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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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Resident Hosts of a Party Had No Duty to Supervise 18-Year-Old Plaintiff Who Became Voluntarily Intoxicated

In a full-fledged opinion by Justice Scudder, over a partial dissent, the Fourth Department addressed many issues (not all mentioned here) stemming from plaintiff’s fall from a bathroom window at a psuedo-fraternity house where the “resident defendants” rented rooms and were responsible for cleaning the bathrooms.  The Fourth Department determined the resident defendants had a duty to maintain the property in a safe condition and to give warning of unsafe conditions that are not open and obvious. There was a question of fact whether the window, which was only 13 inches above the floor and had no screen or fall-prevention device, was a dangerous condition. There was a question of fact whether the hazard was open and obvious. There was a question of fact whether the resident defendants had actual or constructive notice of the hazard.  The court, however, agreed with the defendants that the cause of action based upon an alleged duty to supervise the 18-year-old plaintiff should have been dismissed:

Hosts of parties where alcohol is consumed in a home that they either own or occupy risk exposure to liability under two separate and distinct theories of negligence. One theory is based on their duties as owners or occupiers of the premises “to control the conduct of third persons for the protection of others on the premises” …, and the other theory is based on the duty of adults to “provide[] adequate supervision for minor guests who bec[ome] intoxicated at their home” … . * * *

The issue in this case, insofar as it relates to the negligent supervision claim, is whether the resident defendants had a duty to the adult plaintiff to supervise him and to protect him from injuring himself as a result of his voluntary intoxication. Any duty of the resident defendants to protect the intoxicated plaintiff from himself would come from the fact that they hosted the party, i.e., they provided the alcohol. Otherwise, plaintiff could sue anyone attending the party for failing to supervise him. …The Court of Appeals ….noted that the courts of New York had rejected “any argument that a duty exists to protect a consumer of alcohol from the results of his or her own voluntary conduct” … . We thus conclude that, because plaintiff was not a minor entrusted to the care of the resident defendants, the resident defendants did not have a duty to protect plaintiff from the results of his own voluntary intoxication.  Parslow … v Leake…, 1341, 4th Dept 3-28-14

 

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An Issue Raised for the First Time on Appeal Will Not Be Considered Where the Defect Could Have Been Cured If Raised Below/Trial Court Can Grant Summary Judgment Based on an Unpleaded Defense

The Fourth Department noted that it can not consider an argument raised for the first time on appeal where the defect could have been remedied it been raised below and explained when summary judgment can be granted (by the trial court) on the basis of an unpleaded defense:

…[W]e do not address plaintiff’s contention, raised for the first time on appeal, that Supreme Court erred in granting summary judgment in defendant’s favor because defendant failed to plead the defense of failure to comply with a condition precedent with sufficient specificity (see CPLR 3015 [a]). “An issue may not be raised for the first time on appeal . . . where it ‘could have been obviated or cured by factual showings or legal countersteps’ in the trial court” …. Here, defendant could have attempted to cure that alleged deficiency by seeking leave to amend the answer … . In any event, defendant’s failure to plead that defense in its answer with sufficient specificity does not preclude an award of summary judgment based on that defense. “ ‘[A] court may grant summary judgment based upon an unpleaded defense where[, as here,] reliance upon that defense neither surprises nor prejudices the plaintiff’ ” Accadia Site Contracting Inc v Erie County Water Authority, 325, 4th Dept 3-28-14

 

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Commissioner of Education Has Primary Jurisdiction Over Dispute About the Appropriate Pay for a School Principal Whose Position Was Abolished But Who Was Subsequently Assigned an Assistant Principal Position/Petition for Stay of Arbitration Pursuant to the Collective Bargaining Agreement Should Have Been Granted/Arbitration Prohibited by Public Policy

The Fourth Department determined Supreme Court should have granted petitioner’s application for a stay of arbitration.  A former principal whose position was abolished was hired as an assistant principal.  A grievance was filed by respondent on the former principal’s behalf contending that her new position warranted the same level of pay she had received in the abolished position. After the grievance was denied by petitioner, the respondent demanded arbitration pursuant to the collective bargaining agreement.  The Fourth Department determined the demand for arbitration should have been denied because the matter must be determined by the Commission of Education in the first instance:

It is well settled that, in deciding an application to stay or compel arbitration under CPLR 7503, the court is concerned only with the threshold determination of arbitrability, and not with the merits of the underlying claim (see CPLR 7501…). In making the threshold determination of arbitrability, the court applies a two-part test. It first determines whether “there is any statutory, constitutional or public policy prohibition against arbitration of the grievance” … . “If no prohibition exists,[the court then determines] whether the parties in fact agreed to arbitrate the particular dispute by examining their collective bargaining agreement” … .

