Defendants move for summary judgment dismissing the complaint. Issue has been joined and discovery is complete. By order dated September 14, 2006, the Hon. Rosalyn Richter permitted the parties to file dispositive motions by November 1, 2006. This motion was filed on that date, and is therefore timely under the authority of Brill v. City of New York, 2 NY3d 648 (2004). While the motion for summary judgment was sub judice, the parties fully submitted plaintiff's motion for an order striking defendants' jury demand. These motions are consolidated for consideration and determination in this single decision and order.

This action was brought by the New York State Attorney General ("AG") on behalf of a not-for-profit charitable organization known as the New Dance Group Studio, Inc. ("New Dance"). The defendants are all members of the board of directors of New Dance. Some of them, at various times over the years, have also been officers. Lead defendant Rick Schussel ("Schussel") has always been an officer and/or director in various capacities during all the relevant time periods. He is identified by defendants as the "driving force" of New Dance for the last twenty years. Defendant Tomlinson is married to Schussel.

There are 27 causes of action for various relief that sound primarily in breach of fiduciary duty. In general, the complaint alleges that the Schussel engaged in a series of actions that were detrimental to New Dance, some of which benefitted him personally. In particular (though not exclusively), the complaint claims that Schussel made loans to New Dance that were not memorialized by written documentation, made without proper Board approval and charged excessive interest rates. The complaint also charges that repayment of the loans is [*2]undocumented and part of a larger tax avoidance scheme by Schussel. The complaint further charges that Schussel and his family lived rent free and illegally in New Dance's property, and that his personal family expenses were paid by New Dance, including an automobile and his personal rent for a period of time. The complaint further alleges that Schussel had New Dance pay for him to become licensed to sell real estate and that he then sold New Dance's most significant asset, a building located at 254 West 47th Street in Manhattan ("47th Street building"). It is alleged he was personally paid an exorbitant commission and other fees in connection with the sale. It is also claimed that over the years defendants mortgaged New Dance's 47th Street Building, using funds to repay loans made by Schussel, when they knew that the debt could not be financially supported by New Dance. Still other claims are that the liquid funds obtained from the refinanced mortgages were irresponsibly invested and lost.

The remaining defendants are sued for failing to prevent Schussel's self dealing and by failing to properly oversee Schussel's stewardship of New Dance.

New Dance is a charity that primarily supports a dance troupe. For most of the relevant time period, New Dance's primary asset was the 47th Street building. Defendants mortgaged the 47th Street building over the years and used the proceeds to, among other things, pay Schussel and/or expenses more fully described below. In 2005 it sold the building and as part of the transaction agreed to pay Schussel a brokerage commission of 11.75%, agreed to pay Schussel a finder's fee of another 11.75%, and agreed to repay Schussel for certain loans made, as more fully described herein. In addition New Dance paid all the expenses associated with Schussel acquiring his real estate license.

Based on a series of loans, Schussel claims to be New Dance's primary creditor, now owed in excess of $1,700,000. Schussel claims to have made many personal loans to New Dance. He represents that the loans were necessary because New Dance was in financial straits and that the monies were used to keep the charity afloat. These loans were claimed to be both direct loans and forbearance of Schussel's compensation. In September, 1991 a note memorialized certain loans then outstanding in the amount of $183,870.26. The note contemplated that if other monies were subsequently advanced, they would become subject to the terms of the note. Schussel claims that the additional monies were advanced over the years that are still subject to the terms of the original note. The AG challenges these loans on a number of bases, including whether they were ever actually made, whether they were ever properly authorized by the Board, whether Schussel charged New Dance an excessive rate of interest, and whether they were part of a tax avoidance scheme by Schussel. The AG claims Schussel never reported the compensation turned loans (or any amounts repaid) as income and that he never had New Deal pay payroll taxes on account of such compensation.

Over the years New Dance paid certain expenses submitted by Schussel, including those: for housing and cars and in connection with Schussel acquiring a real estate broker's license. It also paid for the family's food and entertainment. In addition, it is undisputed that Schussel and his family (including co-defendant Tomlinson) lived rent free for many years in the 47th Street building. The parties dispute whether these expenses were personal in nature or required for the benefit of New Dance. They dispute whether these payments were ever properly accounted for in terms of income and payroll taxes.

