Birnbaum v. Birnbaum

• Citation: 73 N.Y.2d 461,539 N.E.2d 574,541 N.Y.S.2d 746
• Parties: , 539 N.E.2d 574 Jay B. BIRNBAUM, Respondent-Appellant, v. Saul I. BIRNBAUM, Appellant-Respondent. Ilene L. FLAUM, Respondent-Appellant, et al., Plaintiffs, v. Saul I. BIRNBAUM, Appellant-Respondent, and Jay B. Birnbaum, Respondent-Appellant.
• Decision Date: 09 May 1989
• Court: New York Court of Appeals

Page 746

541 N.Y.S.2d 746

73 N.Y.2d 461, 539 N.E.2d 574

Jay B. BIRNBAUM, Respondent-Appellant, v. Saul I. BIRNBAUM, Appellant-Respondent.

Ilene L. FLAUM, Respondent-Appellant, et al., Plaintiffs, v. Saul I. BIRNBAUM, Appellant-Respondent, and Jay B. Birnbaum, Respondent-Appellant.

Court of Appeals of New York.

May 9, 1989.

Richard H. Dolan, N.Y. City, for appellant-respondent.

Norman M. Spindelman, Richard S. Brovitz, Rochester, and Carter H. Strickland, Syracuse, for respondents-appellants.

OPINION OF THE COURT

WACHTLER, Chief Judge.

For many years respondent Saul Birnbaum and his brother Bernard Birnbaum engaged in joint real estate enterprises. When Bernard died in 1976, a large portion of his real estate holdings passed to his children, Jay Birnbaum and Ilene Flaum, who are appellants here. An intermixture of familial and economic discord followed, however, between Saul on one side and Jay and Ilene on the other, eventually resulting in a great deal of litigation, of which this case is a small part.

The present dispute involves a shopping center in Cherry Hill, New Jersey, in which Saul has a 50% interest, and in which Jay and Ilene each have a 25% interest, as tenants in common. This property was obtained in 1980 in exchange for another piece of property that had been owned by Saul and Bernard. Soon after acquisition of the Cherry Hill property the tenants in common signed a partnership agreement, naming Saul and Jay managing partners, and requiring that all parties convey their interest in the property to the partnership. Due to conflict between the parties, however, Jay never took an active role in the management of the property, nor did Jay or Ilene convey their interests in the property to the partnership. Nevertheless, through the efforts of Saul the shopping center became an ostensibly profitable endeavor.

The operation and management of the shopping center was a subject of continuous dispute which led to the commencement of numerous actions in the various courts of this State. These actions were consolidated into what essentially became a single accounting proceeding in New York County. From the myriad allegations of the parties in that proceeding, a single issue meriting discussion has filtered its way to this court for review: whether Saul could hire Victoria Tree, who later became his wife, to help develop the property, and properly charge her compensation amounting to hundreds of thousands of dollars to the property, without the consent of Jay and Ilene.

Victoria Tree is not a party in the present actions. The question presented here is whether Saul is entitled to charge Victoria's compensation to the property; we do not have before us the question of whether Victoria is entitled to compensation from Saul personally.

The trial court, confirming a Referee's report, concluded that Victoria's compensation could not be charged to the property. It determined, initially, that Saul personally was not entitled to remuneration for his services in developing the property. The trial court then held that because the services attributed to Victoria were actually part of Saul's fiduciary duty to Jay and Ilene, Victoria was also precluded from receiving compensation from the property, without the consent of Jay and Ilene. The Appellate Division left undisturbed the conclusion that Saul was not entitled to compensation. 139 A.D.2d 462, 528 N.Y.S.2d 32. It reversed the trial court on the issue of payments to Victoria, however, reasoning simply that because Victoria did some work to benefit the property Saul was entitled to charge her compensation to the property. The Appellate Division then certified to this court the question of whether the Appellate Division's order was properly made. We answer this question in the negative.

In the case now before us the lower courts declined to precisely categorize the interests of the parties as partners, joint venturers or tenants in common, although they did conclude that Saul occupied a fiduciary relationship with Jay and Ilene. Jay and Ilene argue here that Saul's role as "patriarch" of the family, along with his duties as either a partner or a tenant in common in the Cherry Hill property gave rise to a fiduciary duty. In contrast, Saul maintains that a partnership exists, which is now in the process of winding up. Partners, however, and particularly managing partners, owe a fiduciary duty to the other partners (see, Meinhard v. Salmon, 249 N.Y. 458, 468, 164 N.E. 545). Consequently, even if we accept Saul's characterization of the relationships operating here, the result is the same: he owed a fiduciary duty to Jay and Ilene to protect their interests in the Cherry Hill shopping center.

Saul's financial transactions with Victoria violated his fiduciary duty to Jay and Ilene in two fundamental aspects. First, as a general proposition, absent an agreement to the contrary, partners, joint venturers, and tenants in common look solely to the appreciation of their interest in the endeavor for their financial rewards, and are not entitled to separate compensation for services rendered (see, Levy v. Leavitt, 257 N.Y. 461, 467, 178 N.E. 758; Myers v. Bolton, 157 N.Y. 393, 399, 52 N.E. 114). Saul does not dispute the lower court's determination that no agreement exists entitling him to compensation for the services he rendered, and thus, personally, he cannot be compensated for the services he provided. Moreover, the trial court's...