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Rainbow Temp Services, Inc. v. Korba

May 16, 2008

RAINBOW TEMP SERVICES, INC., PLAINTIFF-RESPONDENT,
v.
MICHAEL KORBA, DEFENDANT-APPELLANT.



On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, L-3566-05.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted January 9, 2008

Before Judges Wefing and R. B. Coleman.

Defendant Michael Korba, the sole director, officer and shareholder of Gem Packaging and Display, Inc. (Gem), appeals from a judgment in the amount of $230,173.67, plus interest, entered in favor of plaintiff Rainbow Temp Services, Inc. (Rainbow) following a September 27, 2006 bench trial. The amount of the debt was stipulated. It represents the value of unpaid services for employees, formerly Gem employees, who were employed by Rainbow and assigned back to Gem as temporary workers.

Plaintiff and defendant began their business relationship in October 2000. To solve problems defendant was having with his employees, it was decided that Rainbow would employ all of the Gem employees and provide them back to Gem as temporary workers. Andrew Minaya, President of Rainbow, and Korba memorialized this arrangement in an October 25, 2000 contract. The invoices for the employees' services were billed to Gem without any indication that Gem was a corporation. The checks used by Gem to pay the invoices did not reveal the nature of that entity, that is, whether it was operated as a corporation, partnership or some other business form. Minaya did visit some of Gem's plants in summer 2000 and October 2000, and the buildings at those plants displayed signage that contained the company name "GEM Packaging & Display, Inc."

When defendant failed to pay plaintiff for its services, plaintiff filed a complaint in the Law Division, Middlesex County, in late 2001. On March 27, 2002, the court entered default judgment in the amount of $233,785.26 in favor of plaintiff and against defendants Gem Packaging & Display and Michael Korba. Defendants then made a motion to vacate default judgment, which was granted on September 13, 2002.

On December 20, 2002, Gem and Korba entered into an agreement with several of its creditors to settle debts owed. The agreement provided that upon default, "each Creditor shall have the right to pursue any remedy then available to it as if this Agreement had never been made." Gem and Korba did default on these debts, and in response, plaintiff filed a motion on March 11, 2005, to enter default judgment against defendant Michael Korba. The court, however, denied that motion because the matter had been dismissed for lack of prosecution in January 2003. Plaintiff then filed a new complaint against Michael Korba individually. That matter proceeded to trial on September 27, 2006, at the conclusion of which the trial court found Korba personally liable on the debts. Defendant filed the instant appeal on May 16, 2007.

Defendant states the following grounds for his appeal:

POINT I:

THE TRIAL COURT ERRED IN FINDING THAT MICHAEL KORBA WAS PERSONALLY LIABLE FOR DEBT INCURRED BY GEM PACKAGING & DISPLAY, INC. BECAUSE THE PLAINTIFF HAD NOTICE THAT IT WAS CONDUCTING BUSINESS AS A CORPORATION. POINT II: THE COURT ERRED IN FINDING MICHAEL KORBA PERSONALLY LIABLE FOR THE DEBT TO RAINBOW TEMP. SERVICES, INC. BECAUSE THERE WAS AN EXECUTED CREDITORS' AGREEMENT THAT CLEARLY INDICATED THAT GEM PACKAGING AND DISPLAY, INC. WAS RESPONSIBLE FOR THE DEBTS OF THE CORPORATION AND THAT AGREEMENT CONSTITUTED A NOVATION.

Based on the relevant facts and controlling case law, we affirm.

Defendant disputes the determination that he is individually liable for the debt of Gem. He contends that Rainbow was informed that Gem was a corporation and that it was aware or should have been aware of the corporate status by virtue of statements made to Rainbow representatives, business cards given to them and signage that was openly visible at the Gem facilities visited by representatives of Rainbow. We are in agreement with the trial court that African Bio-Botanica, Inc. v. Leiner controls in this matter. 264 N.J. Super. 359 (App. Div. 1993).

In African Bio-Botanica, the defendant was the sole stockholder and president of the corporation. Id. at 360-61. The corporation transacted business under the name "Ecco Bella," though its actual name was "Ecco Bella Incorporated." The defendant placed several orders for merchandise from plaintiff and, on occasion, had the merchandise shipped to her home. Id. at 361. Plaintiff addressed the bill for the purchases to the company name, without any corporate designation. The defendant responded by paying bills with checks imprinted with the name of the company, again without any indication of incorporation. ...


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