Case ID: ny-2d_27/html/0304-01.html
Source: Caselaw Access Project
Author: {"author": "Burke, J. Breitel, J. (dissenting).", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Max Steinberg et al., Individually and as Limited Partners of Madison Discount Co., Suing on Behalf of Themselves and All Other Limited Partners Similarly Situated and for the Benefit of Said Partners, Respondents, v. Leo Goodman et al., Appellants, et al., Defendants.
    Submitted November 11, 1970;
    decided December 10, 1970.
    
      
      Sidney Kramer and Theodore L. Marks for appellants.
    
      
      Max Steinberg, respondent in person and for Agnes Shepard and another, respondents.
   Burke, J.

In this action by three of the limited partners of a partnership to recover a fee charged by the general partners for the sale of partnership property and which resulted in partial summary judgment’s being granted to the limited partners, we are in agreement with the dissent in the Appellate Division which stated that summary judgment was inappropriate in that triable issues of fact are raised as to whether the “ services ” in question fall outside the ambit of the partnership /agreement and, if compensable, whether the failure to obtain prior approval for this charge precludes the obtaining of the fee charged or the reasonable value of the services rendered.

The partnership was formed December 1, 1962 under New Jersey laws under the name Madison Discount Co. to hold title to a shopping, center in Madison, New Jersey. The property had originallv been purchased by the defendants and title transferred to the partnership at its formation. The shopping center was occupied and operated by a sole lessee under a 25-year net lease in the amount of $102,500 annually ending December 31, 1987. In the early part of 1965, the net lessee defaulted and the partnership confronted with the prospect of operating the center itself, decided to sell it. The property was sold for a price of $1,085,000 yielding a profit to the partners.

The defendants, for services rendered in negotiating the sale of the property, took a fee of $10,000 without obtaining the prior authorization of the limited partners. The defendants first disclosed the fee in the closing statement dated July 30, 1965. After the plaintiffs objected to the fee, defendants in a letter dated October 1, 1965 amplified the reasons for the fee.

Plaintiffs’ motion for partial summary judgment addressed to plaintiffs’ second cause of action was granted by Special Term which stated in part ‘ ‘ In the absence of any provision in the partnership agreement for allowance of fee for the type of work allegedly performed and in view of the specific limitation thereon contained in the agreement, it must be concluded that the taking of the fee was improper and illegal.” The majority in the Appellate Division affirmed.

Annexed to defendants ’ affidavit in opposition to the motion for summary judgment was a copy of the partnership agreement, paragraph Fourth of which stated: "Fourth : The business of the partnership shall be conducted and managed by the general partners in accordance with the provisions of the Partnership Law of the State of New Jersey relating to limited partnerships and the general partners shall have full power to sell and convey the real property owned by the partnership on such terms as they may determine, to lease said property on such terms and for such period as they may determine, to mortgage the said property whether by first or second mortgage and to make any agreements modifying any such lease or mortgage.

“ It is hereby agreed that John Guidera and Leo Goodman, of 151 North Dean Street, Englewood, New Jersey, shall prepare all statements, collect the rents, make all disbursements, see that the premises are properly maintained and do all other acts to properly manage the premises in question. For such services the said John Guidera and Leo Goodman shall receive, as an additional annual draw, the sum of Twelve Hundred ($1200.00) Dollars as and for a management fee herein. The said John Guidera and Leo Goodman are hereby authorized to hire an accountant or accounting firm to do the necessary accounting work and to pay a fair and reasonable fee for same, including the preparation of the audit and annual report for the parties hereto. They may hire legal counsel and engage such other services as may be reasonable and necessary. The said John Guidera and Leo Goodman shall be reimbursed for their actual cash disbursements, but their office costs shall not be charged as a cost. There shall be no compensation to the said John Guidera and Leo Goodman other than set forth in this paragraph.”

The issue confronting us is whether there are material issues of fact which exist (Stone v. Goodman, 8 N Y 2d 8, 12) or are fairly debateable (Falk v. Goodman, 7 N Y 2d 87, 91; Sillman v. Twentieth Century-Fox Film Corp., 3 N Y 2d 395, 404) so as to preclude the granting of summary judgment. In our view there are triable issues of fact raised.

The motion for summary judgment was granted because of the limitation contained in the last sentence that “ There shall be no compensation * * * other than set forth in this paragraph. ’ ’ However, this prohibition must be read in the context of the entire paragraph. Defendants Guidera and Goodman, who had been engaged in the real estate and construction business for over 20 years, were to be paid $1,200 annually, i.e. $600 each ‘ ‘ for a management fee ’ ’ for essentially ministerial work involving preparation of statements, making disbursements, collecting the rent, and hiring an accountant to prepare an annual report. The modest fee was apparently set at the amount of $1,200 because the duties contemplated under the agreement were minimal since there was only one lessee under a net lease, and the latter had the responsibility of operating the premises. But the net lessee unexpectedly defaulted less than three years after the running of the 25-year lease. When confronted with the prospect of having to run the entire shopping center, the partners decided to sell the property. It is arguable, therefore, whether the compensation of $1,200 annually to the general partners was intended to cover difficult negotiations involving the sale of the property as well. Defendants’ letter to the investors dated October 1, 1965 stated that the negotiations spanned “five and one half” months and involved two separate deals prior to selection of the best offer. The limitation in the agreement regarding compensation for management services raises a triable issue as to whether the negotiation services performed by the defendants are beyond the bounds of the agreement and hence compensable.

