DePetris v. Traina

211 A.D.3d 939

181 N.Y.S.3d 298

In the Matter of William B. DEPETRIS, respondent,

v.Joseph TRAINA, Jr., appellant.

2020-04562, 2021-02048

Index No. 17146/11

Supreme Court, Appellate Division, Second Department, New York.

Argued—October 24, 2022

December 21, 2022

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...