Guthman v Write Once, Inc.

[*1] Guthman v Write Once, Inc. 2009 NY Slip Op 51040(U) [23 Misc 3d 1131(A)] Decided on May 27, 2009 Justice Court of Village of Hastings-on-Hudson, Westchester County DeVita, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. As corrected in part through May 28, 2009; it will not be published in the printed Official Reports.

Decided on May 27, 2009
Justice Court of Village of Hastings-on-Hudson, Westchester County

Andre Guthman, Plaintiff,

against

Write Once, Inc. and Robert T. Mason, Defendants.



08 SC 192

James R. DeVita, J.

This is a small claims proceeding brought by Andre Guthman, a certified public accountant, against Write Once, Inc. ("Write Once") and Robert T. Mason for professional fees Mr. Guthman claims he is owed by the defendants. There is no written contract between the parties. Plaintiff bases his claim on an oral agreement he contends the parties entered into for the performance of tax and accounting services for Write Once and Mr. Mason personally. The defendants do not dispute the existence of an oral contract. Rather, they contend that Mr. Guthman failed to perform the services called for under the oral agreement in a satisfactory or professional matter and, therefore, failed to complete his obligations under the contract. As an alternative claim, raised by email after the September 24, 2008 trial of this matter, Mr. Guthman asserts a claim sounding in quantum meruit for the purported value of his services even if he did not fully perform under the contract. Mr. Guthman claims that his work provided the basis for the preparation of returns by the accountant hired by Write Once and Mr. Mason after they decided not to file the returns prepared by Mr. Guthman. For the reasons set forth in this Opinion and Order, the Court finds for the defendants and awards judgment to them and against the plaintiff.

Both Mr. Guthman and Mr. Mason testified at the trial, and each offered documentary evidence. Although there was some disagreement in the testimony as to the full extent of the services Mr. Guthman was to provide in exchange for a fee of $2,000,[FN1] it was agreed that at the very least he was to provide complete and accurate corporate income tax returns, IRS Form 1120S, for Write Once for the 2007 tax year. The evidence is quite clear that Mr. Guthman never did that. He provided, and presented to Mr. Mason for his signature, two completed Forms 1120S, the first dated February 21, 2008 (Defendants' Exhibit I) and the second dated March 11, 2008 (Defendants' Exhibit J). Although Mr. Guthman signed both returns as the preparer, and presented them to Mr. Mason as appropriate for filing with the IRS, he conceded at trial that the first one contained several errors, and that even the second, "corrected" return contained at least one error in the form of an inaccurate deduction for employee benefits Write Once was not entitled to deduct, in the amount of $660.

At trial and in his post-trial email submissions, Mr. Guthman sought to minimize the significance of that mistake because of the relatively small amount of the inaccurate deduction. Under Federal tax law, however, the amount of an inaccuracy does not affect its materiality: [*2]"Whether the false itemized deductions had substantial or minor effects on the amount of taxable income reported, the deductions nevertheless caused the tax returns to be inaccurate and thus were material matters." United States v. Klausner, 80 F.3d 55, 61 (2d Cir. 1996), citing inter alia, United States v. Helmsley, 941 F.2d 71, 92 (2d Cir. 1991), cert. denied, 502 U.S. 1091 (1992). If Mr. Mason had filed the even the second, "corrected" return as prepared by Mr Guthman knowing that it contained the inaccurate deduction, he would have committed a federal felony in violation of 26 United States Code § 7206 (1). Thus, providing Write Once and Mr. Mason with a corporate tax return that contained an inaccurate deduction was a material breach of the contract to provide professional tax return preparation services.

Mr. Guthman's alternative claim sounding in quantum meruit must also be rejected. In the first place, "[i]t has long been the law in this State that a party who defaults on a contract cannot recover the amount or value of part performance . . . ." Collar City Partnership I v. Redemption Church of Christ of the Apostolic Faith, 235 AD2d 665, 666, 651 NYS2d 729, 730 (3d Dep't 1997); accord, Tako Holdings, Inc. v. Tillman, 272 AD2d 394, 396, 707 NYS2d 658, 660 (2d Dep't 2000) ("Contrary to the plaintiff's contention, it cannot alternatively recover under a theory of quantum meruit. Where, as here, there is an existing contract between the parties covering the dispute in issue there can be no recovery in quantum meruit . . . ."), citing, inter alia, Clark-Fitzpatrick, Inc. v. Long Is. R.R. Co., 70 NY2d 382, 389 (1987). In the second place, as plaintiff Mr. Guthman would have the burden of proof an any claim based on partial performance. Although he asserts, in conclusory fashion in an email sent to the Court after the close of evidence, that the successor accountant retained by Write Once used Mr. Guthman's work to prepare the returns that were actually filed on behalf of the corporation, he produced no evidence to support that assertion. Thus, even assuming the law of New York permitted recovery in quantum meruit by a party to a contract who fails to perform fully under the contract, Mr. Guthman has not produced any evidence to prove either that his work was used to prepare the subsequent return or the value of the work he did perform under the contract. Therefore, he cannot succeed on that claim, either.

Dated: Hastings-on-Hudson, New York

May 27, 2009

SO ORDERED

James R. DeVita

Acting Village Justice Footnotes

Footnote 1: Mr. Guthman and Mr. Mason disagreed, for example, as to whether the contract included preparation of personal income tax returns for Mr. Mason for the 2007 tax year.