| Klein v CAVI Acquisition, Inc. |
| 2008 NY Slip Op 10031 [57 AD3d 376] |
| December 23, 2008 |
| Appellate Division, First Department |
| Joel J. Klein, Respondent-Appellant, v CAVI Acquisition,Inc., Respondent, and Loeb Holding Corporation,Appellant-Respondent. |
—[*1] Rick C. Kim & Associates, P.C., Flushing (Rick C. Kim of counsel), forrespondent-appellant.
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 summaryjudgment, unanimously affirmed, without costs.
The memoranda of law submitted in connection with the parties' dispositive motions are notincluded in the record. Although, as Loeb now contends, the issue of whether the corporate veilof defendant CAVI Acquisition, Inc., a Delaware corporation, should be pierced is governed byDelaware law (see e.g. Sweeney, Cohn,Stahl & Vaccaro v Kane, 6 AD3d 72, 75 [2004], lv dismissed 3 NY3d 751[2004]), in letter briefs submitted to Supreme Court, both parties maintained that the law to beapplied was not material to the outcome. Loeb argued that petitioner's "claim is no more validunder New York law than it is under Delaware law," and petitioner asserted that, irrespective ofwhether Delaware law governs, "the result remains the same." Having indicated that the court'schoice of applicable law was immaterial, Loeb cannot now assign as error the court's failure todecide the issue solely on the basis of Delaware law (see Cohn v Goldman, 76 NY 284,287 [1879] [questions not raised before the trial court cannot be asserted as error on appeal];Recovery Consultants v Shih-Hsieh, 141 AD2d 272, 276 [1988] [same]). Indeed, Loebcontinues to maintain that "[u]nder any view of New York law, Klein's claim of alter ego liabilityfails."
Petitioner identified an issue of fact as to Loeb's misuse of "the corporate form to operate asophisticated shell game, shuttling assets between entities in an effort to escape the effect of anypotentially 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 AD2d 796,797 [1986] ["intercorporate shuffling of assets and debts"]). In assessing whether Loeb is thealter ego of CAVI, "the question of domination is generally one of fact" (Fletcher v Atex,Inc., 68 F3d 1451, 1458 [2d Cir 1995] [applying Delaware law]) and is thus "particularlyunsuited for resolution on summary judgment" (Forum Ins. Co. v Texarkoma Transp.Co., 229 AD2d 341, 342 [1996]; see [*2]also First Bankof Ams. v Motor Car Funding, 257 AD2d 287, 294 [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 AD2d 112, 117 [2002]; cf.Midland Interiors, Inc. v Burleigh, 2006 WL 3783476, 2006 Del Ch LEXIS 220 [2006][plaintiff prevailed on alter ego claim after trial]).
Petitioner does not contend that he should have been granted summary judgment on hisfraudulent conveyance claim, and Loeb's contention that it should have been granted summaryjudgment dismissing that cause of action is unavailing. On May 25, 2004, petitioner commencedan arbitration proceeding against Loeb and CAVI's predecessor. On May 28, 2004, Loeb andthree other CAVI shareholders lent CAVI money. Eleven months later, on April 28, 2005, Loebfiled a UCC statement with respect to its portion of the loan. Loeb cites no authority for theproposition that the May 2004 loan and the April 2005 UCC filing were "essentiallycontemporaneous," i.e., that the loan was not antecedent. Thus, CAVI gave a security interest toits shareholders—as opposed to outsiders—with respect to an antecedent loan. Sucha conveyance cannot be found, as a matter of law, to have been made for fair consideration(see Farm Stores v School Feeding Corp., 102 AD2d 249 [1984], affd 64 NY2d1065 [1985]; cf. In re AppliedTheory Corp., 323 BR 838 [SD NY 2005], affd 330BR 362 [SD NY 2005]). Concur—Tom, J.P., Saxe, Williams, Catterson and Moskowitz,JJ.