A&M Global Mgmt. Corp. v. Northtown Urology Assocs., P.C.

Decision Date28 March 2014
Citation983 N.Y.S.2d 368,115 A.D.3d 1283,2014 N.Y. Slip Op. 02157
CourtNew York Supreme Court — Appellate Division
PartiesA&M GLOBAL MANAGEMENT CORP., Plaintiff–Respondent–Appellant, v. NORTHTOWN UROLOGY ASSOCIATES, P.C., Defendant, John M. Roehmholdt, Defendant–Appellant–Respondent, and Jacek T. Sosnowski, Defendant–Respondent. (Appeal No. 1.).

OPINION TEXT STARTS HERE

Damon Morey LLP, Buffalo (Michael J. Willett of Counsel), for DefendantAppellantRespondent.

Hogan Willig, PLLC, Amherst (Robert Michalak of Counsel), for PlaintiffRespondentAppellant.

Hurwitz & Fine, P.C., Buffalo (Earl K. Cantwell of Counsel), for DefendantRespondent.

PRESENT: SCUDDER, P.J., FAHEY, PERADOTTO, LINDLEY AND SCONIERS, JJ.

MEMORANDUM:

Defendants John M. Roehmholdt and Jacek T. Sosnowski were the sole directors and equal shareholders of defendant Northtown Urology Associates, P.C. (Northtown), and both were employed by Northtown as physicians. Northtown leased from plaintiff certain office space for a 10–year–term beginning in March 2004.

Sometime in 2006, Sosnowski began negotiations to move his practice out of state and, either at the end of October or in early November of that year, he signed a contract to do so. On November 20, 2006, Sosnowski advised Roehmholdt of his intention to move out of state, and the two, through their attorneys, subsequently entered into negotiations to determine the extent of Northtown's obligations to Sosnowski under their existing employment and buy/sell agreements. Sosnowski accepted the majority of the medical equipment and certain office furniture owned by Northtown in full satisfaction of Northtown's obligations to him, acceding to that arrangement only because Northtown refused to satisfy its obligations to him in cash. Sosnowski ceased practicing with Northtown by mid-January 2007, and he resigned as a director of the corporation on or about January 23, 2007, tendering his stock to the corporation on that same date.

At that time, Roehmholdt did not believe that he could continue Northtown's practice without the assistance of another physician, nor did he believe that he could have recruited another physician in sufficient time to continue the Northtown practice. Consequently, in mid-December 2006, Roehmholdt began employment negotiations with another urology practice, Western New York Urology Associates (WNYUA). WNYUA was not interested in Northtown's medical equipment or its office space, but was interested in employing Roehmholdt and accepting his patients, and Roehmholdt was eventually hired by WNYUA.

In conjunction with his hiring at WNYUA and at WNYUA's expense, on or about January 15, 2007, Roehmholdt sent a letter to his and Sosnowski's patients informing them that, starting on February 5, 2007, he would practice with WNYUA, that “all office appointments [would] be seen at [WNYUA], and that patients were free to pick up their medical records from him if they wished to see a different urologist.” Roehmholdt also stated in the letter that, [i]n considering how [he] could best continue to serve all of the patients in the practice, [he] came to the conclusion that joining a strong, progressive group that practices caring and competent urology would serve [patients] best. [WNYUA] enjoys a well earned reputation as a leader in its field and offers to its patients state of the art care.” He further stated in the letter that he would “continue to see all patients as before, just in a different office location.”

On February 2, 2007, Sosnowski picked up the agreed-upon medical equipment and office furniture and moved out of state. Northtown subsequently vacated the premises it leased from plaintiff and, beginning with the March 2007 payment, ceased paying rent to plaintiff. Plaintiff commenced this action seeking damages for, inter alia, Northtown's alleged breach of its lease with plaintiff. Supreme Court (Curran, J.), granted in part plaintiff's motion seeking summary judgment against Northtown on the first through fourth and sixth causes of action by granting partial summary judgment against Northtown on liability on the first, second and sixth causes of action, which alleged, respectively, that Northtown was in default under the lease, that plaintiff was entitled to recover from Northtown money that it had expended for Northtown's specialized use of the property, and that Northtown was obligated to pay plaintiff reasonable attorneys' fees and costs associated with this action. The court also granted plaintiff a money judgment against Northtown on the third cause of action, which alleged that Northtown was liable for certain operating costs. In addition, the court, inter alia, granted the respective cross motions of Roehmholdt and Sosnowski for summary judgment dismissing the eighth “cause of action,” by which plaintiff sought to pierce Northtown's corporate veil in order to recover damages from Roehmholdt and Sosnowski individually, but also afforded plaintiff leave to amend the complaint “to re-plead any facts necessary to add allegations for recovery against ... Sosnowski and Roehmholdt on the basis of piercing the corporate veil.”

