NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court."
Although it is posted on the internet, this opinion is binding only on the
parties in the case and its use in other cases is limited. R.1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-0711-15T3
WILLARD F. WEIKEL, CPA,
Plaintiff-Respondent,
v.
LISA HARRIS, n/k/a,
LISA BAILEY,
Defendant/Third-Party
Plaintiff-Appellant,
v.
ROBERT HARRIS,
Third-Party Defendant.
________________________________________
Submitted December 22, 2016 – Decided June 6, 2017
Before Judges O'Connor and Whipple.
On appeal from Superior Court of New Jersey,
Law Division, Special Civil Part, Camden
County, Docket No. DC-5195-15.
Obermayer Rebmann Maxwell & Hippel, LLP,
attorneys for appellant (Shari B. Veisblatt
and Amanda W. Figland, on the brief).
Garofalo & O'Neill, P.A., attorneys for
respondent (William S. Ruggierio, on the
brief).
PER CURIAM
Defendant Lisa Bailey appeals from a Special Civil Part
judgment entered against her and in favor of plaintiff Willard
F. Weikel, C.P.A., in the amount of $11,155. Following our
review of the record and applicable legal principles, we affirm
in part, reverse in part, and remand for further proceedings.
I
We derive the following from the record and the evidence
adduced during the bench trial. In April 2015, after over
twenty years of marriage, Bailey and third-party defendant
Robert Harris divorced. During the course of their marriage,
Harris was the owner and president of a Subchapter S corporation
known as Family Limousine, II, Inc. (Limo). Although Bailey was
at times an employee of Limo, there is no evidence she was ever
an officer or shareholder of this entity.
In 2009, plaintiff, a certified public accountant,
commenced providing accounting services for the business, as
well as for Bailey and Harris (couple) personally. By that
time, the business had failed to file income tax returns and
other essential documents with the taxing authorities for three
years. Plaintiff prepared the necessary documents for Limo to
2
A-0711-15T3
file. Limo then closed in January 2010, but, in an ongoing
effort to straighten out Limo's accounting and file the
appropriate documents with both the IRS and the State of New
Jersey, plaintiff provided services for Limo's benefit through
2014. Plaintiff also prepared the couple's and their two adult
children's income tax returns for calendar years 2009 through
2013. Although he periodically provided invoices to Limo and
the couple, plaintiff's bill went unpaid.
In 2014, Bailey filed a complaint for divorce. Aware the
couple was divorcing, plaintiff pressed Bailey and Harris
separately for payment, billing each one-half of the total fees
both Limo and the couple owed to him. Plaintiff settled with
Harris for an undisclosed amount. However, unsuccessful in
obtaining any payment from Bailey, plaintiff filed a complaint
against her in the Special Civil Part seeking the recovery of
his entire bill against Limo and the couple. The bill was
$19,400.1
In his complaint, among other things, plaintiff alleged
breach of contract. It is undisputed plaintiff and Bailey did
not enter a written contract, but plaintiff testified he entered
1
Despite seeking $19,400 from Bailey, in his complaint,
plaintiff acknowledged he could not recover more the $15,000
monetary limit permitted in the Special Civil Part. See R. 6:1-
2(a)(1).
3
A-0711-15T3
into a verbal agreement with the couple to provide accounting
services. In the alternative, he sought the recovery of his
fees under the equitable theory of quantum meruit. In turn,
Bailey filed a third-party complaint against Harris, seeking
indemnification in the event she were found liable to plaintiff.
During the trial, plaintiff acknowledged that, on May 14,
2010, both Limo and the couple filed for bankruptcy relief; the
debts of both Limo and the couple were ultimately discharged.
Plaintiff clarified he sought to recover only those fees for
services provided to Limo and the couple after May 14, 2010; in
the aggregate, those fees were $12,595. In his invoices,
plaintiff did not completely separate the fees he charged Limo
from those he charged the couple.
Plaintiff testified Bailey had been employed as a
bookkeeper for Limo in 2007 and 2008, and that Harris was the
president. Although he was the accountant for Limo, plaintiff
did not identify who the shareholder or shareholders were to
this Subchapter S corporation.
Harris testified it was he who requested plaintiff to
provide "accounting services" for Limo, including that he
prepare "returns" for Limo and "satisfy corporate filings."
Harris did not testify about his relationship to Limo, but noted
Bailey worked in the business as a bookkeeper and driver, as
4
A-0711-15T3
well as "a little bit of everything." Harris did not testify
Bailey was a shareholder in the corporation.
