Gilbert Switzer & Associates v. National Housing Partnership

• Decision Date: 20 May 1986
• Docket Number: Civ. No. N 85-574 (JAC).
• Citation: 641 F. Supp. 150
• Court: U.S. District Court — District of Connecticut
• Parties: GILBERT SWITZER & ASSOCIATES v. NATIONAL HOUSING PARTNERSHIP, LTD. and National Corporation for Housing Partnerships v. Gene DeMATTEO and DeMatteo Construction Company.

641 F. Supp. 150

GILBERT SWITZER & ASSOCIATES v. NATIONAL HOUSING PARTNERSHIP, LTD. and National Corporation for Housing Partnerships v. Gene DeMATTEO and DeMatteo Construction Company.

Civ. No. N 85-574 (JAC).

United States District Court, D. Connecticut.

May 20, 1986.

William H. Clendenen, Jr., Penny Q. Seaman, New Haven, Conn., for plaintiff.

Raymond A. Garcia, Todd Bainer, New Haven, Conn., for defendants.

Christine S. Vertefeuille, David C. Bloomberg, New Haven, Conn., for third-party defendants.

RULING ON PENDING MOTIONS

JOSÉ A. CABRANES, District Judge:

This action arising out of the rehabilitation of Twin Towers, a subsidized housing project for the elderly in Bridgeport, Connecticut, is before the court on the plaintiff's motions for summary judgment and the third-party defendants' motion to dismiss.

The plaintiff, Gilbert Switzer & Associates ("Switzer"), was the architect for the Twin Towers project. The defendant National Housing Partnership ("NHP") is the only remaining general partner of the Twin Towers Associates limited partnership; the defendant National Corporation for Housing Partnerships ("NCHP") is the general partner of the National Housing Partnership. The third-party defendant DeMatteo Construction Company was the general contractor for the Twin Towers project and was formerly a general partner of Twin Towers Associates; the third-party defendant Gene DeMatteo is the principal officer and shareholder of DeMatteo Construction Company.

Switzer claims that it is owed certain fees for architectural services rendered on the Twin Towers project. This claim was submitted to arbitration in accordance with the terms of the contract between Switzer and Twin Towers Associates. Twin Towers apparently was represented at the arbitration by DeMatteo Construction Company pursuant to an agreement between DeMatteo Construction and National Housing Partnership. The arbitrator awarded Switzer the sum of $78,266. The award was confirmed by the Connecticut Superior Court, and that decision was affirmed by the Connecticut Appellate Court; certification was denied by the Connecticut Supreme Court.

In this action, Switzer seeks to recover the unsatisfied balance of the arbitration award from NHP as the general partner of Twin Towers Associates and from NCHP as the general partner of NHP. Switzer has moved for summary judgment on count one of its complaint as well as on the defendants' first counterclaim, which alleges that Switzer was negligent in its work on the Twin Towers project. In addition, the third-party defendants have moved to dismiss the action on the ground that complete diversity is lacking between the parties; this motion is opposed by both the plaintiff and the defendants.

I. Third-Party Defendants' Motion to Dismiss for Lack of Diversity

The court turns first to the third-party defendants' motion to dismiss the action on the ground that diversity of citizenship is lacking between the partners of the plaintiff and some of the limited partners of the defendant NHP.

Our Court of Appeals held in Colonial Realty Corporation v. Bache & Company, 358 F.2d 178, 183-184 (2d Cir.) (Friendly, J.), cert. denied, 385 U.S. 817, 87 S.Ct. 40, 17 L.Ed.2d 56 (1966) ("Colonial Realty"), that the citizenship of a limited partner of a New York partnership was not to be considered in determining the existence of diversity jurisdiction because the limited partner would not have been "a proper party to proceedings by or against a partnership" under New York law. See also Westville Holdings, Inc. v. American Petroleum Partners, 592 F.Supp. 44, 46 (S.D. N.Y.1984); Wroblewski v. Brucher, 550 F.Supp. 742, 751 (W.D. Okla.1982); Williams v. Sheraton Inns, Inc., 514 F.Supp. 22 (E.D.Tenn.1980); C.P. Robinson Construction Company v. National Corporation for Housing Partnerships, 375 F.Supp. 446, 449 (M.D.N.C.1974).

The same result is obtained by applying the Colonial Realty analysis to the facts of the instant case: The limited partners of NHP, a limited partnership organized under the laws of the District of Columbia, are not "proper parties to proceedings by or against" NHP as a matter of either Connecticut or District of Columbia law.

