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Velop, Inc. v. Kaplan

May 19, 1997

VELOP, INC., PLAINTIFF,
v.
HARRY KAPLAN AND THE ESTATE OF TOBEY KAPLAN, DEFENDANTS-RESPONDENTS/CROSS-APPELLANTS, AND STAVOLA CONTRACTING COMPANY, INC., STAVOLA MANAGEMENT COMPANY, INC., STAVOLA ASPHALT COMPANY, INC., STAVOLA COMPANY, JOSEPH C. STAVOLA, JR., FRANK STAVOLA, SR., JOHN W. STAVOLA, SR., JAMES J. STAVOLA, SR., KEVIN NOLAN, EDWARD LANE, AND LEE PARISI, DEFENDANTS-APPELLANTS/CROSS-RESPONDENTS, AND TINTON FALLS CONTRACTING CO., INC., C.H. SUTPHEN, INC., STAVOLA REALTY COMPANY, MICHAEL J. STAVOLA, A/K/A "JACK" STAVOLA, PRIME-A EXCAVATORS, INC., A/K/A PRIME A. EXCAVATION, INC., A/K/A PRIME A. CONSTRUCTION CO., LOUIS F. PETRUZZELLI, WILLIAMSBURG ASSOCIATES, INC., DOMINIC MARTELLI, SALVATORE J. MARTELLI, THOMAS KENNEL, DENNIS M. CRAWFORD, LEO J. ECKMANN, ROBERT H. BABB, HERB KUSHNER, DAVID KOCHEL, THE TOWNSHIP OF OCEAN, MONMOUTH COUNTY, NEW JERSEY, AND JEROME KAPLAN, EDWARD KAPLAN, AND ABE BARSHOP, AS EXECUTORS AND TRUSTEES OF THE ESTATE OF TOBEY KAPLAN, DECEASED, DEFENDANTS. HARRY KAPLAN, JEROME KAPLAN, EDWARD KAPLAN, AND ABE BARSHOP, AS EXECUTORS AND TRUSTEES OF THE ESTATE OF TOBEY KAPLAN, DECEASED, THIRD-PARTY PLAINTIFFS, V. JAN EDELSTEIN, AS EXECUTRIX OF THE ESTATE OF BENJAMIN EDELSTEIN, GARRY SCHECHER, LOUIS LERNER AND MANFRED E. DEMENUS, THIRD-PARTY DEFENDANTS.



On appeal from the Superior Court of New Jersey, Law Division, Monmouth County.

Approved for Publication May 20, 1997.

Before Judges Michels, Muir, Jr., and Coburn. The opinion of the court was delivered by Coburn, J.s.c. (temporarily assigned).

The opinion of the court was delivered by: Coburn

The opinion of the court was delivered by

COBURN, J.S.C. (temporarily assigned).

Harry and Tobey Kaplan owned a small farm. While in their nineties, they entered written contracts which gave rise to this complex litigation: one set of contracts involved the sale of their farm to Velop, Inc., (Velop) which, in turn, contracted to sell to another developer, Williamsburg Associates, Inc., (Williamsburg), and the other set of contracts granted Stavola Contracting Company, Inc., (SCC) the right to mine the farm for soil, which it did to a degree far in excess of that allowed by its contract. After discovering the excessive mining, the purchasers terminated the real estate contracts and Velop sued.

On this appeal, we are directly concerned only with the relations between the Kaplans and the Stavola defendants, the latter consisting of defendants SCC, Stavola Management Company, Inc., (SMC), Stavola Asphalt Company, Inc., (SAC), Stavola Company (SC); the four Stavola brothers, James, John, Joseph, and Frank; two key Stavola employees, Kevin Nolan and Edward Lane; and Lee Parisi, another Stavola employee.

After a four month jury trial which involved claims for breach of contract, negligence, fraud, conversion, tortious interference with contract, and violation of the federal and state RICO statutes, the jury rejected the RICO actions, but on the other causes of action awarded the Kaplans verdicts against the Stavola defendants for $5,925,000 in compensatory damages and, with the exception of Lee Parisi, for $1,002,500 in punitive damages. More specifically, the jury found SCC liable for breach of contract, fraud, and conversion. It found James and John liable for fraud. It found all the Stavola defendants, except Joseph and Frank and Lee Parisi, liable for negligence, and it found all the Stavola defendants liable for tortious interference with contractual rights. SMC stipulated that it would be responsible for payment of the judgments against its employees Nolan, Lane, and Parisi.

