Sweeney v. Kan

773 N.Y.S.2d 420 (2004)

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Nature of the Case

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Facts

Ps represented Amy Kane (W), as the executrix of the estate of Philip Petter. The Seltzer Firm (P) brought a proceeding against W in that court to collect an attorney's fee. W retained Sweeney, Cohn, Stahl & Vaccaro (P) to represent her in the attorney fee proceeding. The Sweeney Firm negotiated a settlement and W agreed to pay the sum of $13,000 within 21 days in full discharge of her fee obligation to the Seltzer Firm. W and her husband, George Kane (H) incorporated the Gin Properties, Inc. (D), as a Subchapter S Corporation in Florida. They used a Florida condominium they owned as the corporate address. One-week later H and W entered into a contract to buy a house located at 73 Gin Lane in Southampton, New York. The contract contained a provision authorizing H and W to assign the home to a corporate entity of which they are the sole shareholders. H is a dentist licensed in the State of New York, but not in Florida. The 73 Gin Lane home is within commuting distance of his professional offices. The money to fund the purchase of this home came from accounts maintained by H. A portion of the purchase funds, $150,000, was derived from a joint account maintained by Smith Barney for H and W at their Sarasota, Florida address. The Seltzer Firm obtained a judgment dated March 8, 1995, for that principal amount. Shortly thereafter, the Sweeney Firm sued H for the balance due on its retainer. On February 28, 1996, it obtained a judgment against Amy Kane in the total sum of $5,049.93. Ps then engaged in proceedings in Florida to collect on their judgments. They were unsuccessful due to Florida law that permits spouses to hold personal property as well as realty in the form of tenancies by the entireties. This form of ownership, under Florida law, protects the property where there are judgment creditors of only one of the spouses. Ps then uncovered the existence of D, the corporation. Ps sued D in that it was the alter ego of H and W and that its property should be sold to pay the judgments. W defaulted in this action and following certain discovery, Ps moved for summary judgment, for the appointment of a receiver, and a direction that the realty owned by D, be sold at public auction. H and W and D, cross-moved for summary judgment dismissing the complaint insofar as asserted against them. The Court granted Ds' cross motion and denied Ps' motions. The law of Florida controlled the issue of piercing the corporate veil and that, because the stock was owned by H and W as tenants by the entireties, Ps cannot reverse-pierce the corporate veil of a Florida corporation. The court held that the corporation was incorporated for a legitimate purpose before Ps obtained their respective judgments, thereby implying that the sequence of events precluded reverse-piercing. This appeal resulted.