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Sweeney v. Waitz

Supreme Court, Suffolk County

October 1, 2019

M. Daniel Sweeney and Joan M. Hauswald, Plaintiffs,
v.
Jacob Waitz and Artisan Builders of the North Fork, Inc., Defendants.

          PLAINTIFFS pro se M. DANIEL SWEENEY JOAN M. HAUSWALD DEFENDANTS' ATTORNEYS GOGGINS & ASSOCIATES.

          HON. SANFORD NEIL BERLAND, A.J.S.C.

         Upon the reading and filing of the following papers in this matter: (1) Notice of Motion by defendants dated January 11, 2019, and supporting papers; (2) Opposition by plaintiffs dated January 23, 2019, and supporting papers; and (3) Affirmation In Reply by defendants dated February 12, 20019, it is

         ORDERED that defendants' motion for summary judgment, pursuant to CPLR § 3212 dismissing the complaint against defendant Jacob Waitz is DENIED; and it is

         ORDERED that defendants' motion for summary judgment, pursuant to CPLR § 3212 dismissing the first cause of action of the complaint sounding in negligence is GRANTED.

         This action arises out of a contract for home improvement entered into between plaintiffs and defendant Artisan Builders of the Northfork, Inc. ("Artisan") on September 23, 2013 (the "home improvement contract") for work to be done on plaintiff's home at 4595 Skunk Lane, Cutchogue, New York (the "project"). Plaintiffs pro se allege in their complaint that the defendants were negligent in the installation of an attic air handler and in the removal of a support beam in the kitchen, and that they breached the home improvement contract by, among other things, failing to perform and/or complete key aspects of the project and by diverting and misappropriating to themselves monies that were required to be used to pay subcontractors or to be otherwise applied to performing and completing the project. Defendants now move for partial summary judgment (1) dismissing the complaint against Jacob Waitz on the grounds that as a matter of law, he cannot be held personally liable for the obligations of the corporate defendant Artisan, and (2) dismissing the first cause of action of the complaint, which sounds in negligence [1], on the ground that neither defendant can be held liable on a tort theory of negligence for an alleged breach of a contractual obligation.

         In support of their motion, defendants proffer, inter alia, the pleadings, an affidavit by defendant Jacob Waitz and the deposition testimony of plaintiff Joan Hauswald.

         It is well settled that the proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case. Before summary judgment may be granted, it must clearly appear that no material and triable issue of fact is presented (see Alvarez v Prospect Hosp., 68 N.Y.2d 320, 324, 508 N.Y.S.2d 923 [1986]; Zuckerman v City of New York, 49 N.Y.2d 557, 427 N.Y.S.2d 595');">427 N.Y.S.2d 595');">427 N.Y.S.2d 595');">427 N.Y.S.2d 595 [1980]). The movant has the initial burden of proving entitlement to summary judgment (Winegrad v New York Univ. Med. Ctr., 64 N.Y.2d 851, 487 N.Y.S.2d 316');">487 N.Y.S.2d 316 [1985]). Failure to make such a showing requires denial of the motion, regardless of the sufficiency of the opposing papers (Winegrad v New York Univ. Med. Ctr., supra). Once such proof has been offered, the burden then shifts to the opposing party, who, in order to defeat the motion for summary judgment, must proffer evidence in admissible form... and must "show facts sufficient to require a trial of any issue of fact" (CPLR 3212 [b]; see Zuckerman v City of New York, 49 N.Y.2d 557, 427 N.Y.S.2d 595');">427 N.Y.S.2d 595');">427 N.Y.S.2d 595');">427 N.Y.S.2d 595 [1980]). As the court's function on such a motion is to determine whether issues of fact exist, not to resolve issues of fact or to determine matters of credibility, the facts alleged by the opposing party and all inferences that may be drawn from them are to be accepted as true (see Roth v Barreto, 289 A.D.2d 557, 735 N.Y.S.2d 197');">735 N.Y.S.2d 197 [2d Dept 2001]; O'Neill v Fishkill, 134 A.D.2d 487, 521 N.Y.S.2d 272');">521 N.Y.S.2d 272 [2d Dept 1987]).

         In support of the first prong of the current motion, which seeks dismissal of the complaint as against defendant Waitz, Waitz avers in his affidavit that he is a stockholder and the president of Artisan. He states that Artisan entered into a home improvement contract with the plaintiffs, that Artisan invoiced the plaintiffs and that plaintiffs paid Artisan. Waitz further avers, among other things, that he never acted outside of his capacity as an officer and employee of the corporation and that he never agreed to be personally responsible for Artisan's obligations in connection with the subject home improvement contract.