On the verdict form, the jury indicated that the compensatory damages would not be different "if any count was dropped," and that the amount of those damages for breach of contract was the same as the damages under the various tort theories. The jury attributed fault to the Stavola defendants in the following percentages: SCC (80%); SMC, SAC and SC, Joseph and Frank (1% each); James and John (2% each); Nolan, Lane, and Parisi (1/4% each). Additional assessments of fault against other defendants not involved in this appeal when added to the above percentages totalled 100%.

Punitive damages were assessed against the Stavola defendants as follows: SCC ($325,000); James and John ($300,000 each); Joseph and Frank ($35,000 each); Nolan ($3,500); and Lane ($4,000).

Plaintiff Velop also received favorable verdicts against the Stavola defendants based on tortious interference with contractual rights and negligence; however, that aspect of the dispute was settled after the filing of the Stavola notice of appeal. A default judgment was entered against defendants Louis F. Petruzzelli and his company, Prime-A Excavators, Inc. All other claims were settled before or during trial.

The trial court reduced the Kaplans' compensatory damage award from $5,925,000 to $2,180,000, but left standing the punitive damage awards totaling $1,002,500; it denied the Stavola defendants' motions for judgments n.o.v. or a new trial. The Stavola defendants appeal, seeking judgment or a new trial; and the Kaplans cross-appeal, seeking reinstatement of the jury's award of compensatory damages. We affirm the liability verdicts, except for the verdicts against Parisi (who was not proven to have been at fault) and the verdict based on common law fraud (which was outside the pleadings). We reverse the judgment on damages and remand for a new trial on damages only, subject to the Kaplans' acceptance of a remittitur.

I

The Kaplan farm, consisting of seventy-one acres, was located on Bowne Road in the Township of Ocean, Monmouth County. With the exception of one five acre parcel on which the house and outbuildings sat, the remaining lands were undeveloped and contained sandy soil useful for landfill and the manufacture of asphalt materials. At the times pertinent to this case, Tobey Kaplan, also known as Tillie, was in her nineties and her husband Harry was approaching one hundred years of age. By the mid-1980's their health had substantially deteriorated. Their attorney, Benjamin Edelstein, attended to legal matters on their behalf.

In 1977, the Kaplans entered into their first two soil mining contracts for the farm with defendant SCC. In 1979, the parties entered into another mining contract. However, SCC's application for a soil removal permit was denied by the township because soil removal was no longer permitted in the municipality. Litigation with the township resulted in judicial recognition that the Kaplans were entitled to have soil removed from their property as the continuation of a non-conforming use. Consequently, in 1985 SCC renewed its application for a soil removal permit. The permit issued on March 18, 1985.

On April 25, 1985, the Kaplans and SCC entered their fourth soil mining contract for the farm. This contract provided for the sale of approximately 301,000 cubic yards of soil for approximately $150,000. The exact price was to be based on the amount of soil removed at the rate of fifty cents per cubic yard. SCC was obliged to conduct its operations in accordance with the township soil removal permit, contracts it entered into with the township in relation thereto, and the applicable statutes, ordinances and local regulations. The soil removal was to be conducted in conformance with a grading map prepared by William D. Ayers, and referred to throughout this litigation as the "Ayers Map." The map divided the property into four sections, numbered 1, 2, 3, and 4.

The initial and subsequent soil removal permits issued by the Township of Ocean allowed for the removal of soil only from section 1 on the Ayers Map.

On August 14, 1986, the Kaplans contracted to sell their farm, excluding the five acre parcel on which the house and outbuildings stood, to plaintiff Velop for $5,000,000. Closing was contingent upon the ability of the purchaser to obtain preliminary site plan approval of the entire property and final site plan and subdivision approval of "the first section of the development."

On September 12, 1986, as a consequence of the Kaplan-Velop contract, the Kaplans and SCC amended the 1985 soil removal contract to provide that it would terminate no later than March 1988, and that if the sale of the farm was not consummated and the farm was again offered for sale, SCC would have a right of first refusal on the same terms as those offered by any prospective purchaser.

On November 16, 1987, the Kaplans agreed to sell the five-acre parcel to Velop for $1,000,000 with the same contingencies as applied to the balance of the land.

On December 30, 1987, Velop contracted to sell the entire Kaplan farm to Williamsburg for approximately $11,000,000. The agreement contemplated a 120 lot subdivision for individual residences. That agreement is quite complex. However, for present purposes, we need only note that two of its contingencies were the ability of the seller to receive preliminary subdivision approval for the entire property by September 1, 1988 and final subdivision approval by January 1, 1989.

