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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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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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“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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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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Victim’s Statements Admissible as Excited Utterances Despite the Passage of Some Time Before the Statements Were Made

The Fourth Department determined the victim’s statements to an emergency medical technician were admissible as excited utterances even though some time had elapsed between the victim’s treatment and her statements.  The court determined that the stress of the situation had not diminished at the time the statements were made:

It is well settled that “[t]he admissibility of an excited utterance is entrusted in the first instance to the trial court. In making that determination, the court must ascertain whether, at the time the utterance was made, the declarant was under the stress of excitement caused by an external event sufficient to still his [or her] reflective faculties, thereby preventing opportunity for deliberation which might lead the declarant to be untruthful. The court must assess not only the nature of the startling event and the amount of time which has elapsed between the occurrence and the statement, but also the activities of the declarant in the interim to ascertain if there was significant opportunity to deviate from the truth. Above all, the decisive factor is whether the surrounding circumstances reasonably justify the conclusion that the remarks were not made under the impetus of studied reflection” … . Notably, “the time for reflection is not measured in minutes or seconds, but rather is measured by facts” … .

There is no dispute that there was a period of time between the victim’s treatment by the EMT and her statements. During that period of time, however, the victim’s child and niece were still in the apartment with defendant, the man who had kidnapped the victim and beaten her with a loaded gun. We thus conclude that “ ‘at the time the utterance[s were] made [the victim] was in fact under the stress of excitement caused by an external event sufficient to still . . . her reflective faculties’ . . . , including both the physical and emotional stress of the [kidnapping and] beating earlier administered by defendant[,] . . . the stress of being confined in [an apartment and car] with defendant following the attack,” and the stress of having two small children still in harm’s way… . People v Miller, 191, 4th Dept 3-28-14

 

Uninhabited Trailer Met Definition of a “Building” Within the Meaning of the Arson Statute

The Fourth Department determined that a trailer that periodically was used as lodging, although not so used at the time of the fire, constituted a “building” within the meaning of the arson statute:

“The ‘ordinary meaning’ of the term ‘building’ has been alternatively defined as ‘a constructed edifice designed to stand more or less permanently, covering a space of land, usu[ally] covered by a roof and more or less completely enclosed by walls, and serving as a dwelling’ . . . , ‘a structure with a roof and walls’ . . . and ‘[a] structure or edifice inclosing a space within its walls and usually, but not necessarily, covered with a roof’ . . . The term generally, though not always, implies the idea of a habitat for a person’s permanent use or an erection connected with his or her permanent use” … .

Inasmuch as the trailer herein was “a constructed edifice enclosed by walls, covered by a roof, designed to stand permanently, and serving a useful purpose, it is included within the ordinary meaning of the word ‘building’ ” … . …In addition to furnishings for sleeping, the trailer had a bathroom and a kitchen. Moreover, the trailer was equipped with a power cord for immediate access to power and a propane tank that could be used to power the refrigerator and heaters. At the time of the arson, the trailer was being used to secure the owners’ property while they were remodeling the inside of their house. In any event, with respect to the trailer’s character as a building in the ordinary sense of the word, it is of no moment that no one was actually residing in the trailer on the day of the incident … .

Even assuming, arguendo, that the trailer did not fit within the ordinary meaning of the term, we conclude that it constituted a building under the secondary definition of building contained in the statute, i.e., a “structure . . . used for overnight lodging of persons, or used by persons for carrying on business therein” (Penal Law § 150.00 [1]). Defendant recognized that the trailer was used for overnight lodging “on ‘vacations’ or weekend retreats,” and it is undisputed that defendant had previously rented the trailer as overnight lodging for a period of four months. Although no one was residing in the trailer on the day of the fire, we likewise conclude that such fact does not alter the essential character of the structure as one used for overnight lodging. People v Norcutt, 195, 4th Dept 3-28-14

 

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Summary Judgment Properly Granted in Favor of Defendant Who Had the Right of Way When Plaintiff Pulled Into Defendant’s Path from a Stop, Even Though there Was Evidence Defendant Was Travelling Slightly Over the Speed Limit/No Evidence Accident Would Have Been Avoided Had the Defendant Been Traveling at the Speed Limit

