Opinion
Decided December 23, 1999
Cross appeals from a judgment of the Supreme Court (Keegan, J.), entered January 26, 1999 in Albany County, which, inter alia, partially dismissed petitioner's application, in a proceeding pursuant to CPLR 5227, to enforce a deficiency judgment against respondents.
Overton, Russell Doerr (Kevin J. Tollisen of counsel), Clifton Park, for appellant-respondent.
Ganz Wolkenbreit (Robert E. Ganz of counsel), Albany, for respondent-appellant.
Fernandez, Burstein Tuczinski P.C. (Daniel J. Tuczinski of counsel), Albany, for Janet S. Fitzgerald and others, respondents.
Hancock Estabrook LLP (Patrick M. Connors of counsel), Albany and Jerome K. Frost P.C., Troy, for William S. Oberheim and another, respondents.
Before: MERCURE, J.P., PETERS, SPAIN, CARPINELLO and GRAFFEO, JJ.
OPINION AND ORDER
Petitioner commenced an action to foreclose a mortgage executed in its favor by 126 State Street Associates, a limited liability partnership (hereinafter the partnership), which secured the partnership's real property. Petitioner obtained a judgment of foreclosure and sale, sold the real property at a judicial sale and then obtained a deficiency judgment against the partnership in the amount of $629,994.60 In this special proceeding brought pursuant to CPLR 5227, petitioner seeks to compel respondents, general and limited partners of the partnership, to pay over funds owed by respondents to the partnership in the amount of the negative balance in each of their capital accounts as reflected in the partnership's Federal partnership return (Form 1065) for 1996 and the K-2 schedules of its partners. As relevant to this appeal, Supreme Court dismissed the petition against the limited partners and two of the general partners, respondents Steven Strong Development Corporation and Richard H. Bickle, but declined to summarily grant or dismiss the petition against another general partner, respondent Steven B. Strong (hereinafter Strong). Petitioner appeals and Strong cross-appeals.
Initially, we conclude that Supreme Court did not err in summarily dismissing the petition against the limited partners, albeit for a different reason than that expressed by Supreme Court. Unlike Supreme Court, it is our view that neither the Partnership Law nor the policy underlying limited liability partnerships serves to bar a proceeding in which a creditor seeks to recover funds that limited partners owe the partnership due to a "difference between his [or her] contribution as actually made and that stated in the certificate as having been made * * * [or] [f]or any unpaid contributions which he [or she] agreed in the certificate to make in the future" (Partnership Law § 106 Partnership [1] [a], [b]). Although Partnership Law § 90 Partnership et seq. is designed to protect limited partners so as to encourage investment by limiting exposure to liability for debts of the business to only the capital invested by the limited partners (see, Lichtyger v. Franchard Corp., 18 N.Y.2d 528, 535-536; Lanier v. Bowdoin, 282 N.Y. 32, 38; Fifth Ave. Bank v. Colgate, 120 N.Y. 381), and generally the limited partner's liability will only be to the partnership for deficits in his or her capital account (see, Partnership Law § 106 Partnership [1]; Bell Sound Studios v. Enneagram Prods. Co., 36 Misc.2d 879, 880), the Partnership Law likewise "serves to protect the legitimate expectations of creditors with regard to a limited partner's promised capital contributions" (In Re The Securities Group 1980, 74 F.3d 1103, 1108) or those which, once made, have been returned to the limited partner (see, Whitley v. Klauber, 51 N.Y.2d 555, 563-565; see also, Partnership Law § 106 Partnership [3], [4]). Thus, to the extent that the deficit in a limited partner's capital account is shown to have resulted from his or her failure to make the required contributions or from the withdrawal of contributions that had been previously made, petitioner is entitled to relief.
We conclude, however, that petitioner failed to support the petition with competent evidence that the limited partners actually owed a debt to the partnership. Although the Federal partnership return and accompanying schedules annexed to the petition reflect a negative 1996 year-end capital account balance of $629,995, it appears from our review of the documents that the deficiency was caused by application of a net loss for the tax year, as well as a $286,755 "ITC Basis Reduction". In any event, petitioner submitted no expert opinion or other aid in interpreting the documents or evidence that otherwise supports an inference that the "paper" deficit in the partners' capital accounts was caused by a failure to make the required capital contributions or by a withdrawal of contributions that had been previously made.
Unlike a complaint in a plenary action, a petition in a special proceeding must be accompanied by competent evidence raising a material issue of fact (see, Matter of Jones v. Marcy, 135 A.D.2d 887, 888; Matter of Garofano v. State of New York, 122 A.D.2d 209). Therefore, the court in which the proceeding is initiated will apply summary judgment analysis and absent a factual issue requiring a trial (see, CPLR 410), will summarily dismiss the petition (see, CPLR 409 [b]; Matter of Conduit Found. Corp. v. Metropolitan Transp. Auth., 66 N.Y.2d 144, 150; Matter of Port of N.Y. Auth. [62 Cortland St. Realty], 18 N.Y.2d 250, 255, cert denied 385 U.S. 1006; Matter of Jones v. Marcy, supra; Matter of Garofano v. State of New York, supra; Matter of Lefkowitz v. McMillen, 57 A.D.2d 979,lv denied 42 N.Y.2d 807; State of New York v. Bel Fior Hotel, 95 Misc.2d 901, 905; 3 Weinstein-Korn-Miller, N.Y. Civ Prac § 409.03; Siegel, N.Y. Prac § 556, at 914-915 [3d ed]). For the reasons previously stated, we conclude that petitioner failed to satisfy its burden of establishing that any debt was owed by the limited partners to the partnership (see, CPLR 5227; Matter of Prudential Blake Realty v. Schenectady Indus. Dev. Agency, 255 A.D.2d 622, 624) and that the petition was properly dismissed against them.
As a final matter, we agree with Supreme Court's finding that factual issues precluded the entry of judgment on the claim against Strong.
Peters, Spain, Carpinello and Graffeo, JJ., concur.
ORDERED that the judgment is affirmed, without costs.