Property Owner’s Effort to Pierce Corporate Veil of Developer’s Entities Rejected—Alleged Damage to Home During New Home Construction on Adjoining Property—Plaintiff Failed to Demonstrate That Defendant Owners Exercised Complete Dominion and Control and That Such Dominion and Control Was “Used to Commit a Fraud or Wrong Against the Plaintiff Which Resulted in the Plaintiff’s Injury”

A plaintiff homeowner alleged that the defendant had caused damage to his home during the construction of a new home on adjoining property (new home). The plaintiff also alleged that the new home encroached on his property and encroached on an easement. Defendants “A” and “B” are real estate developers who, through several companies they own in common, build or redevelop homes and resell them upon completion of construction.

A company owned by “A” and “B,” known as “C,” purchased a lot adjacent to the plaintiff’s home. “C” thereafter hired an architect to prepare plans for the new home and applied for building permits. “C” also hired a surveyor and general contractor. During the course of construction, the NYC Department of Buildings issued notices for several violations of the Administrative Code of the City of New York (violations). The violations included, inter alia, failure to shore and brace the excavation. None of the violations mentioned damage to the adjoining buildings. Approximately six months after the violations had been issued, “C” transferred its interest in the adjoining property to “D,” another entity owned by “A” and “B.” The plaintiff thereafter commenced the subject action. Following completion of the construction work, “E” purchased the adjacent property from “D.”

The plaintiff alleged claims for negligence, intentional or reckless conduct based on the continuation of construction work, despite defendants’ knowledge that they were causing damage to plaintiffs’ property, trespass based on the new home encroaching an easement and encroaching onto plaintiff’s property, piercing the corporate veil of defendant’s corporate entities and for attorney fees.

“A” and “B” thereafter “moved to dismiss the complaint against them because plaintiff had failed to allege a cause of action for piercing the corporate veil.” The trial court denied the motion. The Appellate Division had affirmed, stating that the plaintiff had sufficiently alleged that “A” and “B” “exercised complete domination and control over the assetless corporation in order to commit a wrong against plaintiff.” The parties thereafter made certain cross-motions for summary judgment.

With respect to the corporate veil issue, the court explained:

[a] party seeking to pierce the corporate veil must establish that “(1) the owners exercised complete domination of the corporation in respect to the transaction attacked; and (2) that such domination was used to commit a fraud or wrong against the plaintiff which resulted in the plaintiff’s injury”…. The party seeking to pierce the corporate veil must establish both of these elements. Thus, even if a party establishes that the corporate form was abused, he or she will not be entitled to pierce the corporate veil absent a showing that the corporation abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice against that party such that a court in equity will intervene….

“A” and “B” had cited their own deposition testimony “to demonstrate that they observed corporate formalities and did not…misuse the corporate form and that the corporate form was not used as a means to harm plaintiff or…commit fraud against him.” The court found that such testimony failed to demonstrate as a matter of law, “that they observed corporate formalities in the running of the corporations.” “B” had not recalled whether the defendant corporations maintained separate bank accounts. “B” testified that the subject entities shared an address and an office, each entity was controlled by “A” or “B,” a holding corporation was used to handle the expenses associated with each of the properties, the holding corporation made out checks for the purchase of the subject property, “E”‘s checks to purchase the new home had been made out to a separate entity which was not a named defendant and “B” conceded that a building permit application listed the owner of the new home as “F,” but a sign at the construction site listed a nonexistent entity as the owner.

However, “A” and “B”‘s testimony was “sufficient to demonstrate, prima facie, that they did not abuse the corporate form to commit a fraud or wrong against plaintiff.” “B” had testified that the subject entities had been created for the “legitimate business purpose of purchasing and developing properties.” “B” explained that “A” and “B” had transferred the property from “C” to “D,” “an entity that they had formed more than 10 years ago, because a bank required the transfer as part of a loan refinancing relating to several properties.”

Although “B” acknowledged that he knew of the violations, he asserted that “he was not aware of any damage to plaintiff’s property at any time prior to the transfer of the property from ['C' to 'D'].” “B” claimed that he had only learned of the damage and trespass claims after the plaintiff commenced the instant action. Although “A” and “B”‘s evidence did not address whether their entities were “adequately capitalized or insured, undercapitalization or the carrying of minimal insurance alone does not constitute a fraud or wrong warranting the piercing of the corporate veil….”

The court emphasized that any physical damage to the plaintiff’s property had been caused by the conduct of “C”‘s contractor, or the subcontractors hired by the contractor and was not caused by any acts of “A” or “B,” or entities owned by them. Further, any trespass resulted from “reliance on title searches that failed to discover the reciprocal driveway easements contained in earlier deeds, not any direct fraudulent act of ['A' or 'B'] or any of the entities owned by them.”

Since the plaintiff had failed to demonstrate the existence of factual issues with respect to piercing of the corporate veil, the court denied the plaintiff’s motion for summary judgment on the piercing of the corporate veil. “A” and “B”‘s motion for summary judgment was granted to the extent that the piercing of the corporate veil claims were dismissed.

