Guptill Holding Corp. v. State

• Decision Date: 02 March 1970
• Citation: 307 N.Y.S.2d 970,33 A.D.2d 362
• Parties: In the Matter of GUPTILL HOLDING CORPORATION, Appellant-Respondent, v. STATE of New York, Respondent, and United States of America, Internal RevenueService, Respondent-Appellant.
• Court: New York Supreme Court — Appellate Division

Page 970

307 N.Y.S.2d 970

33 A.D.2d 362

In the Matter of GUPTILL HOLDING CORPORATION, Appellant-Respondent, v. STATE of New York, Respondent, and United States of America Internal RevenueService, Respondent-Appellant.

Supreme Court, Appellate Division, Third Department.

March 2, 1970.

Carter & Conboy, Albany, (James S. Carter, Albany, of counsel) for appellant-respondent.

Louis J. Lefkowitz, Atty. Gen., (Ruth Kessler Toch and Henderson G. Riggs, Albany, of counsel) for respondent State of New York.

James A. Sullivan, Jr., U.S. Atty. for Northern District of New York (Karl Schmeidler, Washington, D.C., and Frank A. Dziduch, of counsel) for respondent-appellant.

Before HERLIHY, P.J., and STALEY, GREENBLOTT, COOKE and SWEENEY, JJ.

HERLIHY, Presiding Justice.

These are appeals by the petitioner and intervenor from an order of the Supreme Court at Special Term, entered September 19, 1968 in Albany County, which directed that a condemnation award by paid to the respondent State of New York.

In 1956, Charles Guptill formed the petitioner corporation and two other corporations to conduct business interests theretofore pursued by him as an individual. The State in 1958, condemned two tracts of land for highway construction purposes. One tract was owned by the petitioner and the other by Guptill individually. The petitioner filed a claim for damages resulting from the condemnation of both tracts of land in April, 1959. Subsequent to the filing of the claim for damages counsel for the petitioner was advised of the separation in title of the condemned premises and Guptill in June of 1959 assigned all of his interest in the claim to the petitioner. The Court of Claims initially awarded consequential damages to the petitioner for both the premises owned by Charles Guptill individually and the premises of petitioner as if there were a unity of title. Upon appeal this court reversed (Guptill Holding Corp. v. State of New York, 20 A.D.2d 832, 247 N.Y.S.2d 800) and remanded the case to the trial court for further proof and findings on the issue of a unified title. On remand the trial court found that Charles Guptill had unqualified control over both tracts of land (he was virtually the sole stockholder of the petitioner and solely conducted its business); that there was a unity of ownership; and that there was a common use of the premises (43 Misc.2d 631, 251 N.Y.S.2d 766).

Upon a subsequent appeal we affirmed the award of damages, holding 'that it would be contrary to common sense and the rule of just compensation to conclude anything but that the two tracts should be treated as one for the purposes of severance damages in this particular case' (23 A.D.2d 434, 437, 261 N.Y.S.2d 435, 437, mot. for lv. to app. den. 16 N.Y.2d 484, 264 N.Y.S.2d 1026, 211 N.E.2d 654).

Because there were various Federal and State tax liens filed against the award and other encumbrances in excess of the amount of the award, it was deposited in a bank pending a further determination as to the validity and priority of the liens against the petitioner. Subsequently on June 1, 1966, Special Term directed that a certain portion of the award be paid to satisfy attorneys' liens thereon and on June 20, 1966 directed that a further portion thereof be paid to a mortgagee bank. The remaining amount of the award was directed by the order appealed from the be paid to the State in partial satisfaction of its tax lien against Charles Guptill. In determining the validity of the tax lien against the petitioner's award Special Term has held that our prior determination as to unity of ownership (23 A.D.2d 434, 261 N.Y.S.2d 435) was a determination that the petitioner corporation 'was actually Charles M. Guptill individually'. However, the opinion of this court in that case clearly did not determine any question as to legal identity between the corporation and Charles Guptill individually. (See p. 437, 261 N.Y.S.2d p. 437.

Generally, a corporate entity will be disregarded only to prevent fraud or illegality or to achieve equity (Bartle v. Home Owners Coop., 309 N.Y. 103, 127 N.E.2d 832). A corporation may be formed for any legitimate purpose, even to merely escape personal liability (City Bank Farmers Trust Co. v. Macfadden, 13 A.D.2d 395, 402, 216 N.Y.S.2d 215, 222, affd. 12 N.Y.2d 1035, 239 N.Y.S.2d 680, 190 N.E.2d 24) or to transact business which if conducted by an individual would violate the usury laws (Jenkins v. Moyse, 254 N.Y. 319, 324, 172 N.E. 521, 522, 74 A.L.R. 205). Incorporations are, however, subject to 'tests of honesty and justice' and will be ignored if a 'perversion of the privilege to do business in a corporate form' (Rapid Transit Subway Construction Co. v. City of New York, 259 N.Y. 472, 489, 182 N.E. 145, 150). Also the business incorporated must be conducted by the...