Crosby & Higgins LLP Secures Appellate Victory Affirming Judgment at Trial

December 8, 2005

December 8, 2005 — Crosby & Higgins LLP Secures Appellate Victory Affirming Judgment at Trial  

Crosby & Higgins LLP has secured an appellate victory on behalf of its client at the New York State Appellate Division, First Department in Manshion Joho Center Co., Ltd. v. Manshion Joho Center, Inc., –N.Y.S.2d –, WL 3312624 (App. Div. First Dep’t Dec. 8, 2005), in a ruling unanimously affirming the trial court decision awarding a $2.1 million judgment for breach of contract arising out of the sale of the client’s 44 New York condominium units and affirming the trial court’s decision to pierce the corporate veil and hold the defendants’ principal personally liable for the judgment. On appeal, the Appellate Division rejected the defendants’ argument that the contract at issue could not be enforced because of the doctrine of unclean hands and because it violated Real Property Law §442 (d) which prohibits the payment of a commission to unlicensed real estate brokers in New York. The court explained:

The doctrine of unclean hands does not avail defendants notwithstanding that plaintiff’s principal initiated the transaction in order to avoid a temporary restraining order barring a transfer of the property pending his divorce action. The doctrine of unclean hands is an equitable defense that is unavailable in an action exclusively for damages (see Hasbro Bradley v Coopers & Lybrand, 128 AD2d 218, 220 [1987], lv dismissed 70 NY2d 927 [1987]). Also, defendants were willing wrongdoers (see Brown v Lockwood, 76 AD2d 721, 729 [1980]). With knowledge of the restraining order, and with the full expectation that the transaction could result in litigation against them by plaintiff’s principal’s wife, defendants designed a transaction that violated the restraining order. Nor does Real Property Law § 442-d, which prohibits recovery of a real estate broker’s commission by brokers who are not licensed in New York, avail defendants. First, as above indicated, the $1.5 million payment was not compensation for real estate brokerage services, but was rather part of the purchase price. Second, section 442-d does not apply to real estate brokerage services[*2]rendered outside of New York (see Gartrell v Jennings, 283 App Div 879 [1954]; Sutton v Transcontinental Inv. Corp., 31 Misc 2d 832 [1961], affd 17 AD2d 807 [1962]). The evidence at trial established that plaintiff, a Japanese corporation, performed services only in Japan, and thus it is inconsequential that the property marketed was in New York.   

With respect to piercing the corporate veil, the Appellate Division likewise concluded that the trial court’s decision to do so was well supported: “[a]mple evidence also supports the trial court’s piercing of the corporate defendants’ corporate veils in order to hold defendant [] personally liable. [Defendant] dominated and controlled his corporations, disregarded corporate formalities, used corporate funds to pay his personal bills, and effectively stripped the assets of the corporation transferred to him by plaintiff to enrich himself while making the corporation judgment proof, thus committing a wrong against plaintiff that resulted in injury (see Simplicity Pattern Co. v Miami Tru-Color Off-Set Serv., 210 AD2d 24 [1994]).