On appeal from Superior Court, Law Division, Monmouth County.
Milmed, Morton I. Greenberg and Furman. The opinion of the court was delivered by Furman, J.A.D.
[189 NJSuper Page 350] In this fraud action, appeal and cross-appeal are brought from a jury verdict of $2 in compensatory damages against defendant Anschelewitz, Barr, Ansell & Bonello, a professional association engaged in the practice of law, and against defendant Richard Bonello, a stockholder individually, and of $50,000 in punitive damages against defendant Richard Bonello individually. In response to written questions, the jury awarded $1 in compensatory damages for fraud in each of two separate transactions and $50,000 in punitive damages without allocation to either of the separate transactions. At the time of the transactions Anschelewitz,
Barr, Ansell & Bonello was a partnership, and Richard Bonello was a partner. Plaintiff cross-appeals from the dismissal of his claims for interest and counsel fees.
Among the multiple issues raised on the appeal and cross-appeal we view as decisive whether plaintiff's proofs established a prima facie cause of action in fraud in either transaction with defendants. Accordingly, we set out the facts in the light most favorable to plaintiff.
In 1973 plaintiff, then in his early seventies in age, had sold his plastic manufacturing business and was seeking opportunities to make investments and to be involved in real estate or business ventures. He met with principals of Avenel Boulevard, Inc. (Avenel), which was constructing a high-rise condominium apartment complex in Monmouth Beach, New Jersey. Avenel had secured a $6,300,000 construction mortgage from Fidelco Growth Investors (Fidelco). Plaintiff was taken to view the site. The principals of Avenel stated that they needed $200,000 to build and furnish a model apartment and asked plaintiff if he would invest that amount. A tentative agreement was reached that plaintiff would loan $200,000 towards the high-rise complex.
The president of Avenel introduced plaintiff to defendant Richard Bonello (Bonello), attorney for Avenel and trustee for the disbursement of the construction mortgage funds. Bonello proposed that, if plaintiff loaned $200,000 for the model apartment, he would receive 10% of the profits on the entire project. Bonello informed him that he had a financial interest himself. He represented that it was a "good project" with a projection of a $1,800,000 profit. Plaintiff was shown cost estimates.
On or about June 27, 1973 plaintiff entered into a loan agreement with Avenel and a separate agreement with Avenel and Fidelco. The closing was at Bonello's office. Plaintiff was represented by his own attorney. The loan agreement provided that plaintiff loan $200,000 to Avenel to be repaid by Fidelco upon assignment to plaintiff from Avenel, as the first disbursement
out of the retainage on construction advances, and that Avenel execute a note to him in that amount "bearing no interest for a period of one year with the right to renew for the period of time contained in the aforementioned Fidelco Growth Investors Mortgage." Plaintiff was to receive interest in the amount of 10% of the net profits to be paid by Avenel in consideration for the loan and "in lieu of periodic interest thereon." The loan agreement recited that a cost estimate had been provided to plaintiff, which was recognized to be "merely the initial estimate . . . subject to variation and final audits." Although the loan agreement referred several times to the high-rise condominium apartment complex, it imposed no specific restriction on Avenel's use of the $200,000.
Prior to the closing of the loan agreement plaintiff had already advanced $75,000 to Avenel upon a representation by two of its principals that Avenel needed that amount for furnishings for the model apartment, which were being delivered C.O.D. Plaintiff's $75,000 check was deposited to the account of Driftwood, Inc., a corporation controlled by the Avenel principals.
Bonello deposited plaintiff's $125,000 check, which completed the $200,000 loan, in his law firm's trust account. Within the next two days Bonello issued five checks on the trust account disbursing the $125,000 together with $3,250 theretofore in the trust account, as follows: $69,500 to one of the principals of Avenel individually, $50,000 to an unsecured creditor of Avenel, $8,000 in two checks to Molly Company, a theatrical venture, and $750 in legal fees to his law firm.
About two or three weeks later plaintiff learned that the furniture for the model apartment had not been delivered and that work on it had been stopped because of lack of funds. The model apartment was completed and available for inspection by September 1973. Ultimately, after a conveyance from Avenel, Fidelco completed construction of the high-rise condominium apartment complex. During this litigation the trustees of Fidelco
reached a settlement with plaintiff for $260,000. Plaintiff failed to offer proof of any loss of profits suffered by Fidelco or Avenel as the result of the diversion of his $200,000 loan to purposes other than the building and furnishing of the model ...