Symbax, Inc. v. Bingaman

• Decision Date: 28 September 1995
• Citation: 219 A.D.2d 552,631 N.Y.S.2d 829
• Parties: SYMBAX, INC., et al., Plaintiffs-Respondents-Appellants, v. Steven W. BINGAMAN, et al., Defendants-Appellants-Respondents.
• Court: New York Supreme Court — Appellate Division

Page 829

631 N.Y.S.2d 829

219 A.D.2d 552

SYMBAX, INC., et al., Plaintiffs-Respondents-Appellants, v. Steven W. BINGAMAN, et al., Defendants-Appellants-Respondents.

Supreme Court, Appellate Division,

First Department.

Sept. 28, 1995.

J.N. Koplovitz, for Plaintiffs-Respondents-Appellants.

L.A. Rodes, for Defendants-Appellants-Respondents.

Before ELLERIN, J.P., and RUBIN, ROSS, NARDELLI and WILLIAMS, JJ.

MEMORANDUM DECISION.

Judgment, Supreme Court, New York County (Peter Fox Cohalan, J.), entered December 22, 1993, after nonjury trial, which, inter alia, amended plaintiffs' fourth cause of action to conform to the evidence presented at trial and directed that plaintiffs recover from defendants $390,615.06, unanimously reversed, on the law, and the matter remanded for a new trial, without costs.

The trial court's failure to state the essential facts supporting its decision or, for the most part, to set forth its rationale, requires remand for a new trial as to Symbax Group, Ltd. on the fourth cause of action (CPLR 4213(b); Weckstein v. Breitbart, 111 A.D.2d 6, 488 N.Y.S.2d 665).

It was error to impose liability on defendant Asset Growth Partners, Inc. ("AGP") under the fourth cause of action. As plaintiff correctly concedes, the doctrine of successor corporation tort liability is not a valid basis for holding AGP liable here; it is an extension of products liability and torts law (Grant-Howard Assoc. v. Gen. Housewares, 63 N.Y.2d 291, 296, 482 N.Y.S.2d 225, 472 N.E.2d 1), and is not applicable in an action to collect on a promissory note. In any event, none of the criteria for such liability, as spelled out in Schumacher v. Richards Shear Co., 59 N.Y.2d 239, 245, 464 N.Y.S.2d 437, 451 N.E.2d 195, was established by the evidence.

Neither can liability be justified, as urged by plaintiffs, under the theories that AGP and Symbax Group ("SG") engaged in an alleged fraudulent conveyance or that AGP is the alter ego or successor corporation to SG or due to de facto merger.

Fraudulent conveyance must be proven by clear and convincing evidence (Marine Midland Bank v. Murkoff, 120 A.D.2d 122, 126, 508 N.Y.S.2d 17, appeal dismissed 69 N.Y.2d 875, 514 N.Y.S.2d 1029, 507 N.E.2d 322). In the case at bar, the trial court expressly stated in its decision that the plaintiffs established the fourth cause of action by a preponderance of the credible evidence. Although the decision does not state the theory underlying that finding, if the court found fraud, it committed reversible error because it failed to adhere to the correct standard of proof (Stephenson v. Lord, 72 A.D.2d 857, 421 N.Y.S.2d 730). A fairer inference would be that no finding of fraud was made, since none was set forth and the standard of proof that was expressly stated was not that for fraud. Moreover, the evidence presented at trial did not clearly and convincingly prove an actual or constructive fraudulent conveyance (see, George Backer Management v. Acme Quilting, 46 N.Y.2d 211, 219-20, 413 N.Y.S.2d 135, 385 N.E.2d 1062).

Successor corporation or "de facto merger" theories will not justify liability here either. As discussed above, successor corporation liability is essentially a torts concept. The evidence presented at trial did not support a finding of de facto merger (see, Irving Bank Corp. v. Bank of New York Co., 140 Misc.2d 363, 366, 530 N.Y.S.2d 757).

Nor should defendant Bingaman have been held individually liable on the fourth cause of action, since he was never named as a defendant with respect thereto. Where amendment of the complaint to conform to the evidence presented at trial (CPLR 3025[c] prejudices the opposing party by "the interjection, at trial, of a new or alternate...