintiff, it found no damages resulted. The jury reached the same results on defendants' cross-claim against Billeci and Shore Pride. The bifurcated punitive damages trial commenced the next day and resulted in a verdict of $400,000 against defendant.

Plaintiff moved for a new trial against Carolyn, and defendant moved for a judgment notwithstanding the verdict or for a new trial, or alternatively for remittitur, and to vacate the punitive damage award. On November 29, 2006, the judge denied all these motions, and entered judgment in favor of plaintiff against defendant in the amount of $958,003.82 which included $325,000 in compensatory damages; $400,000 in punitive damages; pre-judgment interest of $13,463.01 pursuant to Rule 4:42-11; pre-judgment interest of $22,405.48 pursuant to Rule 4:58-2; $194,094.33 in attorney's fees and litigation expenses pursuant to Rule 4:58-2; and $3041 in taxable costs pursuant to Rule 4:42-8(a). All claims and cross-claims against Billeci and Shore Pride were dismissed with prejudice as were defendant's counterclaim and cross-claims. This appeal ensued.

II.

(A)

During Billeci/Shore Pride's case, plaintiff was recalled as a witness and asked questions regarding a number of documents, all authored by, or received by, Vignuolo, and all of which plaintiff claimed to have had no personal knowledge. The documents essentially detailed the timeline of events we discussed above, and were previously admitted into evidence on plaintiff's case. Through a series of leading questions, counsel was able to have plaintiff reiterate the contents of the documents. Defense counsel objected at several points, arguing that plaintiff had no personal knowledge of the documents or their contents. The judge, for the most part, overruled these objections.

Additionally, during Billeci's direct examination, his attorney asked:

Q. During that period of time when you were putting forth your efforts[,] what was your feeling about the other parties and whether they were helping you . . . .

A. I don't know. I always felt that there was somebody dragging their feet trying to hold the deal back, someday, some way.

Though not objected to at trial, defendant now argues Billeci's testimony concerning his "feelings" was erroneously admitted by the trial judge.

Plaintiff's essential claim was that he was kept in the dark about Shore Pride's default and what transpired thereafter. Since plaintiff admitted not knowing about Vignuolo's correspondences, defendant contends this testimony violated N.J.R.E. 602 and should have been barred by the trial judge. That Rule provides that "a witness may not testify to a matter unless evidence is introduced sufficient to support a finding that the witness has personal knowledge of the matter." We agree that it was improper to permit plaintiff to testify from these documents. However, reversal is not required.

"'Traditional rules of appellate review require substantial deference to a trial court's evidentiary rulings.'" Benevenga v. Digregorio, 325 N.J. Super. 27, 32 (App. Div. 1999) (quoting State v. Morton, 155 N.J. 383, 453 (1998)), certif. denied, 163 N.J. 79 (2000). "To reverse the trial court's evidentiary ruling, we must find that the trial judge's decision was clearly capable of producing an unjust result." Bonitsis v. N.J. Inst. of Tech., 363 N.J. Super. 505, 524 (App. Div. 2003) (citing R. 2:10-2), rev'd on other grounds 180 N.J. 450 (2004).

Here, plaintiff admittedly had no knowledge of either the documents or their contents. That was the crux of his case against defendant. However, the documents were in evidence already, in large part, admitted during Vignuolo's testimony. While plaintiff should not have been able to summarize their contents or respond to questions posed about them, that error clearly did not have the capacity to prejudice defendant's case any more than did the contents of the documents, already in evidence, themselves.

Regarding the alleged error in permitting Billeci to testify about his "feelings," there was no objection by defense counsel and the evidence clearly was not capable of bringing about an unjust result.

(B)

Defendant next asserts the trial judge made a series of errors in the jury charge, including his refusal to instruct the jury on the prejudicial effect of plaintiff's and Billeci's so-called "Mary Carter" agreement; his instruction that punitive damages were appropriate to deter "others"; and his refusal to provide the jury with instructions regarding the law governing tax foreclosures. Plaintiff counters that his agreement with Billeci was irrelevant to the jury's determination of the issues and, therefore, the judge properly declined to provide any instruction. He further claims that the judge provided the jury with the model charge on punitive damages, and, based upon the evidence and arguments made in summation, defendant was not prejudiced by the inclusion of the word "others" in describing the deterrent purpose of punitive damages. Lastly, plaintiff argues any special instructions regarding the law of tax foreclosure were unnecessary.

We agree with defendant that the jury instructions on punitive damages ran afoul of Tarr v. Bob Ciasulli's Mack Auto Mall, Inc., 390 N.J. Super. 557 (App. Div. 2007), aff'd, 194 N.J. 212 (2008), and reversal is required. We find the balance of defendant's arguments to be unpersuasive.

