Whitley v. Klauber
| Citation | 417 N.Y.S.2d 959,69 A.D.2d 99 |
| Parties | Harry T. WHITLEY, Plaintiff-Appellant, v. John L. KLAUBER, M.D., David Klein, Stanley Kogut, Lucille Kram, Pauline Kram, Theodore Kram, Laurence Kraut, Milton Kruk, Stephanie Kruk, Eydie Gorme Lawrence, Steve Lawrence, Theodore Lazar, Helen Lazar, Abraham I. Liebowitz, Pearl Liberman, Tony Lieberman, E. G. Marshall, John H. McCormick, Jean McCormick, I. Meyerson, Claudio Morell, Mercedes Morell, Irving Moskowitz, Paul Moskowitz, Edwin R. Nagel, Stanley Neslon, Harry Paperstein, Olive Paperstein, John E. Paplin, Ralph M. Pepe, Eleanor Pepe, Ervin A. Popa, Ist-Van Rabovsky, Nora Kovach, John Raitt, Phyllis M. Rhinelander, Norman D. Riker, Samuel J. Ribman, Hyman Rosen, Hyman Rosen and Dr. William Snyder, Trustees for Rina Helen Berman, Harold Rosenfeld, Louis Rosenstein, Milton Roshberg, Sue Roshberg, Minnie Rothbart, Abraham Sadick, Paula Sadick, William Savage, Kalman A. Schildkraut, Walter Schmidt, Carl Schreuer, Martin Schwartz, Diana E. Seaman, Estate of Arthur X. Shapiro, Morris M. Silverman, Henry Simpson, Victor B. Spector, Gerald Starr, Rafael Stein, Maria Stein, Leonard Stone, Hannah Stone, Julius Sugal, Albert A. Turet, Silvia Turet, Ed Wergeles, Merry Wergeles, Elizabeth H. West, Vincent West, Margaret P. Wyer, Jack Wilkenfeld, Vivienne Wilkenfeld, Sadelle Wise, Jurgen Worthing, Claire Worthing, Daniel T. Alagna, Robert E. Barrett, Nat Berger, Gerrard Berman, Lawrence Joseph Berman, M.D., James Billello, Joseph Blitstein, William A. Borst, Mildred Bromberg, Alfred Bromberg, James A. Brunn, Louise Lewis, Ethel Campbell, Daniel Chait, Abraham Citrin, Rose J. DeHoust, Walter DeHoust, Ann Dorfsman, Louis Dorfsman, Solomon Eisenstark, Barbara Eisenstark, Lawrence Fialkow, Morris Fialkow, Ernest O. Platt, Miriam S. Frank, Robert P. Frenzel, Fania Friedman, Louis Friedman, Rose Friedman, Dr. Wendell D. George, Roslyn Gladstone, Phemia Goldman, Abraham H. Greenberg, Ken Greengrass, John Gregory, Elizabeth Gregory, Sonia Gross, Betty Growald, H. Wilson Guernsey, Al |
| Decision Date | 10 July 1979 |
| Court | New York Supreme Court Appellate Division |
Richard A. Spellman, of counsel (Irving Payson Zinbarg, New York City, with him on briefs; Charles A. Scharf, P. C., New York City), for plaintiff-appellant.
Neal M. Goldman, New York City, of counsel (Stanley Plesent, New York City, with him on brief; Squadron, Ellenoff, Plesent & Lehrer, New York City), for defendants-respondents.
Before MURPHY, P. J., and KUPFERMAN, FEIN, LANE and LYNCH, JJ.
Plaintiff appeals from a judgment entered on an order which denied plaintiff's motion for summary judgment against defendants Daniel T. Alagna, Fania Friedman and Phemie Goldman and granted cross-motion by defendants Theodore Lazar, James A. Brunn, Louise Lewis and Lawrence and Morris Fialkow for summary judgment dismissing the complaint. The judgment dismissed the complaint as against 59 defendants listed in a schedule annexed thereto.
This appeal represents the culmination of ten years of litigation by plaintiff, attempting to recover a finder's fee in connection with the retention of plaintiff by Black Watch Farms, a limited partnership, which had entered into an agreement with plaintiff providing for a commission to be paid for assisting in the sale of the assets of Black Watch Farms. The limited partnership was formed in 1962, essentially as a tax shelter to breed pure bred Angus cattle. When originally formed, the partnership had two general partners, B. W. Farms, Inc. (BWF) and Garfield Douglas, and 108 limited partners. BWF, a New York corporation, had a 14% Interest in the limited partnership. Douglas was also a shareholder of BWF. The limited partners had a total capital contribution in Black Watch, totalling some $860,000.
In 1968, Black Watch entered into an agreement with plaintiff, whereby the partnership agreed to pay plaintiff a commission if a contract could be concluded for the sale of the partnership assets. The contract listed as one of plaintiff's prospects in connection with such sale, Berman Leasing Company, which later changed its name to Bermec Corporation (Bermec). Bermec, in May 1968, announced its intention to acquire Black Watch and an agreement was subsequently entered into between Bermec, BWF, Black Watch Farms, Inc. (Inc.), a wholly owned subsidiary of Bermec which had been formed by Bermec and designated in the agreement as the entity to accept delivery of the assets of Black Watch purchased by Bermec, and Jack Dick, general manager of Black Watch and president and a shareholder of BWF. The transaction, valued at thirty one million dollars, included an initial payment to BWF in the form of Bermec stock valued at $20.5 million, with the balance of $10.5 million to be paid within thirty days to the limited partners in the form of cash or Bermec stock. The limited partners, who held 86% Of the interest in Black Watch, eventually received Bermec stock, thereby effecting a transfer of the assets of Black Watch to Bermec, through its wholly owned subsidiary Inc., by exchange of thirty one million dollars in Bermec's stock. All the limited partners of Black Watch exchanged their interest in the partnership for Bermec stock. As a result of the acquisition, Inc. became the sole general partner and sole limited partner of Black Watch and distributed all partnership assets to itself.
