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PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT SHOULD HAVE BEEN GRANTED, A DE FACTO MERGER OF THE JUDGMENT DEBTOR WITH THE CURRENT DEFENDANT WAS DEMONSTRATED (FOURTH DEPT).

The Fourth Department, reversing Supreme Court, determined plaintiff judgment-creditor’s motion for summary judgment should have been granted. Plaintiff alleged a de facto merger between defendant Luigi’s Bakery Corp and its predecessor Luigi’s Family Bakery, making the Bakery Corp. liable for the Family Bakery’s debt:

Factors courts consider in determining whether a de facto merger has occurred include “continuity of ownership; . . . a cessation of ordinary business and dissolution of the predecessor as soon as practically and legally possible; . . . assumption by the successor of the liabilities ordinarily necessary for the uninterrupted continuation of the business of the predecessor; and . . . a continuity of management, personnel, physical location, assets, and general business operation” … . Not all of these factors are required to demonstrate a merger; ” rather, these factors are only indicators that tend to show a de facto merger’ ” … .

Here, defendants admitted to continuity of ownership between Family Bakery and Bakery Corp., and to two of the other factors of a de facto merger: cessation of ordinary business operations, and continuity of management, personnel, physical location, and general business operation. In both their answer and their bill of particulars, defendants admitted that the successor corporation, Bakery Corp., was formed in the same month that the predecessor corporation, Family Bakery, ceased operations. They also admitted that the successor corporation used the same address and phone number as the predecessor corporation. We therefore conclude that the court erred in determining that there are issues of fact with respect to the date of incorporation of the successor corporation or the date of dissolution of the predecessor corporation. A case for de facto merger can be made without a legal dissolution where, as here, the predecessor company “has become, in essence, a shell” … . Energy Coop. of Am., Inc. v Luigi’s Family Bakery, Inc., 2019 NY Slip Op 02211, Fourth Dept 3-22-19

 

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