Opinion
2007-200 K C.
Decided on February 7, 2008.
Appeal from a final judgment of the Civil Court of the City of New York, Kings County (Laura L. Jacobson, J.), entered May 20, 1996. The final judgment, after a nonjury trial, awarded landlord possession and a monetary award in the principal sum of $100,000, plus $35 costs, "for a total of $135,000" (sic), plus interest from November 1992, and dismissed tenants' counterclaim in a nonpayment summary proceeding.
PRESENT: WESTON PATTERSON, J.P. and RIOS, J.
Final judgment modified by providing that the total of the principal sum awarded, plus costs, is reduced to the amount of $100,035; as so modified, affirmed without costs.
In this commercial nonpayment proceeding to recover possession and several years' unpaid rent, the court held tenants jointly and severally liable for the rent, finding A. Stimler liable upon a piercing of the corporate veil. On appeal, appellants contend, inter alia, that Ms. Stimler should not have been held personally liable.
"Since piercing the corporate veil is a form of equitable relief . . . which Civil Court does not have jurisdiction to grant" ( 19 W. 45th St. Realty Co. v Doram Elec. Corp., 233 AD2d 184, 185), the court could not enter judgment against Ms. Stimler on that ground ( Cobblers Lane Hoa v Greenway Dr. Constr. Co., 3 Misc 3d 134 [A], 2004 NY Slip Op 50454[U] [App Term, 2d 11th Jud Dists 2004]; Mack v City Cadillac-Oldsmobile, 2 Misc 3d 127 [A], 2003 NY Slip Op 51682[U] [App Term, 2d 11th Jud Dists 2003]). However, Ms. Stimler admitted that she executed a lease with landlord on the corporation's behalf and that, pursuant to the lease, she paid two months' security and a month's rent from her personal funds before the corporation came into existence. As a general rule, "a person entering into a contract on behalf of a nonexistent corporate entity may be held personally liable on the contract" ( Spring Val. Improvements, LLC v Abajian ,40 AD3d 619; see also San Sung Korean Methodist Church of N.Y. v Professional USA Constr. Corp. , 14 AD3d 501, 503; Bay Ridge Lbr. Co. v Groenendaal, 175 AD2d 94, 96) even if the other party to the contract knew that the purported principal was nonexistent (2A NY Jur 2d, Agency § 326). In such a case, a subsequent corporate adoption of the contract merely "gives rise to corporate liability in addition to any individual liability" ( Clinton Investors Co., II v Watkins, 146 AD2d 861, 863).
"Whether a person is personally obligated on a preincorporation transaction depends on the intention of the parties" ( Universal Inds. Corp. v Lindstrom, 92 AD2d 150, 151; 14 NY Jur 2d, Business Relationships § 96). Accordingly, when a promoter executes a contract on behalf of a nonexistent corporation, the promoter is presumed to be personally liable under that contract absent proof of the parties' contrary intent ( id.) or until "there has been a novation between the corporation" and the other contracting party ( Clinton Investors Co., II v Watkins, 146 AD2d at 863). Here, there is no evidence whatsoever that the parties intended to deviate from the common-law rule that presumed Ms. Stimler personally liable on the contract she executed on behalf of a nonexistent corporation, and there was no evidence of a novation between landlord and the corporation whereby the corporation assumed liability for the lease to the exclusion of Ms. Stimler's liability (14 NY Jur 2d, Business Relationships § 96).
We agree with the court below that appellants' claim of laches lacks merit ( see Matter of Linker , 23 AD3d 186; Skrodelis v Norbergs, 272 AD2d 316). Accordingly, the imposition of personal liability on Ms. Stimler in the principal sum of $100,000 is appropriate, albeit on a ground other than that adopted by the court below.
However, the final judgment contains a scrivener's error. The total of the principal sum ($100,000) plus costs ($35) should be reduced from $135,000 to $100,035.
Weston Patterson, J.P. and Rios, J., concur.