As previously noted, the Kaplans contracted for soil removal with only one defendant, SCC, but the jury imposed liability not only on that corporation, but also on some of the other Stavola entities and individually to varying degrees on the four Stavola brothers and on three Stavola employees. In light of some of the arguments pressed on appeal, it is appropriate to explain the brothers' relations in running their enterprises.

Only one of the brothers, James, testified during the trial. He related that all four brothers owned equal positions in each entity. They met every morning for one to two hours in their office. They shared one desk. Each morning they would discuss the business of their companies. Important decisions were made jointly. Nothing of importance would happen without them being aware of it. That testimony was confirmed by Nolan, a long-time employee, who stated that he reported to the Stavola brothers and that they ran the companies; their authority was "equal" with no division of responsibility among them. This intensely close relationship was also confirmed by the brothers' attorney, Arthur D. Loring, who described them as the "decision makers." Throughout the trial, witnesses were often permitted without objection to testify about these individual defendants as if they were one. There was no evidence to suggest that any of the brothers was at any time acting for his own benefit to the detriment of the others. Consequently, we note that the jury had an ample basis to infer that the relevant knowledge of each brother was held by the other brothers and that the actions of each were based on joint decisions.

We turn next to the evidence regarding the excessive removal of soil from the farm. The Stavolas took approximately 775,000 cubic yards of soil, measured on an in-ground basis, or 1,000,000 cubic yards, measured on a truck-load basis. Most of the soil came from outside of section 1 on the Ayers Map in violation of the soil removal permits. The amount taken was also over three times the amount to which the Stavolas were entitled under their contract with the Kaplans.

The Stavolas employed Petruzzelli to mine and transport the soil to their asphalt manufacturing plant. Their attorney knew that Petruzzelli had been previously convicted of fraudulent Disposition of property, false swearing, possession of a motor vehicle with an altered identification number, obtaining goods under false pretenses, and embezzlement. James admitted that he understood Petruzzelli had a criminal record. The jury was entitled to infer that the brothers knew at least as much about that record as did their attorney. The Stavolas concede in their reply brief that some of them "might have been negligent in hiring Petruzzelli and in failing to supervise his work."

Mining of the Kaplan farm began in the fall of 1986. In June, 1987, the mining shifted from section 1 to sections 2 and 4 on the Ayers Map. On August 20, 1987, Township Engineer Robert H. Babb wrote to SCC raising numerous complaints about the project, including the illegal mining of section 2. Nevertheless, this mining continued until approximately February, 24, 1988, when Mr. Babb ordered the operation to cease. By then, approximately 565,000 cubic yards of soil, measured on an in-ground basis, had been removed.

One other area of the farm was mined thereafter, a ridge which separated the Kaplan farm from the Seaview property. The Stavolas had been mining the Seaview property for soil immediately before they began operations on the Kaplan farm in 1986. The ridge was a large L-shaped mound of soil approximately thirty to forty feet high. The mining was conducted by Petruzzelli, the same person used by the Stavolas to mine the rest of the farm. It took place in the spring and early summer of 1988. The Stavola field crews, under the supervision of Lane, had staked the area for soil removal. When the township discovered the removal of the ridge, it filed a municipal court complaint against Petruzzelli. On August 29, 1988, he was fined $500 and ordered to pay restitution in the amount of $2,154.60. Within three months the Stavolas transmitted to Petruzzelli a check payable to his company in the amount of $2,154.60. Despite the denials of the Stavolas, based on these circumstances, the jury was entitled to infer, as it apparently did, that the soil from the ridge was removed at the direction of the Stavolas and transported to their plant. The evidence indicated that the amount of soil removed from this area totalled about 200,000 cubic yards.

The effect of the overmining on the land sale contracts was hotly disputed at trial. The Stavolas contend the deals fell apart for other reasons: a decline in the real estate market; an unwillingness to permit the Stavolas to restore the property; Velop's failure to apply for final subdivision approval and its "voluntary" termination of the contract with Williamsburg; and the Kaplans' "knowing" allowance of the excessive mining. While their position finds some support in the record, with the exception of their assertion of the Kaplans' complicity in the overmining, there was strong evidence, which the jury was entitled to credit, to support the Kaplans' contention that the overmining was the crucial factor leading up to the termination of the land sale contracts.

For example on October 17, 1986, an attorney for Velop, wrote to John, SCC and the Kaplans' attorney, indicating awareness of the soil removal contract and his client's concerns about the overmining:

Our client has reason to believe that Stavola has mined the 301,000 cubic yards and that any further soil removal would, therefore, be without right under the contract and a violation of the rights of my client as contract purchaser.

