SUPREME COURT STATE OF NEW YORK COUNTY OF NASSAU. Justice. Defendants.
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1 SCAN SHORT FORM ORDER \ "0 SUPREME COURT STATE OF NEW YORK COUNTY OF NASSAU PRESENT: HON. IRA B. WARSHAWSKY, Justice. LEHMA TAX CREDIT ADVISOR INC. on its own behalf and derivatively on behalf of RIVaL! REDEVELOPMENT COMPANY LLC TRIALIIAS PART 8 Decision and Order -against- Plaintiff INDEX NO. : /2008 MOTION DATE: 04/09/2010 MOTION SEQUENCE: 002 RIOL! REDEVELOPMENT CaMP ANY L.P. and J. CHRISTOPHER DAL Y Defendants. The following papers read on this motion: Notice of Motion, Rule 19-a Statement of Undisputed Material Facts Affirmation & Exhibits Annexed.." Exhibit 4 to the Affdavit of Arunabha Bhoumik (Filed Under Seal)... Memorandum of Law in Support of Plaintiffs Motion for Partial Summar Judgment... Affrmation in Opposition of Oscar Michelen. Response to Rule 19-a Statement & Exhibits Annexed... Second Affirmation of Arunabha Bhoumik in Further Support & Exhibits Annexed...,... Reply Memorandum of Law in Further Support of Plaintiff s Motion for Partial Summar Judgment Plaintiff Lehman Tax Credit Advisor Inc. ("L TCA" commenced this action on its own behalf and derivatively on behalf of Rivoli Redevelopment Company LLC (Rivoli), seeking a judgment declaring defendant Rivoli Redevelopment Company L.P. (RDC), in material breach of the Operating Agreement for Rivoli Redevelopment Company LLC, damages, and other relief
2 and moved this Court by notice of motion for an order granting partial summar judgment. The Court finds as follows: In a motion for summary judgment it is necessar that movement establishes cause or causes of action or defense to sufficiently warant the Court, as a matter of law, in directing judgment in its favor. Where movement presents sufficient evidence to establish its claim, the par opposing summar judgment must produce evidentiary proof in admissible form sufficient to require a trial of material questions of fact. Mere conclusions, expressions of hope or unsubstantiated allegations or assertions, are insufficient. (Zuckerman 557). v. New York 49 N.Y.2d Of course, in the case of multiple causes of action, the Court may grant partial sumar judgment on one or all causes of action, as the evidence would support. The Cour finds the plaintiff has met its burden on all causes of action and defendant has failed to produce evidentiar proof to raise triable issues of fact on any of the causes of action in the complaint. More specifically, after hearing oral argument and based upon the paries ' submissions the Cour finds that the defendant, RDC, failed to fud the Replacement Reserve Fund, and that said failure is a material breach of the operating agreement. ( g 8. 09(d) and 8. 19(a)(ii)(A)). Furer, that the defendant, RDC, has failed to take reasonable steps to ensure that Rivoli complies with its legal obligations. (Failure to comply with the pilot agreement to timely pay taxes to the Vilage of Hempstead). Furtermore: It failed to segregate tenant security deposits. It allowed multiple loans to defendant Christopher Daly and has allowed management company (Sheldrake), Daly s management company, to build up a debt to Rivoli of over milion. It allowed the mortgage to go into default and entered into two forbearance agreements which have expired as of the end of An unsecured mortgage default is a material breach.
3 Defendant was given notice to cure defaults on March and on July 28, Though there was a response to the letter of default, said letter and the ensuing activities of the defendant, have failed to cure defaults. In that L TCA has the right to remove the Managing Member in the event of a material breach (section 8.14 (a)) the Court grants plaintiffs application for removal ofrdc L. P. having found it in material breach ofthe operating agreement. The second cause of action is a derivative claim for Breach of Fiduciar Duty against the managing member and Daly. The managing member has a fiduciar obligation to exercise due care in its obligations to Rivoli. RDC LP, the managing member, has failed to cause Rivoli to: (i) maintain adequate funds in the Replacement Reserve Fund; (ii) to comply with its real propert tax obligations; (iii) to comply with state law with respect to tenant security deposits; (iv) it has engaged in impermissible loans with Rivoli which have not been repaid; and (v) has failed to fud the operating deficit ofrivoli. And has, thus, breached its fiduciar duty to Rivoli. The Third cause of action is a derivative claim for conversion against the managing member and Mr. Daly. (It revolves around the issue ofloans to the managing member or its affiliates). The Cour finds the managing member allowed unauthorized borrowing from Rivoli and that these loans have not been repaid. Thus, said unauthorized borrowing/and/or lending has damaged Rivoli. The Fourh cause of action is a derivative claim for unjust enrichment. It is clear that the managing member and/or its affiliates have been unjustly enriched by the unauthorized borrowings and the failures to repay said amounts. The Fifth cause of action is a claim for money had and received against the managing member and Daly. Once again, it is clear that the managing member and/or its affiliates benefitted from the unauthorized related par loans. The Sixth cause of action is a breach of contract claim against the managing member and
