Deutsch v. Wolff
| Decision Date | 05 October 1999 |
| Citation | 7 S.W.3d 460 |
| Parties | (Mo.App. E.D. 1999) . Geraldine Deutsch, et al., Plaintiffs/Respondents, v. Eugene Wolff, et al., Defendants/Appellants. Case Number: 74743 Missouri Court of Appeals Eastern District Handdown Date: |
| Court | Missouri Court of Appeals |
Appeal From: Circuit Court of St. Louis County, Hon. Herbert Lasky
Counsel for Appellant: Mark G. Arnold
Counsel for Respondent: Gerald P. Greiman and Daniel V. Conlisk
Opinion Summary: Eugene Wolff appeals the trial court's entry of a charging order appointing a receiver for his interest in the D&W Scheutz Road Limited Partnership. The charging order authorizes the receiver to aid the Deutsches in executing upon a judgment previously entered on June 30, 1997 against Mr. Wolff.
AFFIRMED.
Division Two holds: (1) The trial court was authorized to order the sale of Mr. Wolff's interest in the partnership. (2) Sec. 358.280 RSMo 1994 did not restrict the trial court's ability to vest the receiver with management authority.
Opinion Vote: AFFIRMED. Crahan and Mooney, concur.
Eugene Wolff appeals the trial court's entry of a charging order appointing a receiver for his interest in the D&W Scheutz Road Limited Partnership. The charging order authorizes the receiver to aid the Deutsches in executing upon a judgment previously entered on June 30, 1997 against Mr. Wolff. We affirm the judgment.
Eugene Wolff was Marvin Deutsch's accountant and close friend from 1948 until Mr. Deutsch's death in 1972. During this time, the friends entered several business ventures together including the D&W Scheutz Road Limited Partnership ("D&W"). Formed in 1973, D&W is a business that owns, develops, and leases real property in St. Louis County. The partnership agreement divides ownership equally between two partners; Mr. Wolff as sole general partner, and "the Living Trust," of which Geraldine Deutsch is a beneficiary, as limited partner. Mr. Wolff and Mrs. Deutsch are co-trustees of the Living Trust although Mrs. Deutsch delegated her responsibilities as co-trustee to Mr. Wolff.
As sole general partner and active limited partner, Mr. Wolff effectively held complete management authority and control of D&W. Mr. Wolff also served as trustee for two trusts created before Mr. Deutsch's death; the Living Trust, and the Family Trust created for the Deutsch's children and surviving spouse. Alan Wolff, Mr. Wolff's son, also party to this lawsuit, is an accountant and designated as successor trustee for both trusts.
It was alleged, and the trial court found, that the primary assets of the Family Trusts were four real estate projects Mr. Deutsch developed prior to his death. Mr. Wolff personally owned five percent of one project and seven percent of another. In the prior litigation, which established the judgment sought to be enforced herein, the Missouri Supreme Court affirmed the trial court on all counts. Deutsch v. Wolff, slip opinion # 81296 (June 29, 1999). Among other things, the Court rejected Mr. Wolff's claims that he owned a percentage in the other two projects.
Following Mr. Deutsch's death, Mr. Wolff, as Trustee of the Family Trust, assumed management of these projects and D&W. In the underlying case, the trial court found that in this capacity, Mr. Wolff engaged in numerous self-dealing transactions divesting the trusts of income and assets. In particular, between 1972 and 1993 Mr. Wolff overpaid himself approximately $1.5 million in trustee's fees. He improperly claimed an ownership interest in three properties owned by the Family Trust and collected $933,396 from their sale. He collected a 10% sales commission on a sale of tax losses from Trust properties. Additionally, the trial court found Mr. Wolff made a self-interested loan for $183,224.50 from the Family Trust and improperly charged $95,580 to the trusts for miscellaneous services. The Deutsches, as beneficiaries, filed suit against Mr. Wolff for breach of fiduciary duty.