Here, we agree with petitioner that the Commissioner of Education has primary jurisdiction over the parties’ dispute, and that arbitration is therefore prohibited by public policy. As we have previously noted, “ ‘the Commissioner of Education has the specialized knowledge and expertise to resolve the factual issue of whether the . . . former position and the new position are similar within the meaning of Education Law § [2510 (3) (a)]’ ” … . Based on his or her specialized knowledge and expertise, the Commissioner of Education should “resolve, in the first instance,” the issue of fact whether two positions are sufficiently similar under Education Law § 2510 … . Matter of Arbitration …, 285, 4th Dept 3-28-14

 

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“Labor or Services” Complaint Not Specific Enough to Trigger Specific-Answer Requirement Under CPLR 3016

The Fourth Department determined plaintiff nursing home’s motion for summary judgment pursuant to CPLR 3016 was properly denied.  Defendant’s late husband was in plaintiff nursing home for the last 15 months of his life.  Plaintiff sued for $125,265.54 in unpaid invoices. The court determined the complaint did not set forth with sufficient specificity the reasonable value and agreed price of each service provided.  Therefore the statutory requirement for a specific answer to each allegation of service was not triggered:

CPLR 3016 (f) provides that, in an action involving the -2- 205 CA 13-01681 “performing of labor or services,” the plaintiff “may set forth and number in his verified complaint the items of his claim and the reasonable value or agreed price of each.” If the plaintiff does so, “the defendant by his verified answer shall indicate specifically those items he disputes and whether in respect of delivery or performance, reasonable value or agreed price.” “To meet the requirements of CPLR 3016 (f), a complaint must contain a listing of the goods or services provided, with enough detail that it may readily be examined and its correctness tested entry by entry” … . If the complaint lacks sufficient specificity, the defendant may serve a general denial answer … .Here, we conclude that the complaint failed to meet the specificity standards of CPLR 3016 (f) and thus “did not trigger a duty on defendant[’]s part to dispute each item specifically” … .  Waterfront Operations Associates LLC… v Candido, 205, 4th Dept 3-28-14

 

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Defendant’s Flight in His Vehicle, Nearly Striking an Officer, Severed Any Connection with the Initial Detention and Evidence Discarded from the Vehicle Was Properly Seized

The Fourth Department determined an anonymous tip coupled with the police officer’s observations justified the officer’s request that defendant get out of his vehicle—a level three encounter.  Defendant’s subsequent flight in the vehicle, nearly striking an officer, severed any connection between the initial detention and the seizure of evidence discarded from the vehicle:

A police officer testified at the suppression hearing that he received an anonymous tip regarding drug activity taking place at a certain location. Upon proceeding to the location, the officer found defendant sitting in a parked vehicle, which was similar to the description of the vehicle given by the anonymous caller. As the officer spoke with defendant, he noticed what appeared to be a pile of cigar tobacco on the ground outside the vehicle, and the officer knew, based on his training and experience, that emptying a cigar was a common method of preparing a marihuana cigar, or a “blunt.” When the officer asked defendant to step out of the vehicle, defendant instead started the vehicle and sped off, almost striking another officer who was approaching the vehicle on foot. During the ensuing chase, defendant discarded a bag out of the passenger-side window. The bag was later recovered by the police and was found to contain a loaded weapon and marihuana.

The officer’s initial approach of defendant and request for identification was a permissible level one encounter under People v De Bour … . Although the officer’s request that defendant exit the parked vehicle elevated the situation to a level three encounter under De Bour …, we conclude that the officer had reasonable suspicion that defendant was engaged in illegal activity based on the anonymous tip and the officer’s observation of drug activity, i.e., the pile of cigar tobacco on the ground … . In any event, even assuming, arguendo, that defendant was unlawfully detained, we conclude that his criminal conduct in speeding off and almost striking the second officer—conduct for which defendant was convicted of reckless endangerment in the second degree—“severed any causal connection between the unlawful detention and the subsequently-acquired evidence” … . People v Wofford, 252, 4th Dept 3-28-14

 

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Sentencing Court Must Make Finding Whether Eligible Youth Should Be Afforded Youthful Offender Status

The Fourth Department sent the case back for a determination whether defendant should be afforded youthful offender status, a finding which must be made for every eligible youth:

Defendant, an eligible youth, pleaded guilty pursuant to a plea bargain that included a promised sentence and a waiver of the right to appeal. There was no mention during the plea proceedings whether he would be afforded youthful offender treatment.

