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Stankovits v. Schrager

December 19, 2007


On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-8168-04.

Per curiam.


Argued October 17, 2007

Before Judges Payne, Sapp-Peterson and Messano.

Plaintiff Steven Stankovits and defendant Steven Schrager were long-term acquaintances who jointly acquired a string of real properties for investment purposes. After disputes arose between them, plaintiff filed this complaint in November 2004, alleging a breach of contract, specifically an alleged partnership agreement (the Agreement), and a breach of the implied covenant of good faith and fair dealing. Plaintiff sought relief that included 1) the payment of rents and profits in accordance with the Agreement; 2) dissolution of the partnership; 3) appointment of a fiscal agent until all partnership affairs were terminated; 4) the forced sale of all the properties the parties jointly owned; 5) access to the business records of the partnership; 6) compensatory damages; 7) consequential damages; 8) punitive damages; and 9) attorney's fees.

Defendant filed his answer and asserted a counterclaim. He denied the existence of a partnership, although he admitted the parties owned various properties they had "jointly acquired." Defendant denied having violated any agreement or otherwise having caused plaintiff any damages. In his counterclaim, defendant sought 1) partition of the various properties he owned with plaintiff; 2) an accounting of their respective interests; and 3) a "winding up of the [parties'] business relationship." Defendant also alleged he was entitled to compensatory and consequential damages occasioned by plaintiff's breach of certain oral and written agreements between the two and plaintiff's breach of the implied covenant of good faith and fair dealing contained within those agreements. Lastly, defendant sought compensation under the theories of quantum meruit and unjust enrichment.*fn1

On November 10, 2005, the court appointed a fiscal agent for the jointly-held properties, Arthur M. Miller, and a case management order was entered. On May 22, 2006, a jury trial commenced and we summarize the testimony adduced over the following days.

Plaintiff testified that in July of 1994, he and defendant entered into a business relationship to purchase investment properties in the Middlesex County area. Their first purchase, 10 Conover Lane in Manalapan, was a "handy man special." He and defendant agreed to equally share the costs of purchasing and rehabilitating the home and any profits that would result from its sale. Within months, they sold the property and each made a small profit.

Thereafter, plaintiff and defendant would eventually purchase a total of five additional properties: one for $53,000 in South River (the South River Property); a second for $89,900 in Monroe (the Monroe Property); two condominium units located in South Brunswick (the South Brunswick Properties) for a total purchase price of $124,000; and a parking lot adjacent to the Monroe Property for $7100.

At the start of the parties' relationship there was no written agreement. Plaintiff and defendant purchased the South River Property, performed significant rehabilitation on it, and then mortgaged the property. It was also used as collateral to secure a subsequent loan made to the parties by plaintiff's parents. Plaintiff claimed the parties operated the South River Property in the same fashion as their first purchase, that is, both worked on the property and both anticipated splitting the proceeds from any sale. Although plaintiff also claimed that his parents only received sporadic payments on their mortgage note, this apparently did not cause any problems for the parties until their ultimate break up. At the time of trial, plaintiff testified that he and defendant were about to close on the sale of the South River Property for $282,000, thus creating a significant profit after the mortgage loans were satisfied.*fn2

Plaintiff testified that when the opportunity came to purchase the Monroe Property, defendant had no ability to put any money down toward the purchase price. Nevertheless, defendant wanted to acquire the property and continue the business relationship with plaintiff. After some discussion, plaintiff agreed to fund the initial down payment for the property, and he also secured a home equity loan on his personal home sufficient to fund the full purchase price of the Monroe Property.

Because this arrangement differed significantly from how the parties had conducted their prior business relationship, they agreed to set forth the terms of their agreement in writing. This document, which was prepared by defendant and typed on the stationary of his business, Realty Executives, became the focus of the testimony at trial. Because of its brevity, we quote the agreement in its entirety as follows:

Partnership agreement between Steven Stankovits and Steven Schrager

Property: 323 Spotswood Englishtown Road Monroe, NJ

All monies put up are payable to that party at 12%. This is the first expense to be paid out. All additional profits in equity, rental share, etc. are spit 50/50. Steven Stankovits is to put up all monies. Steven Schrager will manage the property at no expense till both parties are paid in full. All out of pocket expenses of the partnership are to be paid equally to both partners. Time by Steven Schrager is not billable till all parties are paid back their outlaid principal[;] this is subject to negotiation by both parties at a later date.

/s/ Steven Schrager 12/29/98

/s/ Steven Stankovits ...

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