On appeal from the Superior Court of New Jersey, Law Division, Middlesex County.
Gaulkin, Dreier and Scalera. The opinion of the court was delivered by Dreier, J.A.D.
Defendants appeal from a ruling by Judge Garrenger in the Law Division holding all corporate defendants jointly and severally liable for $175,564 in unpaid insurance premiums, and James DiDomenico personally liable for $41,265 in compensatory and $100,000 in punitive damages.
The corporate defendants are part of a group of closely held corporations owned by Anthony and Carol DiDomenico or their son James, the common purpose of which was to provide bus services. Two of the major corporations, the Eagle Bus Company which ran a coach service and the Bravo Bus Corp. which leased the busses to Eagle, are not defendants in this action. Other DiDomenico corporations included: Carol Coaches, Inc., which garaged Eagle's busses; All American Coaches, Inc., which was formed to obtain transport rights for other companies; ACJ Transportation Corp. which ran a school bus service; and PDQ Escorts, Inc., which provided escort service to the busses.
Since 1982, Irwin Yagoda, president of plaintiff Stochastic Decisions, Inc., served as insurance broker for many of the DiDomenico corporations. Although Anthony claimed that Yagoda was aware of the separate purposes and functions of each
corporation, Yagoda claimed to be unaware of the responsibilities of each corporation and considered it an ongoing question as to which corporations to insure. Yagoda testified that all the corporations involved in running the bus operation faced potential liability, blanket insurance coverage was necessary, and thus all were listed as named insureds on the policies. When insurance premium payments were made to Yagoda, the money was drawn from whichever DiDomenico corporation could honor the check.
In 1984, Anthony and Carol transferred ownership of Carol Coaches to James. James, upon becoming owner, continued the insurance policy on Carol Coaches that Yagoda had provided. Carol Coaches' property ultimately sold for $2,100,000.
There was a history of delinquent premium payments, and Yagoda had on occasion advanced the funds himself and forwarded payment to the insurance companies. Yagoda and the insurance companies, fearful that Anthony might default, requested financial information from the DiDomenicos. In early 1985, Anthony provided a personal financial statement that falsely reflected his ownership of real estate that belonged to Carol Coaches and his son James. Anthony, Carol and James promised they would sell this land to pay for the premiums, but never did.
In early 1985, the insurance coverage was about to lapse unless the insureds paid $61,000 in audits and adjustments. The DiDomenicos asked Yagoda to forward the adjustment and promised they would pay him back. Yagoda forwarded the adjustment payment, but only after receiving five post-dated checks, signed by James, as part of a repayment schedule. (These checks served as the basis for James' personal liability). Yagoda did not ask for and the repayment schedule did not include personal guarantees or promissory notes from the DiDomenicos. The first post-dated check, a $20,000 check from the ACJ Corp., was to be deposited at the end of the month. This check cleared, and the amount is not in dispute. The
difference was to be paid with four additional post-dated checks from the Eagle Corp. These were to be deposited one per week after the end of the month.
Before the first additional post-dated check was to be deposited, the DiDomenicos instructed Yagoda not to deposit these checks. Eventually, on the advice of the DiDomenico's book-keeper, but not on the authorization of Anthony or James, Yagoda deposited the first check, and it was returned for insufficient funds. Anthony DiDomenico then stopped payment on the rest of the checks because the first was ...