In re Judiciary Tower Associates, Bankruptcy No. 90-00297. Adv. No. 90-0140.
| Decision Date | 12 July 1994 |
| Docket Number | Bankruptcy No. 90-00297. Adv. No. 90-0140. |
| Court | United States Bankruptcy Courts. District of Columbia Circuit |
| Parties | In re JUDICIARY TOWER ASSOCIATES, Debtor. David B. TATGE, Trustee, Plaintiff, v. James P. CHANDLER, et al., Defendants. |
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James P. Chandler and Charles Ware, for defendants James P. Chandler and Robert J. Harper.
William G. Schaffer and Reg J. Lormon, for defendant George E. Bramlett.
Gary Rosen, for defendants Paul J. Riccuiti and C. Robert Buchanan.
Philip J. Jones, for defendant Bernhard J. Bucheit, Jr.
David B. Tatge, the Trustee in this Chapter 7 case, filed this adversary proceeding pursuant to Bankruptcy Code section 723(a) against various partners and former partners in the debtor partnership. The Trustee seeks contribution from the defendants for the deficiency in estate assets to pay those claims on which the respective defendants are personally liable.
The court currently has before it the Plaintiff's two motions for partial summary judgment, seeking judgment for the amount of the allowed claims of Jos. Bucheit & Sons Co., Inc. ("Bucheit & Sons"), Suburban Glass Company ("Suburban Glass"), and Quinn, Ward and Kershaw ("QWK"). Each of these claims is based on a judgment entered by the courts of the District of Columbia or Maryland. The Trustee therefore contends that the issue of liability as to these claims is settled by the principles of claim preclusion and issue preclusion, and argues that there are no disputed material facts that would prevent the granting of summary judgment against the liable partners as to each of these claims. The Trustee also seeks judgment on account of several smaller claims on which there are no prior judgments.
The court's recent enunciation of standards for granting summary judgment in Dicello v. Jenkins, 160 B.R. 1 (Bankr.D.D.C.1993), is adopted here and will not be restated in this text.
The Trustee has filed a Statement of Material Facts To Which No Genuine Issue Exists. The defendants have filed various pleadings recounting the salient facts from their points of view, and voluminous exhibits have been submitted by the parties. Although the defendants contend that there are material facts in dispute, a close reading of the pleadings and materials filed by the parties show that there are few disputes as to the material facts, and many disputes as to the legal conclusions to be derived from those facts. Disputed material facts will be noted below as they become relevant to the analysis.1
Facts pertaining to the individual claims as to which the Trustee seeks contribution are addressed in individual sections below. The undisputed facts as to the partnership in general include the following:
The debtor, Judiciary Tower Associates, is a District of Columbia general partnership formed in 1982 for the purpose of acquiring commercial property at 450 H Street, N.W., in Washington, D.C., and constructing a commercial office tower at that location. The initial partners, and their percentage interests, were: James P. Chandler, 48%; Bernhard Bucheit, 20%; Robert J. Harper, Sr., 10%; C. Robert Buchanan, 10%; Paul J. Ricciuti, 10%; James Martin, 1%; and George E. Bramlett, 1%.
The partnership agreement called for acquisition of the land from James Chandler for $1,468,000. It also provided for a fixed price construction contract from Bucheit & Sons in the amount of $2,225,000, and for $40,000 in architectural fees to Buchanan and Ricciuti.
The purchase of the land was consummated, with Chandler receiving $468,000 in cash and notes for $1 million. Construction then began, but disputes arose and in 1985 Bernhard Bucheit sold his partnership interest to the remaining partners for $8,500.00, and Bucheit & Sons stopped working on the office building. The partnership then hired other construction companies to finish the building.
George Bramlett was a 1% general partner in the debtor when it was formed in 1982. On June 20, 1985, when Bucheit withdrew from the partnership, Bramlett became a 1.25% partner. On October 14, 1985, George Bramlett withdrew from the partnership and conveyed his 1.25% interest in the partnership to Chandler, increasing Chandler's interest to 61.25%.
