Fundamentally, a judgment is a decree determining a lawsuit. If the plaintiff is awarded damages, the judgment will direct the defendant to pay. If the defendant refuses, it’s up to the plaintiff to find assets to seize. But what if the defendant hid or transferred assets to avoid paying?
New York’s Debtor and Creditor Law allows creditors to void certain asset transfers deemed fraudulent. Also, while a judgment against a corporate entity with no assets is usually worthless, a judgment creditor may, under circumstances where corporate formalities have not been followed, pierce the corporate veil and look to the assets of the company’s individual owners. So too, under the de facto-merger doctrine, if the debtor tries to avoid paying by closing up shop and opening under a new name, the creditor may, if certain factors are present, enforce the judgment against the successorentity.
Years ago, a dispute arose almost immediately after the parties signed a 15-year, commercial lease for ground-floor premises in a six-story building owned by Weiss Zarett’s client in the Washington Heights section of Manhattan.
The tenant, a corporation in the business of selling building material, hardware, and plumbing supplies, entered the then-vacant premises and caused severe structural damage. The landlord sued, and after years of hard-fought litigation and a seven-day bench trial, the landlord was awarded a judgment for its damages.
In subsequent proceedings to enforce the judgment, evidence was uncovered indicating that the tenant systematically transferred assets to render itself judgment proof. Weiss Zarett sued on the landlord’s behalf to set aside these transfers as fraudulent. The tenant’s principals were also sued, as was a newly formed entity believed to have been created to take over the tenant’s assets and business operations. The defendants filed a pre-answer motion to dismiss the case. On December 21, 2021, the Supreme Court, New York County, denied the defendants’ motion, sustaining all causes of action.
Weiss Zarett’s tenacious representation may yet result in the judgment’s satisfaction, despite efforts to frustrate enforcement.
If you require legal representation in connection with a business or real-estate dispute, please feel free to contact Michael J. Spithogiannis, Esq. at firstname.lastname@example.org or call our office at 1-516-637-7000 and ask to speak with one of the attorneys in our Litigation Department.
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