         It is a well-settled rule that "an agent for a disclosed principal 'will not be personally bound unless there is clear and explicit evidence of the agent's intention to substitute or superadd his personal liability for, or to, that of his principal'" (Salzman Sign Co. v Beck, 10 N.Y.2d 63, 66-67, 217 N.Y.S.2d 55');">217 N.Y.S.2d 55 [1961], quoting Mencher v Weiss, 306 NY 1, 2, 114 N.E.2d 177');">114 N.E.2d 177 [1953]). The general rule is that a corporation exists independently of its owners, who are not personally liable for its obligations, and that individuals may incorporate for the express purpose of limiting their liability (see East Hampton Union Free School Dist. v Sandpebble Builders, Inc., 66 A.D.3d 122, 126, 884 N.Y.S.2d 94');">884 N.Y.S.2d 94 [2d Dept 2009]; Bartle v Home Owners Co-op, 309 NY 103, 106, 127 N.E.2d 832');">127 N.E.2d 832 [1955]; Seuter v Lieberman, 229 A.D.2d 386, 387, 644 N.Y.S.2d 566');">644 N.Y.S.2d 566 [2d Dept 1996]). "Factors to be considered in determining whether the owner has 'abused the privilege of doing business in the corporate form' include whether there was a 'failure to adhere to corporate formalities, inadequate capitalization, commingling of assets, and use of corporate funds for personal use'" (East Hampton Union Free School Dist. v Sandpebble Builders, Inc., supra at 127, quoting Millenium Constr., LLC v Loupolover, 44 A.D.3d 1016, 1016-1017, 845 N.Y.S.2d 110');">845 N.Y.S.2d 110 [2d Dept 2007]). The mere claim that the corporation was completely dominated by the defendant, or conclusory assertions that the corporation acted as his "alter ego," without more, will not suffice to support the equitable relief of piercing the corporate veil (see Flushing Plaza Associates No. 2 v Albert, 102 A.D.3d 737, 739, 958 N.Y.S.2d 713');">958 N.Y.S.2d 713 [2d Dept 2013]; Matter of Morris v New York State Dept. of Taxation & Fin., 82 N.Y.2d 135, 141-142, 603 N.Y.S.2d 807');">603 N.Y.S.2d 807 [1993]; Abelman v Shoratlantic Dev. Co., 153 A.D.2d 821, 823, 545 N.Y.S.2d 333');">545 N.Y.S.2d 333 [2d Dept 1989]). Some showing of a wrongful or unjust act toward the plaintiff is required (see Vivir of L I Inc. v Ehrenkranz, 145 A.D.3d 834, 835-836, 43 N.Y.S.3d 435');">43 N.Y.S.3d 435 [2d Dept 2016]; Matter of Morris v New York State Dept. of Taxation & Fin., supra at 141-142). Corporate principals may be held personally liable if they participate in the commission of a tort in furtherance of company business (see Rothstein v Equity Ventures, LLC, 299 A.D.2d 472, 750 N.Y.S.2d 625');">750 N.Y.S.2d 625');">750 N.Y.S.2d 625');">750 N.Y.S.2d 625 [2d Dept 2002]; see also 277 Mott Street LLC v Fountainhead Const., LLC, 83 A.D.3d 541, 541-542, 922 N.Y.S.2d 299');">922 N.Y.S.2d 299 [1st Dept 2011]; Pludeman v Northern Leasing Systems, Inc., 10 N.Y.3d 486, 491, 860 N.Y.S.2d 422');">860 N.Y.S.2d 422 [2008]).

         Waitz has established prima facie entitlement to summary judgment on the first prong of the defendants' motion, that he was acting as a disclosed agent for and employee of Artisan. The burden, thus, shifts to plaintiffs to raise a triable issue of fact with respect to Waitz's alleged personal liability. In opposition to the motion, although plaintiffs have provided no proof that there was a failure on the part of Waitz or any other stockholder of Artisan to adhere to corporate formalities or that the corporation was inadequately capitalized, they have provided evidence to support their claim that, among other things, during the course of the project, monies they paid that were required to be used by Artisan to pay subcontractors or to be otherwise applied to performing and completing the project were diverted and misappropriated by the defendants acting by and through Waitz. For example, plaintiff Hauswald testified at deposition that payments that plaintiffs made to defendants for purposes of paying various subcontractors were not received by the subcontractors, delaying the completion of the project and forcing plaintiffs to bear the expense of paying again for the work to be performed under the home improvement contract.

         Section 70 of the Lien Law provides, in pertinent part:

The funds described in this section... received by a contractor under or in connection with a contract for an improvement of real property, or home improvement... and any right of action for any such funds due or earned or to become due or earned, shall constitute assets of a trust for purposes provided in section seventy-one of this chapter.

         A corporation's officers are liable to the beneficiary of such a lien law trust for the diversion of trust funds (see Fleck v Perla, 40 A.D.2d 1069, 339 N.Y.S.2d 246');">339 N.Y.S.2d 246 [4th Dept 1972]). "[I]t is no answer to such liability that the act was done while the officer or agent was acting for the corporation" (Fleck v Perla, supra at 1070). Where officers of a corporate trustee have converted trust funds for their own use, or knowingly participated in a diversion, they may be liable to the trust beneficiary in their individual capacities (South Carolina Steel Corp. v Miller, 170 A.D.2d 592, 595, 566 N.Y.S.2d 368');">566 N.Y.S.2d 368 [2d Dept 1991]; citing Fleck v Perla, supra; Ace Hardwood Flooring Co., Inc. v Glazer, 74 A.D.2d 912, 426 N.Y.S.2d 69');">426 N.Y.S.2d 69 [2d Dept 1980]; Ippolito v TJC Development, LLC, 83 A.D.3d 57, 920 N.Y.S.2d 108');">920 N.Y.S.2d 108 [2d Dept 2011]). ...


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