Spahn v. Spahn

Background

Stephen Spahn sued Kirk Spahn to recover on a September 28, 2017 promissory note. The note, signed by Kirk, states that Kirk promised to pay Stephen $1,000,000 on demand, with five percent annual interest compounded annually. Stephen says he gave Kirk the money as a loan and seeks the principal, interest, and proceeding costs. He demanded payment in April 2024 and says Kirk made no payments.

Kirk admits signing the note and receiving the money but disputes that the payment was a loan. He says it was a gift connected to his decision not to enforce a licensing agreement with Stephen’s preparatory school. Kirk also claims that the family had a practice of preparing sham promissory notes to avoid gift taxes and that Stephen told him the payment would not have to be repaid. Stephen denies those assertions and denies that the payment was connected to the licensing agreement.

Procedural Posture

Stephen initially filed the case in New York state court with a motion for summary judgment instead of a complaint under New York Civil Practice Law and Rules § 3213. Kirk removed the case to federal court based on diversity jurisdiction. After removal, the court treated the motion as a motion for summary judgment under Federal Rule of Civil Procedure 56.

Kirk opposed summary judgment and asked for additional discovery under Rule 56(d). His requested discovery included depositions of attorney Michael Kalnick and Stephen, documents from Kalnick, and documents from Stephen concerning the note and related transactions. Kirk’s counsel stated that Kirk could not yet present facts essential to opposing summary judgment because discovery had not occurred.

Court’s Analysis

The court explained that summary judgment on a promissory note is appropriate only when there is no material dispute about the note’s execution and default. Kirk’s account could create a factual question about execution because, if the parties did not intend repayment, they may not have formed an agreement requiring repayment.

The court found that Kirk’s counsel sufficiently described the information sought and explained how it could raise a genuine dispute about whether the payment was intended to be repaid. The court also noted that no discovery had occurred, so Kirk had not yet had an opportunity to obtain the potentially relevant evidence.

Disposition

Judge Edgardo Ramos deferred consideration of Stephen’s motion for summary judgment and directed the parties to proceed with discovery. The parties were ordered to file a proposed discovery plan by March 21, 2025, and to complete discovery by September 19, 2025. The opinion states that Stephen may object to Kirk’s proposed discovery on any appropriate basis. The court did not decide whether the payment was a loan or a gift, whether the promissory note is enforceable, or whether Kirk owes Stephen the requested amount.