It is undisputed that over the years Schussel made certain significant financial decisions and took actions for New Dance. These actions include the refinancing of the mortgage on the [*3]47th Street building, the investment and consequent loss of $340,000 of invested proceeds from the refinancing and the management certain charitable donations. The parties dispute whether these financial decisions were prudent and/or whether some of the decisions are the product of conflicts of interest. The parties dispute whether the the decisions were made in accordance with New Dance's by-laws. The parties dispute whether the other board members exercised appropriate oversight over Schussel making such financial decisions.

By decision and order dated January 20, 2005, Justice Rosalyn Richter dismissed causes of action 1 through 4 to the extent they related to mortgages or loans made by Schussel prior to June 19, 1998. She further dismissed causes of action 13 and 14 only to the extent they related to Board decisions to increase Schussel's salary made before June 19, 1998. Justice Richter expressly ruled that the factual matters predating June 19, 1998 could be considering in determining whether defendant's activities made within the statute of limitations were actionable.

After the completion of discovery this motion for summary judgment ensued.

Summary Judgment

The moving parties, here defendants, have the initial burden of proving their prima facie case as a basis for summary judgment. CPLR § 3212; Winegrad v. NYU Medical Center, 64 NY2d 851 (1985); Zuckerman v. City of New York, 49 NY2d 557, 562 (1980). Only if they meet their initial burden of proving entitlement to summary judgment, as a matter of law, does the burden then shift to the AG, who must demonstrate, by admissible evidence, the existence of a factual issue requiring a trial. Zuckerman v. City of New York, 49 NY2d 557 (1980). Defendants' initial burden cannot be satisfied by simply claiming that the AG cannot prove its case. In order to achieve summary judgment in their favor defendants are obligated to affirmatively prove their own freedom from liability, as a matter of law. Ayotte v. Gervasio, 81 NY2d 1062 (1993); Scansarole v. MSG, 33AD3d 517 (1st dept. 2006).

Notwithstanding the poundage of paper submitted to the court by the moving defendants, it is defective in certain respects. Many exhibits, identified generally as the books and records of New Dance, are attached only to an attorney's affirmation. While an attorney affirmation can be the vehicle to put proof before the court on summary judgment, the proof must otherwise still be admissible. Zuckerman v. City of New York, 49 NY2d 557 (1980); Ramos v. New York City Housing Authority, 264 AD2d 568 (1st dept. 1999 ). Thus, for example, while an attorney's affirmation can refer to sworn deposition testimony or certified medical records, it cannot be used to submit unauthenticated photographs or business records. McDoanld v. Tishman Interiors Corp., 290 AD2d 266 (1st dept. 2002); Moralez by Perez v. City of New York, 278 AD2d 293 (2nd dept. 2000); Horowitz v. Kevah Konner, Inc., 67 AD2d 38 (1st dept. 1979). Here there is no basis for defendant's attorney to authenticate many of the records submitted as "business records" of New Dance. Even if accepted as authentic, they are not self explanatory and annexing them to the motion without explanation renders them virtually meaningless.

The January 26, 2007 affidavit of Rick Schussel which generally discusses how the books and records of New Dance are maintained does not correct this defect. Not only is Mr. Schussel's affidavit blunderbuss and without reference to authenticating the particular financial documents of New Dance, but it apparently was submitted before the Sachs affirmation in further support, and, therefore, cannot in any manner authenticate the documents contained therein.

Hundreds of pages of deposition testimony have been provided as "factual" support for [*4]defendants' position without appropriate page references or any explanation of their meaning. This renders defendants' motion disorderly and largely incomprehensible, which by itself would warrant denial. Higen Associates v. Serge Elevator Co., Inc. 190 AD2d 712 (2nd dept. 1993); Palisades Collection Llc v. Gaonzalez, 10 Misc 3d 1058(A); 2005 WL 3372971 (NY Co. Civ Ct.).