Plaintiff subsequently served a revised amended complaint in which it asserted additional facts supporting its attempt to pierce Northtown's corporate veil in order to recover damages from Roehmholdt and Sosnowski individually. Defendants joined issue through separate answers, and the matter eventually proceeded to a bench trial, prior to which the parties stipulated that the damages against Northtown would be $200,000. Following trial, Supreme Court (Michalek, J.), granted a judgment that, inter alia, awarded plaintiff money damages against Roehmholdt pursuant to the theory of piercing the corporate veil, dismissed plaintiff's remaining causes of action against Roehmholdt, including the seventh cause of action, for fraudulent conveyance, and dismissed the revised amended complaint against Sosnowski. Following further motion practice, the court granted an order that, inter alia, awarded Sosnowski attorneys' fees and costs against plaintiff. That order also awarded plaintiff attorneys' fees and costs against Roehmholdt, but the amount awarded was less than what plaintiff had requested. In appeal No. 1, Roehmholdt appeals and plaintiff cross-appeals from the judgment and, in appeal No. 2, plaintiff appeals from the order.

Contrary to Roehmholdt's contention in appeal No. 1, we conclude that the court did not err in piercing the corporate veil and finding Roehmholdt personally liable for Northtown's obligations to plaintiff. 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 ( see Matter of Capizola v. Vantage Intl., 2 A.D.3d 843, 844, 770 N.Y.S.2d 395 [2003] ). Upon such a review, the record should be ‘viewed in the light most favorable to sustain the judgment’ ( Farace v. State of New York, 266 A.D.2d 870, 871, 698 N.Y.S.2d 376 [1999];see Parone v. Rivers, 84 A.D.2d 686, 446 N.Y.S.2d 641 [1981] ), 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’ ( New York Tel. Co. v. Harrison & Burrowes Bridge Contrs., 3 A.D.3d 606, 608, 771 N.Y.S.2d 187 [2004] [internal quotation marks and citations omitted] ). [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' ( Thoreson v. Penthouse Intl., 80 N.Y.2d 490, 495, 591 N.Y.S.2d 978, 606 N.E.2d 1369 [1992] [internal quotation marks omitted], rearg. denied81 N.Y.2d 835, 595 N.Y.S.2d 397, 611 N.E.2d 298) (Matter of Syracuse Indus. Dev. Agency [Alterm, Inc.], 20 A.D.3d 168, 170, 796 N.Y.S.2d 503).

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' ( Nasca v. DelMonte, 111 A.D.3d 1427, 1429, 975 N.Y.S.2d 317, quoting Matter of Morris v. New York State Dept. of Taxation & Fin., 82 N.Y.2d 135, 141, 603 N.Y.S.2d 807, 623 N.E.2d 1157). ‘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’ ( Abbott v. Crown Mill Restoration Dev., LLC, 109 A.D.3d 1097, 1101, 972 N.Y.S.2d 117;see Last Time Beverage Corp. v. F & V Distrib. Co., LLC, 98 A.D.3d 947, 951, 951 N.Y.S.2d 77;Fantazia Intl. Corp. v. CPL Furs N.Y., Inc., 67 A.D.3d 511, 512, 889 N.Y.S.2d 28).

The burden of establishing that the corporate veil should be pierced is a heavy one ( see Colonial Sur. Co. v. Lakeview Advisors, LLC, 93 A.D.3d 1253, 1255, 941 N.Y.S.2d 371) 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’ (Matter of Mercury Factoring, LLC v. Partners Trust Bank, 75 A.D.3d 1101, 1103, 904 N.Y.S.2d 851, quoting Morris, 82 N.Y.2d at 140, 603 N.Y.S.2d 807, 623 N.E.2d 1157). “A decision to pierce the corporate veil is a fact-laden [determination]( Abbott, 109...

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