We are currently doing verification in the field but wish to put you on notice of what we believe to be the case so that no soil will be removed beyond the 301,000 cubic yards allowed.

Also, by letter of November 14, 1988, the attorney for Williamsburg wrote to Velop, describing the problems caused by the overmining and detailing the costs of repair, which his client said amounted to a minimum of $1,404,603. He concluded the letter by stating the contract was voidable because of the overmining and demanding a return of the deposit or substantial modification of the contract price. Velop refused to reduce the price. According to the trial testimony of Frank W. Hahne, an engineer employed by Velop, the cost of restoration would have been between $4,500,000 and $5,407,000.

Furthermore, when plaintiff obtained preliminary subdivision approval on October 24, 1988, and demanded payment from Williamsburg, pursuant to its contract, for $150,000, Salvatore Martelli, a principal of Williamsburg, refused to authorize payment because of the loss of the soil, which his company had expected to be able to remove and sell.

There were further negotiations (described at great length by numerous witnesses during the trial) among various parties, including the Stavolas, directed at reaching some accord as a result of the overmining. In the end, they came to naught.

The balance of the relevant evidence will be described in relation to the specific points raised by each party.

II

The Stavolas contend there was insufficient evidence to support the jury's finding of tortious interference with contractual rights. Therefore, they say the trial court erred in refusing to grant their motions for judgment notwithstanding the verdict or a new trial.

A motion for a new trial based on the quality of the evidence may only be granted if, "having given due regard to the opportunity of the jury to pass upon the credibility of the witnesses, it clearly and convincingly appears that there was a miscarriage of Justice under the law." R. 4:49-1(a).

In Dolson v. Anastasia, 55 N.J. 2, 258 A.2d 706 (1969), the Court explained the difference between a new trial motion and a motion for judgment notwithstanding the verdict, pointing out that in the latter case the "judicial function . . . is quite a mechanical one. The trial court is not concerned with the worth, nature or extent (beyond a scintilla) of the evidence, but only with its existence, viewed most favorably to the party opposing the motion." Id. at 5-6. On the other hand, with respect to a new trial motion, the Court said:

The trial Judge's obligation on a motion for a new trial because the verdict is said to be against the weight of the evidence is quite a different and more difficult one. It is clear that such a motion may be properly granted although the state of the evidence would not justify the direction of a verdict. Franklin Discount Co. v. Ford, (supra) (27 N.J., at 490). A process of evidence evaluation, --'weighing'--, is involved, which is hard indeed to express in words. This is not a pro forma exercise, but calls for a high degree of conscientious effort and diligent scrutiny. The object is to correct clear error or mistake by the jury. Of course, the Judge may not substitute his judgment for that of the jury merely because he would have reached the opposite Conclusion; he is not a thirteenth and decisive juror. It was said in Kulbacki, 'what the trial Judge must do is canvass the record, not to balance the persuasiveness of the evidence on one side as against the other, but to determine whether reasonable minds might accept the evidence as adequate to support the jury verdict * * * .' 38 N.J., at 445 This does not mean that the test is the same as on a motion for judgment. Rather what was meant was that in ruling on a motion for a new trial, the trial Judge takes into account, not only tangible factors relative to the proofs as shown by the record, but also appropriate matters of credibility, generally peculiarly within the jury's domain, so-called 'demeanor evidence', and the intangible 'feel of the case' which he has gained by presiding over the trial.

[Id. at 6.]

The standard governing an appellate court's review of a trial court's decision of a new trial motion is "essentially the same as that controlling the trial Judge." Id. at 7. While the reviewing court must consider the significant firsthand observations of the trial Judge regarding the witnesses, the duty remains to determine whether a miscarriage of Justice occurred. Ibid. Since we are satisfied that a new trial on liability is not warranted based on the quality of the evidence, we need not discuss the more restrictive standard applicable to motions for judgment notwithstanding the verdict.

We begin our consideration of the validity of the Kaplans' claim for tortious interference by reference to Harris v. Perl, 41 N.J. 455, 197 A.2d 359 (1964). Speaking for a unanimous Court, Chief Justice Weintraub described in broad terms the essential nature of this tort:

The law protects a man in the pursuit of his livelihood. True, he cannot complain of every disappointment; others too may further their equal interests, and if the means are fair, the advantage should remain where success has put it. But if the act complained of does not rest upon some legitimate interest or if there is sharp dealing or overreaching or other conduct below the behavior of fair men similarly situated, the ensuing loss should be redressed.

Hence one who unjustifiably interferes with the contract of another is guilty of a wrong. And since men usually honor their promises no matter what flaws a lawyer can find, the offender should not be heard to say ...


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