THE DE FACTO CORPORATION

Ocean Park Acquisition L.P. v. R All Mgmt. Svcs. Inc., Date filed: 2022-05-26, Court: Supreme Court, Queens, Judge: Justice Sally Unger, Case Number: 715695/20:

"Management seems to believe it can escape liability in this action because of the corporate dissolution in 2003. However, generally, where a corporation’s term of existence has expired but the corporation carries on its business affairs and exercises its corporate powers as it did prior to the dissolution, it is a de facto corporation (see, Garzo v. Maid of Mist Steamboat Co., 303 N.Y. 516, 104 N.E.2d 882 (1952). "A corporation continues to exist as a legal entity after dissolution, at least for purposes of actions and proceedings." Independent Investor Protective League v. Time, Inc., 50 NY2d 259, 428 NYS2d 671 (1980). To allow the corporate defendant to be shielded from responsibility based upon its own underlying malfeasance, i.e., failure to pay franchise taxes, would make a mockery of our system of justice.

In the case at bar, Management continued to operate and held itself out as a viable corporate entity despite its corporate dissolution, by entering into the Lease approximately seven years thereafter. “A corporation may be held liable on a cause of action that accrues after dissolution if the corporation continued its operations, operated its premises, and held itself out as a de facto corporation, notwithstanding its dissolution.” (Emphasis added) Bruce Supply Corp. v. New Wave Mechanical, Inc., 4 AD3d 444 (2nd Dept 2004), citing Ludlum Corp. Pension Plan Trust v. Matty's Superservice, Inc., 156 AD3d 339, 548 NYS2d 292 (2nd Dept 1989). Therefore, Management is most certainly liable to the plaintiff for rent at least until its surrender of the subject premises."