Court Opinion

ID: 9742523
Source: CourtListenerOpinion
Date Created: 2023-08-26 21:15:24.494162+00
Date Added: 2024-06-11T07:24:33.190742
License: Public Domain

Ciparick, J. (dissenting in part).
I agree with the majority *260that plaintiffs’ first three causes of action were properly dismissed. Because, however, Partnership Law § 121-1102 (d) only prohibits a limited partner from attacking the validity or seeking to set aside or rescind a merger or consolidation, and specifically exempts “an action or contest with respect to compliance with the provisions of the partnership agreement,” I believe a common-law action for damages under a theory of breach of contract and aiding and abetting such breach would lie. I, therefore, disagree and respectfully dissent as to the dismissal of plaintiffs’ fourth and fifth causes of action, as they do not directly attack the merger as such.
It is well established that statutory interpretation begins with the plain language of the statute. “As the clearest indicator of legislative intent is the statutory text, the starting point in any case of interpretation must always be the language itself, giving effect to the plain meaning thereof" (Majewski v BroadalbinPerth Cent. School Dist., 91 NY2d 577, 583 [1998]). We have always preferred a literal reading and look to the unambiguous language of the statute for guidance as to what the Legislature intended. Partnership Law § 121-1102 (d) provides that:
“[a] limited partner of a constituent limited partnership who has a right under this article to demand payment for his partnership interest shall not have any right at law or in equity under this article to attack the validity of the merger or consolidation, or to have the merger or consolidation set aside or rescinded, except in an action or contest with respect to compliance with the provisions of the partnership agreement or [the notice provisions of] subdivision (a) of this section.”
Nowhere does the text of the statute expressly prohibit the availability of the common-law right of a limited partner to seek damages as a result of a breach of contract premised on a general partner’s alleged violation of a partnership agreement and the aiding and abetting of such breach by others. Neither does there exist a clear and specific legislative intent to abrogate the common-law remedy of breach of contract (see Tzolis v Wolff, 10 NY3d 100, 102 [2008]; Hechter v New York Life Ins. Co., 46 NY2d 34, 38-39 [1978]). In fact, there exists no legislative history that supports defendants’ and the majority’s view that the Legislature purposefully intended to make appraisal rights the exclusive remedy for aggrieved limited partners. The statute is very specific that a limited partner has no right to attack the *261validity of a merger and is relegated to exercising dissenter’s appraisal rights, but it does not preclude a common-law action for failure to comply with provisions of the partnership agreement—a breach of contract claim.
I respectfully disagree with the majority that, by allowing the breach of contract actions to proceed, the limited partners will be allowed to “bypass the appraisal process” (majority op at 259) and that the claims are “veiled attacks on the validity of the merger” (majority op at 259). The complaint is simply an allegation asserting that National Housing Partnership (NHP) breached its contractual duty under the partnership agreement and that as a result of the alleged breach the limited partners suffered damages. Such a theory of liability does not “attack the validity of the merger or consolidation” or seek “to have the merger or consolidation set aside or rescinded,” nor does it incorporate the common-law fraud or illegality exception from Business Corporation Law § 623 (k) as suggested by the majority (majority op at 258). The Legislature surely did not intend section 121-1102 to insulate a general partner from an action for damages resulting from a breach of contract merely because the merger or consolidation was successfully completed.
It is well settled that a court, when deciding whether to grant a motion to dismiss pursuant to CPLR 3211, must take the allegations asserted within a plaintiffs complaint as true, and accord plaintiff the benefit of every possible inference, determining only whether the facts as alleged fit within any cognizable legal theory. Here, plaintiffs assert that NHP not only breached its fiduciary duty owed to the limited partners under the partnership agreement, but also specifically breached the partnership agreement prior to the merger by its chronic mismanagement of the property. Plaintiffs also assert that NHP’s failure to take advantage of readily available federal subsidies both decreased the value of the partnership itself and caused a financial loss to the partnership from the loss of additional rental income. Plaintiffs further assert that the AIMCO defendants aided and abetted these breaches by allowing its general partner to engage in transactions not reasonably competitive with those that could have been obtained from unaffiliated persons. Therefore, plaintiffs’ fourth cause of action seeking recovery for damages, including loss of income, incurred as a result of NHP’s alleged breach of contract and of its fiduciary duties under the *262partnership agreement is cognizable as is the fifth cause of action brought against the AIMCO defendants for allegedly aiding and abetting the breach, as both causes of action fall within the exception of section 121-1102.
Recently, in Tzolis v Wolff (10 NY3d 100 [2008]), we held that a limited liability company (LLC) member had the right to assert a derivative cause of action on behalf of the LLC under common law, despite the fact that the legislative history could not conclusively establish why the Legislature omitted text from the LLC statute that would specifically authorize LLC members to bring a derivative suit.
We held in Tzolis “that members of a limited liability company (LLC) may bring derivative suits on the LLC’s behalf, even though there are no provisions governing such suits in the Limited Liability Company Law” (Tzolis at 102). Here, we have a statute prohibiting a limited partner, who had the right under Partnership Law § 121-1102 (d) to demand payment for its partnership interest, from seeking redress. This is so because if the limited partner fails to exercise appraisal rights, it loses its right to either attack the validity of or rescind the merger or consolidation. Nowhere does Partnership Law § 121-1102 (d) likewise prohibit a plaintiff from asserting a claim for damages under a breach of contract theory.
“To hold that there is no remedy when corporate fiduciaries use corporate assets to enrich themselves was unacceptable in 1742 and in 1832, and it is still unacceptable today” (Tzolis at 105).* The rule proposed by the defendants and adopted by the majority allows a merger transaction, in the limited partnership context, to become in effect a general release for a contractual claim for damages by a limited partner against a general partner, regardless of whether the damages arose pre- or post-merger. It relegates the aggrieved limited partner to asserting its rights by way of an appraisal proceeding, a remedy that is not always adequate and certainly would not be adequate here.
*263Therefore, I would modify the order of the Appellate Division to reinstate plaintiffs’ fourth and fifth causes of action.
Judges Read, Smith and Pigott concur with Judge Graffeo; Judge Cipabick dissents in part and votes to reinstate the fourth and fifth causes of action in a separate opinion in which Chief Judge Kaye and Judge Jones concur.
Order affirmed, with costs.

 Indeed, Chief Justice John Marshall wrote,
“[i]f, on tracing the right to contract, and the obligations created by contract, to their source, we find them to exist anterior to, and independent of society, we may reasonably conclude that those original and pre-existing principles are, like many other natural rights, brought with man into society; and, although they may be controlled, are not given by human legislation” {Ogden v Saunders, 12 Wheat [25 US] 213, 345 [1827]).