No citation is needed to establish that the principle that the partner is not entitled to compensation for services rendered by him on behalf of the firm is relevant only to partnerships where each partner has an equal interest, is equally liable and equally responsible for the conduct of the partnership business. This principle, of course, does not apply here where the interests, liabilities and responsibilities of the general partners and the special partners were not equal. It is obviously for that reason that the agreement provided that the compensation agreed on was limited to services rendered in connection with only the management of the premises. Whether then the defendants are entitled to compensation for other services presents an issue of fact. Another issue is whether the defendants waived the claim by failing to make a timely demand.

Accordingly, the order of the Appellate Division should be reversed and the motion for summary judgment should be denied.

Breitel, J. (dissenting).

The issue in this case is not whether, as stated by the majority, “ the compensation of $1,200 annually to the general partners was intended to cover difficult negotiations involving the sale of the property”. If it were, there might be an issue of fact in the case meriting the denial of summary judgment in favor of plaintiffs. But that is not the issue in the case. The issue is whether the parties expressly provided in unequivocal, unqualified, and unconditional language that “ There shall be no compensation to the said John Guidera and Leo Goodman other than set forth in this paragraph ”, and meant it. Since the parol evidence rule forbids defendants to show that they did not mean what they said, that is the end of the matter, there being no ambiguity, indefiniteness, or vagueness in the entire paragraph to be interpreted or construed (Oxford Commercial Corp. v. Landau, 12 N Y 2d 362, 365).

Essentially, there is no more to be said, unless it be sound jurisprudence for courts, let alone parties, to “after think” the written commitments the parties make, and decide anew in the light of subsequent events what might seem to some a fairer dispostion. But even if a sense of justice might override applicable rules of law, there is no equity in defendants’ position. The dispute is between limited partners, that is, investors with limited knowledge and no control, and the managing general partners of the enterprise. It is the managing partners, or their scrivener, who undoubtedly drafted the agreement, the paragraph, and the clause in question. They alone know the facts of the alleged negotiation for the sale, and, what is much more important, could determine how much or how little effort they would expend. Finally, virtually creating an estoppel, if not establishing the manifested agreement of the parties, binding in law on all of them, is the fact that the limited partners invested their money in an enterprise to be operated and controlled by others on the representation embodied in a covenant that “ There shall be no compensation to the said John Guidera and Leo Goodman other than set forth in this paragraph.” Defendants should not be permitted to avoid their written commitments, relied on by those who trusted them. The only recourse they had, if they really thought they were entitled to additional compensation not provided for in the agreement, was to go, in advance, to the limited partners, and ask them frankly for a modification of the old, or to make a new agreement.

Moreover, the basis for the decisions below should not be misapprehended. Compensation was precluded not only because of the provision in the articles but also upon the well-settled principle that a partner is not entitled to remuneration for services rendered by him on behalf of the firm, unless the parties expressly agree to such compensation (Partnership Law, § 40, subd. 6; § 98; N. J. Stat. Ann., § 42:1-18, subd. f; § 42:2-13; 7 Uniform Laws Ann., § 18, subd. [f]; 8 Uniform Laws Ann., § 9). This principle has been strictly enforced by the courts (see, e.g., Levy v. Leavitt, 257 N. Y. 461, 468-469, a case involving “ unexpected obstacles ” which called forth “ extraordinary exertions ”; Condon v. Moran, 11 N. J. Super. 221, 223; Bell v. Perry, 110 N. J. Eq. 365). The result, therefore, is dictated by statute, by principle, by the agreement of the parties, and by defendants’ admission that there was no expressed agreement to compensate.

Not, as has been suggested, is there any issue in the case whether the services ” performed by defendants were within or outside the ambit of the partnership agreement. If the services were not within the ambit of the agreement, defendants had no authority to act, and no right to compensation in quantum meruit or otherwise, because they would be mere volunteers as to the others, motivated only by a concern for their own investments.

Lastly, in order for there to be an issue of fact there must be controverted issues. None has been proffered. No evidentiary proof is suggested to establish prior negotiations, intent, motive, or understandings of fact—the stuff of parol evidence when it is admissible. Defendants do not deny any of the facts upon which plaintiffs rely, and plaintiffs do not dispute that defendants had something to do with the sale of the property. Only an issue of law is raised to which there is but one answer if statute, rule, and precedent are accorded respect.

Accordingly, I dissent and vote to affirm.

Judges Scileppi, Bergan and Gibson concur with Judge Burke; Judge Breitel dissents and votes to affirm in a separate opinion in which Chief Judge Fuld and Judge Jasen concur.

Order reversed, without costs, and case remitted to Special Term for further proceedings in accordance with the opinion herein.