COLONIAL RECORDS STORAGE, LLC v. NANCY S. SIMPSON
Annotate this CaseNOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
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SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-1994-20
COLONIAL RECORDS
STORAGE, LLC,
Plaintiff-Respondent,
v.
NANCY S. SIMPSON, ESQ.,
d/b/a STEIN, SIMPSON &
ROSEN, P.A.,
Defendant-Appellant.
__________________________
Submitted November 10, 2021 – Decided December 9, 2021
Before Judges Fuentes and Gooden Brown.
On appeal from the Superior Court of New Jersey, Law
Division, Bergen County, Docket No. DC-007491-20.
Nancy S. Simpson, appellant pro se.
Respondent has not filed a brief.
PER CURIAM
In this one-sided appeal, defendant Nancy S. Simpson, an attorney
appearing pro se, appeals from a March 12, 2021 final judgment for $14,049.51
entered in favor of plaintiff Colonial Records Storage, LLC (Colonial) following
a bench trial in the Special Civil Part. We reverse.
On July 11, 2020, Colonial, a company that stored, shredded, and
delivered retained business records for professionals, filed a complaint against
"Nancy S. Simpson, Esq. . . . d/b/a Stein Simpson & Rosen, P.A." for overdue
storage fees. At the trial conducted on March 12, 2021, Colonial's Vice
President and General Manager, Mark Lillo, testified that since 1993, Colonial
provided record storage services to defendant Simpson d/b/a Stein Simpson &
Rosen, P.A., a New Jersey domestic professional corporation 1 engaged in the
business of providing legal services. However, in 2017, the firm stopped paying
Colonial's invoices despite Colonial's repeated demands for payment. Lillo
confirmed Simpson never provided legal services for Colonial and their business
relationship was related exclusively to record storage services.
1
A professional corporation is "a corporation . . . organized under [The
Professional Service Corporation Act] for the sole and specific purpose of
rendering the same or closely allied professional service as its shareholders, each
of whom must be licensed or otherwise legally authorized within this State to
render such professional service." N.J.S.A. 14A:17-3(2).
A-1994-20
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Although the law firm no longer "provid[ed] legal services," Simpson
acknowledged "[i]t ha[d] not been formally dissolved." Simpson admitted being
"a shareholder" of the law firm and practicing law "as a member of the firm"
until she retired. However, Simpson denied being personally responsible or
having assumed responsibility for any services provided by Colonial to the firm.
In contrast, Lillo testified that all the files it stored belonged to Simpson, the
firm was Simpson's firm, and Simpson and her secretary were the only members
of the firm with whom Colonial communicated. Nonetheless, while it was
unclear whether all payments on the account "came from [the] firm[,]" all the
invoices submitted by Colonial to support its claim were billed to the firm, not
Simpson. Further, Colonial could not produce a record storage service
agreement or any writing evidencing that Simpson promised to be personally
liable for the charges.
In an oral decision, the judge credited Lillo's testimony and determined
although there was no written storage agreement, there was "an oral agreement"
for services dating back to 1993 between Colonial and the firm of which
Simpson, by her own admission, was a shareholder. The judge found Colonial
proved that monthly unpaid storage fees had accrued from Colonial's retention
of the firm's records and Colonial's continuous attempts to obtain payment went
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3
unheeded. Although there was no written storage agreement indicating whether
the services were contracted in the name of the firm or Simpson, because
Simpson failed to produce any documentation "delineating the nature of the
[shareholder agreement] []or absolving her of any personal liability," the judge
rejected "Simpson's testimony that as a shareholder, she [held] no personal
liability for the fees . . . accumulated on behalf of the firm." Instead, based on
her reading of N.J.S.A. 14A:17-8, the judge concluded shareholders of a
professional corporation are "personally and fully liable and accountable for any
act and for professional services rendered on behalf of the corporation." As a
result, the judge found Simpson personally liable for the unpaid fees due
Colonial and entered a memorializing order of judgment for the amount sought
in Colonial's complaint. This appeal followed.
On appeal, Simpson argues that as a shareholder in Stein Simpson &
Rosen, she was not liable for debts that did not arise out of the performance of
"professional services" by her or the firm under N.J.S.A. 14A:17-8. Simpson
asserts because Colonial did not claim any professional services were rendered
in connection with the unpaid storage fees nor allege she misused the
corporation, the judge erred in finding her liable for "any act" of the corporation.
Additionally, Simpson argues there was no evidence presented at trial that she
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4
had undertaken financial responsibility for the services provided by Colonial in
her personal or individual capacity. Simpson contends the fact that Lillo
testified the stored files belonged to her personally does not deprive her "of the
protective shield of the corporation nor . . . operate to make [her] liable for its
debts."
