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HomeMy WebLinkAbout95-3528 EquityPNC BANK, NATIONAL: ASSOCIATION and : DAVID W. MAGARO, : EXECUTORS OF THE : ESTATE OF WILLIAM G.: MAGARO, deceased, : late, trading as MAGARO : and PHELAN, a · partnership, · Plaintiff · RICHARD E. PHELAN, : Liquidator of Magaro : and Phelan, a : partnership, : Defendant : IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION - EQUITY NO. 95-3528 EQUITY TERM IN RE: OPINION PURSUANT TO PA. R.A.P. 1925 OLER, J., January 16, 2001. In this apparently endless case involving the dissolution of a two-person partnership, Plaintiffs are the personal representatives of one partner, who died on June 6, 1990, and Defendant is the surviving partner, who continued to operate the business. Plaintiffs' complaint alleged that the partnership was dissolved on June 6, 1990, when their decedent died,~ that Defendant had unilaterally operated the business since the decedent died,2 that Defendant had refused to liquidate the partnership as required by the Uniform Partnership Act,3 and that Plaintiffs had been unable to settle the decedent's estate because of Defendant's breach of duties as a surviving partner.4 Plaintiffs' complaint, para. 10. Plaintiffs' complaint, para. 11. Plaintiffs' complaint, para. 12. Plaintiffs' complaint, para. 3. Defendant finally filed an accounting on October 6, 1997. On December 31, 1997, the court ordered him to file a revised accounting. Defendant filed a revised, or supplemental, accounting on January 30, 1998. Objections to the accounting were filed by Plaintiffs, an auditor was appointed, extensive hearings were conducted by the auditor, and an auditor's report was filed. Two appeals by Defendant are now pending in the Pennsylvania Superior Court. The first, filed on September 5, 2000, is from a monetary judgment in favor of Plaintiffs entered by praecipe in accordance with this court's dismissal of exceptions to the auditor's report; the auditor's report had valued the partnership's assets (as of the death of Plaintiffs' decedent). The decree upon which the judgment was entered read as follows: AND NOW, this 31st day of July, 2000, it is ordered and decreed that the Defendant shall pay the Plaintiffs $337,122.50 as the Plaintiffs' portion of the liquidated Partnership, with interest at the legal rate from June 6, 1990, and costs of suit. This first appeal is docketed in the Superior Court at No. 1599 MDA 2000. The rationale of this court fo~' the monetary judgment against Defendant was provided by the court in an opinion which accompanied its dismissal of exceptions to the auditor's report and entry of the said decree.5 Defendant's second appeal, which is the subject of this opinion, was filed on October 4, 2000, and is from a denial of a motion filed by Defendant which this court regarded as a motion for reconsideration or to reopen the record.6 The motion in question attached various tax returns purportedly filed by the estate of 5 See Opinion of Court, July 31, 2000. This court's record in the present case, containing this opinion, has been received by the Superior Court at No. 1599 MDA 2000, because of the initial appeal. 6 Order of Court, September 5, 2000. Defendant's motion, styled a Motion To Open or Modify Judgment, was filed on August 28, 2000, was denied by order of court entered on September 5, 2000, at 10:42 a.m., prior to Defendant's first appeal, which was filed on the same date at 2:35 p.m. 2 Plaintiff"s decedent and suggested that interest provided for in the court's dismissal of objections to the auditor's report and in the resultant judgment was incompatible with a history on the part of the estate of Plaintiff's decedent of accepting the tax benefit of certain partnership losses.7 The failure of Defendant to raise this issue on an earlier occasion was explained in the motion as follows: 2. Shortly [after the above decree was entered], Plaintiff entered judgment upon the ... Decree. 3. By entering judgment on the date of death value, Plaintiff elected to accept the date of death value, together with interest from that date to the present, rather than electing an alternative measure of damages, (specifically, litigating to determine the present day value of the Partnership's assets). 