Bailey testified she had last worked for Limo in 2003, but
on cross-examination admitted she received unemployment
compensation in 2010 for having been laid-off from Limo.
However, she never stated or provided any evidence she had been
a shareholder of the corporation. She did testify Harris was
the "owner" of Limo, and that it was he who retained plaintiff
to provide accounting services for Limo.
Although the trial court explicitly stated it did not know
the "ownership status" of or who was a shareholder in Limo, the
court nevertheless found Bailey responsible for the services
plaintiff provided to Limo, because this entity was a small,
family-run business. The court stated:
This was a closely-held Sub-S corporation.
Nobody told me what the ownership status was
or who was a shareholder, who wasn't a
shareholder, but it was a family op – it was
– well, it was called, "Family Limo"; I
mean, it's kind of what you refer to as a,
"Mom-and-Pop Operation." It's a small
business with, you know, few employees with,
you know, the people apparently [Bailey and
Harris] doing the work.
And I don't know what [Bailey's] stated
ownership interest in it was, but in this
type of closely-held situation -- it's not
like we're doing corporate returns for, you
know, IBM or – or any, you know, major
company; this is a small closely-held
5
A-0711-15T3
company – even if Mr. Harris is a hundred-
percent shareholder, that's not the way it's
going down, you know, in terms of how
they're actually dealing with the matter.
Without expressing employing the term "quantum meruit," the
court essentially applied this doctrine and found Bailey
responsible for the services plaintiff rendered to Bailey and
Harris for their personal financial matters. The court stated:
[A] lot of work [was] done on joint returns
. . . . And, not only that, every year on
the joint returns when the whole package is
put together, nobody – Ms. – Ms. Bailey
never told me, "I didn't sign [the return];
I refused to sign it because I didn't hire
this guy; I didn't want him doing the work;
he was charging too much; I didn't want it
to happen." She never said that.
For reasons not relevant to any issue on appeal, the court
deducted $1440 from the $12,595 plaintiff sought in damages, and
concluded the amount owed to him was $11,155. The court entered
a judgment for this amount against Bailey and in plaintiff's
favor. The court also dismissed Bailey's third-party complaint
against Harris without prejudice, finding the allocation of this
marital debt between Bailey and Harris should be handled by the
Family Part.
II
On appeal, Bailey contends the trial court erred by finding
(1) she was responsible for Limo's debts; (2) there was a
6
A-0711-15T3
binding contract between her and plaintiff to pay for all of his
fees; and (3) she was responsible for plaintiff's fees on a
theory of quantum meruit. Bailey also claims the court erred by
dismissing her third-party complaint against Harris.
Factual findings of the trial court are granted deference
unless "they are so wholly insupportable as to result in a
denial of justice[.]" Rova Farms Resort, Inc. v. Inv'rs Ins.
Co., 65 N.J. 474, 483-84 (1974) (quoting Greenfield v.
Dusseault, 60 N.J. Super. 436, 444 (App. Div.), aff'd o.b., 33
N.J. 78 (1960)). Thus, an "appellate court should exercise its
[] fact finding jurisdiction sparingly and in none but a clear
case where there is no doubt about the matter." Id. at 484.
However, "[a] trial court's interpretation of the law and the
legal consequences that flow from established facts are not
entitled to any special deference," and are reviewed de novo.
Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366,
378 (1995).
We readily dispose of the contention the court erred when
it found there was a binding contract between her and plaintiff.
The court did not make this finding. After determining Bailey
was responsible for Limo's debts on the ground Limo was a small,
family-run operation, the court found plaintiff entitled to
7
A-0711-15T3
recover his fee from Bailey on the theory of quantum meruit, not
breach of contract.
We turn to what we view as the principal contention,
whether Bailey is responsible for Limo's debts. Our Supreme
Court has recognized it is a "fundamental proposition[] that a
corporation is a separate entity from its shareholders, and that
a primary reason for incorporation is the insulation of
shareholders from the liabilities of the corporate enterprise."
State Dep't of Envtl. Prot. v. Ventron Corp., 94 N.J. 473, 500
(1983) (citing Lyon v. Barrett, 89 N.J. 294, 300 (1982)). In
order to overcome the separation of a corporation from its
shareholders or members for purposes of imposing liability,
there must be proof the "corporate veil" should be pierced "to
prevent an independent corporation from being used to defeat the
ends of justice, to perpetrate fraud, to accomplish a crime, or
otherwise to evade the law." Ibid. (citations omitted).
