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ARIES VENTURES LTD. v. AXA FINANCE S.A.

January 18, 1990

ARIES VENTURES LIMITED AND RAYMOND T. MUNDY, PLAINTIFFS,
v.
AXA FINANCE S.A. AND OLIVER ROUSSEL, DEFENDANTS.



The opinion of the court was delivered by: William C. Conner, District Judge.

    OPINION AND ORDER

This diversity action is presently before the Court on defendants' motion for summary judgment pursuant to Fed.R.Civ.P. 56(c) and defendants' motion to dismiss the claim against Axa Finance S.A. ("Axa Finance") pursuant to Fed.R.Civ.P. 12(b)(5) for improper service of process. For the reasons stated below, defendants' motion for summary judgment is granted in part and denied in part. Defendants' motion to dismiss for improper service is denied.

BACKGROUND

Plaintiff Raymond T. Mundy is an attorney as well as president and joint owner of plaintiff Aries Ventures Limited ("Aries"). Defendant Axa Finance is a Swiss corporation with its principal place of business in Geneva, Switzerland; defendant Olivier Roussel is a French citizen residing in Paris.

The present action initially stems from Mundy's involvement with Acor Capital Corporation ("Acor"). Roussel and his family were Acor's principal shareholders and directors. In November 1980, Mundy met with Olivier Roussel, his brother Alain Roussel, and Efrim Pandeff, the president of Axa Capital Corporation ("Axa Capital"),*fn1 to discuss the proposed acquisition by Acor of property located in DeQueen, Arkansas (the "Property"). The Property, consisting of a shoe manufacturing facility, was leased at the time to Tred-2, Inc. ("Tred-2"), a corporation of which Axa Finance was the major shareholder. Jean-Louis Fatio was Axa Finance's sole officer and director as of January 1, 1980 and Roussel was a shareholder until at least 1980.

At the November 1980 meeting, Roussel allegedly proposed that Acor would purchase the Property. Mundy was elected Acor's president by Roussel and his brother shortly after the November meeting, purportedly to carry out the transaction. An agreement was reached with the Economic Development Administration ("EDA") in February 1981, whereby Acor purchased liens and other security positions in the Property held by EDA.*fn2 The purchase was financed by Olivier Roussel and his brother, sister and mother, each of whom contributed 25% of the purchase price. Mundy allegedly performed various legal services in connection with the purchase from EDA.

Shortly after the agreement was reached with EDA, Roussel allegedly directed Mundy to dissolve Acor and sell Acor's interest in the Property to Axa Finance in exchange for Axa Finance's assumption of the debt incurred in the purchase. For reasons which are not entirely clear, the record owner of the Property interests following the sale was Axa Capital.*fn3 The parties have stipulated that Axa Finance held the Property for the benefit of the Roussel family.

After Acor's dissolution, Aries loaned various sums of money to Axa Capital, allegedly in reliance on Axa Capital's authority to act as Axa Finance's agent. In a letter dated January 11, 1984, Mundy wrote to Fatio detailing the amount of various loans Aries had made to Axa Capital. On April 30, 1985, plaintiffs requested reimbursement for moneys loaned and services rendered, which defendants refused to pay. In this action, plaintiffs seek payment of $147,500 in legal fees and approximately $64,000 in loans, plus interest, based on a variety of legal theories.

DISCUSSION

I. Standard for Summary Judgment

Defendants maintain that they are entitled to summary judgment on plaintiffs' claims against the defendants for legal services rendered by Mundy between December 1980 and April 1985 and for loans advanced by Aries during the same period.

A party seeking summary judgment must demonstrate that "there is no genuine issue as to any material fact." Fed.R.Civ.P. 56(c); Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir. 1986), cert. denied, 480 U.S. 932, 107 S.Ct. 1570, 94 L.Ed.2d 762 (1987); see Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "When the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). It must establish that there is a "genuine issue for trial." Id. at 587, 106 S.Ct. at 1356. "In considering the motion, the court's responsibility is not to resolve disputed issues of fact but to assess whether there are any factual issues to be tried, while resolving ambiguities and drawing reasonable inferences against the moving party." Knight 804 F.2d at 11. The inquiry under a motion for summary judgment is thus the same as that under a motion for a directed verdict: "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 2512, 91 L.Ed.2d 202 (1986).

