REFUSED TO COMPLY WITH HIS LOAN AGREEMENTS AND GUARANTEE
KSW, the sole member of and manager of two entities, secured a $12.3 million mortgage, and agreed to a guarantee, which collateralized his entire membership interests in those companies and allowed for a sale and the termination of his interests in the event of a breach.
Of course, when a default was later triggered, KSW’s interests were sold to a third party, who subsequently sued KSW alleging, among other things, “conversion” because the latter refused to relinquish the entities’ books and records and obstructed access to the companies’ bank accounts.
After the New York County Supreme Court found in the purchaser’s favor, and directed that all books and records be surrendered, enjoined KSW from interfering with the entities’ operations, and subsequently held KSW in contempt and awarded the purchaser $25,000 in legal fees, KSW appealed.
Because KSW was found to have acted in derogation of the underlying loan agreements and guarantee, and improperly interfered with the purchaser’s rights and interests, the Appellate Division, First Department, thought that the motion court had properly granted relief in the purchaser’s favor, and “unanimously affirmed” the outcome.
Now who’s default was that?
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DECISION