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Peguero v. 601 Realty Corp.

January 29, 2009

ISHMEL PEGUERO, ET AL., PLAINTIFFS-RESPONDENTS,
v.
601 REALTY CORP., ET AL., DEFENDANTS-APPELLANTS.



Amended judgment, Supreme Court, New York County (Sherry Klein Heitler, J.), entered June 27, 2007, after a jury verdict and stipulated reduction, apportioning fault 75% against defendant 601 Realty Corp. and 25% against defendant Jeffrey Farkas, and awarding plaintiffs $4,235,464.76, modified, on the facts and in the exercise of discretion, that portion of the judgment imposing personal liability on defendant Jeffrey Farkas is vacated and the matter remanded for a new trial on the issue of his liability, the awards for future pain and suffering as to both plaintiffs vacated and the matter remanded for a new trial as to those damages only, and otherwise affirmed, without costs, unless plaintiffs stipulate, within 20 days of service of a copy of this order, to accept reduced awards for future pain and suffering of $1,000,000 for plaintiff Ishmel Peguero and $750,000 for plaintiff Emmanuel Peguero, and the entry of an amended judgment in accordance therewith. Appeal from order, same court and Justice, entered October 5, 2006, which partially granted defendants' posttrial motion to set aside the verdict, unanimously dismissed, without costs, as subsumed in the appeal from the amended judgment. Appeal from order, same court and Justice, entered April 11, 2007, which denied defendants' motion to reargue the October 5, 2006 order, unanimously dismissed, without costs.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the Official Reports.

Friedman, J.P., Gonzalez, McGuire, Moskowitz, JJ.

118078/02

The infant plaintiffs Ishmel and Emmanuel Peguero are brothers who lived with their mother in a building owned by defendant 601 Realty Corp. (the Corporation). Defendant Jeffrey Farkas was a 50% shareholder and president of the Corporation and defendant Sidney Farkas was the managing agent of the building. Plaintiffs commenced this action seeking damages for personal injuries they sustained as a result of their exposure to lead paint in the apartment they occupied in the building. Their complaint, as amplified by their bill of particulars, alleged that defendants (1) knew both that the infant plaintiffs resided in the apartment and that the apartment contained hazardous lead paint to which plaintiffs were being exposed, and (2) negligently failed to abate the hazardous lead paint conditions. In defendants' answer, Jeffrey Farkas asserted as an affirmative defense that he was acting on behalf of the Corporation and thus could not be held personally liable.

At trial, Jeffrey Farkas moved at the close of plaintiffs' proof to dismiss the action as against him on the ground that, with respect to his involvement with the building, he acted on behalf of the Corporation and could not be held personally liable for its negligence. Supreme Court reserved decision on that motion, which Jeffrey Farkas renewed after the close of defendants' proof. While Supreme Court did not expressly rule on Jeffrey Farkas' renewed motion to dismiss the action as against him, it did so implicitly by submitting the issue of whether he was negligent to the jury.

The jury returned a verdict in favor of plaintiffs against the Corporation and Jeffrey Farkas, apportioning 75% of the liability to the Corporation and 25% to Jeffrey Farkas; the jury also determined that Sidney Farkas was not negligent. The jury awarded Ishmel $350,000 for past pain and suffering and $3,000,000 for future pain and suffering, and Emmanuel $250,000 for past pain and suffering and $2,500,000 for future pain and suffering. Supreme Court partially granted defendants' posttrial motion to set aside the verdict, directing a new trial on the issue of damages unless plaintiffs stipulated to reduce the awards for Ishmel to $200,000 for past pain and suffering and $2,000,000 for future pain and suffering, and for Emmanuel to $100,000 for past pain and suffering and $1,000,000 for future pain and suffering. Plaintiffs so stipulated and an amended judgment was entered. Defendants' appeal from, among other things, the amended judgment ensued.

