Summary
holding that if Plaintiffs can show that the use of dominion and control over three corporations to transfer assets of the debtor corporation to the other two corporations was designed to achieve the fraudulent purpose of preventing plaintiffs from satisfying their judgment rather than based on a legitimate business judgment then the corporations can be treated as a single personality for the purpose of enforcing the judgment
Summary of this case from Hewlett Packard Company v. Computer SpecialistsOpinion
February 10, 2000
Order, Supreme Court, New York County (Emily Goodman, J.), entered August 6, 1999, which denied defendants-appellants' motion for summary judgment dismissing the complaint against them, unanimously affirmed, with costs.
Charles R. Jacob, III for the Plaintiffs-Respondents.
Diana D. Parker for the Defendant.
Denis B. Frind for the Defendants-Appellants.
ROSENBERGER, J.P., WILLIAMS, RUBIN, SAXE, BUCKLEY, JJ.
The corporate defendants mischaracterize the theory of this case, which does not involve traditional veil-piercing to hold corporate owners, shareholders or other corporations liable for corporate obligations. Instead, as we have held, the theory of this case is that all four defendants should be treated as a single personality by reason of defendant Cohen's use of "his domination and control over all three corporations to transfer assets of the debtor corporation to the other two corporations so as to make the firm incapable of honoring its obligation to plaintiff" (229 A.D.2d at 313). The record sufficiently demonstrates that Cohen dominated and controlled the judgment debtor and the corporate defendants (see, e.g., Wm. Passalacqua Bldrs., Inc. v. Resnick Developers S., Inc., 933 F.2d 131, 139-141). Further, based on the timing and circumstances of Cohen's decision to wind down the judgment debtor's business, a factual issue exists as to whether that decision was based on a legitimate business judgment, or was designed to achieve the fraudulent purpose of preventing plaintiffs from satisfying their judgment. Should the latter be proved, plaintiffs will have established the requisite grounds for treating all four defendants as a single personality for the purpose of enforcing the judgment (see, Matter of Morris v. New York State Dept. of Taxation and Fin., 82 N.Y.2d 135, 141-142; Solow v. Domestic Stone Erectors, Inc., 229 A.D.2d 321, 313).
THIS CONSTITUTES THE DECISION AND ORDER OF SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.