KLEIN v. Loeb Holding Corporation, Respondent-Appellant-Respondent. (2008)

Order, Supreme Court, New York County (Alice Schlesinger, J.), entered March 27, 2008, which denied respondent Loeb Holding Corp.'s and petitioner's respective motions for summary judgment, unanimously affirmed, without costs.

 The memoranda of law submitted in connection with the parties' dispositive motions are not included in the record.   Although, as Loeb now contends, the issue of whether the corporate veil of defendant CAVI Acquisition, Inc., a Delaware corporation, should be pierced is governed by Delaware law (see e.g. Sweeney, Cohn, Stahl & Vaccaro v. Kane, 6 A.D.3d 72, 75, 773 N.Y.S.2d 420 [2004], lv. dismissed 3 N.Y.3d 751, 788 N.Y.S.2d 661, 821 N.E.2d 965 [2004] ), in letter briefs submitted to Supreme Court, both parties maintained that the law to be applied was not material to the outcome.   Loeb argued that petitioner's “claim is no more valid under New York law than it is under Delaware law,” and petitioner asserted that, irrespective of whether Delaware law governs, “the result remains the same.”   Having indicated that the court's choice of applicable law was immaterial, Loeb cannot now assign as error the court's failure to decide the issue solely on the basis of Delaware law (see Cohn v. Goldman, 76 N.Y. 284, 287 [1879] [questions not raised before the trial court cannot be asserted as error on appeal];  Recovery Consultants v. Shih-Hsieh, 141 A.D.2d 272, 276, 534 N.Y.S.2d 374 [1988] [same] ).   Indeed, Loeb continues to maintain that “[u]nder any view of New York law, Klein's claim of alter ego liability fails.”

 Petitioner identified an issue of fact as to Loeb's misuse of “the corporate form to operate a sophisticated shell game, shuttling assets between entities in an effort to escape the effect of any potentially adverse judgment” (Mobil Oil Corp. v. Linear Films, Inc., 718 F.Supp. 260, 270 [D.Del.1989];  Matter of Superior Leather Co. v. Lipman Split Co., 116 A.D.2d 796, 797, 496 N.Y.S.2d 845 [1986] [“intercorporate shuffling of assets and debts”] ).   In assessing whether Loeb is the alter ego of CAVI, “the question of domination is generally one of fact” (Fletcher v. Atex, Inc., 68 F.3d 1451, 1458 [2d Cir.1995] [applying Delaware law] ) and is thus “particularly unsuited for resolution on summary judgment” (Forum Ins. Co. v. Texarkoma Transp. Co., 229 A.D.2d 341, 342, 645 N.Y.S.2d 786 [1996];  see also First Bank of Ams. v. Motor Car Funding, 257 A.D.2d 287, 294, 690 N.Y.S.2d 17 [1999] ).   As Supreme Court stated, “Issues of fact abound,” and petitioner failed to establish his entitlement to summary disposition (see First Capital Asset Mgt. v. N.A. Partners, 300 A.D.2d 112, 117, 755 N.Y.S.2d 63 [2002];  cf. Midland Interiors, Inc. v. Burleigh, 2006 WL 3783476, 2006 Del. Ch. LEXIS 220 [Del. Ch.2006] [plaintiff prevailed on alter ego claim after trial] ).

 Petitioner does not contend that he should have been granted summary judgment on his fraudulent conveyance claim, and Loeb's contention that it should have been granted summary judgment dismissing that cause of action is unavailing.   On May 25, 2004, petitioner commenced an arbitration proceeding against Loeb and CAVI's predecessor.   On May 28, 2004, Loeb and three other CAVI shareholders lent CAVI money.   Eleven months later, on April 28, 2005, Loeb filed a UCC statement with respect to its portion of the loan.   Loeb cites no authority for the proposition that the May 2004 loan and the April 2005 UCC filing were “essentially contemporaneous,” i.e., that the loan was not antecedent.   Thus, CAVI gave a security interest to its shareholders-as opposed to outsiders-with respect to an antecedent loan.   Such a conveyance cannot be found, as a matter of law, to have been made for fair consideration (see Farm Stores v. School Feeding Corp., 102 A.D.2d 249, 477 N.Y.S.2d 374 [1984], affd. 64 N.Y.2d 1065, 489 N.Y.S.2d 877, 479 N.E.2d 222 [1985];  cf. In re AppliedTheory Corp., 323 B.R. 838 [Bankr.S.D.N.Y.2005], affd. 330 B.R. 362 [S.D.N.Y.2005] ).