Notwithstanding these procedural defects, the court finds that even accepting all of the documentation submitted, the motion for summary judgment must, in any event, be denied on its merits. Rather than expressly referencing the 27 causes of action set forth in the complaint, defendants have chosen to deal with claims according to broad categories of arguments. These arguments, which are expressly raised in their Memorandum of Law (pp 23-30), are briefly summarized a follows:

Defendants argue that there is no evidence that Schussel stole money from New Deal and, therefore, they are entitled to summary judgment dismissing the complaint.

Defendants argue that Justice Richter's January 20, 2005 ruling on the statute of limitations precludes the AG from attacking the 11.75% interest rate initially established in the 1991 note.

Defendants argue that the Board is protected by the business judgment rule.

Defendants claim that the AG cannot prove that New Dance suffered any financial loss on account of the alleged conduct.

Finally, defendants argue the equitable relief sought by the AG, to wit resignation of the Board members, is moot because certain members of the board are prepared to resign.

1. Mootness of Equitable Relief

Dealing with the easiest argument first, the court completely rejects defendants' claim that the "equitable" relief of forcing them all to resign from the New Dance's Board is moot. Defendants do not contest the right of the AG to remove a director of officer for cause. See NPCL § 714. The gravamen of defendants' argument is that some of the directors are willing to resign voluntarily. Defendants argue that defendants Cohen, Schneiderman and Tomlinson have become so "disillusioned" by the AG's actions that they are fully prepared to resign. Schussel and Dall, however, are fully committed to see this through. Not only are there no affidavits by the defendants who intend to resign, even assuming this is true, they have not yet done so. Therefore, the issue of whether they should be removed remains in actual controversy. Furthermore, even if they were to resign whether the remaining board members have to be removed would be an actual controversy that still would need adjudication by the court. Hearst Corp. v. Clyne, 50 NY2d 707 (1980).

2. The 11.75% interest rate

The court also rejects defendants' claims that Justice Richter's ruling on the statute of limitations issues precludes any attack whatsoever on the 11.75% interest rate charged by Schussel on loans he made to New Dance.

Many allegations center on the fact that over the years Schussel claims to have made loans to New Dance, both directly and also in the form of forbearance from collecting salary. Schussel claims that the terms and conditions of the loans was originally set pursuant to a 1991 Note that was restated in 1996. The note was a due on demand note and provided that interest was payable "at the highest rate of other loans recorded on the books for the corporation (as of September 1, 1991, 11.75% per annum)." On the date the 1991 note was executed, it recited [*5]that $183,870.26 was owed to Schussel. It further recited that Schussel shall continue to make loans, as needed to New Dance, and that such additional loans shall be according to the same terms of the note.

In 1996 Rick Schussel and New Dance entered into another agreement which, among other things, ratified the 1991 Note and acknowledged at that time that Schussel was owed $499,980.11, representing principal and accrued interest.

Shortly after the AG began its investigation ^[FN1] Schussel and New Dance entered into a new promissory note, which superceded all other notes and agreements between the parties, specifically referencing the 1991 note. The outstanding balance of $1,162,952 was a restated amount of principal and accrued interest through the date of the note. The 2003 note expressly set the interest rate at 11.75%.

Justice Richter's decision on the statute of limitation motion does not completely preclude the AG's claims, that improper interest was charged to New Dance on the loans. It does, however, preclude the AG from challenging any loan and accrued interest that occurred before June 19, 1998. To the extent that Schussel continued to charge interest at 11.75% after that date on any outstanding principal and to the extent any additional principal may have been advanced after June 19, 1998, the claim may be perused. In this regard, the AG claims that the 11.75% interest rate was charged in violation of the terms of the note itself which set the interest rate no higher than the highest interest rate on New Dance's books and records at any particular time. It also claims that the interest rate was a breach of defendants' fiduciary duty since they could have, and were, obtaining financing from the market place at lower interest rates. In either event, the date of accrual for the statute of limitations on claims related to the notes is the date on which the breach occurred. Here each time interest was calculated and charged on the outstanding loan balance, a separate claim for breach of fiduciary duty and/or breach f the terms of the prior note accrued. See: Phoenix Acquisition Corp. v. Campcore, 81 NY2d 138 (1993).

