LEASE SHIELDED SHAREHOLDERS FROM LIABILITY
When a landlord decided to go after the individual shareholders of a professional corporation, which vacated its commercial space prematurely, the New York County Supreme Court opted to grant the shareholders’ dismissal request.
And on its review of the dispute, the Appellate Division, First Department, affirmed the dismissal because the lease “unambiguously provide[d] that (1) no property or assets of the individual defendants ‘shall be subject to levy, execution or other enforcement procedure for the satisfaction of Owner's remedies’ under the lease, and (2) plaintiff would not be able to make creditor claims against the individual defendants for "any portion of any distribution … consistent with Tenant's customary past practice.’”
In this instance, none of the challenged transactions were found to be “extraordinary” in nature. For example, their “salary payments,” were seen as having been made for “fair consideration,” as were all third-party transactions. Given there was no wrongdoing, and absent an intent to defraud, the AD1 thought no “alter ego” or “piercing” analysis applied here.
And, finally, given that the shareholders weren't “strangers to the lease,” a claim for “tortious interference,” couldn't be asserted against them, particularly since “their actions were driven by a bona fide economic interest — namely, the interest in not having defendant tenant continue to pay rent for unneeded office space.”
And that’s where we need to end that.
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DECISION