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Augustus J. Peek, Jr., and v. Johl & Co. Inc. and

December 11, 2012


On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-1511-09.

Per curiam.


Submitted December 5, 2011

Before Judges A. A. Rodriguez and Sabatino.

Plaintiffs, Augustus J. Peek, Jr., and his wife Beatrice Peek, appeal from a final judgment entered on September 7, 2010 after a bench trial in this business dispute. For the reasons that follow, we affirm.

Plaintiffs owned and operated an insurance business, known as the Augustus J. Peek, Jr. Agency, in Ridgefield. They founded the agency in the 1950s.

On October 1, 2007, plaintiffs and defendants, Johl & Co., Inc. and John H. Johl, entered into a written agreement in which plaintiffs sold their insurance business to defendants. In connection with the purchase, defendants agreed to make forty-eight monthly installments of $1,750, totaling $84,000, in payment of a promissory note. In addition, defendants agreed to lease the office building that plaintiffs owned for two years, at a rent of $1,200 per month.

The parties' agreement contained a restrictive covenant barring plaintiffs from operating, directly or indirectly, the same or a similar business within New Jersey for a period of five years. However, as a transitional matter, plaintiffs were allowed to receive and retain in full any commissions for sales that their business had made and invoiced prior to October 2007. In addition, on any new policies written after October 1, 2007, defendants agreed to pay plaintiffs fifty percent of the commission for the year that such a policy was written.

After the agreement was struck and the business was taken over by defendants, various problems and disputes arose. Defendants perceived that rather than assisting in the transition of the business, Mr. Peek instead undermined it. In particular, defendants discovered that after the sale Mr. Peek was continuing to deal with another insurance broker, the Scirocco Agency ("Scirocco"). Evidently, plaintiffs had a history of referring business to Scirocco to obtain policies that plaintiffs could not themselves obtain directly for their customers. In exchange, Scirocco would provide plaintiffs with a referral fee, by evenly splitting the commissions gained on such policies.

It came to light that, after the sale of the business, Scirocco was sending commission payments to Mr. Peek at his personal address, thereby bypassing defendants' office. The commission checks from Scirocco, which had been made out to plaintiffs' agency before the sale, were thereafter made out to Mr. Peek individually, as the payee.

Concluding that plaintiffs were in breach of the restrictive covenant, defendants stopped making payments on the promissory note in December 2008. Defendants also vacated the premises and stopped paying rent with nine months still remaining on the lease.

In February 2009, plaintiffs filed a complaint in the Law Division, seeking to recover the balance of over $59,000 due on the promissory note, plus interest, as well as an additional $10,800 in unpaid rent on the lease. Plaintiffs further alleged that defendants had damaged the leased premises, and therefore sought $4,500 for the costs of replacing a water heater, and another $500 for repairing a broken window.

Defendants filed a counterclaim, alleging that plaintiffs had breached their restrictive covenant by continuing to receive commission payments from Scirocco after the sale. Defendants also denied liability for the sums sought by plaintiffs. Plaintiffs, meanwhile, denied that they had breached the restrictive covenant or that they had been improperly accepting post-sale commissions. According to Mr. Peek, he had asked the post office to redirect mail in his name addressed to his former office to his residence because defendants' employees allegedly had been opening his personal mail. Mr. Peek also claimed that he sent the disputed post-sale commissions back to Scirocco and had not kept the funds.

After hearing testimony from Mr. Peek, Mr. Johl, Scirocco's bookkeeper, and several other witnesses, the trial judge, Honorable Joseph S. Conte, concluded that plaintiffs had, in fact, breached the restrictive covenant. The judge specifically found Mr. Peek's benign explanation of the post-sale events was not credible. Instead, the judge concluded in his written decision that Mr. Peek "intended to conceal receipt of those checks from [Scirocco] from [d]efendants." The judge was not persuaded by Mr. Peek's contention that he had the checks mailed to his home only after discovering that defendants were opening his personal mail at the office. The judge ...

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