Significantly, in holding that the statute of limitations precluded claims pre-dating June 19, 1998, Justice Richter did not hold that the 11.75% interest rate established in the 1991 and 1996 notes was proper or that it could not be challenged legally. Indeed, she expressly stated that the events that preceded the limitations cutoff date could still be considered in figuring whether actions taken within the limitations period were appropriate.Additionally to the extent the loans were restated in 2003 at an "agreed" interest rate of 11.75%, the AG may challenge the "negotiated" interest rate as a breach of fiduciary duty.

3. No proof of Stealing

Defendants claim that because there is no proof that Schussel "stole" anything from New Dance, they should be awarded summary judgment dismissing the complaint. The claims against defendants sound in breach of fiduciary duty. The duty of officers and directors is codified in N-PCL § 717 which provides in relevant part:

" [d]irectors and officers shall discharge the duties of their respective positions in good faith and with that degree of diligence, care and skill which ordinary prudent men would exercise under similar circumstances in like positions." [*6]

As stated by the Court of Appeals in the seminal case of Consumers Union of U.S., Inc. v. State of New York, 5 NY3d 327 (2005), supra:

"Proper discharge of these duties ensures that a not-for-profit board's financial decisions are made soundly and legally, that an individual director, when faced with an opportunity that could benefit both the organization and him/herself, acts in the organization's interest first, and that the board prudently manages its assets in furtherance of its organization's stated charitable purpose, among other things. Put another way, these fiduciary duties are the high standards by which not-for-profit boards and individual directors are held accountable for the decisions they make and transactions they engage in."

See also: People ex rel. Spitzer v. Grasso, 42 AD3d 126 (1st dept. 2007).

Regardless of whether the actions taken here fit into defendants' definition of "stealing," there are issues of fact about whether defendants acted according to the appropriate standard of care.

Many of the transactions that are challenged by the AG are those that Schussel personally financially benefitted from. This conflict of interest warrants a higher degree of scrutiny. Here are some of the more obvious examples of issues that are in dispute:

The loans that Schussel claims to have made to New Dance are supported only by notes (in 1991, 1996 and 2003) and due to officer ledgers maintained by Schussel himself or under his supervision. There are no board minutes approving the terms of the loans and there is no evidence of an actual transfer of monies (cancelled checks, etc.). There is no evidence that the interest rates charged by Schussel were fair and reasonable. Indeed there is evidence that over the life of the loans cheaper financing in arms' length transactions was available to New Dance. Thus, in 1998 New Dance obtained outside loans at an interest rate of 8% which were then refinanced after 2003 to 6%. Schussel, however, in 2003 charged 11.75% on loans he purportedly made to New Dance.

Although Schussel claims that the form of these loans was often times forbearance of salary, there is no indication that defendants properly accounted for these monies from a tax point of view, and one of the AG's express allegations is that Schussel used New Dance to avoid paying personal income taxes. There is no proof that in the years that these forbearance loans were made Schussel, either on his own behalf or on behalf of New Dance, properly accounted for the monies as income to him. Loans were claimed to have been repaid in part by having New Dance pay for certain personal expenses of Schussel. These repayments were not treated as income to Schussel either.Although the monies at issue were "compensation," defendants did not insure that payroll taxes were paid and Schussel himself took advantage of this unusual compensation arrangement by not paying any income taxes. Despite the plethora of documentation provided by defendants on this motion, they have not provided tax returns of New Dance or Schussel.The issue of the payment by New Dance of Schussel's (and also Tomlinson's) personal expenses also has not been conclusively refuted by defendants entitling them to summary judgment. In the matter of expenses it appears that defendants believe that because some expenses paid were booked as personal to Schussel (as loan repayment) while others were booked as New [*7]Dance's expenses, that the matter should end there. Thus defendants rely on their "meticulous" record keeping on Quicken and the audited financial reports to support their position. Entries however are only as good as who makes them. Here entries appear to have been made either by or under the dominion of Schussel. Audited financial statements are not conclusive, as a matter of law, of the facts asserted therein. See, e.g.: Webber, Richard; Subtle Hazards, 124 BLJ 324, 343 (April 2004).

