RICHARD W. TULLY, JR., Plaintiff-Appellant,
PETER MIRZ, Defendant-Respondent.
Submitted October 16, 2018
appeal from Superior Court of New Jersey, Law Division,
Bergen County, Docket No. L-5951-16.
E. Mazur, attorney for appellant.
Weinstein Group, PC, attorneys for respondent (Lloyd J.
Weinstein, on the brief).
Judges Fisher, Hoffman and Geiger.
Richard W. Tully, Jr. and defendant Peter Mirz were the sole
shareholders of a closely-held corporation they jointly
started known as Interstate Fire Protection, Inc. (IFP).
Plaintiff and defendant, who are brothers-in-law, did not
initially sign a written agreement stating how profits and
losses would be shared, though for the first five years of
the business they took an equal salary. When IFP began
experiencing financial difficulties, plaintiff contributed
significant funds to pay its expenses. Eventually, IFP
defaulted on a loan from TD Bank, N.A., and judgment was
entered against it in the State of New York.
the parties were unable to reach an agreement concerning
their respective contributions to IFP's debts, plaintiff
filed suit to recover fifty-percent of the "substantial
contributions" he and his other company made to IFP to
cover its shortfalls. Plaintiff appeals from an August 28,
2017 order dismissing his complaint against defendant without
prejudice following a one-day bench trial. For the following
reasons, we affirm in part and reverse and remand in part.
2005, plaintiff and defendant formed IFP, a fire protection
contractor serving primarily commercial customers, as a
partnership. Two years later they incorporated the business
in New York. Each party made an initial $35, 000 investment
in IFP, and were paid equal salaries during IFP's first
parties did not initially enter into a written agreement as
to how IFP losses would be shared individually. However, they
eventually entered into a Shareholders-Partners Agreement
(Agreement) on January 15, 2009. Under the Agreement,
plaintiff and defendant are equally responsible for IFP's
liabilities, "unless the losses are occasioned by the
willful neglect or default, and not the mere mistake or
error, of any of the parties."
had substantial prior experience in the construction industry
and had previously formed Interstate Mechanical Services,
Inc. (IMS), which provided HVAC-related mechanical
contracting services to its clients. Plaintiff brought his
name, reputation, and client contacts to IFP. He continued to
own and operate IMS in conjunction with IFP. Defendant had no
role in IMS.
worked in the fire protection field prior to forming IFP, and
was licensed to perform that trade, but had no prior
experience owning a business. Defendant was responsible for
running IFP's day-to-day operations.
2008, IFP received a $250, 000 line of credit from TD Bank.
The line of credit was later increased to $750, 000. However,
financial difficulties eventually led the parties to reduce
IFP's line of credit to $450, 000 in 2011. Plaintiff,
defendant, and IMS each guaranteed repayment of the line of
credit when it was initially opened and each time it was
financial difficulties led it to default on its obligation to
TD Bank. Plaintiff alleges IFP's financial difficulties
were caused by defendant's mismanagement and willful
neglect, including failure to estimate projects properly and
failure to properly mobilize and coordinate IFP's forces.
On January 7, 2015, TD Bank filed a collection action against
IFP, IMS, plaintiff, and defendant in the Supreme Court of
New York, and in April 2016, secured a judgment in the amount
of $530, 687.40 plus statutory interest (IFP judgment).
the IFP judgment held the debtors jointly and severally
liable, plaintiff and IMS entered into a settlement agreement
with TD Bank, which discharged them from the obligation in
exchange for payment of $300, 000. Plaintiff and IMS
performed and were formally released on October 20, 2016.
Defendant and IFP remained liable to TD Bank for the
remaining balance of $226, 469.40. TD Bank receives payment
from defendant through a wage garnishment.
alleges he and IMS extended loans to IFP, or made payments on
its behalf, for which they expected to be repaid by IFP.
Although payment has been demanded, it has not been remitted.
also alleges that in 2012, defendant sold the assets of IFP
to Pace Plumbing Corp. without fully disclosing the terms of
the sale to plaintiff, or by misrepresenting the terms of the
sale. These claims were withdrawn by plaintiff during the
also alleges defendant misappropriated IFP funds by
falsifying the time sheets of former IFP employee James Gould
in an alleged kickback scheme wherein Gould was paid for
overtime he did not perform, with the unearned income being
applied to the debt defendant owed Gould on a personal loan
from 2010. Plaintiff further alleges defendant converted IFP
funds through Gould's bank account in 2012. Finally,
plaintiff alleges defendant misused IFP funds for personal
expenses, such as excessive payments for company vehicles
that were used personally by defendant.
filed a six-count Chancery action against defendant alleging:
breach of fiduciary trust (count I); breach of contract
(count II); mismanagement (count III); breach of the covenant
of good faith and fair dealing (count IV); conversion (count
V); and fraud (count VI). Plaintiff demanded judgment against
defendant: (1) compelling repayment to IFP of monies
wrongfully converted by defendant or compelling defendant to
repay to plaintiff his proportionate share; (2) compelling
repayment of loans made to IFP or payments made on its behalf
or compelling defendant to repay to plaintiff his
proportionate share; (3) compelling defendant to comply with
all obligations imposed by the Agreement, including ...