The term "Mary Carter" agreement derives from the case of Booth v. Mary Carter Paint Co., 202 So. 2d 8 (Fla. Dist. Ct. App. 1967). In general such agreements have three characteristics:

(1) the liability of the settling defendant is limited and the plaintiff is guaranteed a minimum recovery; (2) the settling defendant remains a party to the pending action without disclosing the full agreement to the nonsettling defendants and/or the judge and jury; and (3) if judgment against the nonsettling defendant is for more than the amount of settlement, any money collected will first offset the settlement so that the settling defendant may ultimately pay nothing.

[England v. Reinauer Trans. Cos., L.P., 194 F.3d 265, 274 (1st Cir. 1999) (quoting Banovz v. Rantanen, 649 N.E.2d 977, 980 (Ill. App. Ct. 1995)).]

See also Langer v. Monarch Life Ins. Co., 966 F.2d 786, 793 n.3 (3d. Cir. 1992) (a "Mary Carter" agreement is "any agreement between the plaintiff and some, but less than all, defendants whereby the parties place limitations on the financial responsibility of the agreeing defendants, the amount of which is variable and usually in some inverse ratio to the amount of recovery which the plaintiff is able to make against the nonagreeing defendant or defendants"). We have characterized a "Mary Carter" agreement, as "a settlement device . . . [that] secretly and unfairly allies one defendant with plaintiff to the prejudice of the other defendant." Benz v. Pires, 269 N.J. Super. 574, 578 n.2 (App. Div. 1994).

Plaintiff and Billeci entered into their agreement after the close of all evidence, but prior to summations. Their negotiations were not secret, however, as defendant's counsel cross-examined plaintiff in front of the jury about his on-going discussions with Billeci and his attorney. The actual agreement provided plaintiff with no compensation. While agreeing to release Billeci from personal liability, plaintiff pursued his claim against Shore Pride. In fact, the jury concluded that although Shore Pride had breached its agreement with plaintiff and the Mupos, its actions caused none of the parties any damage. Plaintiff did not agree to limit his recovery against Shore Pride based upon the size of his recovery against defendant or Carolyn. In short, we conclude the settlement bore little resemblance to a traditional "Mary Carter" agreement. We find no error in the judge's refusal to charge the jury in this regard.

As to defendant's claim that the judge failed to adequately instruct the jury regarding the law of tax foreclosures, or otherwise tailor the charge to the contentions raised by the parties, we note no request for such a charge was ever made at trial, nor was the issue raised in defendants' post-verdict motions. We therefore decline the opportunity to address it. Nieder v. Royal Indemn. Ins. Co., 62 N.J. 229, 234 (1973).

We do agree with defendant, however, that the judge's instructions regarding punitive damages require reversal. In his charge, the judge said:

Punitive damages are awarded as a punishment of the defendant and as a deterrent to others from following his example . . . . [P]unitive damages are intended to punish a wrongdoer and to deter that wrongdoer and others from similar wrongful conduct in the future . . . . Punitive damages are also designed to serve as an example to discourage anyone else from committing similar acts.

(Emphasis added.)

This language tracked the model civil jury charge.

In Tarr, we concluded that the plaintiff's counsel's exhortation to the jury to award punitive damages to deter others "constituted plain error under the [Punitive Damages] Act [N.J.S.A. 2A:15-5.9 to -5.17], and to the extent the argument was condoned by the jury instructions the charge was also contrary to the Act." Tarr, supra, 390 N.J. Super. at 569. Our decision in Tarr was issued after the trial in this case. It was subsequently affirmed by the Supreme Court. Tarr, supra, 194 N.J. at 216.

Plaintiff contends that in the context of this case and the charge as a whole, the language regarding the deterrence of others did not amount to harmful error. He notes that unlike the plaintiff in Tarr, he did not argue that punitive damages were appropriate to deter anyone other than defendant. He notes further that defendant never objected to the charge or to the summation.

However, as we noted in Tarr, the charge was a fundamental misstatement of the law because "the [Punitive Damages] Act prohibits enhancing a punitive damage award for general deterrence purposes." Id. at 562. Even without a specific invitation to do so from plaintiff's counsel, we believe the instructions signaled to the jury that punishing others through an award of punitive damages was appropriate. Whether they did so, of course, is not something we can divine. However, we do conclude that the error had the capacity to clearly bring about an unjust result, and thus, requires reversal. R. 2:10-2.

