Morris v. New York State Dept. of Taxation and Finance

CourtNew York Court of Appeals
Writing for the CourtHANCOCK; KAYE; LEVINE
Citation623 N.E.2d 1157,82 N.Y.2d 135,603 N.Y.S.2d 807
Parties, 623 N.E.2d 1157 In the Matter of Joseph MORRIS, Appellant, v. NEW YORK STATE DEPARTMENT OF TAXATION AND FINANCE et al., Respondents.
Decision Date19 October 1993

Page 807

603 N.Y.S.2d 807
82 N.Y.2d 135, 623 N.E.2d 1157
In the Matter of Joseph MORRIS, Appellant,
v.
NEW YORK STATE DEPARTMENT OF TAXATION AND FINANCE et al., Respondents.
Court of Appeals of New York.
Oct. 19, 1993.

Page 808

[82 N.Y.2d 136] [623 N.E.2d 1158] Dorsey & Whitney, New York City (Richard H. Silberberg and Robert G. Manson of counsel), and Simon, Uncyk & Borenkind, New York City (Eli Uncyk of counsel), for appellant.

[82 N.Y.2d 137] Robert Abrams, Atty. Gen., Albany (Lew A. Millenbach, Jerry Boone and Peter H. Schiff of counsel), for New York State Dept. of Taxation and Finance, respondent.

OPINION OF THE COURT

HANCOCK, Judge.

Petitioner, a New Jersey resident who maintained a rented apartment in New York, was the president of Sunshine Developers, Inc. (Sunshine), a closely held corporation owned entirely[82 N.Y.2d 138] by his brother and his nephew. Respondent New York State Department of Taxation and Finance (the Department) assessed a compensating use tax against petitioner for two cabin cruisers purchased by the corporation outside of New York and allegedly used by him on his individual business in State waters. Although owning no stock in Sunshine, petitioner assertedly controlled the corporation and his responsibility for the tax has been upheld by disregarding the separate corporate entity under the doctrine of piercing the corporate veil. Because of his leasing a New York apartment, it has been held that petitioner, although a New Jersey resident, could not claim the nonresident's exemption from the tax (see, Tax Law § 1118[2]. On his appeal, the decisive question is whether the Tax Appeals Tribunal and Appellate Division properly sustained the assessment against petitioner on the theory of piercing the corporate veil. For reasons to be explained, we conclude that, on the facts in this record, that theory should not have been applied. We, therefore, reverse.

Page 809

[623 N.E.2d 1159] I

The pertinent facts may be summarized from the determinations of the Administrative Law Judge of the Division of Tax Appeals and of the Tax Appeals Tribunal. Sunshine was a company with offices in New Jersey incorporated in Delaware in 1977 for the purpose of purchasing, owning, operating and leasing boats. Petitioner's brother, Robert Morris, was the majority shareholder and acted as Sunshine's secretary-treasurer; petitioner's nephew Drew, 14 years old at the time of incorporation, was the other shareholder. Robert Morris knew little about the assets or business activities of the corporation and did not participate in business decisions. As the sole board member, petitioner acted as chair and board secretary and made all corporate decisions. Petitioner had been a resident of New Jersey since 1980; from 1977 until 1984 he rented an apartment in New York City for the rare occasion when he stayed in New York overnight for business reasons.

In 1977 and in 1978 Sunshine purchased, owned, and operated at different times its primary assets, two boats ("the 1977 boat" and "the 1978 boat"), which it leased for the purpose of business entertainment to other companies owned by petitioner and Robert Morris. In October 1982, the Department assessed sales and use taxes against Sunshine for the purchase and use of these boats (see, Matter of Sunshine Developers v. [82 N.Y.2d 139] Tax Commn., 132 A.D.2d 752, 517 N.Y.S.2d 317, lv denied 70 N.Y.2d 609, 522 N.Y.S.2d 109, 516 N.E.2d 1222). On appeal, an Administrative Law Judge (ALJ), finding delivery of the boats to have occurred outside of New York, cancelled all sales tax assessments as well as the use tax on the 1977 boat, which had been used only infrequently in New York. The ALJ sustained the use tax on the 1978 boat, however. The Appellate Division upheld the tax, concluding that the 1978 boat "was seasonally moored, and therefore used, in New York. These facts support [the Department's] further conclusion that petitioners [including Sunshine] were engaged in carrying on a business in this State and, thus, not entitled to the exemption for nonresidents" (id., 132 A.D.2d at 754-755, 517 N.Y.S.2d 317). The use tax assessed on the 1978 boat was paid to the Department.

The corporation subsequently sold these assets, and from June 1981 through August 1984 it purchased, owned and operated at different times two other boats ("the 1981 boat" and "the 1984 boat"). The corporation bought them following special board meetings at which petitioner, sitting as sole board member, authorized the purchases. Both boats were picked up by petitioner in North Carolina. And both boats were moored during the summer months at Montauk, New York.

In April 1985, the Department sent a notice of determination of sales and use taxes due on the 1981 and 1984 boats in the amount of $76,390, plus interest and penalties, to petitioner, Robert Morris and Sunshine. The Department's action was based upon the mooring of the 1981 and 1984 boats at Montauk as well as on the allegation that Sunshine was a corporate resident of New York. On appeal, it was claimed that no sales tax was due as Sunshine was exempt from the use tax as a nonresident corporation. In May 1990, an ALJ concluded: (1) that Sunshine was entitled to the nonresident exemption pursuant to Tax Law § 1118(2); and (2) that, notwithstanding the Department's contentions, the corporate veil should not be pierced to impose personal liability for the taxes upon either petitioner or Robert Morris. In 1988, the sales and use tax on the 1981 boat was paid to the New Jersey Department of the Treasury.