Love v. Rebecca Development, 24622/05, NYLJ 1202573039592, at *1 (Sup., KI, Decided Aug. 20, 2012), Schmidt, J.

Court Denies Plaintiffs’ Motion for a Preliminary Injunction Directing Defendants to Reinstall Ramps—Fair Housing Act—New York State Fire Prevention and Building Code

The plaintiffs were disabled tenants of an apartment complex (complex). They claimed that “the defendants had improperly removed wheelchair ramps used by [them] to access their respective apartments,” thereby “depriving plaintiffs of reasonable and safe access to their apartments.” The plaintiffs had moved for a preliminary injunction seeking an order directing the defendants “to reinstall the ramps during the pendency of the instant litigation.” The plaintiffs argued that absent injunctive relief, they would suffer irreparable harm because they would “continue to be without one means of access to their respective apartments” and that they are likely to succeed on the merits because the defendants’ alterations violated New York State building codes and constituted a violation of the Fair Housing Act.

The defendants countered that the alteration plans (alterations) complied with all state and local building codes (codes) and had been specifically approved by the local fire department and that removal of the ramps did not “unlawfully limit or restrict access to any portion of the apartment complex.” The court denied the motion for a preliminary injunction.

The plaintiffs’ apartments were on the first floor of the complex. Both apartments are wheelchair accessible through the primary front door access. Prior to the alterations, plaintiffs’ apartments included raised patio areas at the back of their units which were accessed by a sliding glass door. With respect to the plaintiffs’ apartments, but not all of the apartments in the complex, “each rear patio area included a ramp which led to a large, unimproved grassy area. Aside from being mowed, the grassy area was not otherwise maintained or considered or intended by the defendants to be a common area.”

The complex included a recreation area, including “picnic tables, a baseball diamond, playground, and basketball court for the use and enjoyment of all tenants.” The large grassy yard adjoining the back of the plaintiffs’ apartments, contained “no sidewalks, tables, benches, or recreational equipment.” Further, the rear yard is not maintained in the winter. The defendants alleged that they received approvals from the local town Fire Department and the NYS Division of Housing and Community Renewal.

Pursuant to the renovation plans, the rear patio of each plaintiff’s apartment was to be enclosed and the ramps were to be removed. All first floor apartments “were to have enclosed patios, with no access ramps or stairs from the grassy area to the patio.” After the ramps were removed, the plaintiffs filed the subject complaint. In asserting violations of codes and the Fair Housing Act, the plaintiffs alleged that the alterations rendered their apartments “less-accessible than they were prior to the renovations being commenced” and asserted that the renovations removed “an emergency escape route from their apartments.”

In order to establish a Fair Housing Act claim, “a plaintiff must establish that he is a member of a protected class, that a reasonable accommodation or modification to the plaintiff’s housing is necessary to provide the plaintiff with an equal opportunity to use and enjoy his housing, and that the defendant has refused to make or permit the accommodation or modification.”

The court found that the plaintiffs had failed to establish that the ramps were “necessary to provide them with equal opportunities to use and enjoy their housing.” According to the alteration plans, “no units, either for handicapped or non-handicapped residents, include direct access to the grassy area.” Thus, the plaintiffs had not been denied “a type of access to an area that is available to non-handicapped residents.” Rather, “no residents [had] direct access to the grassy area from their apartments….” Thus, the plaintiffs could “not establish that their access to the grassy area is not equal to access afforded non-handicapped residents.”

Further, the plaintiffs have “unencumbered access to the grassy area via a sidewalk adjacent to the area which is the same access provided to all other residents.” The court opined that the plaintiffs may prefer their alternative access, but such alternative access was not “fundamental to their use and enjoyment of the property….” Thus, the court found that the plaintiffs had not demonstrated that they were likely to succeed on their Fair Housing Act claims.

The court then found that the NYS Uniform Fire Prevention and Building Code provision cited by the plaintiffs did not “prohibit any modification which may have the effect of reducing accessibility to a building.” Rather, such section barred “reduced access to areas of ‘primary function’ as defined in the code.” The code defined a “primary function” as a “major activity for which the facility is intended.” The grassy area was not “a communal area” and was “not maintained, other than being mowed.” Moreover, the defendants had provided a playground and other recreational areas for the use of tenants, and the plaintiffs had unencumbered access to such areas. Therefore, the court found that the plaintiffs were unlikely to succeed on the merits of their building code claim.

Additionally, the plaintiffs had failed to include affidavits or other direct evidence indicating that they would suffer irreparable harm if the ramps were not reinstalled. The fact that one tenant preferred to use his back door to access his parking area, did not establish that he is subject to irreparable harm by being required to use his front door. The defendants had established that the screen doors used to access the rear patios cannot be locked from the outside and therefore, if the tenant were to leave his apartment from the rear, there would be no way to secure his apartment. If the apartment was left unsecured, “intruders would be able to access his apartment, and also the inside of the otherwise-secured apartment building, thus subjecting other tenants to potential personal danger or property theft.” The court noted that the defendants had “a legitimate interest in maintaining the security of their apartment buildings,” and “need not provide an accommodation that subjects the [complex] to a potential threat.”

