Dennis Carlston v. Henry Grausz, Gene Farber
Published: Dec. 13, 1997 | Result Date: Nov. 4, 1997 | Filing Date: Jan. 1, 1900 |Case number: 158675 – $5,200,000
Judge
Court
Marin Superior
Attorneys
Plaintiff
Defendant
Experts
Plaintiff
Stephen Boulac
(technical)
Randy Sugarman
(technical)
Peter J. Benvenutti Jr.
(Keller, Benvenutti & Kim LLP)
(technical)
Defendant
Brian Minnihan
(technical)
Facts
In April 1991, a limited partnership named GFI Commercial Mortgage L.P. was formed. The general partner was GFI Mortgage Acquisition Corporation (General Partner) whose two co-equal shareholders were defendant Henry Grausz (Grausz) and defendant Gene Farber (Farber). The plaintiffs were limited partners of the Partnership. The purpose of the Partnership was to acquire a mortgage loan portfolio and to profit from the income stream it generated. The portfolio was acquired through the use of investment capital provided by the partners and with money supplied by certain institutional bondholders which purchased bonds issued by the limited partnership. The Partnership assets also included the underlying mortgage obligations in the loan portfolio and their replacements, including a mortgage obligation secured by property in London County, Virginia and owned by Washington International University in Virginia. The land in Virginia had $5 million of equity over and above the balance owed on the Promissory Note. That note fell into default and the debtor offered title to the land (and hence the net equity) in full satisfaction of the note and the guarantee. Grausz personally borrowed enough money to pay off the note balance with the title being transferred to an affiliate company rather than the Partnership. The plaintiffs brought this action against defendants based on breach of fiduciary duty and conversion theories of recovery.
Settlement Discussions
The plaintiff made a settlement demand for resignation of the General Partner and, according to defendant, demanded that defendant relinquish ownership of the property without being reimbursed for the purchase and development expense. The defendant demanded plaintiff pay $1.2 million in attorney fees to defendant.
Damages
The plaintiff claimed $10 million in economic damages.
Result
POST TRIAL MOTIONS: Defendant has filed an appeal.
Other Information
The judgment was entered approximately four years and two months after the case was filed. A mediation was held on Feb. 18, 1997, before Thomas Jenkins of JAMS/Endispute. It did not resolve the mater. EXPERT TESTIMONY: Plaintiff's bankruptcy expert, Peter Benvenutti, testified that it was a breach of the General Partner's fiduciary duty not to place the Partnership into a Chapter 11 reorganization bankruptcy so that the negative cash flow caused by defendants could be avoided through a cramdown reorganization of the bond debt.
Length
two weeks
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