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Criteria for Piercing the Corporate Veil Explained/Appellate Review Powers Re: a Bench Trial Described

The Second Department determined Supreme Court (in a bench trial) had properly pierced the corporate veil to find the owner personally liable.  The court described the criteria for piercing the corporate veil and noted that, in reviewing a bench trial, the appellate court has the same fact-finding powers as the trial court:

“In reviewing a determination made after a nonjury trial, the power of this Court is as broad as that of the trial court, and we may render a judgment we find warranted by the facts, bearing in mind that in a close case, the trial court had the advantage of seeing and hearing the witnesses” … .

“The general rule . . . is that a corporation exists independently of its owners, who are not personally liable for its obligations, and that individuals may incorporate for the express purpose of limiting their liability” … . The doctrine of piercing the corporate veil is an exception to this general rule, allowing the imposition of individual liability on owners for the obligations of their corporation “to prevent fraud or to achieve equity” … . “A plaintiff seeking to pierce the corporate veil must demonstrate that a court in equity should intervene because the owners of the corporation exercised complete domination over it in the transaction at issue and, in doing so, abused the privilege of doing business in the corporate form, thereby perpetrating a wrong that resulted in injury to the plaintiff” … . AZTE Inc v Auto Collection Inc, 2015 NY Slip Op 00711, 2nd Dept 1–28-15

 

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Twenty-Day Time-Limit for Making an Application to Stay Arbitration Starts When the Notice or Demand for Arbitration Is Received, Not When It Is Mailed/An Application for a Stay of Arbitration Is “Made” When It Is Filed/Appellate Court May Consider a Purely Legal Issue Raised for the First Time on Appeal

The First Department determined the twenty-day time-limit for an application to stay arbitration, when the notice or demand for arbitration is sent by mail, runs from the date the notice or demand is actually received.  The court further noted that it can rule on a purely legal question raised for the first time on appeal:

Even though CPLR 7503(c) says, “An application to stay arbitration must be made by the party served [with a notice or demand for arbitration] within twenty days after service upon him of the notice or demand” (emphasis added), case law establishes that, when the notice or demand is mailed — as it was in the case at bar — “[t]he notice to arbitrate does not start the time to respond until receipt”… . * * *

The issue of whether an application to stay arbitration is “made” (CPLR 7503[c]) when the petition is filed, as opposed to when it is served, is a purely legal one; hence, it “may properly be considered by this Court for the first time on appeal” … . In fact, an application is made when the petition is filed … . Matter of Travelers Prop Cas Co of Am v Archibald, 2015 NY Slip Op 00465, 1st Dept 1-20-15

 

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Owners/Occupiers of a Single Family Residence Not Responsible for Maintaining Abutting Sidewalk Pursuant to the NYC Administrative Code

The Second Department exercised its discretion to hear an appeal which had been dismissed for failure to perfect and affirmed the dismissal of the complaint.  Defendants owned and occupied a single-family residence.  Therefore, pursuant to the Administrative Code of the City of New York, defendants were not responsible for maintaining the sidewalk abutting the property:

On February 20, 2008, the injured plaintiff allegedly tripped and fell on a sidewalk abutting the defendants’ property. The defendants established their prima facie entitlement to judgment as a matter of law by demonstrating that the subject property was a single-family residence, that it was owner occupied, and that it was used solely for residential purposes (see Administrative Code of City of NY § 7-210[b]), thus exempting them from liability pursuant to Administrative Code of the City of New York § 7-210(b) for the alleged failure to maintain the sidewalk abutting their property … . Saunders v Tarsia, 2015 NY Slip Op 00352, 2nd Dept 1-14-15

 

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Statute Prohibits Petition for Downward Modification of Support After Arrears Accrue/No Appeal Lies from an Order Entered by Consent

The Second Department determined father could not bring a petition for retroactive reduction of child support and a reduction of arrears after the arrears had accrued.  The court noted that father could not appeal an order he consented to:

Family Court Act § 451 provides that the court “shall not reduce or annul child support arrears accrued prior to the making of an application pursuant to this section.” A court “ha[s] no discretion to reduce or cancel arrears of child support which accrue before an application for downward modification of the child support obligation” … . Here, the father petitioned for a downward modification of his child support obligation after the arrears accrued. Thus, any modification was [*2]prohibited.