In their pleadings, Buchanan and Ricciuti assert that they withdrew as partners, obtaining releases from some or all liability. However, they have offered absolutely no evidence from which a finder of fact could conclude that there was ever an effective withdrawal. All that the evidence shows is a history of negotiations between Buchanan, Ricciuti and Chandler which did not result in an agreement because Buchanan and Ricciuti demanded a release that Chandler was unwilling to provide. Buchanan and Ricciuti did at one point attempt to accept an offer made by Chandler, but that offer had been expressly contingent on acceptance within a certain time frame, which had elapsed prior to the attempted acceptance. According to all of the evidence presented, there was never a meeting of minds, never an open offer that was accepted. Thus, the contention that Buchanan and Ricciuti are not liable for certain claims on account of their withdrawal from the partnership must be rejected.
Bankruptcy section 723(a) provides:
If there is a deficiency of property of the estate to pay in full all claims which are allowed in a case under this chapter concerning a partnership and with respect to which a general partner of the partnership is personally liable, the trustee shall have a claim against such general partner for the full amount of the deficiency.
Whether a general partner is personally liable on a claim is not determined by the Bankruptcy Code, but by the relevant state law. In re CS Associates, 160 B.R. 899, 907 (Bankr.E.D.Pa.1993); In re Miramar Mall Limited Partnership, 152 B.R. 631, 633 (Bankr.S.D.Cal.1993). Because the debtor is a District of Columbia partnership, we must look to D.C. law to determine which partners are liable for which claims.
As a preliminary matter, several defendants have argued that the complaint must be dismissed because there are assets in the bankruptcy estate which may exceed the amount of the claims ultimately allowed. Regardless of whether there was any merit to this contention when the complaint was filed, there is none today. The claims against the bankruptcy estate have been liquidated and allowed or disallowed (except for one claim still being litigated). The assets of the bankruptcy estate alluded to by the defendants are a malpractice action against Quinn, Ward & Kershaw, a suit against the bonding company for Bucheit & Sons, and a suit against Bucheit & Sons. The cause of action against Quinn, Ward & Kershaw has been settled by the Trustee, as discussed below. The cause of action against Bucheit & Sons has little or no value because it apparently is barred by res judicata. The claim against Bucheit & Sons's bonding company is also of questionable value, because that company is itself bankrupt. There is no reasonable basis to believe that these assets can total anywhere near the amount of the allowed claims against the estate, and so these potential assets raise no defense to liability on the Trustee's action. See Bell & Beckwith, 112 B.R. 863, 869 (Bankr.N.D.Ohio 1990); CS Associates, 160 B.R. 899, 909-10. The court will hold a hearing to determine the value that these assets have for the estate in order to quantify the amount of liability.
Finally, Bramlett contends that the debtor is not the same partnership in which he was a general partner, and that he is therefore not a "general partner of the partnership." Bramlett asserts that liability under section 723(a) does not extend to former general partners in the debtor, only to current general partners. The parties have not cited, nor has this court found, any precedent on this question.2
The statutory language is that as to the deficiency in estate assets to pay "all claims which are allowed in a case under this chapter concerning a partnership and with respect to which a general partner of the partnership is personally liable, the trustee shall have a claim against such general partner . . ." This language is ambiguous on the question posed. Among the ambiguities, section 723(a) does not refer to a case "in which a partnership is the debtor," nor does it limit itself to claims "with respect to which a general partner of the debtor is personally liable." It is unclear whether the phrase "concerning a partnership" in section 723(a) modifies "all claims . . ." or whether it modifies "case under this chapter." Clearly, the claims asserted against Bramlett, even if viewed as claims against the partnership which was the debtor's predecessor, are "claims . . . concerning a partnership and with respect to which a general partner of the partnership is liable."
The plain language of section 723(a) therefore does not determine this issue. Section 723(a) does not limit itself to current general partners, nor does it explicitly include former ones. However, where state law provides that a former general partner is personally liable on a claim (see D.C.Code § 41-135(a)), that former general partner would seem to fall within the ambit of the statute. Moreover, this reading is consistent with the fact that the partnership's right to seek contribution against a former general partner is property of the bankruptcy estate under section 541(a). See In re The Ridge II, 158 B.R. 1016, 1023 (Bankr.C.D.Cal.1993) (); In re Litchfield Co. of South Carolina Ltd., 135 B.R. 797, 803 (W.D.N.C.1992) (...
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