TBG Funding LLC v. Kenwood Commons, LLC, 2026 WL 504166 (Feb. 12, 2026).
Opinion 2026 New_York Exclusive_Remedy Opinion2026TBGFundingNewYorkExclusivityTurnover
Related Article: None.
AI Synopsis
♦ The New York Supreme Court (Albany County) addressed whether a judgment creditor may obtain turnover of a judgment debtor’s LLC membership interests despite “pick your partner” transfer restrictions in operating agreements. Following a foreclosure deficiency judgment of approximately $17.9 million, the plaintiff sought turnover of the defendants’ interests in two LLCs—Winter Investors, LLC and Tunnel Associates, LLC—or, alternatively, charging orders. The court held that LLC membership interests are personal property subject to enforcement under CPLR article 52 and that charging orders under LLC Law § 607 are discretionary, not exclusive remedies. It concluded that judgment debtors have standing to invoke operating agreement provisions but that those provisions do not bar turnover where CPLR § 5225 authorizes it. Turnover was deemed appropriate for Winter because the judgment debtors owned 100% of that entity, eliminating concerns about non-debtor members. As to Tunnel, which had an unaffiliated co-owner, the court found no requirement that non-debtor members affirmatively consent to turnover, particularly where they did not intervene after notice. Accordingly, the court ordered turnover of the specified LLC membership interests to the plaintiff’s designee to satisfy the judgment in whole or in part. ♦
TBG Funding LLC v. Kenwood Commons, LLC, 2026 WL 504166 (Feb. 12, 2026).
Supreme Court, Albany County, New York.
TBG FUNDING LLC, Plaintiff,
v.
KENWOOD COMMONS, LLC, Jacob Frydman, Jacob Frydman 2000 Irrevocable Trust and Monica Libin 2000 Irrevocable Trust, Defendants.
Index No. 902353-19
Decided on February 12, 2026
Attorneys and Law Firms
BLANK ROME LLP, New York (William Dorsey, of counsel, Hilary Korman, of counsel) for Plaintiff Guild Ventures LLC
The Law Office of Joseph Indusi, PLLC, Hauppage (Joseph Indusi, esq) for Defendants Kenwood Commons LLC, Jacob Frydman, Jacob Frydman 2000 Irrevocable Trust and Monica Libin 2000 Irrevocable Trust
Opinion
Thomas Marcelle, J.
PAGE_1
In December 2024, at the conclusion of a foreclosure proceeding, plaintiff Guild Ventures won a judgment of $17,885,966.09 against defendant judgment debtors. fn1 Now, plaintiff seeks to collect on that judgment through a motion for turnover of judgment debtors' LLC membership interests—the Frydman Trust's 8.75 percent interest in Tunnel Associates, LLC ("Tunnel"); the Libin Trust's 8.75 percent interest in Tunnel; the Frydman Trust's 50 percent interest in Winter Investors, LLC ("Winter"); and the Libin Trust's 50 percent interest in Winter—in full or partial satisfaction of the $17,885,966.09 judgment together with interest accrued ("the judgment"). In the alternative, plaintiff seeks charging orders charging the Libin and Frydman Trusts' economic interests in Winter and Tunnel and confirming that all economic benefits of the Trusts' membership interests be awarded to Guild in full or partial satisfaction of the judgment.
fn1. Defendant judgment-debtors are the Jacob Frydman 2000 Irrevocable Trust ("Frydman Trust"), the Monica Libin 2000 Irrevocable Trust ("Libin Trust"), and Jacob Frydman.
The case centers around the "pick your partner" provisions in the operating agreements of Winter and Tunnel. Distilled to its essential, this provision is designed to protect the non-debtor members from being forced into an involuntary partnership with somebody's creditor. So, the question is whether the court can order the turnover of a partnership interests thereby forcing a new partner on the non-debtor members. New York courts have not addressed whether a judgment debtor has standing to assert a "pick your partner" provision as a defense to turnover of its membership interest in a multi-member LLC. While the law is unsettled in this area, for the reasons explained below, the court determines that turnover is lawful.
Facts
This case has a long history, but it is sufficient for this decision to begin with the deficiency judgment. In December 2024, this court granted plaintiff a judgment of $17,885,966.09 against judgment debtors following plaintiff's foreclosure on a 71-acre property in Albany, New York. The judgment represents a deficiency amount owed to plaintiff after the foreclosure and sale of the property. To satisfy the deficiency, plaintiff now seeks turnover of certain LLC membership interests judgment debtors hold in a valuable commercial property in Manhattan ("500 Tenth Avenue"). Plaintiff obtained document and testimonial evidence revealing that judgment debtors own an indirect 25 percent interest in 500 Tenth Avenue.
