Business entities, including properly-formed foundations, are separate legal entities that are distinct from the individuals associated with those entities. Consequently, there is a "corporate veil" that cannot be breached to impose liability on such an entity unless the elements required to pierce the corporate veil are proven. In the recent unpublished Appellate Division decision, the court confirmed this premise and found that the John "Jack" Phillips Family Foundation LTD. was not responsible to pay a judgment entered against John Phillips Jr. individually. In doing so, the court stated, "Like any other person or entity, the Foundation was entitled to due process, which would include the right to have the civil claim against it set forth in a complaint, the right to be personally served with that complaint, the right to file a responsive pleading, the right to discovery, and all the other rights delineated in our court rules prior to the entry of a judgment against it. See Nelson v. Adams, 529 U.S. 460, 465-66 (2000). The proceedings in the trial court short-circuited all these rights. Indeed, it seems as though the mechanism employed in the trial court required that the Foundation disprove its liability rather than requiring plaintiff to prove its entitlement to relief." Consequently, absent a separate lawsuit and requisite proofs, the only person or entity responsible for the judgment would be the individual defendant who was named in the lawsuit. (Comegno Law Group, PC v. John Phillips, Jr.)
The New Jersey Prompt Payment Act ("PPA"), N.J.S.A. 2A:30A-1, et. seq., includes numerous provisions that protect contractors including, the ability to collect interest of prime plus 1% on overdue balances and the ability to suspend performance after seven-day written notice of non-payment. In ERCO Interior Systems, Inc. v. National Commercial Builders, Inc., a New Jersey contractor sued a Kansas company for work that the contractor performed in New Jersey. When the NJ contractor brought suit for non-payment, the Kansas company moved to dismiss the case on the basis that the contract has a forum selection clause mandating that any enforcement actions be brought in Kansas. However, the Appellate Division held that due to the fact that the case involved the PPA, the forum selection clause was invalid. Noting that forum selection clauses will not be enforced where such enforcement would violate the public policy of New Jersey, the Court found that there was a strong public policy behind the PPA and that the PPA claim, along with the other associated claims of breach of contract, etc. must all be litigated in New Jersey. ERCO Interior Systems, Inc. v. National Commercial Builders, Inc.
Peter J. Vazquez, Jr.