Opinion
2020-04562, 2021-02048 Index No. 17146/11
12-21-2022
In the Matter of William B. DEPETRIS, respondent, v. Joseph TRAINA, Jr., appellant.
Stephen A. Grossman & Associates (Rivkin Radler, LLP, Uniondale, NY [Cheryl F. Korman ], of counsel), for appellant. John Ray, Miller Place, NY, for respondent.
Stephen A. Grossman & Associates (Rivkin Radler, LLP, Uniondale, NY [Cheryl F. Korman ], of counsel), for appellant.
John Ray, Miller Place, NY, for respondent.
VALERIE BRATHWAITE NELSON, J.P., LARA J. GENOVESI, DEBORAH A. DOWLING, HELEN VOUTSINAS, JJ.
DECISION & ORDER In a proceeding pursuant to CPLR article 52 to enforce a judgment, Joseph Traina, Jr., appeals from (1) a decision of the Supreme Court, Suffolk County (H. Patrick Leis III, J.), dated March 13, 2020, and (2) a judgment of the same court entered August 13, 2020. The judgment, upon the decision, made after a nonjury trial, is in favor of the petitioner and against Joseph Traina, Jr., in the total sum of $2,378,567.90.
ORDERED that the appeal from the decision is dismissed, as no appeal lies from a decision (see Schicchi v. J.A. Green Constr. Corp., 100 A.D.2d 509, 509–510, 472 N.Y.S.2d 718 ); and it is further,
ORDERED that the judgment is reversed, on the facts, the petition is denied, and the proceeding is dismissed; and it is further,
ORDERED that one bill of costs is awarded to Joseph Traina, Jr.
Joseph Traina, Jr., established the limited liability company J.T. Jr. Club, LLC (hereinafter the LLC), for the purposes of operating a bar in Sag Harbor. Traina was the sole member of the LLC. In 2005, the petitioner commenced a personal injury action against the LLC. The bar closed sometime in 2006, and when the lease on the property ended in February 2007, the LLC left the fixtures and equipment at the premises. A few months later, the petitioner obtained a default judgment in the personal injury action against the LLC in the principal sum of $1,101,160 (hereinafter the 2007 judgment).
In 2011, the petitioner commenced this proceeding pursuant to CPLR 5225 and 5227 to enforce the 2007 judgment against Traina personally, seeking to pierce the corporate veil on the theory that Traina was the alter ego of the LLC. Following a nonjury trial, the Supreme Court determined that the LLC was under the total dominion and control of Traina, that it lacked corporate formalities and was undercapitalized, and that it was "a virtual sham for [Traina's] individual activities." The court further found that Traina's abandonment of the only assets the LLC owned, the fixtures and equipment at the bar, stripped the LLC of its ability to pay the petitioner and rendered the LLC judgment proof, justifying the court's intervention to pierce the corporate veil and hold Traina personally responsible for the 2007 judgment. In a judgment entered August 13, 2020, the court awarded the petitioner the total sum of $2,378,567.90, against Traina, representing the sum of the 2007 judgment with interest and costs. Traina appeals.
Generally, a member of a limited liability company cannot personally be held liable for any debts, obligations or liabilities of the limited liability company, "whether arising in tort, contract or otherwise" ( Limited Liability Company Law § 609[a] ). The concept of piercing the corporate veil is an exception to this general rule, permitting, in certain circumstances, the imposition of personal liability on members for the obligations of the limited liability company (see Grammas v. Lockwood Assoc., LLC, 95 A.D.3d 1073, 1074–1075, 944 N.Y.S.2d 623 ; see also Matter of Morris v. New York State Dept. of Taxation & Fin., 82 N.Y.2d 135, 140–141, 603 N.Y.S.2d 807, 623 N.E.2d 1157 ). While the "decision whether to pierce the corporate veil in a given instance will necessarily depend on the attendant facts and equities ... [g]enerally ... piercing the corporate veil requires a showing that: (1) the owners exercised complete domination of the corporation [or LLC] in respect to the transaction attacked; and (2) that such domination was used to commit a fraud or wrong against the [party seeking to pierce the corporate veil] which resulted in [the party's] injury" ( Matter of Morris v. New York State Dept. of Taxation & Fin., 82 N.Y.2d at 141, 603 N.Y.S.2d 807, 623 N.E.2d 1157 [citation omitted]; see Cortlandt St. Recovery Corp. v. Bonderman, 31 N.Y.3d 30, 47, 73 N.Y.S.3d 95, 96 N.E.3d 191 ; Conason v. Megan Holding, LLC, 25 N.Y.3d 1, 18, 6 N.Y.S.3d 206, 29 N.E.3d 215 ).
