Court Opinion

ID: 4547507
Source: CourtListenerOpinion
Date Created: 2020-07-10 16:11:18.77751+00
Date Added: 2024-06-11T12:53:39.214551
License: Public Domain

J-A11010-20

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

    PROFESSIONALS REAL ESTATE                  :   IN THE SUPERIOR COURT OF
    PARTNERSHIP                                :        PENNSYLVANIA
                                               :
                                               :
                v.                             :
                                               :
                                               :
    HEISTER H. LINN, JR.                       :
                                               :   No. 1970 MDA 2019
                       Appellant               :

                 Appeal from the Order Dated August 29, 2019
               In the Court of Common Pleas of Lycoming County
                        Civil Division at No(s): 14-1392

BEFORE:      PANELLA, P.J., McLAUGHLIN, J., and STEVENS, P.J.E.

MEMORANDUM BY PANELLA, P.J.:                              FILED JULY 10, 2020

        Pennsylvania law allows a creditor to obtain a lien on a debtor partner’s

financial, but not operational, interest in a partnership. To do this, the creditor

asks a court to issue what is known as a charging order. If the charging order

will not satisfy the debt in a reasonable time, the court is empowered to

foreclose on that partner’s financial interest and direct that it be sold.

        Here, Appellant, Heister H. Linn, D.D.S., consented to the entry of a

charging order burdening his partnership interest in Appellee and creditor,

Professionals1 Real Estate Partnership (“PREP”). At issue in this appeal is

____________________________________________

   Former Justice specially assigned to the Superior Court.

1
 There is some dispute over the exact spelling of the name of the partnership.
For the sake of consistency, we will follow the trial court’s lead and utilize
“Professionals.”
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whether the court erred in foreclosing on the charging order and directing

Appellant’s financial interest in PREP be sold. After careful review, we affirm.

      Appellant and two other professionals formed PREP in 1982 to purchase

a building that would house three offices. PREP subsequently bought two

parcels that it then combined into a single address (“the Property”). After

another partner joined in 1983, each partner was liable for the debts of PREP

in proportion to the amount of office space used.

      This situation continued amicably for nearly thirty years. In 2012,

Appellant stopped paying his share of PREP’s rent. Appellant claimed he

stopped paying his share because he wanted an accounting of PREP. However,

the trial court found this claim incredible, as there is no written evidence of

Appellant’s demand for an accounting until 2019.

      Thereafter, with all partners considering retirement, the Property was

listed for sale. An agent listed the Property for $725,000 in the spring of 2016.

There was no interest, so the listing was removed.

      The agent re-listed the Property for $950,000 in the summer of 2016.

Once again, the Property received no interest, and the listing was removed.

      The three other partners are all current on their obligations to PREP. In

2018, an arbitrator found Appellant liable to PREP for $111,728.35 in

delinquent payments. Appellant did not timely appeal the award, and it was

confirmed in the trial court on November 16, 2018.

      PREP filed the petition underlying this appeal in early 2019. The petition

sought a charging order, as well as a foreclosure and sale of Appellant’s

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financial interest in PREP. In March, the parties stipulated to the entry of the

charging order; Appellant, however, contested the request for foreclosure and

sale.
        The court scheduled a hearing for May 13, 2019. In the meantime,

Appellant sought an accounting from PREP. PREP objected, arguing that

Appellant was attempting to re-litigate the arbitrator’s award. In what it

termed “an abundance of caution,” the trial court directed PREP to provide

Appellant an accounting and rescheduled the hearing for June 12, 2019.

        On June 4, Appellant claimed he was unable to interpret the accounting

and sought to depose the partner who had managed PREP for over 30 years.

Over PREP’s objection, the trial court granted Appellant the right to depose

the managing partner. The court re-scheduled the hearing for August 1, 2019.

        PREP presented evidence that, during the litigation, PREP’s agent had

located a potential buyer for the Property. None of the partners were

enthusiastic about what would eventually become a $600,000 offer, but all

except Appellant agreed to the sale. Appellant refused to sell the Property until

he received an appraisal of the property’s value.

        Shortly thereafter, Appellant offered to purchase the Property for

$601,000. However, this price was conditioned on, among other things, the

abandonment of any claims PREP or the other partners had against Appellant

or his professional corporation. Appellant’s written offer concluded with a

threat of legal action and a reminder that “it is one thing to get an arbitrator’s

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award, and another to collect the money.”

      After the hearing, the trial court concluded that foreclosure was

appropriate and directed the sale of Appellant’s financial interest in PREP.

Appellant timely filed the instant appeal.

