The decision of the learned court at Special Term is right and should be affirmed. The facts alleged in the counterclaim and setoff are admitted for the purposes of the motion to strike out. They show a fraud practiced upon the defendant by the plaintiff, in that the plaintiff induced the defendant to loan money to a subsidiary of plaintiff upon the representation that plaintiff borrowed no money in its own name, but used the name of its subsidiary for borrowing such money as plaintiff needed; that the business of its said subsidiary was large and prosperous, and the subsidiary solvent and worth at least $150,000. Plaintiff further represented that it would deposit in the defendant bank $10,000, to remain in the bank during the entire period of the loan as security for the repayment thereof. The aforesaid representations are alleged to have been false, the facts being that plaintiff did borrow money in its own name and the business operated by it through its subsidiary was insolvent. The notes given by the subsidiary having been dishonored, and the plaintiff having sought to withdraw the money deposited as aforesaid, the facts set up by defendant in opposition are sufficient in law and should not be struck out. It is not a case of a mere diversity or corporate entity between plaintiff and its subsidiary. There is present in addition a fraudulent holding out and concealment, thus bringing the case within the principle that corporate entity will not be allowed to be employed for the perpetration of a fraud, whereby another may be unjustly enriched. (Quaid v. Ratkowsky, 183 App. Div. 428; affd., 224 N. Y. 624.) In other words, the plaintiff will not be permitted to profit through shielding itself behind a corporate entity now interposed only because of the previous active fraud of the plaintiff.
It may be that the proof to be offered by the defendant at the trial will not be sufficient to sustain the allegations of the pleading but here we are dealing only with the latter.
Order reversed, with twenty dollars costs and disbursements, and motion granted, with ten dollars costs.