In any event, the Family Court properly concluded that the father was barred from relitigating the amount of arrears owed. The order dated July 11, 2012, which fixed the amount of arrears that the father owed, and provided the basis for the entry of the money judgment against him, was entered on his consent. On appeal, a party may not collaterally attack an order entered on his or her consent … . Matter of Cadwell v Cadwell, 2015 NY Slip Op 00369, 2nd Dept 1-14-15

 

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Defendant’s Motion to Vacate a Default Judgment of Divorce Should Have Been Granted Even Though Defendant First Appeared and Then Withdrew

The Fourth Department defendant’s motion to vacate a default judgment of divorce should have been granted, even though the defendant had appeared in the action and then withdrew.  The court noted that a default judgment cannot be appealed and the only remedy is therefore a motion to vacate:

We reject plaintiff’s contention that defendant could not move to vacate the judgment based on excusable default pursuant to CPLR 5015 (a) (1) because he appeared and then withdrew his appearance on the record. Regardless of the fact that defendant appeared initially, the judgment was entered upon defendant’s default. Defendant therefore could not appeal from the judgment of divorce (see CPLR 5511) and, indeed, his only remedy was to move to vacate the judgment of divorce pursuant to CPLR 5015 (a) (1) … .

We conclude that defendant demonstrated both a reasonable excuse for the default and a meritorious defense …, and that he is entitled to vacatur of those parts of the judgment of divorce distributing the parties’ assets …, the only parts of the judgment challenged by defendant on appeal … . Defendant averred that he informed his attorney that he disagreed with the proposed resolution of the parties’ retirement accounts and did not want to finalize the judgment on those terms, but that he was subsequently unable to contact his attorney, and a default judgment of divorce was entered without his knowledge. Furthermore, the judgment of divorce failed to resolve the outstanding issues regarding distribution of the retirement accounts, the home equity loan, and defendant’s enhanced earning capacity, which issues the parties expressly acknowledged remained to be resolved and were dependent upon, at least in part, the forthcoming report. Marshall v Marshall, 2015 NY Slip Op 00059, 4th Dept 1-2-15

 

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Larceny Jury Instruction Shifted Burden of Proof to Defendant—Reversal Required In Absence of Preservation of the Error

The Fourth Department reversed defendant’s conviction because the jury instruction shifted the burden of proof to the defendant:

Penal Law § 155.15 (1) provides that, “[i]n any prosecution for larceny committed by trespassory taking or embezzlement, it is an affirmative defense that the property was appropriated under a claim of right made in good faith.” …[H]owever, the Court of Appeals in People v Chesler (50 NY2d 203, 209-210) “held that section 155.15 was unconstitutional insofar as it made a good-faith claim of right an affirmative defense because to do so impermissibly shifted the burden onto the defendant to disprove the element of intent.” Rather, “a good faith claim of right is properly a defense–—not an affirmative defense—–and thus, the [P]eople have the burden of disproving such defense beyond a reasonable doubt’ ” … . Here, however, the court instructed the jury that “defendant has the burden of proving that she took, withheld or obtained the property under a claim of right made in good faith by a preponderance of the evidence.” We conclude that the court committed a mode of proceedings error when it shifted the burden onto defendant to disprove the element of intent …, thereby requiring reversal of the judgment and a new trial even in the absence of preservation … . People v Forbes-Haas, 2015 NY Slip Op 00092, 4th Dept 1-2-15

 

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Where Proof Is Directed Exclusively to a Theory Not Charged in the Indictment, the Proof Is Insufficient to Support the Conviction—Such a Variance Need Not Be Preserved by Objection to Be Raised on Appeal/Conduct of Spectators (Mouthing Words When Victim Testified) Did Not Require that the Spectators Be Removed and Did Not Mandate the Declaration of a Mistrial

The Fourth Department determined that variance between the charges described in the indictment and the proof at trial required the dismissal of several counts.  Such a variance does not need to be preserved for appeal by objection.  The court noted that the trial judge’s failure to exclude spectators who were mouthing word’s during the victim’s testimony was not an abuse of discretion:

“Where the charge against a defendant is limited either by a bill of particulars or the indictment itself, the defendant has a fundamental and nonwaivable’ right to be tried only on the crimes charged” … . We have thus held that, where, as here, a defendant contends that he or she has been convicted upon an uncharged theory of the crime, such a contention does not require preservation… . * * *

“Where there is a variance between the proof and the indictment, and where the proof is directed exclusively to a new theory rather than the theory charged in the indictment, the proof is deemed insufficient to support the conviction” … . Counts two and three of the indictment alleged hand-to-vagina contact, but the victim testified that the only part of defendant’s body that came into contact with her vagina was defendant’s penis. Indeed, when asked specifically if any other part of defendant’s body came into contact with her vagina during the incident encompassed by counts two and three, the victim responded, “No.” Count nine of the indictment alleged penis-to-vagina contact, but the victim testified that defendant touched her vagina with his hand during that incident. Again, when asked specifically if any other part of defendant’s body came into contact with her vagina during the incident encompassed by count nine, the victim responded, “No.” We thus conclude that the evidence is legally insufficient to support the conviction with respect to counts two, three and nine and that defendant was denied his fundamental and nonwaivable right to be tried on only those crimes charged in the indictment. We therefore modify the judgment accordingly.  People v Duell, 2015 NY Slip Op 00014, 4th Dept 1-2-15

 