Having said that, we agree with plaintiff that the retrial should be limited solely to determining the amount of punitive damages. Defendant has raised no specific argument assailing the jury's verdict in the first instance, and we find no reason to reverse its conclusion that punitive damages were warranted. Therefore, the re-trial is limited solely to determination of the appropriate quantum of punitive damages. See Tarr, supra, 390 N.J. Super. at 569-70.

(C)

Lastly, defendant argues the jury's award of compensatory damages in the amount of $325,000 on its finding that he breached his fiduciary duty was inconsistent with its finding that defendant's fraud and diversion of funds only resulted in damages of $223,700. He contends that since the difference between the two--$101,300--was the exact amount Maenza disbursed for costs associated with the development project, the higher damage award was "excessive" and lacked any "logical explanation." We disagree and find the argument to be of insufficient merit to warrant extensive discussion in this opinion. R. 2:11-3(e)(1)(E).

It suffices to say that in other contexts, the Court has held that the breach of a duty inherent in the relationship of the parties can result in either legal or equitable relief. Cameco, Inc. v. Gedicke, 157 N.J. 504, 518 (1999). This can include "compensation for a direct injury suffered . . . as a result of the [] breach[.]" Ibid. In the present case, plaintiff actually sought "benefit of the bargain" damages. He argued that the appropriate measure of damages included the profit he would have earned if the development project came to fruition, i.e., one-half of the $2,000,000 Shore Pride was to pay for the purchase of CMS's stock. The jury rejected that claim, perhaps finding it too speculative. Instead, the jury concluded that whether or not some of plaintiff's investment actually paid for professional services associated with the project, defendant's conduct damaged plaintiff because it sealed the project's fate. Thus, restitution of the full amount of plaintiff's investment was an appropriate measure of damages. We find no basis for reversal.

III.

We turn to the issue presented by plaintiff's cross-appeal. The jury awarded plaintiff damages because defendant obtained an improper personal benefit in his capacity as a corporate officer or director. Although the jury also concluded Carolyn did the same thing, it determined that her conduct did not cause plaintiff any damages. Plaintiff contended in his post-verdict motion for a new trial that these findings were so inherently inconsistent that a new trial was required on the issues of causation and damages. The trial judge denied the motion, concluding

I can reconcile [the jury's] decision on the basis that [it] believe[d] that although [Carolyn] was the beneficiary of this money she was, in fact, an innocent beneficiary in that she did not do anything to create the benefit. It was given to her. And that the party responsible for that benefit was [defendant] who controlled the trust account and directed it to be disbursed to her.

Plaintiff raises the same argument before us. We affirm the judgment of no cause of action against Carolyn, but for reasons other than those expressed by the trial judge. See El-Sioufi v. St. Peter's University Hosp., 382 N.J. Super. 145, 169 (App. Div. 2005).

Plaintiff correctly notes that N.J.S.A. 14A:2-7(3) prohibits a corporation's certificate of incorporation from shielding an officer or director from personal liability if he or she received an improper personal benefit. Traditionally "a stockholder ha[d] no individual claim for loss in value of his investment resulting from acts of a director in breach of his fiduciary obligation." 68th St. Apts., Inc. v. Lauricella, 142 N.J. Super. 546, 557 (Law Div. 1976), aff'd. o.b. 150 N.J. Super. 47 (App. Div. 1977).

We have recognized, however, that in a closely-held corporation such as CMS, "[t]he difficulties which unavoidably arise in attempting to apply corporate norms . . . have led to the development of substantial authority permitting departure from these norms and recognition instead of the real relationships of the principals." 68th St. Apts., supra, 142 N.J. Super. at 558. Thus, procedural rules governing derivative suits may be suspended, and individual shareholders may sue officers directly for breaches of their fiduciary obligations. See Brown v. Brown, 323 N.J. Super. 30, 36-38 (App. Div.) (discussing circumstances where direct action is appropriate, and collecting cases in which individual direct actions were permitted), certif. denied, 162 N.J. 199 (1999).

In denying plaintiff's motion for a new trial, the judge focused on Carolyn's lack of direct involvement in, or knowledge of, CMS's daily operation. These facts were essentially undisputed. However, a corporate director cannot claim ignorance to avoid liability because "a director should become familiar with the fundamentals of the business in which the corporation is engaged." Francis v. United Jersey Bank, 87 N.J. 15, 31 (1981). "A director is not an ornament, but an essential component of corporate governance. Consequently, a director cannot protect himself behind a paper shield bearing the motto, 'dummy director.'" Id. at 34. "Even in a small corporation, a director is held to the standard of that degree of care that an ordinarily prudent director would use under the circumstances." Id. at 35-36. When the claim is that a director failed to take adequate care in carrying out her fiduciary obligations, a traditional negligence analysis must also be employed. Id. at 39. The director's negligence must be "a proximate cause of the loss[,]" i.e., the director's "act or omission [must be] a necessary antecedent of the loss[.]" Ibid.