Moreover, no apartments had access to the grassy area via steps or ramps, since the area was “not intended to be traversed to access apartments.” There were no sidewalks, the ground was irregular and not maintained in the winter, which made the subject area “unsuitable and potentially dangerous for using an electric wheelchair to traverse.” Accordingly, the plaintiffs had failed to demonstrate that they would suffer irreparable harm absent the grant of injunctive relief.

The court also noted that the alterations complied with all codes with respect to emergency accessability. The court stated that although one of the plaintiffs would like an additional emergency exit, “he fails to establish that he is legally entitled to such an alternate method of access.”

A plaintiff had claimed that he would suffer irreparable harm because “he [could] not escort his children to and from their bus stop.” There was no evidence, however, establishing that such tenant could not use his front door to escort his children to the bus stop. The court emphasized that the subject grassy area was not intended to be “an access way to or from any apartment….” Moreover, the plaintiffs had failed to show that the defendants were obligated to provide such plaintiff with “special direct access to an area that no other apartment has direct access to, or that failure to allow such access constitutes an irreparable harm.”

Finally, the court explained that it was not “unsympathetic to the plaintiffs’ argument that a method of ingress and egress to their apartments—which heretofore existed and was beneficial to the plaintiffs—has been taken away.” The court stated that “nothing in this decision prevents the defendants from working with the tenants to explore compromise solutions that would restore access to and from the respective patios to the grassy area while maintaining the safety and security of all residents.”

Little v. Landsman Development, 12-CV-6386T, NYLJ 1202570714061, at *1 (WDNY, Decided Sept. 5, 2012), Telesca, J.

Condominiums—Foreclosure of Lien Arising From Common Charges, Special Assessments, Late Fees and Other Charges—New York Does Not Require a Specific Form of Oath—Lien Law §23 Mandates Liberal Construction and “Substantial Compliance” Is Sufficient

This case involved the foreclosure of a lien, filed in the Office of the City Register. The lien had been filed against a condominium unit, “based upon unpaid condominium common charges, special assessments, late fees and other charges through….”

The complaint alleged that the defendants had defaulted in their obligations under the Declaration and By-Laws of the condominium by failing to pay common charges and other amounts due to the condominium. The defendants had moved pursuant to CPLR 3211(a)(7) for “an order dismissing the plaintiff’s complaint and for an order pursuant to CPLR 6514(a) canceling the notice of pendency on the ground that the notice of lien” was “invalid, a nullity and of no force and effect.”

The defendants argued that the lien had been acknowledged, but was “not duly verified as required by RPL §339-aa inasmuch as there is no jurat or signature of the officer who allegedly administered the oath to the President of the condominium association.” The defendants asserted that “a mere acknowledgment is not and cannot be a substitute for the statutory requirement that a lien be duly verified” and that “a jurat stating when and before whom the affidavit or verification was sworn to is not included as part of the verification of the lien in question.”

The notice of lien had been signed by the president of the Board of Managers. The verification stated that he had been duly sworn, that he read the notice of lien and that it was true to his own knowledge, “except as to matters stated to be alleged upon information and belief.” Under the president’s verification, was a signature of a notary. The notary stated that on a specified date, the president of the condominium board had personally appeared before the notary and acknowledged to the notary that he is the individual who executed the instrument.

The court denied the defendants’ motion to dismiss the complaint, to cancel the notice of pendency and to vacate the notice of lien. The court explained:

Although the verification does not contain the precise wording “sworn to before me,” which defendant asserts is required, there is no specific form of oath required in this State, other than that it be calculated to awaken the conscience and impress the mind of the person taking it in accordance with his or her religious or ethical beliefs…. Here, the lien states that [the President] was in fact duly sworn, that he knew the contents to be true from personal knowledge and also contains the notary’s statement that the affiant personally appeared, proved his identity, and acknowledged that he executed the verification. The document also contains the notary’s signature and stamp. As such “the notary, in the absence of a showing to the contrary, is presumed to have acted within his or her jurisdiction and to have carried out the duties required by law….”

Additionally, the defendants had not identified any inaccuracies in the lien and “Lien Law §23, which mandates a liberal construction of that law, states that ‘substantial compliance with its several provisions shall be sufficient for the validity of a lien and to give jurisdiction to the courts to enforce the same’….” Accordingly, the court found that the plaintiff’s notice of lien had been properly verified, is in admissible form and “is valid and sufficient and meets the requirements of RPL §339-aa.”

Board of Managers of 33-44 82nd Street Condominium v. Roman, 7246/12, NYLJ 1202570712643, at *1 (Sup., QU, Decided Sept. 5, 2012), McDonald, J.

Scott E. Mollen is a partner at Herrick, Feinstein and an adjunct professor at St. John’s University School of Law.