Opinion
02 Civ. 4402 (LLS)
February 19, 2003
OPINION AND ORDER
In this action for the sale of the PTR Company's sole asset, an accounting and its dissolution as a partnership, the single present issue is whether PTR Co. should be joined as a necessary and indispensable party to the litigation pursuant to Fed.R.Civ.P. 12(b)(7) and 19.
PTR Co. is not an abbreviation of PTR Company. They are separate entities. They are each a separate partnership. The question here is whether PTR Co. is a partner in PTR Company.
Since the nursing home whose proposed sale is at the heart of this litigation is an asset of PTR Company, it is fundamental that all the partners of PTR Company should be parties to the litigation. Thus, if PTR Co. is a partner in PTR Company it must be joined and, since PTR Co.'s partners' residences render it a New York entity, its joinder defeats diversity jurisdiction and requires dismissal of this action.
For the reasons which follow, I conclude that (although plaintiff points to documents and circumstances to the contrary, including the absence of evidence that Teitelbaum gave the required consent to PTR Co. as a partner in place of the Land Partners) there is sufficient evidence that PTR Co. is a partner in PTR Company that it must he coined.
1.
Defendants assert, without contradiction, that for each year since 1989 PTR Company filed with the Internal Revenue Service a Schedule K-1 listing PTR Co. as one of its partners. In its 1989 Schedule K-1 (part of Ex. 10 to the Felner Declaration), PTR Company represents that PTR Co. is one of its general partners, with a 50% interest in profit sharing, a 50% interest in loss sharing and a 50% interest in ownership of capital.
2.
On each of November 2, 1994 and October 31, 1996 plaintiff's attorney approved distributions of $100,000 to PTR Co. from PTR Company' s escrow account, when the same amounts were distributed to plaintiff as executrix of Joel Teitelbaum's estate. Additional partnership distributions to PTR Co. and the estate were similarly approved in the amounts of $150,000 on August 15, 1997 and $200,000 on June 17, 1998. Thus, plaintiff approved $550,000 in partnership distributions to PTR Co. over a period of four years.
Plaintiff now says that those approvals meant nothing to her, because she did not care where the money went: "I was concerned with one thing, that I obtain the same distribution that the other side was taking. If I received my distribution, I couldn't care less as to whom the other side's monies went to." (Hanna Teitelbaum Certification of Nov. 7, 2002 ¶ 10)
The facts cannot be disregarded so cavalierly. She had a fiduciary responsibility, not only to Teitelbaum's estate but also to the other partners in PTR Company, to see that its partnership assets were distributed properly. Her approval of the distribution of over a half-million dollars to PTR Co. argues that it was viewed as a legitimate partner in PTR Company.
3.
On April 17, 1992 plaintiff executed a document called "PTR Company — Designation of Authorized Signatory." That document asserts that plaintiff and PTR Co. constituted "all of the partners of PTR Company, a general partnership," and it described PTR Co. as "one of the general partners of PTR Company."
This document is significant for two reasons. The first one is its express acknowledgment that PTR Co. is one of the two general partners of PTR Company.
The second reason is less obvious. Originally PTR Company was composed of five persons: Joel Teitelbaum on one hand, and four "Land Partners" on the other. By an instrument dated June 22, 1972, the four Land Partners declared that they held their partnership interests in PTR Company as "nominees and agents" for PTR Co. Plaintiff insists that Joel Teitelbaum never accepted that document, nor consented to the addition or substitution of PTR Co. in place of the Land Partners, and that his consent was required by ¶ 13(a) of PTR Company's partnership agreement:
The Land Partners may add or substitute another party or parties as a Partner or Partners thereto provided that Teitelbaum consents to said addition or substitution and said consent shall not be unreasonably withheld.
The Designation reflects de facto acceptance of that substitution. The reason there were only two partners in PTR Company in 1992 (although two of the original Land Partners were still living) is that the Land Partners had been replaced by PTR Co., and Joel Teitelbaum had been replaced by plaintiff as executrix of his estate.
