In The Matter Of

1545 OCEAN AVENUE, LLC. 893 N.Y.S.2d 590 (2010)

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Nature of the Case

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Facts

1545 LLC was formed in November 2006, and an operating agreement was executed by Ocean Suffolk and Crown Royal. It provided for two managers: Houten, who was a member of Ocean Suffolk, and King, who was a member of Crown Royal. Each member contributed 50% of the capital which was used to purchase premises known as 1545 Ocean Avenue. 1545 LLC was formed to purchase the property, rehabilitate an existing building, and build a second building for commercial rental. Ocean Suffolk (D) alleges that when there were no bona fide bidders, the managers agreed to allow Houton Construction to perform the work. P maintains that Houten began demolition and reconstruction on the building without King's consent. Houten claims that he discovered and remediated various structural flaws with the claimed knowledge and approval of King or another member of P. King wanted an architect to review the blueprints since it had been started without the necessary building permits. King also claimed that Houten did not have the proper equipment to efficiently do the excavation and demolition work, causing the billing to be greater than necessary. Houten billed 1545 LLC the sum of $97,322.27 for this work. King claims that he agreed 1545 LLC would pay the invoice on the condition that it would no longer unilaterally do work on the site. Houten continued working on the site. King did nothing to stop it. The Suffolk County Department of Health required an environmental review and found a 'hot spot' P recommended F&E for $6,675. Houten objected to F&E and had another firm do a separate evaluation without King's approval, while Van Houten asserts that although F&E eventually charged $8,229.63 for its work, payment to F&E by 1545 LLC was made with his approval. Houten claimed that the separate evaluation was paid for by D out of its own account. Tensions between King and Houten escalated. King asserted that things could not continue as they were or else the project would not be finished in an economical or timely manner. King acknowledged that the construction work undertaken by Houten was 'awesome.' King sought to have D buy out P's membership in 1545 LLC or, alternatively, to have P buy out D. King sent a 'stop work' request to Houten. Houten continued to work unilaterally on the site so that the project was within weeks of completion when this proceeding was commenced whereby further work by Houten was enjoined. The agreement provides that dissolution of the Company, was to be governed by the applicable provisions of the Limited Liability Company Law article VII. The sole ground for dissolution cited by P is deadlock between the managing members. Houten and D denied the allegations in the petition and set forth their claim that they did business in accordance with the operating agreement.