The evidence revealed the following ownership maze. 500 Tenth Avenue is owned by 500 Lincoln Owner LLC, which is in turn owned by 500 Lincoln LLC. 500 Lincoln LLC is owned 50 percent by an unaffiliated investor and 50 percent by Tunnel Associates, LLC. Judgment debtor Frydman and various entities under his control have held a 50 percent interest in Tunnel since it was formed in 2002. Specifically, the Frydman Trust owns 8.75% of Tunnel, the Libin Trust owns 8.75% of Tunnel, and Winter Investors, LLC owns 32.5 % of Tunnel. Winter itself is owned 50 percent by the Libin Trust and 50 percent by the Frydman Trust, and judgment debtor Frydman manages Winter and co-manages Tunnel. In sum, judgment debtors collectively own 50 percent of Tunnel and 100 percent of Winter.
PAGE_2
After judgment debtors repeatedly failed to make any payments toward the judgment since December 2024, plaintiff has filed a motion for turnover of judgment debtors' membership interests in Winter and Tunnel or, in the alternative, an order charging those membership interests with payment of the judgment.
Judgment debtors say that turnover would be inappropriate given the operating agreements of Winter and Tunnel, which restrict transfer of membership interests. Specifically, Section 6.1 of the Tunnel Operating Agreement provides that "no Member may sell, assign, pledge or otherwise transfer ... its Membership Interest. to any other person or entity without first obtaining written consent of the Managers" of Tunnel. And Section 3.1.6.1 of the Winter Operating Agreement provides that no Member owning less than 75% of Winter may transfer his membership interest in Winter without first offering that interest for sale to the other members. Because of these "pick your partner" provisions, judgment debtors maintain that the court should, at most, issue charging orders against their Winter and Tunnel membership interests.
Discussion
When a judgment creditor wants to enforce the judgment on the judgment debtor's LLC membership interests, the court has discretion to order turnover of those membership interests or to issue a charging order (see 79 Madison LLC v. Ebrahimzadeh, 203 A.D.3d 589, 590, 166 N.Y.S.3d 126 [1st Dept. 2022] [citing CPLR § 5225 and LLC Law § 607]). A judgment creditor with a charging order receives only "the distributions and allocations of profits and losses" an assignee would be entitled to; the creditor may not participate in the management and affairs of the LLC or exercise any rights or powers of a member (LLC Law §§ 607[a], 603[a][3]). By contrast, a creditor who gets the remedy of turnover would supplant the judgment debtor as a member and gain all the attendant rights and privileges.
Judgment debtors' standing
At the outset, plaintiff raises an interesting question of judgment debtors' standing. Conceding that judgment debtors have standing to object to turnover, plaintiff nonetheless posits that judgment debtors lack standing to assert a "pick your partner" provision of the operating agreement. The proffered reason is that standing requires the litigant to have an interest in the claim at issue, and since judgment debtors have no interest in post-turnover business, only the non-debtor members of Tunnel would have an "interest" in asserting contracting rights under the operating agreement. fn2 Moreover, plaintiff notes, accurately, that "pick your partner" provisions are designed to protect the non-debtor members from being forced to do business with the creditor, not to protect the debtor members' assets from a judgment creditor (cf. Jay D. Adkisson, Charging Orders: The Peculiar Mechanism, 61 South Dakota L Rev 440, 451 [2016] ["[The charging order remedy] is not meant to protect the debtor-partner's interests, but rather protects the non-debtor partners from being forced into what amounts to an involuntary partnership with somebody's creditor"]).
fn2. Plaintiff also maintains that in a post-judgment proceeding, as a judgment creditor, it stands in judgment debtors' shoes and supports turnover. But here, the "claim at issue" is not post-turnover business but turnover itself. Moreover, while a judgment creditor may stand in the judgment debtors' shoes to enforce debts owed to the judgment debtor by third parties (Port Chester Electrical Constr. Corp. v. Atlas, 40 N.Y.2d 652, 657, 389 N.Y.S.2d 327, 357 N.E.2d 983 [1976]), in a motion for turnover of a judgment debtor's LLC membership interest, it looks to the court that a judgment creditor cannot stand in a judgment debtor's shoes before the membership interests have been turned over.
