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Trial Court Properly Pierced the Corporate Veil/Criteria for Review of a Bench Trial and for Piercing the Corporate Veil Explained

The Fourth Department determined the trial court had properly pierced the corporate veil to find the defendant physician personally liable to the plaintiff landlord.  The defendant ceased paying rent when he joined another urology practice.  The court noted that the defendant (Roehmholdt) made no effort to continue his business (Northtown Urology) at plaintiff’s location, but rather took more lucrative employment, encouraged his patients to follow him, and used corporate funds to satisfy a personal debt.  In the course of upholding the piercing of the corporate veil, the Fourth Department explained how it reviews determinations made in a bench trial:

As a preliminary matter, we note that, “[o]n an appeal from a judgment rendered after a nonjury trial, our scope of review is as broad as that of the trial court … . Upon such a review, the record should be‘viewed in the light most favorable to sustain the judgment’ …, and this Court should evaluate ‘the weight of the evidence presented and grant judgment warranted by the record, giving due deference to the trial court’s determinations regarding witness credibility, so long as those findings could have been reached upon a fair interpretation of the evidence’ …. ‘[T]he decision of the fact-finding court should not be disturbed upon appeal unless it is obvious that the court’s conclusions could not be reached under any fair interpretation of the evidence, especially when the findings of fact rest in large measure on considerations relating to the credibility of witnesses’ … .

With respect to piercing the corporate veil, we note that it is not “ ‘a cause of action independent of that against the corporation; rather it is an assertion of facts and circumstances which will persuade the court to impose the corporate obligation on its owners’ ” … . “ ‘A plaintiff seeking to pierce the corporate veil must establish that the owners, through their domination, abused the privilege of doing business in the corporate form, thereby perpetrating a wrong that resulted in injury to the plaintiff . . . Factors to be considered in determining whether [a corporation] has abused [that] privilege . . . include whether there was a failure to adhere to corporate formalities, inadequate capitalization, commingling of assets, and use of corporate funds for personal use’ ” … .

The burden of establishing that the corporate veil should be pierced is a heavy one … but “ ‘[b]roadly speaking, the courts will disregard the corporate form, or, to use accepted terminology, pierce the corporate veil, whenever necessary to prevent fraud or to achieve equity’ ” … . “A decision to pierce the corporate veil is a fact-laden [determination]” …, and “[n]o one factor is dispositive” … . A & M Global Management Corp v Northtown Urology Associates PC, 124, 4th Dept 3-28-14

 

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