“Upon conviction of an eligible youth, the court must order a [presentence] investigation of the defendant. After receipt of a written report of the investigation and at the time of pronouncing sentence the court must determine whether or not the eligible youth is a youthful offender” (CPL 720.20 [1]). A sentencing court must determine whether to grant youthful offender status to every defendant who is eligible for it because, inter alia, “[t]he judgment of a court as to which young people have a real likelihood of turning their lives around is just too valuable, both to the offender and to the community, to be sacrificed in plea bargaining” … . People v Scott, 293, 4th Dept 3-28-14

 

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Trial Court Should Not Have Precluded Expert Testimony Based Upon Failure to Make Timely Disclosures— Rather, the Trial Should Have Been Adjourned

Noting that the appellate court has the power to make its own discretionary determinations about discovery and CPLR article 31 matters, even in the absence of the abuse of discretion by the trial judge, the Fourth Department, over a two justice dissent, found that the trial judge should not have granted the defendants’ motion to preclude testimony by plaintiffs’ experts based upon the failure to make timely disclosures:

“[W]e have repeatedly recognized that ‘[a] trial court has broad discretion in supervising the discovery process, and its determinations will not be disturbed absent an abuse of that discretion’ . . . We have also repeatedly noted, however, ‘that, where discretionary determinations concerning discovery and CPLR article 31 are at issue, [we] “[are] vested with the same power and discretion as [Supreme Court, and thus we] may also substitute [our] own discretion even in the absence of abuse” ’ ” … . Under the circumstances of this case, we substitute our discretion for that of Supreme Court, and we conclude that the court should have adjourned the trial rather than granting defendants’ motion, thereby precluding the subject expert testimony and striking the subject expert disclosures. Smalley … v Harley-Davidson Motor Company Inc…, 372, 4th Dept 3-28-14

 

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Court Review of Sufficiency of Evidence Before a Grand Jury Explained

The Fourth Department determined the circumstantial evidence of constructive possession of a package containing drugs was legally sufficient to support the indictment.  The court explained how the sufficiency of evidence before a grand jury is analyzed:

On a motion to dismiss the indictment pursuant to CPL 210.20 (1) (b), “the inquiry of the reviewing court is limited to the legal sufficiency of the evidence; the court may not examine the adequacy of the proof to establish reasonable cause” … . The “reviewing court must consider ‘whether the evidence viewed in the light most favorable to the People, if unexplained and uncontradicted, would warrant conviction by a petit jury’ ” … . In the context of grand jury proceedings, “legal sufficiency means prima facie proof of the crimes charged, not proof beyond a reasonable doubt” … . Thus, we must determine “ ‘whether the facts, if proven, and the inferences that logically flow from those facts supply proof of every element of the charged crimes,’ and whether ‘the [g]rand [j]ury could rationally have drawn the guilty inference’ ” … .  People v Forsythe, 359, 4th Dept 3-28-14

 

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Response to Jury Note Without Notice to Defendant Required Reversal and a New Trial

Over a dissent, the Fourth Department determined the trial court committed a mode of proceedings error by responding to a jury request for exhibits without notice to the defendant:

CPL 310.20 (1) provides that, upon retiring to deliberate, the jurors may take with them “[a]ny exhibits received in evidence at the trial which the court, after according the parties an opportunity to be heard upon the matter, in its discretion permits them to take” (emphasis added). CPL 310.30 provides that, “[a]t any time during its deliberation, the jury may request the court for further instruction or information with respect to . . . the content or substance of any trial evidence . . . Upon such a request, the court must direct that the jury be returned to the courtroom and, after notice to both the people and counsel for the defendant, and in the presence of the defendant, must give such requested information or instruction as the court deems proper” (emphasis added). Here, as part of its instructions to the jury, the court informed the jurors that “[e]xhibits that were received in evidence are available, upon your request, for your inspection and consideration.” The court, however, neither elicited on the record whether defendant, who proceeded pro se at trial, waived his right to be present when such a request was made nor informed defendant on the record that the exhibits would be given to the jury without reconvening. Prior to receiving the jury’s verdict, the court indicated that it had received a jury note “that has been marked as a Court Exhibit which was just the jury requesting certain items of evidence that had already been admitted and received in evidence, that they were provided with those items pursuant to discussions we had and what they were told before deliberations.” We note that those “discussions” do not appear to have been transcribed, and no agreement by defendant to forego the right to be present for the receipt of jury notes appears in the record before us. Inasmuch as the court failed to obtain defendant’s express agreement waiving his right to be present for the reading of the jury note at issue, we conclude that the court committed a mode of proceedings error when it provided exhibits to the jury in response to a jury note without notice to defendant, thereby requiring reversal of the judgment and a new trial … . People v Roberites, 164.1, 4th Dept 3-28-14

 

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