Ordinarily, "'we do not disturb the factual findings and legal conclusions
of the trial judge'" in a bench trial "'unless we are convinced that they are so
manifestly unsupported by or inconsistent with the competent, relevant and
reasonably credible evidence as to offend the interests of justice.'" Seidman v.
Clifton Sav. Bank, S.L.A., 205 N.J. 150, 169 (2011) (quoting In re Tr. Created
By Agreement Dated December 20, 1961, ex rel. Johnson, 194 N.J. 276, 284
(2008)). However, "[q]uestions of law receive de novo review." Allstate Ins.
Co. v. Northfield Med. Ctr., P.C., 228 N.J. 596, 619 (2017) (citing Manalapan
Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)). Here,
we agree with Simpson that the judge misapplied the protection against personal
liability afforded under N.J.S.A. 14A:17-8 and the resulting imposition of
personal liability on her was error.
N.J.S.A. 14A:17-8 provides:
Any officer, shareholder, agent or employee of a
professional corporation . . . shall remain personally
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and fully liable and accountable for any negligent or
wrongful acts or misconduct committed by him, or by
any person under his direct supervision and control,
while rendering professional service on behalf of the
corporation in this State to the person for whom such
professional service was being rendered; provided, that
the personal liability of shareholders of a professional
corporation, in their capacity as shareholders of such
corporation, shall be no greater in any aspect than that
of a shareholder-employee of a corporation organized
under the provisions of the Business Corporation Act
of New Jersey, exclusive of this act.
Thus, under N.J.S.A. 14A:17-8, a shareholder cannot escape personal
liability for her own negligence or misconduct while rendering services on
behalf of a professional corporation. See Lederman v. Prudential Life Ins. Co.
of Am., Inc., 385 N.J. Super. 324, 347 (App. Div. 2006) ("Under both New York
and New Jersey law, a shareholder of a professional corporation is only liable
for his own negligent or wrongful misconduct or the conduct of an employee he
supervises." (citing N.J.S.A. 14A:17-8)). However, shareholders of a
professional corporation, in their capacity as shareholders, have the same
protections from liability that a shareholder of any other corporation would
have. N.J.S.A. 14A:17-8.
"'[A] primary reason for incorporation is the insulation of shareholders
from the liabilities of the corporate enterprise.'" Richard A. Pulaski Constr. Co.
v. Air Frame Hangars, Inc., 195 N.J. 457, 472 (2008) (quoting N.J. Dep't of
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Env't. Prot. v. Ventron Corp., 94 N.J. 473, 500 (1983)). To that end, N.J.S.A.
14A:5-30(2) declares "[u]nless otherwise provided in the articles of
incorporation, a shareholder of a corporation is not personally liable for the acts
of the corporation, except that a shareholder may become personally liable by
the reason of his own acts or conduct." For example, "'[a]n individual may be
liable for corporate obligations if he was using the corporation as his alter ego
and abusing the corporate form in order to advance his personal interests.'" Sean
Wood, L.L.C. v. Hegarty Grp., Inc., 422 N.J. Super. 500, 517 (App. Div. 2011)
(quoting Casini v. Graustein (In re Casini), 307 B.R. 800, 811 (Bankr. D.N.J.
2004)). Thus, "[w]here the corporate form is used by individuals for the purpose
of evading the law, or for the perpetuation of fraud, the courts will not permit
the legal entity to be interposed so as to defeat justice." Karo Mktg. Corp., v.
Playdrome Am., 331 N.J. Super. 430, 442 (2000) (quoting Trachman v.
Trugman, 117 N.J. Eq. 167, 170 (Ch. Div. 1934)).
Here, Colonial was not a client of the firm and produced no evidence to
show Simpson, in her personal capacity, was a party to the storage service
agreement it maintained with the firm. Instead, the record showed all of
Colonial's invoices for services rendered identified the firm as the debtor, not
Simpson personally. Further, the judge did not find the firm was Simpson's alter
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ego or that Simpson had abused the corporate form. See Marascio v.
Campanella, 298 N.J. Super. 491, 502 (App. Div. 1997) (holding a shareholder
who allegedly paid some corporate obligations from a personal checking account
did not provide a basis for piercing the corporate veil to impose personal liability
on the shareholder); Arrow Mfg. Co., v. Levinson, 231 N.J. Super. 527, 533-34
(App. Div. 1989) (setting aside a judgment because there was insufficient
evidence to pierce the corporate veil and hold the individual personally liable
for the corporate debt). Consequently, as an attorney-shareholder, Simpson had
no personal liability for the firm's unpaid invoices for storage services.
Undoubtedly, Colonial has the right to sue the firm and obtain a judgment
against it.2 However, on these facts, contrary to the judgment entered in favor
of Colonial, Simpson is not personally liable for the storage fees.
Reversed.
2
In fact, the judge found "because the firm [had] not formally dissolved," both
"Simpson and the firm" remained "responsible for the balance due . . . to
Colonial."
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