Court Opinion

ID: 2743021
Source: CourtListenerOpinion
Date Created: 2014-10-16 15:06:22.141549+00
Date Added: 2024-06-11T09:55:35.678415
License: Public Domain

State of New York
                   Supreme Court, Appellate Division
                      Third Judicial Department
Decided and Entered: October 16, 2014                   517651
________________________________

BURTON F. CLARK, INC., et al.,
   Doing Business as CLARK
   COMPANIES,
                    Respondents,
      v

HILLSIDE COMPANIES, INC.,                   MEMORANDUM AND ORDER
   Formerly Known as HILLSIDE
   HOMES AND DEVELOPMENT
   CORPORATION, Doing Business
   as HILLSIDE COMMERCIAL
   CONTRACTING, et al.,
                    Appellants.
________________________________

Calendar Date:   September 10, 2014

Before:   Lahtinen, J.P., McCarthy, Rose, Lynch and Devine, JJ.

                             __________

      Lewis & Greer, PC, Poughkeepsie (J. Scott Greer of
counsel), for appellants.

      Young Sommer, LLC, Albany (Joseph F. Castiglione of
counsel), for respondents.

                             __________

Lahtinen, J.P.

      Appeals (1) from an order of the Supreme Court (Lambert,
J.), entered March 26, 2013 in Delaware County, which, among
other things, granted plaintiffs' motion for partial summary
judgment, and (2) from the judgment entered thereon.

      Plaintiffs – subcontractors on a 2006 construction project
– obtained a judgment in September 2010 for $166,877 plus
                              -2-                517651

interest and costs against the general contractor, defendant
Hillside Companies, Inc. (hereinafter the corporation). In an
effort to fully recover on that judgment, plaintiffs, among other
things, commenced this litigation against defendants Michael
Perez and Robert Tompkins – the corporation's owners and officers
– as well as against the corporation and two related entities
alleging unjust enrichment and seeking to pierce the corporate
veil to reach Perez and Tompkins (hereinafter collectively
referred to as the owners). Defendants' pre-answer motion to
dismiss was denied. After issue was joined but before discovery,
plaintiffs moved for summary judgment against the owners, and
defendants cross-moved for partial summary judgment. Defendants'
motion was denied. However, finding as a matter of law that the
corporation's veil should be pierced, Supreme Court granted
plaintiffs' motion and also awarded counsel fees to plaintiffs.
Defendants appeal.

      Piercing the corporation veil requires proof that: "(1) the
owners exercised complete domination of the corporation in
respect to the transaction attacked; and (2) that such domination
was used to commit a fraud or wrong against the plaintiff which
resulted in [the] plaintiff's injury" (Matter of Morris v New
York State Dept. of Taxation & Fin., 82 NY2d 135, 141 [1993]).
This has been characterized as a "heavy burden" (TNS Holdings v
MKI Sec. Corp., 92 NY2d 335, 339 [1998]) that generally is not
well suited for summary judgment (see Klein v CAVI Acquisition,
Inc., 57 AD3d 376, 377 [2008]), particularly since such relief
"will necessarily depend on the attendant facts and equities"
(Matter of Morris v New York State Dept. of Taxation & Fin., 82
NY2d at 141).

      In seeking to pierce the corporate veil, plaintiffs, among
other things, point to large unsecured loans made by the
corporation to the owners during 2006 and 2007. The record
reflects that most – if not all – of the unsecured loans were
made before plaintiffs asserted their claim near the end of 2007
against the corporation regarding payment for work on the 2006
project and, at such time, the project owner had withheld payment
to the corporation based on the project owner's complaints about
                              -3-                517651

plaintiffs' work.1 The corporation had paid plaintiffs
$1,063,088 of the agreed amount of $1,229,965. Since the loans
mostly predated plaintiffs' claim and there was arguably a
legitimate concern regarding whether plaintiffs were entitled to
the remaining balance, this record fails to establish as a matter
of law that the loans resulted from fraud or a wrong by the
owners intended to harm plaintiffs.

      Further, there is evidence that, at the end of 2007, the
corporation still had considerable assets. The owners assert
that, during the relevant time, they obtained funds for the
corporation that were secured by their assets. The downturn in
the construction industry purportedly then affected the
corporation's business. The record does not clearly indicate
that the corporation was purposefully drained of funds and
rendered incapable of paying the judgment during the pertinent
time. In fact, there is little evidence in the record about the
financial condition of the corporation after 2007. The proof in
the record, viewed most favorably to the owners as the opponents
of summary judgment, does not support the conclusion that
corporate formalities had been disregarded to such a degree that
the corporate veil should be pierced. There are triable issues
regarding piercing the corporate veil.2

      We find no merit in defendants' contention that their cross
motion should have been granted. There is ample evidence in the

    1
        Plaintiffs' claim was filed in November 2007 as a
counterclaim in an action brought by the corporation regarding
plaintiffs' allegedly defective work in the 2006 project.
Apparently, the owner of that project eventually accepted
plaintiffs' work in 2009 and made a final payment to the
corporation.
    2
        Although our reversal of summary judgment granted to
plaintiffs necessarily vacates the award of counsel fees, we note
that such fees generally are not recoverable unless authorized by
statute, court rule or a written agreement of the parties (see
Baker v Health Mgt. Sys., 98 NY2d 80, 88 [2002]) – none of which
are reflected in this record.
                              -4-                  517651

record, viewed most favorably to plaintiffs as to this issue,
that summary judgment was not warranted (see Rosplock v Upstate
Mgt. Assoc., Inc., 108 AD3d 825, 828 [2013]; Lally v Catskill
Airways, 198 AD2d 643, 644-645 [1993]). The remaining issues, to
the extent not academic, are unavailing.

     McCarthy, Rose, Lynch and Devine, JJ., concur.

      ORDERED that the order and judgment are modified, on the
law, without costs, by reversing so much thereof as granted
plaintiffs' motion for partial summary judgment and awarded
damages; motion denied; and, as so modified, affirmed.

                             ENTER:

                             Robert D. Mayberger
                             Clerk of the Court