Market Street Associates Ltd. Partnership v. Frey

• Decision Date: 27 August 1991
• Docket Number: No. 90-3392,90-3392
• Parties: MARKET STREET ASSOCIATES LIMITED PARTNERSHIP and William Orenstein, Plaintiffs-Appellants, v. Dale FREY, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 588

941 F.2d 588

MARKET STREET ASSOCIATES LIMITED PARTNERSHIP and William

Orenstein, Plaintiffs-Appellants, v. Dale FREY, et al., Defendants-Appellees.

No. 90-3392.

United States Court of Appeals,

Seventh Circuit.

Argued June 5, 1991.

Decided Aug. 27, 1991.

Michael B. Apfeld (argued), Jane C. Schlicht, William Duffin, Godfrey & Kahn, Milwaukee, Wis., for plaintiffs-appellants.

James W. Greer (argued), Diane S. Sykes, Bruce G. Arnold, Whyte & Hirschboeck, Milwaukee, Wis., for defendants-appellees.

Before CUMMINGS and POSNER, Circuit Judges, and NOLAND, Senior District Judge. ^*

POSNER, Circuit Judge.

Market Street Associates Limited Partnership and its general partner appeal from a judgment for the defendants, General Electric Pension Trust and its trustees, entered upon cross-motions for summary judgment in a diversity suit that pivots on the doctrine of "good faith" performance of a contract. Cf. Robert Summers, " 'Good Faith' in General Contract Law and the Sales Provisions of the Uniform Commercial Code," 54 Va.L.Rev. 195, 232-43 (1968). Wisconsin law applies--common law rather than Uniform Commercial Code, because the contract is for land rather than for goods, UCC § 2-102; Wis.Stat. § 402.102, and because it is a lease rather than a sale and Wisconsin has not adopted UCC art. 2A, which governs leases. But before we can get to the substance of the dispute we need to consider a jurisdictional and a procedural question.

The suit was filed in a Wisconsin state court and removed to federal district court. The defendants were required in the petition for removal to set forth the facts establishing federal jurisdiction. 28 U.S.C. § 1446(a). Mistakenly believing that the only citizenships that count in the case of a limited partnership are those of the partnership itself and of its general partners, the defendants contented themselves with alleging that the plaintiff is a Wisconsin limited partnership, that its sole general partner is a citizen of Wisconsin, and that none of the defendants is a citizen of that state. In fact, for purposes of deciding whether a suit by or against a limited partnership satisfies the requirement of complete diversity of citizenship--that no party on one side of the case may be a citizen of the same state as any party on the other side--the citizenship of all the limited partners, as well as of the general partner, counts. Carden v. Arkoma Associates, 494 U.S. 185, 110 S.Ct. 1015, 108 L.Ed.2d 157 (1990). Although Carden was decided after the present suit was removed to federal district court, the rule adopted in that case had been the law of this circuit since Elston Investment, Ltd. v. David Altman Leasing Corp., 731 F.2d 436 (7th Cir.1984). Later cases reiterating the rule include Northern Trust Co. v. Bunge Corp., 899 F.2d 591, 594 (7th Cir.1990); F. & H.R. Farman-Farmaian Consulting Engineers Firm v. Harza Engineering Co., 882 F.2d 281, 284 (7th Cir.1989), and Stockman v. LaCroix, 790 F.2d 584, 587 (7th Cir.1986). Even when the appeal was argued, more than a year after Carden came down, the parties' lawyers were unaware of the rule; indeed they seemed astonished at the suggestion that the citizenship of the limited partners was relevant to jurisdiction.

After the oral argument, we directed the parties to submit affidavits concerning the citizenship of the limited partners and that of the individual defendants, the trustees, for it is their citizenship, not that of the trust, that counts for diversity purposes. Navarro Savings Ass'n v. Lee, 446 U.S. 458, 100 S.Ct. 1779, 64 L.Ed.2d 425 (1980); Goldstick v. ICM Realty, 788 F.2d 456, 458 (7th Cir.1986). All that the record contained on that score was an allegation that none of the defendants is a citizen of Wisconsin, which would not be good enough should it turn out that some of the limited partners are nonresidents of Wisconsin as well.

