CPA v. IV LLC (2011)

MEMORANDUM OF DECISION

In this action, the plaintiff claims he is owed money for his services as an accountant to the defendants on theories of breach of contract, unjust enrichment and quantum meruit.   The defendants deny these claims.   This action was tried to the court on March 16, 2011.   Based upon the evidence and testimony presented, the court finds the following facts by a preponderance of the evidence.

In March 2007, the plaintiff sold a motel to the principals of the defendant, JAYMS IV Enterprises, LLC [JAYMS].   During the course of that transaction, the plaintiff, who is a certified public accountant, and the principals of JAYMS orally agreed that the plaintiff would do the bookkeeping, accounting, payroll and tax preparation for the principals' four limited liability corporations for the sum of $1,500.00 per year for each corporation.   Specifically as regards this corporation, therefore, the parties entered into an oral contract for these services for 2007.

In October 2007, the property owned by JAYMS, a gas station, was sold and the LLC was dissolved.   At that time, the plaintiff, who prepared the checks for JAYMS, prepared a check in the amount of $750.00, payable to himself and presented it to principal Suresh Patel for his signature.   Believing that JAYMS was being asked by the plaintiff to pay for the two fiscal quarters during which the plaintiff provided services, Suresh Patel signed the check that day.   In other words, Suresh Patel believed JAYMS was being charged a prorated amount by the plaintiff.

In preparing final returns for JAYMS, the plaintiff discovered that the prior tax preparer had failed to list the assets of JAYMS on its 2005 and 2006 returns.   The plaintiff met with two of the principals of JAYMS, Suresh Patel and Jayesh Patel in March or April 2008.   The plaintiff informed these principals of the ramifications of the error and pointed out the tax benefits they would receive by filing amended returns for these two years.   The principals were shocked and concerned about the errors made by the prior preparer and the parties agreed that the plaintiff would file amended returns for 2005 and 2006 in addition to preparing the 2007 return.

The plaintiff testified that at the meeting in March or April 2008, he informed the principals of JAYMS that he would charge them $12,000.00 to amend the returns.   The principals adamantly deny that additional payment for amending the returns was ever discussed or that they agreed to enter into what would essentially be a second oral agreement for services.   The defendant principals further claim that the plaintiff never requested or demanded additional compensation for the preparation of the amended returns until June 2008 when they terminated his services as to the remaining LLCs. Shortly after he was terminated, the plaintiff made demand of the $750.00 which was unpaid from the first oral agreement and $12,000.00 from the alleged second oral agreement.   The defendant witnesses testified that the demand was retribution for the plaintiff's termination from servicing the remaining LLCs.

Although the testimonies of the plaintiff and the defendant witnesses are each plausible, the court finds the testimony of the defendant witnesses more credible.   The court considers the consistency of testimony of the two defendant witnesses and the inconsistent testimony of the plaintiff as to the surrounding circumstances.   The plaintiff has no documentary evidence to establish a second agreement to pay for the amendment of the prior returns.   The initial agreement was vague as to what services were to be provided by the plaintiff in exchange for the $1,500.00 fee other than bookkeeping, accounting, payroll and preparation of returns.   There is no evidence that the plaintiff, who prepared the checks for the defendant LLC, prior to his termination, ever billed for the amount he alleges he contracted for to prepare the amended returns or prepared a check payable to himself for Suresh Patel to sign.   Other than being concerned about the competency of their former preparer, there is no reason why the defendants would incur additional costs of preparation of the amended returns when they could have gone back to that preparer, confronted him about the error and had the returns amended by that preparer.   Further, the plaintiff testified that he had already done the computations for the amended returns prior to his discussion with the defendants about filing the returns.