There is substantial evidence in the record that certain perquisites and expenses paid by New Dance were not normal and customary expenses of the charity. Just to raise a few: New Dance paid Schussel and Tomlinson's rent for an apartment in which they lived in 2000 to 2001. This expense was not recorded as either compensation to Schussel or to reduce the monies owed to him by New Dance. For many years Schussel and his family lived at the 47th Street residence. They lived there despite the fact that there was no certificate of occupancy for such use. Their utility use was paid for by New Dance. Schussel's claim that he needed to be at the building as a night watchman is self serving and does not preclude a finder of fact concluding that this arrangement was an improper personal use of an asset belonging to New Dance. Nor is his insistence that the accommodations were not particularly nice or commodious even relevant.

Likewise New Dance for a time paid automobile expenses attendant to Schussel's personal automobile. Later on New Dance purchased a new automobile that Schussel used personally. Although Schussel claims that the accurately accounted for personal verses corporate use of the automobile, other than his personal representation, there is no proof of this. Nor is there any proof that he accounted for his personal expenses by reporting it as income to the IRS. Although defendants provide a ledger of what was reported to the IRS, conspicuously absent are documents actually filed with the IRS. The same analysis applies to New Deal's payment of food bills.

Defendants have not proved that the agreed to terms of the sale of the 47th Street building insofar as the personally benefit Schussel are not a breach of fiduciary duties. The sale provides enormous personal financial benefits to Schussel that are outside the realm of market conditions. The terms provide that Schussel will receive an 11.75% broker's commission for the sale. Schussel obtained his broker's license entitling him to any commission only recently and the expenses relative to obtaining that license were paid for by New Dance. These expenses were not accounted for as any reduction in loan or income to Schussel. It is not clear, as a matter of law, that Schussel is also entitled to an additional 11.25% as a finder's fee or that such an arrangement is free from conflicts of interest.

Defendants have not addressed certain issues at all , including claims that invested monies which were lost, were imprudently invested, or that donated monies were not used according to the donor's intent. They have also not addressed claims that the level of compensation set for Schussel was not made in accordance with New Dance's by-laws and was fraught with conflict of interest because Schussel and/ or his spouse Tomlinson may have voted on or participated in the setting of such compensation. The non-Schussel defendants do not indicate at all how they independently oversaw Schussel's management of New Dance.

While defendants express indignation in this motion at having been investigated, their [*8]conclusion that there is no case to be made against them is not supported by the record. The issues presented are ones for the trier of fact to consider and determine if the parties engaged in wrongdoing with respect to their duties to New Dance.

4. Business Judgment Rule

Defendants argue that their acts are protected under the business judgment rule, warranting summary judgment dismissing the complaint. In general, the business judgment rule prohibits inquiry into actions taken by members of a Board of Directors that are taken in good faith on behalf of a corporation. It applies equally to for profit and not for profit corporations. Consumers Union of U.S., Inc. v. State of New York, 5 NY3d 327 (2005). Where, however, there is a showing that a breach of fiduciary duty occurred, including evidence of bad faith and self dealing, or decisions affected by inherent conflicts of interest, judicial inquiry is triggered. Van Der Lande v. Stout, 13 AD3d 261 (1st dept. 2004); Jones v. Surrey Corp., 263 AD2d 33 (1st Dept 1999); Higgins v. New York Stock Exchange, 10 Misc 3d 257 (NY Co. Sup. Ct. 2005).

Since there are issues of fact about whether defendants engaged in breaches of their fiduciary duties, there likewise can be no summary adjudication as a matter of law, based upon the business judgment rule.