We have now received the submissions and determined that there is complete diversity of citizenship; although not all of the limited partners are Wisconsinites, none of them is a citizen of the same state as any of the trustees. But by their insouciance concerning jurisdiction the litigants not only ran the risk of having to start the case over in state court but also made more work for us and delayed the decision of the appeal. We remind the bench and bar of this circuit that it is their nondelegable duty to police the limits of federal jurisdiction with meticulous care and to be particularly alert for jurisdictional problems in diversity cases in which one or more of the parties is neither an individual nor a corporation. For it is with respect to the other, the unconventional entities--two of which, a partnership and a trust, are involved in this case--that mistakes concerning the existence of diversity jurisdiction are most common. Among other unconventional entities that lawyers and judges in diversity suits should be wary of tripping over are joint ventures, joint stock companies, labor unions, religious and charitable organizations, municipal corporations and other public and quasi-public agencies, and the governing boards of unincorporated institutions. For a partial list, see 13B Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 3630, at pp. 682-89 (2d ed. 1984).

The procedural question is whether, as the pension trust argues, Market Street Associates waived its right to a trial by moving for summary judgment and arguing in support of the motion that there were no genuine issues of material fact. That motion was filed in response to the pension trust's own motion for summary judgment, which the judge granted. If the pension trust is right, all that Market Street Associates can argue on appeal is that it was entitled to judgment as a matter of law--not that it was entitled to a trial.

The pension trust is wrong. Moving for summary judgment is not a waiver of the right to a trial if the motion is denied. It is true that the moving party must claim that there are no genuine issues of material fact, for if there are, summary judgment is improper. But if the judge disagrees, it doesn't mean that the party loses the whole case on the spot; it just means that he cannot avoid a trial, as he had hoped to do by filing the motion.

The principle is the same if both parties move for summary judgment. Zook v. Brown, 748 F.2d 1161, 1166 (7th Cir.1984); Case & Co. v. Board of Trade, 523 F.2d 355, 360 (7th Cir.1975). Each party will be arguing that the facts are so one-sided in his favor that there is no need for a trial, but if the judge disagrees, neither party has waived the right to a trial. The filing of cross motions for summary judgment must be distinguished from the case in which the parties stipulate that the judge may enter final judgment on the record compiled in the summary judgment proceedings. May v. Evansville-Vanderburgh School Corp., 787 F.2d 1105, 1115-16 (7th Cir.1986); Lac Courte Oreilles Band v. Voigt, 700 F.2d 341, 349 (7th Cir.1983); Nielsen v. Western Electric Co., 603 F.2d 741, 743 (8th Cir.1979); Starsky v. Williams, 512 F.2d 109, 112-13 (9th Cir.1975). If they do that, they waive their right to a trial. There was no such stipulation here.

All this is settled law. The pension trust's counsel should no more have argued that Market Street Associates waived its right to a trial then he should have removed the case to federal court without ascertaining that the court would have jurisdiction.

We come at last to the contract dispute out of which the case arises. In 1968, J.C. Penney Company, the retail chain, entered into a sale and leaseback arrangement with General Electric Pension Trust in order to finance Penney's growth. Under the arrangement Penney sold properties to the pension trust which the trust then leased back to Penney for a term of 25 years. Paragraph 34 of the lease entitles the lessee to "request Lessor [the pension trust] to finance the costs and expenses of construction of additional Improvements upon the Premises," provided the amount of the costs and expenses is at least $250,000. Upon receiving the request, the pension trust "agrees to give reasonable consideration to providing the financing of such additional Improvements and Lessor and Lessee shall negotiate in good faith concerning the construction of such Improvements and the financing by Lessor of such costs and expenses." Paragraph 34 goes on to provide that, should the negotiations fail, the lessee shall be entitled to repurchase the property at a price roughly equal to the price at which Penney sold it to the pension trust in the first place, plus 6 percent a year for each year since the original purchase. So if the average annual appreciation in the property exceeded 6 percent, a breakdown in negotiations over the financing of improvements would entitle Penney to buy back the property for less than its market value (assuming it had sold the property to the pension trust in the first place at its then market value).

One of these leases was for a shopping center in Milwaukee. In 1987 Penney assigned this lease to Market Street Associates, which the following year received an inquiry from a drugstore chain that wanted to open a store in the shopping center, provided (as is customary) that Market Street Associates built the store for it. Whether Market Street Associates was pessimistic about obtaining financing from the pension trust, still the lessor of the shopping center, or for other reasons, it initially sought financing for the project from other sources. But they were unwilling to lend the necessary funds without a mortgage on the shopping center, which Market Street Associates could not give because it was not the owner but only the lessee. It decided therefore to try to buy the property back from the pension trust. Market Street Associates' general partner, Orenstein, tried to call David Erb of the pension trust, who was responsible...