Jeffrey Farkas asserts that the court erred in submitting the issue of his negligence to the jury and that it should have dismissed the complaint as against him because he acted in his capacity as an officer of the Corporation and thus could not be held personally liable. Even assuming that Jeffrey Farkas is correct that he was acting solely in his capacity as an officer of the Corporation, he would not be entitled to dismissal of the complaint as against him on that ground. That he acted solely in his capacity as an officer of the Corporation is not a sufficient ground for dismissal. Rather, "a corporate officer who participates in the commission of a tort may be held individually liable, regardless of whether the officer acted on behalf of the corporation in the course of official duties and regardless of whether the corporate veil is pierced" (Espinosa v Rand, 24 AD3d 102, 102 [2005] [emphasis added, internal quotation marks omitted]; see W. Joseph McPhillips, Inc. v Ellis, 278 AD2d 682 [2000]). The "commission of a tort" doctrine permits personal liability to be imposed on a corporate officer for misfeasance or malfeasance, i.e., an affirmative tortious act; personal liability cannot be imposed on a corporate officer for nonfeasance, i.e., a failure to act (Michaels v Lispenard Holding Corp., 11 AD2d 12, 14 [1960]; see MLM LLC v Karamouzis, 2 AD3d 161 [2003]).

Jeffrey Farkas, who bore the burden of proof on his affirmative defense that he was not personally liable because he acted as an officer of the Corporation (see generally Brignoli v Balch, Hardy & Scheinman, 178 AD2d 290, 290 [1991]), did not assert before Supreme Court that his alleged negligence consisted merely of nonfeasance and instead argued only inaccurately and more generally that personal liability could not be imposed upon him because he acted in his capacity as an officer of the Corporation (see 220-52 Assoc. v Edelman, 18 AD3d 313, 315 [2005] [for argument to be preserved for appellate review it must have been fully articulated before the court of original jurisdiction]; see also Robillard v Robbins, 78 NY2d 1105, 1106 [1991]). As a result of Jeffrey Farkas' failure to argue before Supreme Court that his alleged negligence consisted merely of nonfeasance, the issue of whether he engaged in affirmative acts of negligence or negligently failed to act was not submitted to the jury and, as discussed below, the sufficiency of the evidence must be gauged in light of the charge as given to the jury.

The court's charge regarding the principles of negligence on which the jury was to base its verdict did not differentiate between affirmative acts of negligence and negligent failures to act. Because Jeffrey Farkas did not object to this portion of the charge or request contrary instructions, "the law as stated in that charge became the law applicable to the determination of the rights of the parties in this litigation . . . and thus established the legal standard by which the sufficiency of the evidence to support the verdict must be judged" (Harris v Armstrong, 64 NY2d 700, 702 [1984], citing Up-Front Indus. v US Indus., 63 NY2d 1004 [1984]; Rajeev Sindhwani, M.D., PLLC v Coe Bus. Serv., Inc., 52 AD3d 674, 676-677 [2008]; see Loughry v Lincoln First Bank, NA, 67 NY2d 369, 376-377 [1986]). The law stated in that portion of the charge was as follows:

"In this case the plaintiff[s'] claim is that the defendants did not act reasonably and that the infants suffered damages as a result. The defendant[s] claim that they did act reasonably and as such are not liable. The plaintiff[s] ha[ve] the burden of proving that the defendant[s] w[ere] negligent and the defendant[s'] negligence was a substantial factor in causing lead poisoning damages to the children. The defendant[s] ha[ve] the burden of proving that the plaintiff[s] w[ere] negligent and that the plaintiff[s'] negligence was a substantial factor in causing the damage to the children.

"Negligence is the lack of ordinary care. It is a failure to use that degree of care that a reasonably prudent person would have used under the same circumstances. Negligence may arise from doing an act that a reasonably prudent person would not have done under the same circumstances or, on the other hand, from failing to do an act that a reasonably prudent person would have done under the circumstances."

Evaluating the evidence according to the charge as given, we conclude that it is sufficient to support the jury's determination that Jeffrey Farkas was negligent. Notably, plaintiffs adduced evidence that a lead paint hazard existed in their apartment, that Jeffrey Farkas was responsible for inspecting the apartments in the building, that he was in plaintiffs' apartment on numerous occasions, that he had notice of the lead paint hazard in the apartment, and that he ultimately hired workers to abate the hazard.

We disagree with our dissenting colleague's conclusion that Jeffrey Farkas preserved for appellate review his argument that the complaint should be dismissed as against him because the evidence was legally insufficient to establish that he should be held personally liable. As noted above, because Jeffrey Farkas did not object to this portion of the charge or request contrary instructions, the ...


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