When plaintiff did not receive the commission alleged to be due in connection with the transaction, he commenced an action in 1968 against Black Watch and BWF as its general partner. After a tortuous legal history, which included entry of two judgments, both of which were vacated, one reversed on appeal by this court (Whitley v. Black Watch Farms, 50 A.D.2d 549, 376 N.Y.S.2d 1), the action was tried before Justice Sheldon Levy, who awarded judgment to plaintiff in the sum of $1,552,034.50, representing an award to plaintiff in the sum of $993,232.60, with appropriate interest on $571,800 from July 11, 1968 and interest on $421,432.60 from January 31, 1969. Justice Levy found that BWF was "the only general partner of the limited partnership." An appeal from that judgment was dismissed by order of this court entered November 29, 1977.
During the intervening years, the parties to the agreement relating to the transfer of the assets of Black Watch had been either dissolved, were adjudicated bankrupt or had died. BWF, former corporate general partner of Black Watch, had been rendered a shell, having distributed its assets consisting of the Bermec stock which it received in July, 1968. This distribution, which occurred by the time plaintiff commenced his action against Black Watch, in effect rendered BWF insolvent. Inc., the Bermec subsidiary that acquired the partnership assets, filed bankruptcy under Chapter XI in September 1970 and was adjudicated a bankrupt. Bermec also filed under Chapter XI in March 1971. To date, the only recovery which plaintiff obtained on his $1.5 million judgment against the partnership and its general partner, BWF, was the sum of $20,983. which plaintiff received in June 1977 as a result of a claim which he filed in Inc.'s bankruptcy proceeding. No recovery was realized from the partnership, since Black Watch was dissolved in August of 1968, several months after the transfer of assets.
As a result, this action was brought in April 1978 against the limited partners of Black Watch. Plaintiff seeks to recover their respective capital contributions which plaintiff claims were returned to each limited partner as a result of the acquisition of Black Watch by Bermec, through its subsidiary, Inc. Plaintiff, contending that he never received the commission due as a result of his efforts in connection with the transaction which effected a transfer of the partnership assets, moved for partial summary judgment against three of the limited partners named in the action to compel each to turn over the amount which each received as his or her capital contribution, with appropriate interest. Defendants Daniel T. Alagna, James A. Brunn, Louise Lewis, Lawrence Fialkow, Morris Fialkow, Fania Friedman and Phemie Goldman, cross moved to amend their answers and for summary judgment dismissing the complaint. Special Term denied plaintiff's motion and granted the cross-motion, finding that the manner by which Bermec acquired ownership of the assets of Black Watch in exchange for Bermec stock was completely without evidence of fraud, thereby precluding plaintiff from any recovery against the limited partners under Partnership Law §§ 105(1)(a) or 106(4). In so holding, Special Term found dispositive the fact that the limited partners did not receive a return of their capital contribution from the limited partnership, but rather received Bermec stock for their respective interests directly from Bermec. The court concluded, therefore, that the device used by Bermec to acquire Black Watch, by creating Inc., was not a fraudulent maneuver to avoid the appearance of a return of capital contribution to the limited partners.
We disagree. Such considerations as to whether the acquisition of Black Watch by Bermec was with a fraudulent purpose are irrelevant. Plaintiff's entitlement to a finder's fee and the liability of the limited partnership therefor has already been established in the prior litigation between plaintiff and Black Watch and its general partner, BWF. The prior determination of Justice Levy is dispositive as to the merits of plaintiff's claim and is not open for review in this action. In effect, plaintiff, as an unsatisfied judgment creditor, seeks to enforce...
To continue reading
Request your trial
-
In re Sharps Run Associates, LP
...followed Kittredge and upheld the right of a creditor to recover withdrawn contributions on behalf of the partnership. 416 N.E.2d at 576. Whitley went further and held that a creditor who has received judgment against a limited partnership may recover the contributions from the limited part......
- Whitley v. Klauber
-
T.R. America Chemicals, Inc. v. Seaboard Sur. Co.
...here, which it is not, there is no showing of any required change in position or resulting prejudice to plaintiff (Whitley v. Klauber, 69 A.D.2d 99, 108, 417 N.Y.S.2d 959, aff'd, 51 N.Y.2d 555, 435 N.Y.S.2d 568, 416 N.E.2d 569; 36 N.Y.Jur., Limitations and Laches § B. Right of Third-Party D......
-
Partnership Equities, Inc. v. Marten
...Financing Limited Partnerships and Their Partners: Caveat Creditor, 37 Bus.Law. 171, 181-182. Thus, in Whitley v. Klauber, 69 A.D.2d 99, 105-107, 417 N.Y.S.2d 959 (N.Y.1979), aff'd, 51 N.Y.2d 555, 435 N.Y.S.2d 568, 416 N.E.2d 569 (1980), a judgment creditor of a limited partnership was perm......