Plaintiff protests that the letter which transmitted the Designation to her attorney assured that it would not be construed as a waiver of any of the positions of the parties "with regard to the resolution of their differences, all such positions being hereby reserved." But whether PTR Co. was a partner in PTR Company was not one of their differences at that time. Ms. Teitelbaum clearly had no such issue in mind when she signed the Declaration in 1992, for she states that it is "only now that we are in dispute with the Land Partners that I became aware that the Land Partners allege that they actually transferred their interest." (Hanna Teitelbaum Certification of Nov. 7, 2002 ¶ 7)
4.
On November 14, 2002 Justice Kenneth W. Rudolph of the Supreme Court of the State of New York, Commercial Division, Westchester County, denied this plaintiff's motion to dismiss PTR Co.'s complaint for lack of standing, and rejected her argument that PTR Co. was not a partner in PTR Company. See PTR Co. v. Hanna Teitelbaum as Executrix, Index No. 02-8835. Justice Rudolph held:
Defendant's dismissal application argues essentially that the Estate did not consent to the assignment by the land partners of their interest in the partnership to PTR, that PTR is not a partner and accordingly lacks standing to commence this action. PTR replies that the Estate previously consented in writing to the assignment of their partnership interest to PTR. Too, between 1994 and 1998, the partnership, with the Estate's written consent, made equal distributions of at least $550,000 to PTR and the Estate, as general partners of the partnership.
The Court finds that the documentary evidence submitted on this pre-answer motion to dismiss, makes a prima facie showing that PTR and the Estate are partners and that PTR has standing to bring this action. The documentary evidence includes, inter alia, the April 17, 1992 designation of authorized signatory, the monetary distributions made to the Estate and PTR in 1994, 1996, 1997 and 1998 and the several partnership tax returns and schedule K-1 forms.
5.
In a complaint dated June 6, 2002, filed in the Supreme Court in the State of New York, County of Bronx (Index No. 20615/02), verified by a member of her firm of attorneys in this action, plaintiff alleged that defendants, including PTR Co., "have, or may claim to have, some interest in, or lien upon the mortgage premises, or some part thereof, which interest or lien, if any, is subject and subordinate to the lien of the mortgage being foreclosed." The "mortgage premises" involved in the Bronx County complaint are those involved in this action.* * * * *
Generally, all partners are necessary parties in an action seeking a partnership accounting or dissolution. See N.Y. Partnership Law § 44;SS Machinery Corp. v. General Motors Corp., 1994 WL 529867 (S.D.N.Y. 1994); Tesco Properties, Inc. v. Troy Rehabilitation and Improvement Project, Inc., 166 A.D.2d 839, 562 N.Y.S.2d 827 (3rd Dept. 1990); Goodwin v. MAC Resources Inc., 149 A.D.2d 666, 540 N.Y.S.2d 477 (2nd Dept. 1989); Marks v. Zucker, 118 A.D.2d 452, 499 N.Y.S.2d 740 (1st Dept. 1986); see also 59 Am. Jur.2d § 872 ("All persons with shares or interests in the assets of a partnership must be joined as necessary parties in any suit for judicial dissolution."). In the event of dissolution of a partnership, an assignee of a partner's interest also has the right to seek an accounting. See N.Y. Partnership Law § 53.
Plaintiff has not attempted to argue that, if PTR Co. is a partner, any of the factors listed in Provident Tradesmens Bank Trust Co. v. Patterson, 390 U.S. 102, 109-12 (1968) and F.R.Civ.P. 19(b) would allow this action to proceed. Indeed, there is no good reason for it to do so, in light of the litigation currently pending between all concerned parties in the Supreme Court of the State of New York, Westchester County, involving substantially the same facts, claims and requests for relief.
Conclusion
PTR Co. is an indispensable party to this action. Its joinder would defeat diversity jurisdiction.
The Clerk will enter an order dismissing the action for absence of PTR Co., an indispensable party.
So ordered.