The opinion of the court was delivered by: Lewis A. Kaplan, District Judge.
Creditors of a corporation move for summary judgment against the corporation's sole owner in connection with the company's failure to make payments due under promissory notes.
Although there are disputes as to an abundance of unimportant details, the material facts are undisputed. Unless otherwise noted, the following facts are undisputed for purposes of this motion.
Antaeus Enterprises, Inc. ("Antaeus") is a private investment corporation incorporated in Delaware with its principal place of business in New York. The remaining plaintiffs are three individuals, Eugene Brody, a citizen of New York, and James H. Rand and William G Cooling, citizens of Connecticut.*fn1
Defendant SD-Barn Real Estate, LLC ("SD-Barn") is a New Hampshire limited liability company, of which defendant L. John Davidson, a New Hampshire citizen, is the sole member. SD-Barn holds no regular meetings, generally has no employees and, until October 2002, had no business or assets and had not been used for any purpose.*fn2
A. Pasteurized Egg Corporation
In 2001 and 2002, plaintiffs invested in a company founded by Davidson called Pasteurized Egg Corporation ("PEC"). Davidson, Rand, Brody, Antaeus representative John Beinecke, and an individual named Arthur Blasberg served on PEC's board of directors.*fn3
In September 2002, the members of the PEC board met to discuss various options for dealing with PEC's then-existing financial difficulties. They agreed that PEC would take out a $700,000 debtor-in-possession loan (the "DIP Loan"), with SD-Barn acting as the financing vehicle. Investors would lend money to SD-Barn, which in turn would lend the funds to PEC.*fn4
In October 2002, Antaeus, Brody, and Rand each lent $100,000 and Cooling $50,000, which together amounted to half of the DIP Loan, to SD-Barn.*fn5 The remaining $350,000 was supplied by Davidson and an individual named Frederick Flather (together with plaintiffs, the "DIP Lenders").*fn6 SD-Barn issued promissory notes to each DIP Lender and extended the $700,000 DIP Loan to PEC. PEC executed a note in favor of SD-Barn (the "PEC Note").*fn7
B. National Pasteurized Eggs
1. The NPE Note PEC in July 2003 agreed to sell substantially all of its assets to an Illinois company called National Pasteurized Eggs, LLC ("NPE").*fn8 As part of that transaction, NPE agreed to assume PEC's obligation to repay the DIP Loan. It subsequently made a $200,000 cash payment to SD-Barn and delivered to SD-Barn a promissory note in the amount of $592,250.73 (the "NPE Note"), which represented the remaining amount due on the PEC Note, including accrued interest.*fn9
The NPE note provided that NPE would make monthly interest payments and two principal payments to SD-Barn. The first principal payment would be made on July 31, 2004 in the amount of half of the total principal balance then outstanding. The second payment would be made on July 31, 2005 in the amount of the remaining principal balance.*fn10
After paying expenses, SD-Barn distributed the balance of NPE's $200,000 cash payment on a pro rata basis to each of the DIP Lenders. It then issued amended and restated promissory notes (the "Amended Notes") in the following amounts:
* Flather: $42,532.06*fn11
The Amended Notes required SD-Barn to deliver to each DIP Lender that lender's pro rata share of any payments made by NPE to SD-Barn within five days of SD-Barn's receipt thereof. The Amended Notes provided further that SD-Barn's failure to make timely payment of principal or interest thereunder would constitute an "Event of Default," which would trigger a right to acceleration upon exercise of which all sums payable ...