Professionals Real Estate Partnership v. Linn, H. ( 2020 )


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  • 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    NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37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.”
    J-A11010-20
    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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Document Info

Docket Number: 1970 MDA 2019

Filed Date: 7/10/2020

Precedential Status: Precedential

Modified Date: 7/10/2020