Wood Creek Capital Management has filed suit against a fellow hedge fund, aiming to take control of SageCrest II after its $5 million redemption request was blocked.

Wood Creek claims SageCrest, which describes itself as a credit opportunity fund offering loans to smaller private companies with “strong collateral positions,” approved its withdrawal request last spring, but then rescinded all redemption requests when the credit crisis began battering the $650 million fund, the New York Post repots.

Amid an avalanche of withdrawal demands, Philip and Alan Milton, the brothers who run SageCrest, offered to return some of New Haven, Conn.-based Wood Creek’s investment by selling a pair of profitable aircrafts. Instead, according to Wood Creek, the $80 million proceeds went to a senior collateralized debt holder, Deutsche Bank.

Greenwich, Conn.-based SageCrest has responded to the Wood Creek lawsuit by taking the redemption battle to the Delaware courts.