Schibuk v. Poinciana-Regency Ltd. Partnership

• Decision Date: 20 May 1991
• Docket Number: No. 88 Civ. 3361.,88 Civ. 3361.
• Citation: 764 F. Supp. 878
• Parties: Norman SCHIBUK, Plaintiff, v. POINCIANA-REGENCY LIMITED PARTNERSHIP, Regency Securities Corporation and Thomas C. Maloney, Defendants and Third-Party Plaintiffs. POINCIANA-REGENCY LIMITED PARTNERSHIP, Regency Securities Corporation and Thomas C. Maloney, Third-Party Plaintiffs, v. CIRCLE CONSULTING GROUP, INC. and Circle Properties, Ltd., Third-Party Defendants.
• Court: U.S. District Court — Southern District of New York

764 F. Supp. 878

Norman SCHIBUK, Plaintiff, v. POINCIANA-REGENCY LIMITED PARTNERSHIP, Regency Securities Corporation and Thomas C. Maloney, Defendants and Third-Party Plaintiffs.

POINCIANA-REGENCY LIMITED PARTNERSHIP, Regency Securities Corporation and Thomas C. Maloney, Third-Party Plaintiffs, v. CIRCLE CONSULTING GROUP, INC. and Circle Properties, Ltd.,

Third-Party Defendants.

No. 88 Civ. 3361.

United States District Court, S.D. New York.

May 20, 1991.

Abelman Frayne Rezac & Schwab, Jeffrey A. Schwab, Helmuth P. Svoboda and Michael Aschen, New York City, for plaintiff.

Baer Marks & Upham, Barry J. Mandel and Dov H. Scherzer, New York City, for defendants and third-party plaintiffs.

Cadwalader, Wickersham & Taft, New York City (No response to motion), for third-party defendants.

MEMORANDUM OPINION AND ORDER

BERNARD NEWMAN, Senior Judge, U.S. Court of International Trade, sitting as a U.S. District Court Judge by designation:

INTRODUCTION

This is an application by plaintiff, dated March 29, 1991, pursuant to Fed.R.Civ.P. 52 and 59 to reopen, vacate or amend the court's findings of fact and conclusions of law dated March 19, 1991 and the judgment of dismissal for lack of subject matter jurisdiction entered on March 25, 1991. Additionally, in accordance with Fed.R.Civ.P. 15(b) and 28 U.S.C. § 1653 plaintiff seeks leave to file an amended complaint alleging a new cause of action conforming to the evidence at trial. The two applications were properly filed concurrently. See Markert v. Swift & Co., 173 F.2d 517 (2d Cir. 1949); Wright, Miller & Kane, Federal Practice and Procedure: Civil 2d § 1489.

For the reasons that follow, plaintiff's motions are denied. The decision, findings and conclusions of March 19, 1991 and judgment of March 25, 1991 are adhered to in all respects.

BACKGROUND

This action was commenced on March 13, 1988. In his complaint, Norman Schibuk ("Schibuk") predicates the court's subject matter jurisdiction on diversity of citizenship, 28 U.S.C. § 1332(a). Lack of subject matter jurisdiction was initially raised as an affirmative defense in defendants' answer to the complaint and subsequently presented in the joint pretrial order, but inexplicably was expressly not pressed by defendants when this court called the exigent jurisdictional issue to the attention of counsel at the commencement of trial (Tr. 17).

After a bench trial on June 19 and 20, and August 7, 1990, and the filing of all post-trial briefs, which was finalized on October 29, 1990 by the submission by plaintiff of a response to defendants' reply brief, and while the case was still sub judice, counsel for defendants delivered a letter to the court dated February 4, 1991, "to bring to the Court's attention a recent United States Supreme Court decision concerning subject matter jurisdiction which is relevant to the Court's consideration of this matter." Citing Carden v. Arkoma Assocs., 494 U.S. 185, 110 S.Ct. 1015, 108 L.Ed.2d 157 (February 27, 1990), and averring the common New York State citizenship of Schibuk, a limited partner in the defendant Poinciana-Regency Limited Partnership ("Poinciana"), and certain other limited partners of Poinciana, defendants requested dismissal of this action for lack of diversity jurisdiction under 28 U.S.C. § 1332(a).

The dispute between the parties on the merits has its genesis in Schibuk's 1986 purchase of units in Poinciana, a Delaware real estate limited partnership, his election to rescind that purchase and recover his capital contribution by virtue of the conditional option of rescission in the partnership's Offering Memorandum dated July 9, 1986 and alleged fraud, and the refusal by Poinciana's general partners to permit rescission.

At the commencement of this action in 1988 for rescission and damages, Schibuk was a resident of New York. Shortly after Schibuk filed his complaint, he moved his domicile from New York to Vermont. So far as the record shows, Schibuk has never sold, gratuitously transferred, retransferred, or otherwise disposed of his partnership units in Poinciana.

In its decision of March 19, 1991, this court following the holding and rationale of Carden found that the requisite complete diversity of citizenship under 28 U.S.C. § 1332(a) between Schibuk (whether a New York or a Vermont limited partner of Poinciana) and all of the partnership's limited partners (including Schibuk) was absent and accordingly dismissed this action for lack of diversity jurisdiction. Fed.R.Civ.P. 12(h)((3). Further, the court rejected plaintiff's claim of "ancillary jurisdiction" under New York Civil Practice Law and Rules § 302 and New York Business Corporation Law § 1314.