II. First and Second Causes of Action

In two identical causes of action, the first on behalf of Aries and the second on behalf of Mundy, two separate legal theories are alleged. Plaintiffs first allege a contract claim wherein defendants, either directly or through their agent, Axa Capital, contracted and agreed to pay Mundy for legal services rendered and to repay Aries the moneys loaned.*fn4 Second, plaintiffs claim that Roussel, through Axa Finance, controlled the activities and affairs of Axa Capital and Acor and is liable for their debts under the theory of piercing the corporate veil.*fn5

A. Contract Claims

Mundy alleges that he performed various legal services on behalf of defendants in connection with the Property. There is no written evidence, such as a retainer agreement, to show that Mundy was asked to perform legal services on behalf of either defendant. Mundy claims that he did not request a retainer agreement because he "knew and trusted" Roussel. Plaintiffs' Brief in Opposition to Defendants' Motion ("Plaintiffs' Brief") at 5.

Mundy nevertheless asserts that there is ample evidence of an agreement between Mundy and Roussel concerning legal services.*fn6 As evidence, Mundy points to Roussel's request that Mundy become president of Acor. Mundy Affidavit ¶¶ 6, 7. Mundy claims that he was not hired by Acor, which he alleges had insufficient funds to pay him, but by Roussel for Roussel's personal benefit. Mundy Affidavit ¶¶ 9, 10. Mundy maintains that he became Acor's president to assist Roussel in acquiring the Property in Acor's name.*fn7 Mundy also claims that Roussel or his brother asked him to perform legal work in connection with the dissolution of Acor. Mundy argues that Roussel is thus liable under an implied contract for payment which was formed by the rendition and acceptance of services, as one is not expected to "labor without hire." See Fox v. Arctic Placer Mining & Mill Co., 229 N.Y. 124, 128, 128 N.E. 154 (1920).

However, there are no disputed material facts concerning a contract directly between Mundy and defendants for legal services performed after Acor's dissolution.*fn9 In both his affidavit and brief, Mundy states that he was requested to act as attorney for Axa Capital and Pandeff in connection with a March 1984 action, brought by Security National Bank ("SNB") against Axa Capital and Pandeff personally, as guarantor of the loan, to foreclose its lien on the Property. Mundy states that he was requested to act as attorney by Pandeff, not by either defendant. Mundy Affidavit ¶ 22; Plaintiffs' Brief at 10. No evidence is provided that either Roussel or Axa Finance directly contracted with Mundy for legal representation in the SNB action and therefore, whether defendants are liable for contracts entered into by Axa Capital is more appropriately addressed in connection with the agency theories of the seventh and eighth causes of action.

The same rationale applies to Aries' allegations that defendants, either directly or indirectly, agreed to pay Aries for sums loaned to Axa Capital. There are no written loan agreements between Aries and either Roussel, Axa Finance or Axa Capital. Aries admits that Roussel and Axa Finance did not request that Aries loan the money and were not aware of the loans at the time they were made. Mundy Deposition at 138, 302. The evidence is clear that the loans were requested by Pandeff, president of Axa Capital, and used in connection with the Property. Like Mundy's claim for legal services after Acor's dissolution, Aries' contract claims are more appropriately addressed in connection with plaintiffs' seventh and eighth causes of action, which maintain that Roussel and Axa Finance are liable for the contracts entered into by Axa Capital by virtue of its agency relationship with Axa Finance.

B. Piercing the Corporate Veil*fn10

Plaintiffs argue that Roussel controlled both Acor and Axa Capital to the extent that their corporate veils should be pierced. It is a basic principle of corporate law that a shareholder is only liable to the extent of his investment. It is also well settled that New York courts*fn11 are reluctant to disregard the corporate entity and pierce the corporate veil. William Wrigley Jr. Co. v. Waters, 890 F.2d 594 (2d Cir. 1989); Puma Indus. Consulting, Inc. v. Daal Assoc., Inc., 808 F.2d 982 (2d Cir. 1987).

Courts will disregard the corporate form and impose liability on a shareholder when a shareholder has used control of a corporation to further his own, rather than the corporation's, business. Dow Chemical Pacific, Ltd. v. Rascator Maritime S/A, 782 F.2d 329, 342 (2d Cir. 1986); England Strohl/Denigris, Inc. v. Weiner, 538 F. Supp. 612, 613 (S.D.N Y 1982), aff'd without opinion, 740 F.2d 954 (2d Cir. 1984). Courts have established certain criteria to be considered in determining whether piercing the corporate veil is appropriate. These include: (1) the absence of corporate formalities which are part of normal corporate existence, i.e., the election of directors, keeping of corporate records; (2) inadequate capitalization; (3) personal use of corporate funds; and (4) perpetration of fraud through the corporate vehicle. See Walter E. Heller & Co. v. Video Innovations, Inc., 730 F.2d 50 ...


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