Three recent appellate decisions, each sparse on fact, nevertheless remind us of the relevance of well settled legal principles and confirm the proof required to prevail on each.The first, Tewksbury Management Group, LLC v. Rogers Investments NV LP1, involves application of the doctrine of res judicata; the second, Bonacasa Realty Company, LLC v. Salvatore2, discusses the concept of piercing the corporate veil; and the third, MH Residential 1, LLC MH v. Barrett3, inter alia, discovery.
In Tewksbury, the commercial tenant commenced an action against its landlord claiming landlord breached the lease by failing to obtain a valid certificate of occupancy, remove building violations that allegedly interfered with tenant’s use of the premises, to provide heat and to deliver possession of the entire premises. By order entered April 19, 2012, the Supreme Court granted landlord’s motion to dismiss the complaint.
As it turns out, several years earlier in 2008, landlord commenced a nonpayment proceeding against tenant. That proceeding ended with a consent judgment of possession and judgment for rent arrears. In affirming the dismissal of tenant’s claims upon the doctrine of res judicata, the Appellate Division held that tenant’s claims were “inextricably intertwined with defendant’s claims in the summary proceeding” and could have been raised by tenant in that summary proceeding. Obviously, tenant’s claims, if proved, would have provided a defense to landlord’s claims for possession and rent. Having failed to raise the claims in the summary proceeding and, more importantly, having consented to a judgment for rent arrears and possession, tenant necessarily acknowledged rent was owed, thus precluding its claim that landlord breached the lease. If you represent a tenant and have claims that could provide a defense to a claim of nonpayment and that would also result in an award of damages, the claim must be raised in the summary proceeding or it may be forever lost.
In Bonacasa, tenant vacated the demised premises prior to the expiration of the lease. Landlord thereafter commenced an action against the corporate tenant for rent due and owing and also asserted claims against the corporation’s principal. Landlord alleged that the corporation was a sham corporation “formed solely for the purpose of leasing the premises” and the individual defendant exercised dominion and control over the corporation and thus sought to pierce the corporate veil. In affirming the dismissal of the claim against the individual defendant, the Appellate Division found the evidence supported the finding that the individual “executed the lease in his corporate capacity as a principal of [the corporate tenant] and that he did not exercise dominion and control over [the corporation] to commit a wrong or injustice against the plaintiff.” The Court further found that “a simple breach of contract, without more, does not constitute a fraud or wrong warranting the piercing of the corporate veil.”
Finally, MH Residential 1, LLC, involved protracted residential holdover proceedings. Tenants filed two motions for leave to conduct various discovery. In affirming the denial of the first motion, the Appellate Term noted that the motion was made eleven months after an unappealed order denied a prior motion for similar relief and tenant had not shown a “material change in circumstances.” As for the second motion, the Court determined movant had not demonstrated “ample need” for the discovery sought. These standards for obtaining discovery are well known, but need to be remembered as litigation progresses.
1 2013 WL 5712338, ___N.Y.S.2d___ (1st Dep’t 2013)
2 109 A.D.3d 946, 972 N.Y.S.2d 84 (2d Dep’t 2013)
3 41 Misc.3d 24,___N.Y.S.2d___(App. Term 1st Dep’t 2013)