The Department appealed to respondent Tax Appeals Tribunal (the Tribunal). In May 1991, the Tribunal sustained the ALJ's determination of no imposition of sales or use taxes upon Sunshine, concluding that Sunshine was a nonresident corporation, which did no business in New York; it also [82 N.Y.2d 140] sustained the determination pertaining to Robert Morris that he had insufficient control of Sunshine to justify piercing the corporate veil. But the Tribunal reversed as to petitioner Joseph Morris and pierced the corporate veil, concluding that he was [623 N.E.2d 1160] the equitable

Page 810

owner and controlling principal of Sunshine and therefore personally liable for the tax. The Tribunal also held that petitioner Joseph Morris did not qualify for the nonresident tax exemption due to his rental of a New York City apartment when the 1981 and 1984 boats were purchased. The Tribunal modified the total amount of tax assessed against him to reflect a credit for the sales and use tax paid to the State of New Jersey on the 1981 boat.

Petitioner commenced a CPLR article 78 proceeding in the Appellate Division to review the Tribunal's determination. The Appellate Division sustained all of the Tribunal's conclusions, relieving Sunshine and Robert Morris of any liability and holding "that there is...

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721 practice notes
  • Travelers Cas. v. Dormitory Auth.-State , Master File No. 07 Civ. 6915(DLC)
    • United States
    • U.S. District Court — Southern District of New York
    • August 26, 2010
    ...(2d Cir.2003) (discussing New York law on alter-ego liability); accord 735 F.Supp.2d 82Morris v. N.Y. State Dep't of Taxation & Fin., 82 N.Y.2d 135, 140-42, 603 N.Y.S.2d 807, 623 N.E.2d 1157 (1993). DASNY may not resist summary judgment by relying on an alter-ego theory. As a threshold matt......
  • N.Y. State Electric & Gas Corp. v. Firstenergy Corp., Civil Action No. 3:03-CV-0438 (DEP)
    • United States
    • U.S. District Court — Northern District of New York
    • July 11, 2011
    ...wrong committed by the subsidiary under the influence of the dominant parent corporation. See Morris v. N.Y. Dep't of Taxation and Fins., 82 N.Y.2d 135, 142-43, 603 N.Y.S.2dPage 211807 (1993). Finally, NYSEG also seems to argue that AGECO is liable for all of NYSEG's liabilities that were i......
  • Picard v. Magnify Inc. (In re Bernard L. Madoff Inv. Sec. LLC), Adv. Proc. No. 08–01789 (SMB) SIPA LIQUIDATION
    • United States
    • United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York
    • April 13, 2018
    ...of the owners and to hold them liable for some underlying corporate obligation." Morris v. N.Y. State Dep't of Taxation & Fin. , 82 N.Y.2d 135, 603 N.Y.S.2d 807, 623 N.E.2d 1157, 1160 (1993).Initially, the parties dispute which substantive law governs the question of Green's alter ego liabi......
  • Weinberg v. Picker, Index No.: 510746/2015
    • United States
    • United States State Supreme Court (New York)
    • April 24, 2017
    ...imposition of personal liability in order to avoid fraud or injustice (see Matter of Morris v. New York State Dept. of Taxation & Fin., 82 N.Y.2d 135, 140, 603 N.Y.S.2d 807, 623 N.E.2d 1157). A member of a limited liability company will not be held liable for the liabilities of the company ......
  • Request a trial to view additional results
720 cases
  • Travelers Cas. v. Dormitory Auth.-State , Master File No. 07 Civ. 6915(DLC)
    • United States
    • U.S. District Court — Southern District of New York
    • August 26, 2010
    ...(2d Cir.2003) (discussing New York law on alter-ego liability); accord 735 F.Supp.2d 82Morris v. N.Y. State Dep't of Taxation & Fin., 82 N.Y.2d 135, 140-42, 603 N.Y.S.2d 807, 623 N.E.2d 1157 (1993). DASNY may not resist summary judgment by relying on an alter-ego theory. As a threshold matt......
  • N.Y. State Electric & Gas Corp. v. Firstenergy Corp., Civil Action No. 3:03-CV-0438 (DEP)
    • United States
    • U.S. District Court — Northern District of New York
    • July 11, 2011
    ...wrong committed by the subsidiary under the influence of the dominant parent corporation. See Morris v. N.Y. Dep't of Taxation and Fins., 82 N.Y.2d 135, 142-43, 603 N.Y.S.2dPage 211807 (1993). Finally, NYSEG also seems to argue that AGECO is liable for all of NYSEG's liabilities that were i......
  • Picard v. Magnify Inc. (In re Bernard L. Madoff Inv. Sec. LLC), Adv. Proc. No. 08–01789 (SMB) SIPA LIQUIDATION
    • United States
    • United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York
    • April 13, 2018
    ...of the owners and to hold them liable for some underlying corporate obligation." Morris v. N.Y. State Dep't of Taxation & Fin. , 82 N.Y.2d 135, 603 N.Y.S.2d 807, 623 N.E.2d 1157, 1160 (1993).Initially, the parties dispute which substantive law governs the question of Green's alter ego liabi......
  • Weinberg v. Picker, Index No.: 510746/2015
    • United States
    • United States State Supreme Court (New York)
    • April 24, 2017
    ...imposition of personal liability in order to avoid fraud or injustice (see Matter of Morris v. New York State Dept. of Taxation & Fin., 82 N.Y.2d 135, 140, 603 N.Y.S.2d 807, 623 N.E.2d 1157). A member of a limited liability company will not be held liable for the liabilities of the company ......
  • Request a trial to view additional results

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