''Berkey v. Third Avenue Railway Co'' 244 N.Y. 602 (1927) is a classic veil piercing case by Judge

Benjamin N. Cardozo Benjamin Nathan Cardozo (May 24, 1870 – July 9, 1938) was an American lawyer and jurist who served on the New York Court of Appeals from 1914 to 1932 and as an Associate Justice of the Supreme Court of the United States from 1932 until his dea ...

United States corporate law United States corporate law regulates the governance, finance and power of corporations in US law. Every state and territory has its own basic corporate code, while federal law creates minimum standards for trade in company shares and governance ...

Facts

Minnie Berkey had an accident on a

tram A tram (called a streetcar or trolley in North America) is a rail vehicle that travels on tramway tracks on public urban streets; some include segments on segregated right-of-way. The tramlines or networks operated as public transport are ...

line operated by the Forty-second Street, etc., Railway Company. She suffered personal injury. The

Third Avenue Railway The Third Avenue Railway System (TARS), founded 1852, was a streetcar system serving the New York City boroughs of Manhattan and the Bronx along with lower Westchester County. For a brief period of time, TARS also operated the Steinway Lines i ...

owned it, along with another two corporations with street railways on different routes. Third Avenue not only owned nearly all the stock, the

board of directors A board of directors (commonly referred simply as the board) is an executive committee that jointly supervises the activities of an organization, which can be either a for-profit or a nonprofit organization such as a business, nonprofit organiz ...

and executive officers were also nearly the same. Ms Berkey sued the parent, Third Avenue Railway Co, to compensate her for personal injury. However, it was contrary to New York law at the time for one street railway company to assign its franchise to another without the Railway Commission's approval. So it was argued that a transfer in any liabilities from one to the other was an illegal contract, and therefore transfer of tort liability for Ms Berkey's personal injury was also illegal.

Judgment

The New York Court of Appeals held that the Third Avenue Railway Co was not liable for the debts of the subsidiary. The domination of the parent company over the subsidiary had to be complete for the parent company to be treated as liable for the debts of the subsidiary. It was needed that the subsidiary be merely the

alter ego An alter ego (Latin for "other I", " doppelgänger") means an alternate self, which is believed to be distinct from a person's normal or true original personality. Finding one's alter ego will require finding one's other self, one with a differen ...

of the parent, or that the subsidiary be thinly capitalized, so as to perpetrate a fraud on the creditors. Cardozo J said the following. Benjamin Cardozo

Notes

{{reflist New York (state) state case law United States corporate case law 1927 in United States case law 1927 in New York (state) Streetcars in New York (state)

Facts

Judgment

See also

Notes