4 Daly. Said claim is for the failure to fund the operating deficit pursuant to the Operating Agreement, section 8. 09(b). Said failure to fund, has been set forth by the plaintiffs in this motion and no issue of fact remains. NOW, based upon the above findings, it is, therefore ORDERED that defendant Rivoli Redevelopment Company L.P. is declared to be in material breach of the Operating Agreement for Rivoli Redevelopment Company LLC dated Februar 1, 1997 (the "Operating Agreement); and it is fuher ORDERED that effective 45 days from the date ofthis Order (or upon an earlier date agreed to among the paries), the powers, authorities, rights, obligations and duties of the Managing Member of Rivoli Redevelopment Company LLC are hereby transferred to a non- Member Manager not affliated with Plaintiff Lehman Tax Credit Advisor (the "Non-Member Manager ), designated by Plaintiff Lehman Tax Credit Advisor, Inc.; and it is fuher ORDERED that effective 45 days from the date of this Order (or upon an earlier date agreed to among the paries), the property management agreement, if any, between Rivoli, Inc. or any of its subsidiaries Redevelopment Company LLC and the Sheldrake Organization divisions or affiliates, is terminated without penalty or other payment obligation ofrivoli Redevelopment Company LLC, and the Non-Member Manager is authorized to execute on behalf of Rivoli Redevelopment Company LLC, a new property management agreement with a propert management company not affiliated with Plaintiff Lehman Tax Credit Advisor Inc. on ; and it is further terms approved by Plaintiff Lehman Tax Credit Advisor Inc. ORDERED, that defendants fully cooperate in the transition ofthe powers, authorities rights, obligations and duties of the Managing Member of Rivoli Redevelopment Company LLC and the Sheldrake Organization, Inc. as propert manager, including without limitation (i) the Nontransferring to a bank account of Rivoli Redevelopment Company LLC designated by Member Manager any funds or balances of Rivoli Redevelopment Company LLC held by defendants, Sheldrake Organization, Inc. or any oftheir affiliates, and (ii) obtaining consent of property manager for puroses of the the Vilage of Hempstead to the appointment of a new PILOT agreement, pursuant to the November 17, 2008 resolution of the board of trustees of the
5 Vilage of Hempstead; and it is furher ORDERED that judgment in the amount of$ , reflecting monies currently missing from the tenant security deposit accounts of Rivoli Redevelopment Company LLC, is entered in favor of Rivoli Redevelopment Company LLC against defendants, jointly and severally; and it is fuher ORDERED that judgment in the amount of $82 300, reflecting monies curently due from Company LLC, is entered in favor of defendant J. Chrstopher Daly to Rivoli Redevelopment Rivoli Redevelopment Company LLC against defendants, jointly and severally; and it is further ORDERED that judgment in the amount of $1 009, , reflecting monies curently, is entered in due from the Sheldrake Organization, Inc. to Rivoli Redevelopment Company LLC, jointly and severally; and it is favor of Rivoli Redevelopment Company LLC against defendants furter 290, reflecting monies curently missing ORDERED that judgment in the amount of $449, from the Reserve Fund for Replacements for Rivoli Redevelopment Company LLC, is entered in favor of Rivoli Redevelopment Company LLC against defendants, jointly and severally; and it is fuer, defendant Rivoli Redevelopment Company L.P. retains its Percentage Interest in Rivoli Redevelopment Company LLC pursuant to and in accordance with Section (a) (i) ofthe Operating Agreement; and it is fuher, defendant Rivoli Redevelopment Company s Special Capital Contribution pursuant L.P. retains its obligation to make the Managing Member to and in accordance with Section (b)(ii) ofthe Operating Agreement; and it is further, the Sheldrake Organizatio, Inc. retains such rights as it may have to be paid a Development fuer Fee pursuant to and in accordance with Section 10 of the Operating Agreement; and it is, defendant Rivoli Redevelopment Company in accordance with Article XI of the L.P. retains its right to receive distributions fuer; of proceed Operating Agreement. And, finally, it is
6 ORDERED that any monetar amounts due to Rivoli Redevelopment Company, LLC, as a result of the above decision, not covered by the above orders, shall be determined at trial. Any of the above ordered amounts unelated to those which would be due pursuant to statutory requirement (ie. rent security deposits) may be offset by any amounts that may be due the Managing Member, Daly, or Sheldrake, pursuant to contract or other agreement. All to be determined at trial by the Court or a Cour Attomey/Referee to whom the Cour shall assign said matter. It is SO ORDERED. Dated: April 9, 2010 ENTERF;O APR NASSAU COUNTY COUNTY CLERK' S OFFICE
Plaintiff, Defendants.
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