4. Until the date upon which judgment was entered, it remained unclear as to whether Plaintiff would exercise such election, or whether the litigation would continue. 11. Now that the estate has elected to take its distributive share of the Partnership's assets as of June 6, 1990, it is clear that the entirety of the tax deductions for the partnership's assets from 1990 to the present should have been claimed by Defendant ..., rather than having been divided and "shared" with the Estate. 14. Defendant therefore asks that this Court open the judgment entered on August 3, 2000, so that the same may be modified to appropriately reflect the value which the Estate has received following the date of death, which amount will reduce the judgment amount accordingly.8 On September 5, 2000, the court entered the following order, denying Defendant's motion: Defendant's Motion To Open or Modify Judgment, filed August 20, 2000. Sld. AND NOW, this 5th day of September, 2000, upon consideration of the Defendant's Motion To Open or Modify Judgment, which appears to the court to be a motion for reconsideration or a motion to reopen the record to submit additional evidence, the motion is denied. Defendant filed an appeal from this order, as noted, on October 5, 2000. The present opinion in support of the order is written pursuant to Pennsylvania Rule of Appellate Procedure 1925(a). STATEMENT OF FACTS A detailed statement of the facts of this case has been provided in an opinion of the court dated July 31, 2000.9 For this reason, a brief summary only of the facts will be provided herein. William G. Magaro, Plaintiffs' decedent, and Richard E. Phelan, Defendant, formed a partnership to acquire and develop real estate,l° William G. Magaro died on June 6, 1990.Il Thereafter, Defendant collected all money owed to the partnership and continued to conduct the business of the partnership.~2 On June 30, 1995, the personal representatives of the decedent, Plaintiffs, filed the present action in equity, alleging that their decedent and Defendant were equal partners in an enterprise known as Magaro and Phelan,~3 that the business of the partnership "was the acquisition and development of real estate, including leasehold improvements, fixtures and equipment for restaurants and the leasing of 9 As noted previously, because of an earlier appeal by Defendant pending in the Superior Court, this opinion is to be found in the record received by the Superior Court at No. 1599 MDA 2000. l0 N.T. 1-4, Auditor's Hearing, March 9, 1999 (hereinafter N.T. __); Auditor's Exhibit 1, para. 2, 4. ~ Auditor's Exhibit 1, para. 3. Pursuant to 15 Pa. C.S. §8351 and §8353, the death of William G. Magaro dissolved the partnership on the date of his death, June 6, 1990. ~2 Plaintiffs' complaint, para. 11; Defendant's answer, para. 11. ~3 Plaintiffs' complaint, para. 4. 4 said facilities to restaurant operators,''~4 that the partnership owned real estate at various named locations,~5 that their decedent died on June 6, 1990,~6 that letters testamentary were granted on his estate to Plaintiffs nine days after his death,i? that Defendant continued to operate the business unilaterally after their decedent's death,~8 that Plaintiffs had made repeated requests that Defendant liquidate the partnership as required under the Uniform Partnership Act,~9 that Defendant refused to do so,2° and that Plaintiffs had been unable to settle the decedent's estate as a consequence.2~ More than seven years after his partner's death, Defendant filed an accounting, on October 31, 1997. The accounting was revised, pursuant to court order, on January 30, 1998. The parties were unable to resolve objections to the accounting filed by Defendant, and on February 18, 1998, an auditor in the person of Samuel L. Andes, Esq., was appointed in the matter by the court.22 Hearings which produced six volumes of transcribed testimony were held by the auditor. On December 9, 1999, the auditor filed his report concerning the partnership assets. The auditor concluded that the net value of the partnership on the date of death of Plaintiffs' decedent, June 6, 1990, was $674,245.00.23 Defendant filed nineteen exceptions to the Auditor's Report? ~4 Plaintiffs' ~5 Plaintiffs' 16 Plaintiffs' ~? Plaintiffs' ~8 Plaintiffs' complaint, para. 7. complaint, para. 8. complaint, para. 3. complaint, para. 3. complaint, para. 11. 