      Before addressing the issues contained in Appellant’s Brief, we must

address the brief itself. Appellant’s brief violates several of our Rules of

Appellate Procedure. See, e.g., Pa.R.A.P. 2116(a) (“Each question [in the

statement of questions involved] shall be followed by an answer stating simply

whether the court or government unit agreed, disagreed, did not answer, or

did not address the question.”); Pa.R.A.P. 2117(b) (“The statement of the case

shall not contain any argument.”). Particularly egregious is the fact that

Appellant’s arguments were not divided into two separate sections and, other

than a cursory citation to the statute giving the trial court the power to

foreclose on a partnership interest, Appellant makes no additional citations to

authorities nor does he reference the record in any way. See Pa.R.A.P. 2119

(a-c). Nonetheless, Appellant has done enough to allow us to review the issues

he raises, and we decline to find waiver.

      Both of Appellant’s main arguments assert that the trial court incorrectly

applied the Revised Uniform Partnership Act (“RUPA”). Review of a court’s

interpretation and application of a statute is a question of law. See

Commonwealth v. Corban. Corp., 909 A.2d 406, 410 (Pa. Super. 2006).

Our review is plenary, and we must determine whether the court committed

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an error of law. See id. To the extent Appellant’s arguments are based upon

the trial court’s findings of fact and credibility determinations, our review is

limited to determining whether the findings are supported by the record. See

G & G Investors, LLC v. Phillips Simmons Real Estate Holdings, LLC,

183 A.3d 472, 478 (Pa. Super. 2018).

      In his first argument, Appellant asserts the court erred in concluding

that PREP had met its burden under RUPA to foreclose on his transferable

partnership interest. Appellant contends the court improperly placed the

burden of proof on him: instead of requiring PREP to prove the distributions

would not pay off the debt in a reasonable time, he believes the court required

him to prove that the distributions would pay off the debt in a reasonable time.

      Under RUPA, PREP was entitled to foreclose on the charging order and

sell Appellant’s transferable interest if distributions under the charging order

would not pay off the debt in a reasonable time. See 15 Pa.C.S.A. § 8454(c).

A transferable interest is defined as a partner’s right to receive distributions

from the partnership. See 15 Pa.C.S.A. § 8412.

      While we agree with Appellant that it was PREP’s burden to establish its

right to the remedy provided by section 8454(c), we cannot agree with

Appellant’s characterization of the record. PREP presented, without any

significant objection from Appellant, evidence that showed that PREP had

never paid distributions to partners. See N.T., 8/1/19, at 18 (identifying that

there have been no distributions to the partners in the past thirty-five years).

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The trial court’s observation that Appellant “wholly failed” to establish that

distributions could pay off the debt in reasonable time must be viewed against

this factual background.

      As there was essentially uncontroverted evidence that PREP had never

given distributions to partners, the court did not err in placing the burden on

Appellant to establish that PREP would or could give distributions in the future.

      In a tenuously related argument, Appellant claims the allegedly unique

circumstances   of   this   case   make   foreclosure   under   section   8454(c)

inappropriate. Appellant correctly highlights that a sale pursuant to

foreclosure is likely to be less in value than partner’s full interest in the

partnership. He posits that this could lead to a slippery slope where a

partnership could operate in bad faith to obstruct the sale of partnership

property for the purpose of obtaining the debtor’s transferable interest at a

discount.

      This argument is unavailing. First, Appellant does not contest that the

clear language of the statute provides for this remedy. Second, even if we

were to contemplate the possibility of an equitable exception for bad faith

maneuvering by a partnership creditor, such a case is not present before us.

By all accounts, it is PREP and the other partners who seek the sale of PREP

on the open market, while Appellant is seeking to obstruct the sale. We cannot

conclude that the court erred in foreclosing the charging order and directing

the sale of Appellant’s transferable interest.

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      In his final argument, Appellant contends the remaining partners have

actively sought to obstruct payment of distributions capable of discharging his

debt. As an example, he highlights the partners’ unanimous rejection of an

initial third-party offer of $550,000 for the Property. Appellant contends that

if this offer had been accepted, PREP would have distributed sufficient funds

to satisfy Appellant’s debt to PREP.

      While Appellant casts this rejection as some form of nefarious conspiracy

against him, we note that Appellant himself rejected the same offer. Further,

the remaining partners were willing to accept an offer of $600,000 shortly

thereafter, which presumably also would have been sufficient to discharge

Appellant’s debt. Appellant is the sole reason this sale was not consummated.

      After reviewing the record, we cannot conclude the trial court erred in

foreclosing on the charging order and directing the sale of Appellant’s

transferable interest.

      Order affirmed.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 07/10/2020

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