In his present application, plaintiff seeks: (1) reargument of the issue of diversity jurisdiction; (2) amendment of the court's findings and conclusions to state affirmatively that the court has diversity jurisdiction; and (3) leave to amend the complaint to conform to the evidence adduced at trial, by adding a new cause of action raising a federal question (Fed.R.Civ.P. 15(b)), and to amend his jurisdictional allegations by alleging a federal law cause of action and/or diversity of citizenship (28 U.S.C. § 1653).

DISCUSSION

I.

Diversity Jurisdiction

A.

The court first addresses plaintiff's contentions that defendants have failed to support their motion to dismiss with any showing whatever that there was a common citizenship between him and other Poinciana limited partners, and consequently, plaintiff had no burden of proving diversity of citizenship. See Ostow & Jacobs, Inc. v. Morgan-Jones, Inc., 189 F.Supp. 697, 698 (S.D.N.Y.1960) ("Defendant must at least submit some proof that the jurisdictional facts so alleged do not exist").

Defendants argue, correctly, that once the court's diversity jurisdiction is placed in issue, "the burden of proving diverse citizenship falls upon the party invoking federal jurisdiction and remains there even if the other party challenges this assertion." Lang v. Windsor Mount Joy Mut. Ins. Co., 487 F.Supp. 1303 (E.D.Pa.1980), aff'd without opinion, 636 F.2d 1209 (3d Cir.1980). See also McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 785, 80 L.Ed. 1135 (1935) (party invoking jurisdiction "must carry throughout the litigation the burden of showing that he is properly in court"); Boyd, Weir & Sewell, Inc. v. Fritzen-Halcyon Lijn, Inc. 709 F.Supp. 77, 78 (S.D.N.Y.1989); Brignoli v. Balch, Hardy & Schieman, Inc., 696 F.Supp. 37, 40 (S.D.N.Y.1988); Willis v. Westin Hotels Co., 651 F.Supp. 598, 601 (S.D.N.Y.1986); Bevilaqua v. Bernstein, 642 F.Supp. 1072, 1073 (S.D.N.Y.1986); Trager v. New Rochelle Hospital Medical Center, 453 F.Supp. 516, 519 (S.D.N.Y. 1978).

At trial, defendants presented no evidence specifically directed at proving nondiversity of citizenship between Schibuk and other Poinciana limited partners; indeed, the jurisdictional issue raised as an affirmative defense in the answer and pretrial order was expressly not "pressed" by defendants. Nonetheless, it is fundamental that "subject matter jurisdiction is an unwaivable sine qua non for the exercise of federal judicial power." Curley v. Brignoli, Curley & Roberts Associates, 915 F.2d 81 (2d Cir.1990), cert denied, ___ U.S. ___, 111 S.Ct. 1430, 113 L.Ed.2d 484 (1991), citing Carden, 110 S.Ct. at 1021. See also, Musico v. Champion Credit Corp., 764 F.2d 102 (2d Cir.1985).

Defendants strenuously disclaim they have any burden of proving that this court has subject matter jurisdiction, and in any event, they again point specifically to exhibits F, G, I and J showing that there were Poinciana limited partners with New York mailing addresses. Although obviously not conclusive of domicile or citizenship, those exhibits are a sufficient evidentiary showing ("some factual predicate") to put the matter of diversity of citizenship in issue and place a burden on plaintiff of establishing the jurisdiction of this court in response to defendant's motion to dismiss of February 4, 1991. Obviously, in view of Carden (decided on February 27, 1990), Schibuk's New York citizenship at the commencement of the action and the New York addresses of other Poinciana limited partners, raise a serious question concerning this court's diversity jurisdiction. Yet, in his response of February 7, 1991 to defendants' motion to dismiss, plaintiff offered no proof of diversity of citizenship, not even an affidavit on the issue; rather, plaintiff submitted only legal argument, predicated largely on his move to Vermont after commencement of the action and defendants' failure to pursue the issue at trial.

Having lost the first round on the issue of diversity jurisdiction in reliance on questions of law, Schibuk now seeks reargument raising an evidentiary issue concerning the citizenship of Poiciana's other limited partners and the burden of proof. However, on the record presented, the court is constrained to find that plaintiff had the burden of proof on defendants' jurisdictional challenge and has not sustained that burden.

B.

Carden teaches that for diversity of citizenship to exist under 28 U.S.C. § 1332(a), there must be complete diversity on both sides and that the citizenship of a plaintiff limited partner must be diverse with all of the partnership's limited partners. This court determined in its opinion of March 19, 1991 that under the Carden rationale, there can be no diversity of citizenship in a suit by a limited partner against the limited partnership — regardless of the citizenship of other limited partners — since plaintiff's citizenship would be present on both sides of the case.

Schibuk maintains that Carden does not lead to that conclusion. This court disagrees. See Curley, 915 F.2d at 84 ("defendants invoked Carden, correctly contending that Carden destroys plaintiffs' diversity scenario because plaintiffs' New Jersey citizenship is also attributed to the defendant limited partnership" (emphasis added);...