The Fourth Department, over a dissent, determined that summary judgment was properly granted to defendant truck driver who struck plaintiff’s vehicle as it entered the roadway from a stop.  The truck driver had the right of way (there was no stop sign for the truck driver) and there was evidence the truck was travelling in excess of five miles an hour over the speed limit. The court determined there was no evidence the accident could have been avoided even if the truck had been traveling at the speed limit:

“It is well settled that a driver who has the right-of-way is entitled to anticipate that drivers of other vehicles will obey the traffic laws requiring them to yield” (…see Vehicle and Traffic Law § 1142 [a]). Nevertheless, “a driver cannot blindly and wantonly enter an intersection . . . but, rather, is bound to use such care to avoid [a] collision as an ordinarily prudent [motorist] would have used under the circumstances” … .

Here, we conclude … that defendants met their initial burden of establishing that defendant was operating his vehicle “ ‘in a lawful and prudent manner and that there was nothing [he] could have done to avoid the collision’ ” … . Defendant testified that he saw plaintiff’s vehicle at the stop sign, braked as soon as he entered the intersection, and turned to the left “microseconds” after he braked. Despite defendant’s efforts to avoid the accident, his truck struck the rear of plaintiff’s vehicle on the passenger’s side. In opposition to the motion, plaintiff failed to raise an issue of fact … . Contrary to plaintiff’s contention, “the fact that [defendant] may have been driving at a speed in excess of five miles per hour over the posted speed limit . . . is inconsequential inasmuch as there is no indication that [defendant] could have avoided the accident even if [he] had been traveling at or below the posted speed limit” … . Heltz v Barratt…, 184, 4th Dept 3-28-14

Similar (but not identical) facts, same result, over a dissent, in Johnson v Time Warner…, 175, 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

 

Inadequate Supervision and Unsanitary Living Conditions Warranted a Neglect Finding

The Fourth Department reversed Family Court and found the three and a half year old child to be neglected.  The child wandered off out of the house and was found by a neighbor one and a half blocks away .  And the child had been living in highly unsanitary conditions:

…[A] neglected child is defined as a child less than 18 years of age “whose physical, mental or emotional condition has been impaired or is in imminent danger of becoming impaired as a result of the failure of his [or her] parent . . . to exercise a minimum degree of care . . . in providing the child with proper supervision or guardianship, by unreasonably inflicting or allowing to be inflicted harm, or a substantial risk thereof” (Family Ct Act § 1012 [f] [i] [B]). As the Court of Appeals has explained, “[t]he statute . . . imposes two requirements for a finding of neglect, which must be established by a preponderance of the evidence . . . First, there must be proof of actual (or imminent danger of) physical, emotional or mental impairment to the child . . . Second, any impairment, actual or imminent, must be a consequence of the parent’s failure to exercise a minimum degree of parental care . . . This is an objective test that asks whether a reasonable and prudent parent [would] have so acted, or failed to act, under the circumstances” … . Moreover, it is well established that “the statutory requirement of imminent danger . . . does not require proof of actual injury” …, and that “[a] single incident where the parent’s judgment was strongly impaired and the child exposed to a risk of substantial harm can sustain a finding of neglect” … . * * *

As relevant to the second basis for neglect alleged in the petition, a neglected child is defined as a child less than 18 years of age “whose physical, mental or emotional condition has been impaired or is in imminent danger of becoming impaired as a result of the failure of his [or her] parent . . . to exercise a minimum degree of care . . . in supplying the child with adequate food, clothing, [or] shelter . . . though financially able to do so or offered financial or other reasonable means to do so” (Family Ct Act § 1012 [f] [i] [A]). We conclude that the court’s determination that the child was not neglected based on the condition of the mother’s apartment lacks a sound and substantial basis in the record. * * * Under the … circumstances, we conclude that the unsanitary and unsafe condition of the mother’s apartment posed an imminent danger of impairment to the child’s physical, mental, or emotional condition … . Matter of Raven B, 77, 4th Dept 3-28-14

 

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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