Court Opinion

ID: 6072548
Source: CourtListenerOpinion
Date Created: 2022-01-13 17:15:44.897399+00
Date Added: 2024-06-11T08:52:58.173977
License: Public Domain

—Order unanimously affirmed without costs. Memorandum: Supreme Court properly denied that part of plaintiffs cross motion seeking to dismiss the second counterclaim asserted by defendant A & A Metal Fabricating, Inc. (A & A). Plaintiff, individually and as president of A & A, entered into a stock purchase agreement pursuant to which defendant Warren Industries, Inc. (Warren) would become the sole shareholder of A & A. The agreement also provided that plaintiff would be employed by A & A for three years and would receive certain benefits. A & A terminated plaintiff a few months after the agreement was signed, and plaintiff commenced the instant breach of contract action. A & A alleges in its second counterclaim that plaintiff violated the covenant not to compete contained in the agreement, pursuant to which A & A represented to Warren that plaintiff would not compete with A & A within a 300-mile radius, for a period of three years. Plaintiff contends that any covenant made by A & A to Warren is not binding on him and that, although pursuant to the agreement he was to sign a covenant not to compete at the closing of the agreement, he was never asked to do so.
We conclude that, under the circumstances presented here, *975plaintiff, as president and sole shareholder of A & A, “exercised complete domination” of A & A with respect to the stock purchase agreement and that, “through [his] domination, [he] abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice against [defendants] such that a court in equity will intervene” (Matter of Morris v New York State Dept. of Taxation & Fin., 82 NY2d 135, 141-142). Through his domination of A & A, plaintiff warranted to Warren that he would not compete with A & A; plaintiff now attempts to hide behind the corporate veil to shield himself from that warranty. We conclude that the corporate veil of A & A therefore should be pierced with respect to plaintiff (see, Austin Powder Co. v McCullough, 216 AD2d 825, 826), and that plaintiff is subject to liability for the alleged breach of the covenant not to compete (see generally, Hyland Meat Co. v Tsagarakis, 202 AD2d 552, 553). Contrary to plaintiff’s further contention, A & A is the intended beneficiary of the covenant not to compete and thus has standing to assert a counterclaim against plaintiff for the alleged breach of that covenant (see, Rekis v Lake Minnewaska Mtn. Houses, 170 AD2d 124, 128-129, lv dismissed 79 NY2d 851, rearg denied 79 NY2d 978). (Appeal from Order of Supreme Court, Erie County, NeMoyer, J. — Reargument.) Present — Green, J. P., Hayes, Hurlbutt, Scudder and Lawton, JJ.