PAGE_3
New York courts have not addressed whether a judgment debtor has standing to assert a "pick your partner" provision as a defense to turnover of its membership interest in a multi-member LLC. In this case, judgment debtors' LLC membership interests—i.e., their personal property, not property of the LLC—is at stake. Judgment debtors are party to the operating agreements of Winter and Tunnel and raise certain provisions of the operating agreements in their defense to turnover. Consequently, ordinary standing principles of contract law apply. "Standing requires an inquiry into whether the litigant has an interest in the claim at issue ... that the law will recognize as a sufficient predicate for determining the issue at the litigant's request" (3 Carmody-Wait 2d § 19:10, citing Downey Sav. and Loan Ass'n, F.A. v. 162 Grand Newburgh LLC, 897 N.Y.S.2d 835, 897 N.Y.S.2d 835 [Sup. Ct., Kings County 2010]); see also Soc'y of Plastics Indus. v. County of Suffolk, 77 N.Y.2d 761, 772, 570 N.Y.S.2d 778, 573 N.E.2d 1034 [1991] [deciding that that "an injury in fact—an actual legal stake in the matter being adjudicated—ensures that the party seeking review has some concrete interest in prosecuting the action ...."]). The injury must also be "fairly traceable" to the challenged conduct and likely redressed by a favorable decision (Dental Soc. of New York v. Carey, 61 N.Y.2d 330, 338, 474 N.Y.S.2d 262, 462 N.E.2d 362 [1984]).
Plaintiff contends that only the non-debtor LLC members whose "pick you partner" rights could be affected by turnover would have standing to object based on the "pick your partner" provision. But here, judgment debtors are parties to the operating agreements and bound by their terms. They will also suffer a concrete harm—loss of their membership interest and ability to do business with the other LLC members—should the court order turnover despite the "pick your partner" provisions. Therefore, the court concludes that judgment debtors have standing to assert provisions of the operating agreement in opposing turnover, even if those provisions were meant to benefit non-debtor members, and even if the defense is ultimately futile or meritless.
Consent of non-debtor members
Considering the "pick your partner" provisions in the operating agreements of Winter and Tunnel, judgment debtors submit that the court should issue a charging order, if anything at all, because the non-debtor members of the LLCs have not explicitly consented to turnover. Judgment debtors suggest that turnover of a judgment debtor's LLC membership interest is proper only where the judgment debtor is the sole member of the LLC.
Beginning with general principles, the Court of Appeals has held that membership interests in LLCs are intangible property that is "clearly" assignable and transferable (Hotel 71 Mezz Lender LLC v. Falor, 14 N.Y.3d 303, 314, 900 N.Y.S.2d 698, 926 N.E.2d 1202 [2010]). CPLR article 52 sets forth procedures for the enforcement of money judgments in New York and allows for a money judgment to be enforced against any property that can be assigned or transferred (CPLR 5201[a]). As to property of judgment debtors, CPLR 5225(a) provides that "where it is shown that the judgment debtor is in possession or custody of money or other personal property in which he has an interest, the court shall order that the judgment debtor pay the money ... to the judgment creditor and, if the amount to be so paid is insufficient to satisfy the judgment, to deliver any other personal property to a designated sheriff" (CPLR 5225[a]). CPLR 5240 empowers the court to modify the use of any enforcement procedure, including ordering a direct turnover to plaintiff (79 Madison, 166 N.Y.S.3d at 129).
Therefore, under CPLR article 52, a court has the power to order a direct turnover of judgment debtors' LLC membership interests to plaintiff, notwithstanding the LLC's operating agreement (id.; Hotel 71 Mezz Lender, 14 N.Y.3d at 314, 900 N.Y.S.2d 698, 926 N.E.2d 1202; see also 245 Park Member LLC v. HNA Group (Int'l) Co., 2024 WL 1506798 [2d Cir. 2024] [holding that an LLC membership interest is property against which a judgment may be enforced under New York's enforcement procedures]).
Furthermore, as a practical matter with respect to Winter, judgment debtors collectively own a 100 percent interest in the LLC and manage it, too. With no non-debtor members to concern the court, the rationale for honoring the "pick your partner" provision and issuing a charging order disappears. Consequently, the court finds turnover of judgment debtors' interests in Winter to be appropriate.