5. No Damages

This argument as stated is ipse dixit and is, therefore, rejected.First of all, most of the remedy sought is non-monetary; the AG seeks removal of the defendants from their positions at New Dance and other equitable relief voiding transactions, etc. Moreover, if the AG prevails on some or all of its claims, then monetary damages would necessarily flow. For example, if Schussel was paid (or is owed) too much interest, then the excess interest needs to be credited or recouped. If he improperly charged personal expenses to New Dance, that money needs to be paid back. If his failure to prudently and conservatively manage New Dances finances (for example the $340,000 loss of invested New Dance principal) there may be a right to a surcharge.

Although the application of the statute of limitations necessarily carries with it a conclusion that New Dance owes Schussel monies, the remedies herein may be an offset to reduce the amount of monies that Schussel is owed.

Motion to Strike Jury Demand

The AG moves to strike defendants' demand for a jury made on the "law" causes of action asserted against them. Defendants seek a jury on the fifth, sixth, seventh, eighth, ninth, tenth, thirteenth, fourteenth, fifteenth, sixteenth, seventeenth, eighteenth, nineteenth, twentieth, twenty-first, twenty-second, twenty-third and twenty-fifth causes of action. The AG claims that a jury is not available on these equitable causes of action asserted against defendants and that the right to a jury was otherwise waived by the interposition of an equitable counterclaim covering the same transactions and occurrences. Alternatively the AG requests that the "equitable" claim be tried by the court before the "law" claim are put before a jury. The defendants oppose the motion as untimely and also on the merits.

The court finds that the motion is timely. There is no specific timetable by when a motion to strike a jury demand must be made. CPLR §§ 4101, 4102. The operating consideration is whether there is prejudice to the other side.See: AJ Fritschy v. Chase Manhattan Bank, 36 AD2d 600 (1st dept. 1971). Since this motion was brought while a motion for summary judgment was sub judice and before any trial date was actually set, there is no [*9]prejudice to the defendants if the court considers the motion to strike on the merits.

Issues of law are entitled to be tried before a jury. Issues in equity are not. Both parties acknowledge that the complaint sounds primarily in breach of fiduciary duty. Breach of fiduciary duty is something of a hybrid, having been found by the courts to sometimes constitute a law claim and sometimes an equity claim. See: Kaufman v. Cohen, 307 AD2d 113 (1st dept. 2003); Zarina Zainal v. America-Europe-Asia International Trade & Management Consultants, 254 AD2d 52 (1st dept. 1998).

In connection with the motion on the statute of limitations, however, Justice Richter expressly held that this matter was primarily one for equitable relief and that the monetary relief was ancillary thereto. In considering whether to apply a three or six year statue of limitations, Justice Richter was squarely presented with the issue of whether the complaint or any of the causes of action asserted therein were legal or equitable in nature, because an equitable claim for breach of fiduciary duty is subject to a six year statue of limitations while a legal claim for breach of fiduciary duty is subject to a three year statute of limitations. Justice Richter held that all causes of action were primarily equitable and applied a six year statute of limitations to all causes of action. Her holding is law of the case. People v. Evans, 94 NY2d 499 (2000). In view of Justice Richter's prior holding, no jury trial is available on any asserted cause of action in the complaint because the relief sought is primarily equitable in nature. See also: Trepuk v. Frank, 104 AD2d 780 (1st dept. 1984); Marcus v. Fabrikant, 81 AD2d 527 (1st dept. 1981).

In view of this court's conclusion regarding law of the case, it does not reach the parties' other arguments on the issue of jury waiver.

Conclusion

In accordance herewith, it is hereby:

ORDERED that defendants' motion for summary judgment is denied in its entirety and the parties are directed to proceed to trial, and it is further

ORDERED that the plaintiff's motion seeking to strike defendants' jury demand is granted in its entirety and the jury demand is hereby stricken, and it is further

ORDERED that within 30 days plaintiff shall file this decision and order with Clerk in the office of trial support so that the matter may be calendared for trial, and it is further

ORDERED that any requested relief not otherwise granted herein is denied, and it is further

ORDERED that this shall constitute the decision and order of the court.

Dated:New York, New York

September 11, 2007SO ORDERED:

___________________

J.G. J.S.C.