DECESION AND ORDER Over the course of three dates, September 10, 2019, October 7, 2019, and November 19, 2019, this court conducted a trial on all issues pertaining to the complaint in this action. The court listened to testimony and considered other evidence presented by both sides. Len Zaccagnino testified for the plaintiff. He indicated that he was the general manager for the plaintiff-corporation for the past eight years. He further testified that the plaintiff was in the business of linen and uniform rental. On July 11, 2016, the defendant entered into a five-year, auto self-renewing contract for a maximum of ten years. The contract (hereinafter “subject-contract”) essentially documented the defendant’s agreement to rent sheets, towels and robes from Unitex Textile Rental Corp. (hereinafter “Unitex”) for a specified price. Pursuant to the terms of that contract, Mr. Zaccagnino regularly presented bills to the defendant for services rendered and the defendant paid those invoices. However, on June 15, 2017, Mr. Zaccagnino received an e-mail from the defendant indicating that the defendant was discontinuing the services that Unitex was contracted to provide. And, between June 12, 2017 and August 30, 2017, Mr. Zaccagnino submitted nine invoices the plaintiff issued to the defendant — which were unpaid — totaling $1,545.50. Pursuant to the liquidated damages clause of the subject-contract, Mr. Zaccagnino explained that the defendant became liable for liquidated damages by refusing to honor the five-year subject-contract. And, Mr. Zaccagnino submitted to the court an invoice totaling $10,165.42 purporting to show how much money the defendant now owes to Unitex in liquidated damages. Upon cross-examination of Mr. Zaccagnino, he indicated that both A & P Coat Apron Linen Supply, Inc. and Unitex Textile Rental Corp. both existed simultaneously. And, he was not sure of the legal relationship between the two corporations, but he did understand they were related. And, he understood that his duties included him managing accounts for both companies. At the conclusion of Mr. Zaccagnino’s testimony, the plaintiff rested. First Hurtle for the Plaintiff to Overcome: Standing After the plaintiff rested, the defense in this action motioned the court to dismiss the complaint. The defense argued that the plaintiff failed to present evidence tending to show that A&P Coat, Apron & Linen Supply, LLC. (the plaintiff in this action purporting to be formerly known as Unitex Textile Rental Corp.) has authority or standing to bring a court action on behalf of Unitex Textile Rental Corp. The court deferred making a ruling on the defense motion; after which the court, in the interest of justice, gave the plaintiff another opportunity to present another witness who can testify as to the legal relationship between A & P Coat Apron & Linen Supply, Inc. and Unitex Textile Rental Corp. Thereafter, Steven Gottlieb testified on behalf of the plaintiff. He indicated that he was the chief financial officer for Unitex Textile Services, LLC. He further testified that Unitex Textile Services, LLC is the parent company for a series of subsidiary corporations, including Unitex Textile Rental, Corp., and A & P Coat, Apron & Linen Supply, Inc. Mr. Gottlieb presented to the court an organizational chart that he drafted and maintained in the ordinary course of business, in order to demonstrate the relationship between Unitex Textile Rental Corp and A & P Coat, Apron & Linen Supply Inc. Based on that organizational chart, both corporations (along with quite a few other corporations) were all owned and/or controlled, in one way or another, by one person: Michael Potack. Mr. Gottlieb further testified that for family estate planning reasons, Unitex Textile Rental Corp was merged into A & P Coat, Apron and Linen Supply Inc. However, both corporations had the same owners. Mr. Gottlieb presented a document to the court, dated in the year 2006, tending to show that A & P Coat, Apron & Linen, Inc. was legally authorized to do business as “Unitex”. However, the court did not consider this evidence, as it appeared to be irrelevant to this action. Based on Mr. Gottlieb’s testimony, the court finds that, because both corporations essentially had the same owners, A & P Coat, Apron & Linen Supply, Inc. has legal standing to bring a legal action on behalf of Unitex Textile Rental Corp. Second Hurtle for the Plaintiff to Overcome: Incorrect Caption The caption of this action sets forth the plaintiff as “A&P Coat, Apron & Linen Supply, LLC” — which the court notes is NOT a legal entity within the state of New York. The plaintiff’s witness Steven Gottlieb only testified about “A & P Coat, Apron & Linen Supply, Inc.” Nevertheless, based on the evidence presented at trial, the court deems the caption to merely possess a harmless typographical error, and hereby, sua sponte, amends the caption to correct the plaintiff’s name to read “A & P, Coat, Apron & Linen Supply, Inc.”