By: Quinn Wetherall | Contributor
Debtor Creditor Law; Violated; Fiduciary duty; Breach;
Plaintiffs owned membership interests in Nashville Properties, LLC. Defendants Spitzer and Steinberg were managing members of Nashville. Nashville owned a 66% interest in 401 Church Street, LLC. In the name of Nashville, Spitzer and Steinberg took out a loan from Sova Management, LLC and pledged Nashville membership interests, including Plaintiffs’ interests, as collateral for the loan. Nashville defaulted on its loan to Sova; as a result, Sova took over Nashville, and Sova was treated as owning Nashville’s interest in Church Street. Plaintiffs filed suit to recover their membership interests in Nashville and Church Street. Plaintiffs moved for partial summary judgment on several counts, including a declaration Plaintiffs continue to hold their membership interest in Nashville, and Sova did not obtain an interest in Plaintiffs’ membership interest; a declaration stating the Church Street interest transfer to Sova was void and should be set aside; a claim alleging the transfer of Nashville’s membership interest to Sova violated debtor creditor law §§ 273, 274, and 275; a claim against Nashville’s managers for breach of fiduciary duty; and a declaration stating Spitzer, Steinberg, and others are no longer Nashville managers. Defendants Poznanski and Sova cross-moved for partial summary judgment dismissing the claims against them. In support of Plaintiffs’ Motion for Summary Judgment, Plaintiff Saul Tawil’s affidavit states the following: (1) the loan from Sova to Nashville was never paid to nor used for the benefit of Nashville; (2) the loan agreement made Poznanski co-manager of Nashville with veto power over all of Nashville’s expenditures, which further underscores Nashville was not to use the loan proceeds; and, (3) neither Plaintiffs nor Nashville received any consideration for the transfer of Church Street to Sova. However, in support of Defendants’ motion, Defendant Spitzer’s affidavit stated: (1) Spitzer was authorized to enter into the financing agreement with Sova under Nashville’s Operating Agreement; and, (2) the Defendants conferred with Nashville members and received authorization from Nashville members to enter into the financing agreement with Sova. The Court dismissed both requests for partial summary judgment because a clear factual dispute exists.
Tawil v. Spitzer, Index No. 652720/2011, 09/29/14 (Oing, J.).