19 Plaintiffs' complaint, para. 12. 20 Plaintiffs' complaint, para. 12. 21 Plaintiffs' complaint, para. 15. 22 Order of Court, February 18, 1998. 23 Auditor's Report, at 35. 24 Defendant's Exceptions to Auditor's Report, filed January 18, 2000. 5 These exceptions were dismissed by this court on July 31, 2000, and the decree quoted above was entered, directing that Defendant pay to Plaintiffs half of the indicated value of the partnership, with interest from June 6, 1990, the date of death of Plaintiff's decedent. An appeal to the Superior Court from the judgment entered pursuant to this decree was filed by Defendant on September 5, 2000, and remains pending in the Superior Court. The motion filed by Defendant which is the subject of this opinion, and which the court regarded as a motion for reconsideration or to reopen the record, was denied on September 5, 2000. DISCUSSION A motion for reconsideration or modification, a motion to reopen the record, and a motion to open judgment are all addressed to the sound discretion of the trial court. Ellenbrogen v. PNC Bank, N.A., 731 A.2d 175, 180 n.7 (Pa. Superior Ct. 1999) (motion for reconsideration); Touraine Partners v. Kelly, 333 Pa. Super. 196, 482 A.2d 240 (1984) (motion to reopen record); Ehnes v. Wagner, 388 Pa. 102, 104, 130 A.2d 171,172 (1957) (motion to open judgment). Discretion is abused when the course pursued represents not merely an error of judgment, but where the judgment is manifestly unreasonable or where the law is not applied or where the record shows that the action is a result of partiality, prejudice, bias or ill will. Coker v. $.M. Flickinger Co., 533 Pa. 441,447-48, 625 A.2d 1181, 1185 (1993). In the absence of an agreement to the contrary, a partnership is dissolved on the date of any partner's death. Hansel v. Hansel, 300 Pa. Super. 548, 556, 446 A.2d 1294, 1298 (1982). The right to an account of the partner's interest shall accrue to any partner or his legal representative as against the surviving partner at the date of dissolution. Id. at 556, 446 A.2d at 1299. When a partnership is dissolved by the death of a partner, it is the duty of the surviving partner to wind up partnership business and settle its affairs without delay. Wisocki, Adm'x. v. Howell, 37 D. & C.2d 666, 670 (Franklin County 1965). Liability of the surviving 6 partner to account to the deceased partner's estate continues until payment is made. Spivak v. Bronstein, 367 Pa. 70, 76, 79 A.2d 205, 207-08 (1951). Until such payment is made, the estate of the deceased partner has the option to claim either the profits attributable to the decedent's interest or legal interest. Id. If the estate chooses to take legal interest, such interest will be added from the date of the partner's death until the date his or her portion of the partnership's net value is distributed. Id. "[L]itigation must eventually come to an end." McMillen v. $4 Lumber, Inc., 538 Pa. 567, 571,649 A.2d 932, 934 (1994). In the present case, it has been more than a decade since Defendant's surviving partner died and more than a decade since an estate was opened by Plaintiffs; Defendant's conduct as a surviving partner, including the filing of a belated accounting as to which objections proved meritorious, has made it impossible for the estate to be settled in a timely manner. The merits of the decree issued by this court on July 31, 2000, based on the record developed by the parties, whereby Defendant was directed to pay to Plaintiffs half the value of the partnership assets as of the death of Plaintiff's decedent, with interest from the date of death, were subject to review by way of an appeal from the judgment entered thereon, and are presently before the Superior Court. No legitimate purpose was to be served, in the court's view, by reopening the case or reconsidering its disposition in this forum. For the foregoing reasons, the court entered the order dated September 5, 2000, denying Defendant's Motion To Open or Modify Judgment, from which Defendant has appealed. 7 John M. Eakin, Esq. Main and Market Streets Mechanicsburg, PA 17055 Attorney for Plaintiff Mark D. Bradshaw, Esq. 126 Locust Street Harrisburg, PA 17101 Attorney for Defendant