Sosinsky, Rodis & Stein v Ravens

[*1] Sosinsky, Rodis & Stein v Ravens 2005 NY Slip Op 50077(U) Decided on January 27, 2005 Appellate Term, Second Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on January 27, 2005
SUPREME COURT OF THE STATE OF NEW YORK
APPELLATE TERM: 2nd and 11th JUDICIAL DISTRICTS
PRESENT: January 27, 2005 SUPREME COURT OF THE STATE OF NEW YORK APPELLATE TERM : 2nd and 11th JUDICIAL DISTRICTS PRESENT : PESCE, P.J., PATTERSON and RIOS, JJ.
2004-552 Q C

SOSINSKY, RODIS & STEIN, Appellant,

against

IRVING RAVENS and MICHAEL RAVENS, Respondents, -and- TIP TOP FARMS, INC. and PURETEST MILK CO., INC., Defendants.

Appeal by plaintiff from so much of an order of the Civil Court, Queens County (A. Gazzara, J.), entered on March 6, 2003, as denied its motion for summary judgment.

Order unanimously modified by granting plaintiff's motion for summary judgment as against defendant Irving Ravens in the principal sum of $25,000 and by granting that part of plaintiff's motion seeking dismissal of defendant Michael Ravens' first through fourth affirmative defenses; as so modified, affirmed without costs.

In this breach of contract action to recover payment for work, labor and services rendered by plaintiff to the corporate defendants from 1990 to September 1991, the corporate defendants defaulted in appearing at trial and a default judgment was entered against said corporations on February 25, 1997. At that time, the individual defendants had not been named as parties to the action. Thereafter, in seeking to enforce the judgment, plaintiff discovered at the deposition of [*2]Michael Ravens, an officer of both corporations, held on January 12, 2001, that the assets of both corporations were sold in March 1990 and said entities were dissolved. It appears, based upon Ravens' deposition testimony, that the corporations netted the sum of $459,453.37 from said sale. Additional funds had been held in escrow relating to the sale of the corporations, and Ravens testified that he received a payment in the sum of $122,230.43 from the escrow funds. He testified further that his father, Irving Ravens, president and sole shareholder of both corporations, received a payment of $138,948.69 from said escrow funds, and that his father withdrew $459,453.37 from the corporate accounts. Pursuant to the Civil Court's order, which is not the subject of this appeal, Michael Ravens and Irving Ravens were added as parties to the action in June 2001. Thereafter, plaintiff made the instant motion for summary judgment against said individual defendants. In support of the motion, plaintiff argued that Michael and Irving Ravens can be held individually liable in their capacity as shareholders, officers or directors of the dissolved corporations. The individual defendants argued that any claim plaintiff may have against them is barred by the statute of limitations. The action was commenced in 1992 for a breach of contract claim arising in 1991 and 1992, and plaintiff did not seek to add them as parties until June 2001. The court below denied plaintiff's motion for summary judgment finding that issues of fact exist which require a trial to determine the liability of the individual defendants.

It is well settled that a corporation which no longer exists, nevertheless, remains liable for its obligations until its affairs are fully adjusted (Matter of Rodgers v Logan, 121 AD2d 250 [1986]). However, where it is impossible to obtain a judgment or satisfaction thereof against a dissolved corporation, a creditor may maintain an action directly against the directors, officers or shareholders of such a corporation to the extent that they received or continue to hold assets of the corporation (see Wells v Ronning, 269 AD2d 690, 692 [2000]; Matter of Rodgers, 121 AD2d at 253; Phohl Brothers Landfill Site Steering Committee v Allied Waste Systems, Inc., 255 F Supp 2d 134 [2003]; Flute v Rubel, 682 F Supp 184, 187 [1988]). In the instant case, Michael Ravens admits that the proceeds of the sale of the corporations were transferred to his father and that they both received payments from funds held in escrow on behalf of the corporations. Absent a showing that all of the corporate liabilities had been satisfied, a distribution on account of the equity interest Irving Ravens had as the sole shareholder of said corporations could not have been made to him, and he continues to hold said funds in trust for the benefit of creditors of the corporation (Wells v Ronning, 269 AD2d 690, supra).

Upon a review of the record, we conclude that the first through the fourth affirmative defenses should be dismissed. However, a question of fact has been raised by Michael Ravens regarding payments he received from the corporate defendants which were for his alleged salary and benefits.
Decision Date: January 27, 2005