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Case Remitted for Determination Whether Defendant Should Be Adjudicated a Youthful Offender/Record Insufficient to Determine Whether Court Erred In Not Disclosing to the Defendant the Written Submissions of the Victims Which Were Reviewed by the Court–Case Remitted to Make an Adequate Record for Review

The Fourth Department determined County Court erred in failing to determine whether defendant should be adjudicated a youthful offender.  The Fourth Department further determined the record was not sufficient for consideration of defendant’s argument County Court erred when it refused to allow defendant to see the written submissions to the judge made by the victims. The case was remitted for consideration of whether the defendant should be adjudicated a youthful offender and to create a record of the written submissions and the reasons defendant was refused access to them.  People v Minemier, 2015 NY Slip Op 00171, 4th Dept 1-2-15

 

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Defendant’s Attorney Not Ineffective for Failing to Make a Motion to Suppress—Nature of a Motion Which, If Not Made, Would Constitute Ineffective Assistance Addressed by the Majority and the Dissent

The Fourth Department, over a two-justice dissent, determined that defendant’s attorney was not ineffective for failure to move to suppress a few of the items of stolen property seized after a traffic stop.  The majority and the dissent disagreed about whether the appeal questioned the validity of the traffic stop or the arrest after the stop.  The dissent felt that a motion to suppress all of the evidence based upon the arguable invalidity of the vehicle stop should have been made. The majority felt that the validity of the stop had not been questioned on appeal. The majority noted that, because the defendant testified, even if the evidence had been suppressed, the defendant could have been impeached with the suppressed evidence. The most useful discussion in the decision concerns the general nature of a motion which, if not made, would constitute ineffective assistance:

We respectfully disagree with our dissenting colleagues that the threshold standard to be applied in determining whether an attorney was ineffective for failing to file a particular motion is “whether the motion at issue had more than little or no chance of success.” It is true, as the dissent points out, that the Court of Appeals has repeatedly stated that “[t]here can be no denial of effective assistance of trial counsel arising from counsel’s failure to make a motion or argument that has little or no chance of success’ ” … . By so stating, however, the Court was not articulating the standard for what does constitute ineffective assistance of counsel; instead, the Court was explaining what does not constitute ineffective assistance of counsel. As noted, the Court has made clear in other cases that the standard to be applied is whether defense counsel failed to file a “colorable” motion and, if so, whether counsel had a strategic or legitimate reason for failing to do so … . Although neither the Court of Appeals nor the Appellate Division has defined “colorable” in this context, the term is elsewhere defined as “appearing to be true, valid, or right” (Black’s Law Dictionary 301 [9th ed 2009]). Federal courts have described a colorable claim as one that has ” a fair probability or a likelihood, but not a certitude, of success on the merits’ ” … . Here, for the reasons previously stated, we do not believe that a motion to suppress evidence as the product of an unlawful arrest would likely have been granted. People v Carver, 2015 NY Slip Op 00046, 4th Dept 1-2-15

 

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Appeal Dismissed Pursuant to Fugitive Disentitlement Doctrine Reinstated Upon Posting of a Bond

The Fourth Department, which had previously dismissed respondent’s appeal pursuant to the fugitive disentitlement doctrine, reinstated the appeal upon respondent’s posting a $25,000 bond:

We previously dismissed respondent’s appeal from an “order of dismissal” entered by Family Court upon declining to sign an order to show cause seeking to vacate two orders entered on respondent’s default. One of the orders determined that respondent was in willful violation of a child support order, and the other order committed him to a term of six months of incarceration … . The court also issued a warrant for respondent’s arrest … . We determined that the fugitive disentitlement theory applied both to respondent’s order to show cause to vacate the default orders and to the subsequent appeal … . We nevertheless granted respondent leave to move to reinstate his appeal upon the posting of an undertaking in the amount of $25,000 with the court within 60 days of service of our order with notice of entry … . Respondent timely posted the undertaking and his motion to reinstate the appeal was granted by this Court.

“The principal rationales for the doctrine [of fugitive disentitlement] include: (1) assuring the enforceability of any decision that may be rendered against the fugitive; (2) imposing a penalty for flouting the judicial process; (3) discouraging flights from justice and promoting the efficient operation of the courts; and (4) avoiding prejudice to the nonfugitive party”… . By posting an undertaking in the amount of the child support arrears, we conclude that respondent has demonstrated that he is not flouting the judicial process and has provided a means of enforcement of the court’s order determining the amount of child support arrears in the event that the court’s determination is unchanged (see Family Ct Act § 471; CPLR 2502 [c]). We conclude that the fugitive disentitlement theory no longer applies to respondent … , and thus we reverse the order insofar as appealed from and remit the matter to Family Court to determine respondent’s application to vacate the orders entered on his default and the warrant for his arrest. Matter of Shehatou v Louka, 2015 NY Slip Op 00086, 4th Dept 1-2-15

 

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