Posted by Kathy Bazoian Phelps
Deepening insolvency is alive and well, at least in the Eastern District of New York. That court recently found that deepening insolvency is an appropriate measure of damages resulting from a breach of fiduciary duty claim. Federal Nat’l Mtge. Assoc. v. Olympia Mortgage Corp., 2014 U.S. Dist. LEXIS 79479 (E.D.N.Y. June 10, 2014).
Olympia Mortgage moved for entry of judgment on its claims for breach of fiduciary duty, among others, against Avruhum Donner, who was the former president and a principal shareholder of Olympia. The court found that, “Donner owed a fiduciary duty to Olympia, that he breached that duty, not only by causing the fraudulent transfers to be made, but also by engaging in various schemes to disguise Olympia's financial condition, and that, as a result of this breach, Olympia incurred damages in the form of increased indebtedness to Fannie Mae, among others.”