The third-party defendants have sought to distinguish the instant case from Colonial Realty on the asserted ground that "Connecticut law does not prohibit limited partners from suing or being sued on behalf of a limited partnership." Third Party Defendants' Memorandum in Support of Motion to Dismiss (filed April 21, 1986) ("Third-Party Defendants' Memorandum II") at 14. However, the only authority that the third-party defendants have cited in support of this proposition is C.G.S. § 34-34a,¹ which is applicable only to limited partnerships organized under the laws of Connecticut. Compare C.G.S. § 34-9(8) (defining "limited partnership" for purposes of the Connecticut Limited Partnership Act as "a partnership formed by two or more persons under the provisions of this chapter and having one or more general partners and one or more limited partners") (emphasis added) with C.G.S. § 34-9(5) (defining "foreign limited partnership" for purposes of the Connecticut Limited Partnership Act as "a partnership formed under the laws of any state other than this state and having one or more general partners and one or more limited partners").

Moreover, with respect to limited partnerships organized under the laws of other jurisdictions, C.G.S. § 34-38f ("Foreign Limited Partnerships, Governing Law") provides that "the laws of the state under which a foreign limited partnership is organized govern its organization and internal affairs and the liability of its limited partners." It is evident from this statutory language that the court must look to the law of the District of Columbia to determine whether the limited partners may sue and be sued on behalf of NHP. There is nothing in C.G.S. § 34-38f or in any other provision of Connecticut law to support the third-party defendants' contention that, while District of Columbia law governs the liability of the limited partners to third parties, Connecticut law governs the capacity of the limited partners to sue and be sued by a third party on behalf of NHP.

Accordingly, the court holds that the Connecticut Limited Partnership Act reflects a clear legislative intent that District of Columbia law ought to govern the question of whether a limited partner is a "proper party to proceedings by or against" a limited partnership organized under the law of the District of Columbia.²

The law with respect to whether a limited partner is "a proper party to proceedings by or against a partnership" is substantially identical in New York and the District of Columbia. Compare New York Partnership Law § 115³ with D.C.Code § 41-226.⁴ Neither jurisdiction permits a limited partner to sue or be sued on behalf of his limited partnership except "where the object is to enforce a limited partner's right against or liability to the partnership." D.C.Code § 41-226. Accordingly, the rule that diversity jurisdiction is not defeated by the citizenship of a limited partner who is not "a proper party to proceedings by or against a partnership" must produce the same result in the instant case as in Colonial Realty.

A different outcome is not required by the decision of the Supreme Court in Navarro Savings Association v. Lee, 446 U.S. 458, 100 S.Ct. 1779, 64 L.Ed.2d 425 (1980) ("Navarro"), which required the citizenship of the trustees of a business trust to be considered in determining the existence of diversity jurisdiction. The relationship between the trustees and the business trust in Navarro was significantly different from the relationship between the limited partners and the partnership in Colonial Realty or in the instant case. For example, the trustees, unlike limited partners, had the "power to transact the trust's business, to execute documents, and `sue and be sued in the name of the Trust or in their names as Trustees of the Trust.'" Navarro, supra, 446 U.S. at 459, 100 S.Ct. at 1781. The trustees also had the authority to "invest the funds of the trust, lend money, and initiate or compromise lawsuits relating to the trust's affairs." Id. The court therefore "finds nothing in the Supreme Court's decision in Navarro which permits or requires this court to foresake the binding precedent of Colonial Realty." Westville Holdings, Inc. v. American Petroleum Partners, 592 F.Supp. 44, 46 (S.D. N.Y.1984).⁵

Accordingly, the third-party defendants' motion to dismiss is hereby denied.

II. Plaintiff's Motion for Summary Judgment on Count One of the Complaint

The plaintiff has moved for summary judgment on count one of the complaint. The plaintiff seeks in this count to hold the defendants liable for a judgment entered against the Twin Towers Associates limited partnership.

The court may grant summary judgment only if it finds that there is no "genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Rule 56(c), Fed.R.Civ.P. "The burden is on the moving party `to demonstrate the absence of any material factual issue genuinely in dispute.'" American International Group, Inc. v. London American International Corporation, 664 F.2d 348, 351 (2d Cir.1981), quoting Heyman v. Commerce & Industry Insurance Company, 524 F.2d 1317, 1319-1320 (2d Cir.1975). In determining whether there is any material issue of fact, the court must "resolve all ambiguities and draw all inferences against the moving party." Schwabenbauer v. Board of Education, 667 F.2d 305, 313 (2d Cir.1981).

The defendants and third-party defendants offer three arguments in opposition to the plaintiff's motion for summary judgment: First, the third-party defendants contend that "under the prevailing rule, resort may be had to the individual property of a partner for the payment of debts of the partnership only where the partnership's assets have been exhausted."...