Here, there is no dispute Limo was a corporation, albeit a
Subchapter S corporation, a kind of corporation "formed to take
advantage of the tax treatment provided by Subchapter S of the
Internal Revenue Code, 26 U.S.C. § 1361 et seq." Carter v.
Anderson (In re Carter), 182 F.3d 1027, 1028 n.1 (9th Cir.
1999). However, "[w]hile an S corporation is treated
differently for taxation purposes, it remains a corporation in
8
A-0711-15T3
all other ways, and it and its shareholders are separate
entities." Smith Setzer & Sons v. S.C. Procurement Review
Panel, 20 F.3d 1311, 1318 (4th Cir. 1994).
A Subchapter S corporation's similarity to a corporation
includes that a Subchapter S shareholder is not at risk for
being responsible for corporate debt. "Subchapter S permits
small businesses, or S corporations, to receive the 'non-tax
advantages of incorporation such as . . . insulation from
personal liability[.]'" Tarrant v. Dep't of Taxes, 733 A.2d
733, 737 (Vt. 1999) (quoting Cohen v. Colo. Dep't of Revenue,
593 P.2d 957, 959 (Colo. 1979)). A shareholder's insulation
from the debts of a corporation is not in any way affected if a
corporation is organized in compliance with the provisions of
Subchapter S. Stock v. Stock, 693 So. 2d 1080, 1086 (Fla.
1997).
Here, there is no evidence Bailey was a shareholder, let
alone a finding it was necessary to pierce the corporate veil to
hold her accountable as a shareholder for a wrong committed.
At best, Bailey was an employee, and there is no contention her
status as employee created liability for Limo's debts."
Therefore, that portion of the judgment attributable to the fees
plaintiff charged to provide services to Limo are not Bailey's
responsibility. Because the evidence does not enable us to
9
A-0711-15T3
determine which part of the judgment is for fees incurred to
provide services to Limo, we must vacate the judgment and remand
this matter to the trial court so that it can make this finding
and enter an amended judgment.
We find no error in the trial court's finding Bailey is
liable to plaintiff for the fees he charged to provide services
for her and Harris in connection with their personal finances.
The court properly applied the doctrine of quantum meruit to
this matter. To recover under this doctrine, a claimant must
show proof of "(1) the performance of services in good faith,
(2) the acceptance of the services by the person to whom they
are rendered, (3) an expectation of compensation therefor, and
(4) the reasonable value of the services." Starkey v. Estate of
Nicolaysen, 172 N.J. 60, 68 (2002) (quoting Longo v. Shore &
Reich, Ltd., 25 F.3d 94, 98 (2d Cir. 1994) (citations omitted)).
Plaintiff has met this test. There is no question he
performed accounting services for Bailey (and Harris) with
respect to their personal finances in good faith; Bailey
accepted these services; and these services were rendered in the
expectation plaintiff would be compensated. Finally, Bailey
does not challenge the value of the services rendered.
Last, we are in accord with the trial court's decision to
dismiss without prejudice Bailey's third-party complaint. Most,
10
A-0711-15T3
if not all, of the subject debt was incurred during the
marriage. At the time of divorce, not only are the parties'
assets subject to equitable distribution, but their debts are
subject to allocation. See Monte v. Monte, 212 N.J. Super. 557,
567 (App. Div. 1986). We are informed neither Bailey nor Harris
included plaintiff's debt on the Case Information Statements
each filed in the divorce action, and neither considered such
debt when they settled that matter. How the debt to plaintiff
is to be allocated between Bailey and Harris must be handled in
the Family Part. See R. 5:1-2(a) ("[A]ctions in which the
principal claim is unique to and arises out of a family or
family-type relationship shall be brought in the Family Part.").
In summary, the judgment for $11,155 is vacated and this
matter is remanded to the trial court for further proceedings to
determine what fees are attributable to the services plaintiff
rendered to Limo, including but not limited to preparing the
general ledgers for the corporation and any tax returns or other
documents filed with the taxing authorities. Those fees for
services plaintiff rendered to Bailey and Harris with respect to
their personal finances shall then be reduced to a judgment.
Finally, plaintiff's motion to strike Bailey's brief and
appendix, and to impose sanctions, is denied.
11
A-0711-15T3
Affirmed in part, reversed in part, and remanded for
further proceedings in conformance with this opinion. We do not
retain jurisdiction.
12
A-0711-15T3