The amendments to each return consisted of copying over line items, completion of a Form 1065, making corresponding line changes and adding an explanatory note.   The plaintiff's testimony that this took between thirty and forty hours, also undocumented, is not credible.   Neither is his testimony that the value of his hourly services is doubled when amending returns compared to initially completing returns.   Further, the plaintiff's testimony that one-third of the charge of $12,000.00 related to preparation of 2007 returns is not credible as he also testified that such preparation was included in the initially contracted $1,500.00 fee.

Concerning the claim of breach of contract in the First Count, there was a meeting of the minds as to oral agreement for compensation of $1,500.00 to the plaintiff for various services.   The plaintiff has failed to establish a meeting of the minds as to the alleged second contract, particularly as to compensation.   The court finds that there was no meeting of the minds as to additional compensation for preparation of the amended returns.

To the extent that the plaintiff is claiming an oral modification to the contract for services, for a valid modification to exist, there must be mutual assent to the meaning and conditions of the modification and the parties must assent to the same thing in the same sense.   Modification of a contract may be inferred from the attendant circumstances and conduct of the parties.   A modification of an agreement must be supported by valid consideration and requires a party to do, or promise to do, something further than, or different from, that which he is already bound to do.   While mutual promises may be sufficient consideration to bind parties to a modification, a promise to do that which one is already bound by his contract to do is not sufficient consideration to support an additional promise by the other party to the contract.  Harley v. Indian Spring Land Co., 123 Conn.App. 800, 821–22, 3 A.3d 992 (2010).   The plaintiff himself testified that the amendments for the prior years were necessary for the preparation of a proper return for 2007.

As to the First Count, claiming breach of contract, the court finds that the plaintiff provided services for more than two quarters, that there was no agreement as to a pro rata billing, that the contract was for annual services and that the plaintiff is entitled to recover the unpaid $750.00 for his services concerning the year 2007.   However, there was no meeting of the minds as to the alleged second contract for payment of $12,000.00.   The plaintiff is awarded $750.00 for his unpaid services based upon the oral agreement.

Concerning the claim of unjust enrichment in the Second Count, generally for a benefit to be unjust, the defendants must have solicited it.  Schirmer v. Souza, 126 Conn.App. 759, 770;  Wesson, Inc. v. Hychko, 205 Conm. 51, 57, 529 A.2d 714 (1987).   Here, the defendants did not solicit the benefit.   Further, the plaintiff has failed to credibly establish that his services in amending the returns was not encompassed in his contract to perform accounting, bookkeeping and payroll services for the year 2007.   Therefore, the plaintiff has not proven that the defendants unjustly did not pay him for the benefits.   Andy's Oil Service, Inc. v. Hobbs, 125 Conn.App. 708, 714, 9 A.3d 433 (2010).

As to the claim of quantum meruit in the Third Count, “[a] party may not recover the reasonable value of services rendered, pursuant to the doctrine of quantum meruit, when the actions for which it seeks relief were governed by an express contract.”  David M. Somers & Associates, P.C. v. Busch, 283 Conn. 396, 408, 927 A.2d 832 (2007).   All of the witnesses testified as to the existence of the original contract for services to be provided as to 2007 accounting, bookkeeping, payroll and preparation of tax returns.   The court finds that the amendments to prior returns were encompassed by that contract.

The plaintiff claims that, as a result of the amendments, the defendant principals received additional tax refunds, benefited from capital gains deductions upon sale of the subject property and avoided the potential costs of audits.   While all of this may be true, it is not for consideration as the court finds that these benefits were gained as the result of the first oral agreement for services during the 2007 calendar year.   As the services provided in amending the returns and the benefits derived therefrom were the result of the original oral agreement, the plaintiff does not prevail on his claims of unjust enrichment and quantum meruit in the Second and Third Counts and finds in favor of the defendants as to these counts.

WHEREUPON, for the foregoing reasons, judgment enters in favor of the plaintiff against the defendants on the First Count in the amount of $750.00.   Judgment enters in favor of the defendants on the Second and Third Counts.

Robert E. Young, Judge

Young, Robert E., J.