On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-8818-02.
Before Judges Stern, Coburn and S.L. Reisner.
The opinion of the court was delivered by: Stern, P.J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Defendant Geoffrey Pierini appeals from a $40,000 judgment*fn1 entered in favor of plaintiff after a bench trial based on the deposit by Smart Space, Inc. of a $40,000 check jointly payable to Smart Space and Ace Audio-Visual which Ace did not endorse. Pierini is Smart Space's president and sole shareholder.*fn2 He argues that the trial court improperly held that "the participation theory of tort liability" was applicable, and contends that he cannot be held personally liable for the bank's conversion of the check. He also argues that, even if he can be held liable, the judge should have reduced the judgment based on the bank's comparative negligence. We hold that the evidence permits the finding of conversion by Pierini, that the Uniform Commercial Code (UCC) does not preclude the action under the doctrine of equitable subrogation, and that the principle of comparative negligence is not applicable to reduce the judgment.
Smart Space, defendant's wholly owned corporation, was in the business of constructing work stations for medical professionals and imaging centers for magnetic resonance imaging (MRI), CAT scan and X-ray equipment. Defendant was "running the business" and was responsible for its sales, bidding and technical aspects of the business.
In the spring of 2000, Smart Space was engaged in performing a construction contract for the University of Medicine and Dentistry of New Jersey (UMDNJ) in Scotch Plains. Smart Space subcontracted with Ace for the installation of equipment.
On May 20, 2000 Smart Space sent UMDNJ an application for a progress payment of $45,554.50 pursuant to the construction contract. The payment request was accompanied by Pierini's affidavit which certified that Smart Space owed Ace $78,710. The affidavit included a paragraph which reads:
[A]ll payment or advances received . . . by said subcontractor for or in connection with its subcontract work will be held as trust funds to be applied first to the payment in full of the foregoing obligations before using the same for any other purpose.
Because the payment was delayed by virtue of some dispute between UMDNJ and Smart Space, and Ace informed UMDNJ that it was not receiving payment for the work it had performed under the subcontract, Smart Space, Ace and UMDNJ agreed that UMDNJ would write a check for $40,000 payable jointly to Smart Space and Ace, to be charged against the payment due to Smart Space. Pierini wrote a letter "requesting" issuance of the joint check.
Nick Fabbroni, UMDNJ's project manager, testified that the check "should have gone to Ace," but was inadvertently mailed to Smart Space.
George Mulry, Smart Space's office manager, testified that after the check was received at Smart Space's office, he deposited it in Smart Space's account at plaintiff bank. Because Pierini was out of town at the time, Mulry spoke with Smart Space's attorney, Thomas Frey, before depositing the check. Frey had been retained because he was an "accountant/lawyer," and Smart Space was experiencing "financial problems at the time the check came in." Mulry was directed to refer to Frey all issues relating to Ace.
At one point in his testimony, Mulry, who was no longer employed by Smart Space, said he remembered "Jeff [Pierini] giving me the check and asking him about it, and him saying just don't worry about it just get it to deposit it -- you know, get it into the bank." Mulry also testified that defendant was "very much hands-on management . . . involved in all ...