PAGE_4
Tunnel, by contrast, is owned 50 percent by judgment debtors and 50 percent by an unaffiliated investor. In addition to the "pick your partner" provisions of the operating agreement, judgment debtors cite LLC Law § 607 to argue that turnover would be inappropriate here. LLC Law 607 provides that a judgment creditor with a charging order has only the rights of an assignee of the membership interest, and further, that "[n]o creditor of a member shall have any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of the limited liability company." A membership interest in an LLC, however, is personal property and not property of the LLC (LLC Law § 601). fn3 And as plaintiff notes, LLC 607(a)'s provision for charging orders merely gives the court the discretion to issue a charging order. It does not mandate the charging order as an exclusive remedy or limit the broad power the court has under CPLR 5225 and CPLR 5240 to order a turnover when it sees fit (see 79 Madison LLC v. Ebrahimzadeh, 203 A.D.3d 589, 590, 166 N.Y.S.3d 126 [1st Dept. 2022] [concluding "to the extent Limited Liability Company Law § 607 (a) permits a judgment creditor to obtain a charging lien against a member's interest, it does not [ ] say that this is the creditor's exclusive [ ] remedy, nor does it purport to abolish or limit CPLR 5225 (a)"]).
fn3. "A membership interest in the limited liability company is personal property. A member has no interest in specific property of the limited liability company" (LLC Law § 601).
No precedent governs whether a judgment creditor must prove that non-debtor LLC members affirmatively consent to turnover for a plaintiff to receive turnover, but existing caselaw is illuminating. In Hotel 71, the Court of Appeals held, without qualification, that the defendants' membership interests in 22 out-of-state limited liability companies were "clearly assignable and transferable" under CPLR article 52 (14 N.Y.3d 303, 314, 900 N.Y.S.2d 698, 926 N.E.2d 1202 [2010]). As plaintiff observes, the Court of Appeals did not inquire into the operating agreements of any LLC and nothing in evidence suggested that the 22 LLCs were owned solely by defendant. Yet, it held unequivocally that the defendants' membership interests in the 22 LLCs were transferable.
In the same vein, the First Department in 79 Madison held that turnover is proper so long as a judgment creditor plaintiff meets its burden under CPLR 5225(a) "of proving that defendant was 'in possession or custody of' ... a membership interest in [an LLC]" (79 Madison, 203 A.D.3d at 589, 166 N.Y.S.3d 126). There, the plaintiff judgment creditor submitted a letter from a bank stating that the defendant judgment debtor was the sole owner of an LLC to prove that the plaintiff was entitled to the defendant's membership interest in that LLC (id.). The court found that the letter, along with defendant's lack of denial that he owned the LLC, was sufficient proof to grant the plaintiff's petition (id.). Judgment debtors read significance into the defendant in 79 Madison being the sole member of the LLC; they say this case is different because they are not the sole owners of Tunnel. That is true, 79 Madison also held more generally that a "judgment creditor's petition [for turnover] can be granted with respect to the interest that the judgment debtor concedes he owns in an LLC" (id. at 590, 166 N.Y.S.3d 126). This makes clear that turnover is not limited to single-member LLCs; any LLC membership interest of a judgment debtor, so long as conceded or proven, can be turned over under CPLR 5225.
In light of Hotel 71 and 79 Madison LLC, as well as the broad power the court has to tailor enforcement procedure under CPLR article 52, the court sees no reason to require proof that non-debtor members of Tunnel affirmatively consent to turnover. Tunnel was given a restraining notice before the turnover motion and non-debtor members have not appeared or otherwise intervened. In other circumstances, where the non-debtor members or the LLC seek to intervene, a charging order may be a more appropriate remedy (see Matter of Sirotkin v. Jordan, LLC, 141 A.D.3d 670, 672, 35 N.Y.S.3d 443 [2d Dept. 2016] [observing that CPLR 5240 and LLC Law 607 give the court discretion, in an appropriate case, to issue a charging order instead of ordering turnover]). Those circumstances are not present here. Therefore, the court finds turnover of judgment debtors' membership interests in Winter and Tunnel to be appropriate to satisfy the judgment in full or in part. Accordingly, it is hereby
PAGE_5
ORDERED, that, pursuant to CPLR § 5225, the Frydman Trust's 8.75 percent interest in Tunnel, the Libin Trust's 8.75 percent interest in Tunnel, the Frydman Trust's 50 percent interest in Winter, and the Libin Trust's 50 percent interest in Winter be turned over to plaintiff Guild's designee, DAMM Investments LLC.