"Evidence of domination alone does not suffice without an additional showing that it led to inequity, fraud or malfeasance" ( TNS Holdings, Inc. v. MKI Sec. Corp., 92 N.Y.2d 335, 339, 680 N.Y.S.2d 891, 703 N.E.2d 749 ; see Matter of Morris v. New York State Dept. of Taxation & Fin., 82 N.Y.2d at 141–142, 603 N.Y.S.2d 807, 623 N.E.2d 1157 ). The party seeking to pierce the corporate veil has the burden to establish that "the owners, through their domination, abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice against that party such that a court in equity will intervene" ( Matter of Morris v. New York State Dept. of Taxation & Fin., 82 N.Y.2d at 142, 603 N.Y.S.2d 807, 623 N.E.2d 1157 ; see TNS Holdings, Inc. v. MKI Sec. Corp., 92 N.Y.2d at 339, 680 N.Y.S.2d 891, 703 N.E.2d 749 ). "Factors to be considered in determining whether the owner has abused the privilege of doing business in the corporate form include whether there was a failure to adhere to corporate formalities, inadequate capitalization, commingling of assets, and use of corporate funds for personal use" ( East Hampton Union Free School Dist. v. Sandpebble Bldrs., Inc., 66 A.D.3d 122, 127, 884 N.Y.S.2d 94, affd 16 N.Y.3d 775, 919 N.Y.S.2d 496, 944 N.E.2d 1135 [internal quotation marks omitted]; see Bonanni v. Horizons Invs. Corp., 179 A.D.3d 995, 1001, 118 N.Y.S.3d 137 ; Sky–Track Tech. Co. Ltd. v. HSS Dev., Inc., 167 A.D.3d 964, 965, 91 N.Y.S.3d 119 ). Here, although Traina did not observe all corporate formalities, the evidence established that he ran a real business, with employees, customers, and vendors, and the petitioner presented no evidence that the LLC was undercapitalized or that Traina commingled the assets of the LLC with his own or used corporate funds for personal use (see Ciavarella v. Zagaglia, 132 A.D.3d 608, 609, 19 N.Y.S.3d 506 ; Roka, LLC v. Hing Lam, 126 A.D.3d 622, 6 N.Y.S.3d 242 ). Moreover, while the petitioner demonstrated that Traina exercised complete domination and control over the LLC, he failed to show that Traina's actions, including abandoning certain fixtures and equipment to his landlord, were for the purpose of leaving the LLC judgment proof or to perpetrate a wrong against the petitioner (see Edward Tyler Nahem Fine Art, L.L.C. v. Barral, 136 A.D.3d 477, 478, 24 N.Y.S.3d 634 ; James v. Loran Realty v. Corp., 85 A.D.3d 619, 619–620, 925 N.Y.S.2d 492, affd 20 N.Y.3d 918, 956 N.Y.S.2d 482, 980 N.E.2d 532 ; Treeline Mineola, LLC v. Berg, 21 A.D.3d 1028, 1029, 801 N.Y.S.2d 407 ). Accordingly, the petitioner did not meet his burden of proof to establish that there was a basis to pierce the corporate veil under these circumstances.
BRATHWAITE NELSON, J.P., GENOVESI, DOWLING and VOUTSINAS, JJ., concur.