The jury rejected plaintiff's assertion that Carolyn had breached her fiduciary duty as a corporate official to act in good faith. If it had accepted that claim, and found that plaintiff had nevertheless suffered no damage, we could conclude the jury found the breach was not a proximate cause of plaintiff's loss. However, we cannot employ the same analysis regarding the improper personal benefit claim. Having determined that Carolyn obtained an improper personal benefit as a corporate officer or director, it seems axiomatic that plaintiff was damaged.

However, we are troubled by the jury's finding in the first instance. It was undisputed that Carolyn had no direct involvement in any of the activity associated with the development project. It was defendant, not she, who was copied on all correspondence addressed to CMS. It was defendant, not she, who directed the disbursements of the funds received from plaintiff. Plaintiff acknowledged that all of his significant contacts were with defendant, not Carolyn.

The jury implicitly accepted these undisputed facts when it concluded that defendant had received an improper personal benefit in the amount of $223,700. The $107,200 in checks Maenza issued in Carolyn's name is included within the amount the jury assessed against defendant. In other words, the jury concluded that it was defendant, not his wife, who had truly received the benefit of all the monies transferred from Maenza's trust account to either himself, Carolyn, their children, or Mupo Investments, Inc. When Carolyn testified as plaintiff's witness, she was never asked whether she actually received the funds at all, and there is no testimony otherwise that specifically addressed the issue.

Moreover, Maenza's ledger sheet reflected that he disbursed the first check in Carolyn's name from his trust account on November 13, 2002. The forbearance agreement, which was executed on September 30, 2002, includes plaintiff's signature as secretary of CMS. Although plaintiff disputed he was ever formally nominated and approved as secretary of the corporation, Maenza testified that he was in fact the secretary of CMS and signed the document as such. Thus, consistent with Carolyn's testimony, there was substantial evidence that by the time the first trust account check was written in her name, she was no longer a director or officer of CMS.

Defendant and Carolyn presented a united defense that essentially urged the jury to conclude that plaintiff's investment was the purchase price for half of the stock they owned in CMS, thus, making all $325,000 their money. Whether Carolyn personally obtained the monies when she was an officer or director of the corporation was not an issue to which the jury's attention was ever drawn. The judge's charge, unfortunately, never specifically explained the issue of corporate director liability in this context. Instead, it provided the jury with a single set of instructions regarding both defendant and Carolyn and never drew a distinction between them. See Reynolds v. Gonzalez, 172 N.J. 266, 289 (2002) (noting "[t]he failure to tailor a jury charge to the given facts of a case constitutes reversible error where a different outcome might have prevailed had the jury been correctly charged").

When we review the jury's findings as to Carolyn in the context of the entire verdict and the totality of the record, we are convinced that there was insufficient evidence upon which to conclude Carolyn was liable for receiving an improper personal benefit while a corporate officer or director of CMS. As a result, we affirm the judgment dismissing plaintiff's claim against Carolyn.

IV.

In sum, we reverse the grant of punitive damages against defendant and remand that issue only for a new trial solely as to the quantum of punitive damages. In all other respects, we affirm. We do not retain jurisdiction.

 

Although the caption of the complaint denominated defendant as "Carol J. Mupo," when she testified under oath, she gave her name as Carolyn Mupo, which we adopt throughout this opinion. She and Edward J. Mupo are husband and wife. When using the singular "defendant," we refer to appellant Edward J. Mupo. To avoid confusion, we shall refer to Carolyn Mupo by her first name and intend no disrespect by this formality.

Defendant agreed to accept less than the original investment amount with an understanding that plaintiff would eventually pay the balance when the development project was completed.

The agreement is not dated. Maenza was to serve as escrow agent and hold the CMS stock pending actual transfer.

In his reply brief, defendant argues that the charge as a whole permitted the jury to speculate as to plaintiff's damages. However, to the extent the sufficiency of plaintiff's proof of damages was an issue raised below in the post-verdict motions, it was rejected by the judge and we would agree that there was sufficient evidence regarding damages. Moreover, as we note below, the jury rejected plaintiff's claim for "benefit of the bargain" damages. Thus, much of defendant's argument regarding jury speculation in awarding damages is irrelevant.

(continued)

(continued)

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A-2390-06T2

 

August 26, 2009