. Insofar as both relevant corporations essentially had the same owners, this court rules that A & P Coat, Apron & Linen Supply, Inc. does have legal standing to sue for a debt owed to Unitex Textile Rental, Corp. Third Hurtle for the Plaintiff to Overcome: Plaintiff was a defunct entity at the time this action was commenced. In making this decision, the court took judicial notice of all the corporate filings listed on the New York State Department of State, Division of Corporations official website. And, both Unitex Textile Rental Corp. and A & P Coat, Apron & Linen Supply, Inc. were defunct corporations in the State of New York. at the time this action was commenced. The fact that the plaintiff-corporation was defunct before this action arose, raises the issue of whether a defunct corporation can institute legal actions to collect outstanding debt. Fortunately, for the plaintiff, under New York Law, corporations continue to exist as legal entities even after dissolution, at least for purposes of actions and proceedings. (See e.g., Independent Investor Protective League v. Time, Inc., 1980, 50 N.Y.2d 259, 428 N.Y.S.2d 671, 406 N.E.2d 486, re-argument denied 50 N.Y.2d 1059, 431 N.Y.S.2d 1031, 410 N.E.2d 760). And, as the defense noted in its post-trial memorandum, even a dissolved corporation may properly continue to act as needed to wind up its own affairs — i.e., “fulfill or discharge contracts, collect its assets, sell its assets for cash at public or private sale, discharge or pay its liabilities, and do all other acts appropriate to liquidate its business” [NY CLS Bus Corp §1005(a) (2)]. This action is clearly and attempt by a defunct corporation to collect one of its assets — i.e., an account receivable. Accordingly, the court finds that the plaintiff, although defunct, did have legal authority and standing to commence and maintain this action against the defendant. Fourth Hurtle for the Plaintiff to Overcome: Both plaintiff corporate entities were defunct, before the contract in this action arose. Upon this court’s further review of the corporate filings listed on the New York State Department of State, Division of Corporations official website, the court flagged yet another issue to be decided in this action. It is clear, based on the courts review of said filings, that both Unitex Textile Rental Corp. and A & P Coat, Apron & Linen Supply, Inc. were defunct entities before the defendant in this action even signed the contract which is the subject of this action. So, the issue before the court now becomes, whether a company (i.e., Unitex Textile Rental Corp.) which was merged out of existence, and was no longer an active corporation in the state of New York as of 2015 (i.e. a defunct entity), can enter into a valid and binding contract to deliver services to the defendant in this action in 2016. Interestingly enough, New York law allows, pursuant to the doctrine of estoppel (and for no other reason), even a non-existent and/or defunct corporation may be deemed to exist and possess the capacity to contract [see e.g., TY Builders II, Inc. v. 55 Day Spa, Inc., 167 A.D.3d 679, 90 N.Y.S.3d 47 (2d Dep't 2018)]. However, the law is also clear that the doctrine of estoppel only applies under certain circumstances. The doctrine of estoppel is an equitable remedy that is reserved for only certain equity-related fact patterns. Specifically, it only applies in situations where a person or entity engages in a business transaction and receives the benefit thereof and later tries to avoid paying for that benefit — based solely on the fact that the contract requiring payment was entered into by an entity that does not exist [see TY Builders II, Inc. v. 55 Day Spa, Inc., 167 A.D.3d 679, 90 N.Y.S.3d 47 (2d Dep't 2018); see also Boslow Family Ltd. Partnership v. Glickenhaus & Co., 7 N.Y.3d 664, 827 N.Y.S.2d 94, 860 N.E.2d 711 (2006)]. In this action, the subject contract was entered into by Unitex Textile Rental Corp., which was a company that did not exist and was otherwise defunct at the time of contracting. So, now the court must consider whether the defendant in this action is trying to avoid paying for a service/benefit received from the defunct corporation. It was clear from the testimony at trial that, beginning in June of 2017, the defendant refused to accept any further service from Unitex Textile Rental Corp. and otherwise did not actually receive the benefit of any services provided by Unitex Textile Rent Corp. And, the defendant otherwise paid for any and all prior services it actually received from the plaintiff. Therefore, the doctrine of corporation by estoppel does not apply to this action. Dated: March 2, 2020