The trial court in the initial suit found for plaintiffs on all counts, removed Wolff as trustee, and awarded the Deutsches approximately $3 million in damages for the overcharges, monies wrongfully taken from the trusts, and accountant's malpractice. The court also entered a charging order appointing a receiver to administer Mr. Wolff's interest in D&W, authorize sale thereof, and assume any management duties with respect to the partnership. Because Mr. Wolff appealed the underlying judgment, execution of the charging order was suspended.
In the instant case, Wolff appeals the trial court's entry of the charging order against his interest in D&W arguing that the scope of the order exceeds the court's statutory authority. This court will affirm the trial court's entry of the charging order unless there is no substantial evidence to support it, if it is against the weight of the evidence, or it erroneously declares or applies the law. Murphy v. Carron, 536 S.W.2d 30 (Mo.banc 1976).
Mr. Wolff alleges that the trial court erred in ordering sale of his interest in the D&W Partnership because a partner's "underlying interest" cannot be sold. Mr. Wolff interprets the statutory definition of partnership interest as preventing the trial court from ordering sale of his interest in D&W. The Uniform Partnership Act, adopted in Missouri in 1949, defines a partnership interest as a partner's share of the firm's profits and surpluses. Section 358.260 RSMo 1994. Mr. Wolff reads the statute as providing two distinct partnership interests: a right to share profits and surpluses, and an underlying economic interest that cannot be conveyed. Such a distinction does not exist in Missouri partnership law.
A partnership interest is an economic right to share in the profits and surpluses, most accurately characterized as intangible personal property. Additional non-economic interests in the partnership include the partners' rights to acquire property, including management powers and co-tenancy in specific partnership property. Section 358.240 RSMo 1994. Partners also hold certain information rights such as the right to inspect partnership books and demand an accounting. Section 358.190, .200, .220 RSMo 1994. The underlying interest which Mr. Wolff perceives likely refers to the culmination of these non-economic rights associated with partnership. A partner may not assign these rights absent approval of the remaining partners. Section 358.270.1 RSMo 1994.
In contrast, the partner's economic interest in profits and surpluses may be conveyed or assigned without the approval of the remaining partners. Id. If assigned, the assignee will not become a partner without consent of the other partners as he or she only succeeds to the assignor's right to profits and surpluses. J. Crane & A. Bromberg, Partnership section 42, at 239 (1968). For example, in Tupper v. Kroc, the trial court appointed a receiver to sell and manage the general partner's interest in a limited partnership to remedy the general partner's breach of fiduciary duty to the partnership. Tupper v. Kroc, 494 P.2d 1275 (Nev. 1972). In Tupper, the general partner argued that he retained an equity interest in the partnerships' assets, unreachable by the trial court. The court held that after the sale, the general partner had no rights to the profits, surplus, or any equity in the partnership property although the sale of his interest did not divest the general partner of his other partnership rights. Tupper, 494 P.2d at 1280.
In the present case, section 358.280.2 specifically authorizes a court to sell a partnership interest to satisfy a partner's individual debt without causing dissolution. Mr. Wolff confuses the transferability of a partner's interest with the significant restrictions on disposition of partnership property. Where the court directs sale, the interest charged may be purchased by any one or more of the partners without thereby causing a dissolution. Section 358.280.2(2) RSMo 1994; Gates Rubber Co. v. Williford, 530 S.W.2d 11, 15 (Mo.App 1975). In contrast, creditors may not attach or otherwise encumber partnership property to satisfy a partner's individual debt. Section 358.250 RSMo 1994; Anchor Centre Partners, Ltd. v. Mercantile Bank, N.A., 803 S.W.2d 23, 31 (Mo.banc 1991). This follows from a partner's inability to assign his rights in specific partnership property. J. Crane & A. Bromberg, Partnership section 43, at 245. Therefore, partnership property is only reachable by...
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...evidence to support it, it is against the weight of the evidence, or it erroneously declares or applies the law. Deutsch v. Wolff, 7 S.W.3d 460, 462 (Mo.App.E.D.1999) (citing Murphy v. Carron, 536 S.W.2d 30 (Mo. banc 1976) ).DiscussionIn his first point, Berger claims the trial court erred ......
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