Opinion
Index No. 700910 2012 Motion Seq. No. 1 Motion Cal. No. 66
05-08-2013
Short Form Order Present: HONORABLE
Justice
The following papers numbered 1 to 17 read on this motion by plaintiff pursuant to CPLR 3212 for summary judgment in its favor as against defendants, to strike the amended answer, including the affirmative defenses and counterclaim of defendant Kinpit Associates, L.P. (Kinpit Associates) with prejudice, and to strike the answer and affirmative defenses of defendants Kinpit Realty Inc., (Kinpit Realty), St. Johns I Associates, L.P. (St. Johns), and Troy D. Stevens, Jr. A/k/a Troy Stevens with prejudice; and on this cross motion by defendant Kinpit Associates for summary judgment dismissing the complaint and all cross claims asserted against it.
+---------------------------------------------------------+ ¦ ¦Papers ¦ ¦ ¦ ¦ ¦ ¦Numbered ¦ +----------------------------------------------+----------¦ ¦Notice of Motion - Affidavits - Exhibits ¦1-5 ¦ +----------------------------------------------+----------¦ ¦Notice of Cross Motion - Affidavits - Exhibits¦6-8 ¦ +----------------------------------------------+----------¦ ¦Answering Affidavits - Exhibits ¦9-12 ¦ +----------------------------------------------+----------¦ ¦Reply Affidavits ¦13-14 ¦ +----------------------------------------------+----------¦ ¦Sur-Reply and Supplemental Rely Affirmations ¦15-17 ¦ +---------------------------------------------------------+
Upon the foregoing papers it is ordered that the motion and cross motion are determined as follows:
Plaintiff commenced this action to recover on a business revolving line of credit agreement dated December 18, 2002, and guaranties. Plaintiff alleges that it extended a commercial extension of credit to defendant Kinpit Realty in the principal amount of $250,000.00 pursuant to the terms and conditions of the revolving credit agreement. It also alleges that defendants St. Johns, Kinpit Associates and Stevens each gave guaranties of the payment of the indebtedness of defendant Kinpit Associates to plaintiff. Plaintiff further alleges that defendant Kinpit Realty defaulted under the terms of the revolving credit agreement by failing to remit payment when due and owing on February 1, 2012 and thereafter. Plaintiff additionally alleges that it provided notice of the default, and accelerated the debt and made demand for payment of the loan, but no part of the outstanding loan balance has been paid.
Defendant Kinpit Associates served an amended answer to the complaint with a counterclaim for alleged aiding and abetting the breach of fiduciary duties owed to it by Stevens and Kinpit Realty, and a cross claim against defendants Kinpit Realty, St. Johns and Stevens for indemnification. Defendants Kinpit Realty, St. Johns and Stevens served a combined answer. Plaintiff served a reply to the counterclaim asserted by defendant Kinpit Associates, asserting various affirmative defenses including the expiration of the statute of limitations.
Plaintiff moves for summary judgment in its favor against defendants and to strike the amended answer, including the affirmative defenses and counterclaim of defendant Kinpit Associates with prejudice, and to strike the answer and affirmative defenses of defendants Kinpit Realty, St. Johns, and Stevens with prejudice. Defendant Kinpit Associates opposes the motion and cross moves for summary judgment dismissing the complaint and any cross claims asserted against it. The other defendants have not appeared in relation to the motion or cross motion.
It is well established that the proponent of a summary judgment motion "must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact" (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]).
In support of its motion, plaintiff submits a copy of the pleadings, the revolving line of credit agreement, the general security agreement, a notice of default, the guaranties of defendant Kinpit Associates, St. Johns and Stevens, and the affidavit of Christopher W. Gates, vice president of "Special Credits" of plaintiff, attesting to the default by defendant Kinpit Realty under the revolving credit agreement.
In opposition and in support of its cross motion, defendant Kinpit Associates asserts that it is not liable on the guaranty which was executed by defendant Stevens, as "[p]artner" on behalf of Kinpit Associates. Defendant Kinpit Associates asserts it is not in the business of guaranteeing the debts of another, and that defendant Stevens, one of two general partners of Kinpit Associates at the time of the execution of the guaranty on January 8, 2002, exceeded his authority to act on behalf of the limited partnership when executing the guaranty. Defendant Kinpit Associates asserts that under the terms of paragraph 14 (A) of the limited partnership agreement dated July 30, 1974, its general partners are prohibited from extending the credit or capital of the limited partnership for anything other than for partnership business, and that the guaranteeing of the debt of defendant Kinpit Realty was not related to Kinpit Associates's business as the owner and operator of an apartment complex. It also asserts that paragraph 14 (C) of 1974 limited partnership agreement requires approval of 51% of the holders of limited partnership interests when obtaining refinancing and that none of the limited partners authorized defendant Stevens to bind the limited partnership to the guaranty. Defendant Kinpit Associates offers, among other things, a copy of the 1974 limited partnership agreement between the general partners and limited partners of the partnership named "Kinpit Associates" and the affidavit of Seymour C. Nash, a limited partner of defendant Kinpit Associates and the managing member of Kinpit Holding, LLC (Kinpit Holding), a New York limited liability company, a current general partner of defendant Kinpit Associates.
Courts have consistently concluded that a partner has no implied authority to bind the partnership upon a contract of guaranty (see Chelsea Natl. Bank v Lincoln Plaza Towers Assocs., 93 AD2d 216, 218 [1st Dept 1983], affd 61 NY2d 817 [1984]; First Natl. Bank of Ann Arbor, Mich. v Farson, 226 NY 218, 223 [1919]; see also General Overseas Films, Ltd., v Robin Intl., Inc., 542 F Supp 684, 692 [SD NY 1982]). Nonetheless, a plaintiff may establish partnership authority for a guaranty or surety agreement executed by an individual partner where it can show that such actions are expressly authorized under a partnership agreement, or were incident to carrying on the usual business of the partnership because they would be expected due to the particular circumstances and requirements inherent in carrying on that type of business (see Chelsea Natl. Bank, 93 AD2d 216, affd 61 NY2d 817).
Plaintiff argues that defendant Kinpit Associates cannot rely upon the 1974 limited partnership agreement to challenge the validity of the Kinpit Associates guaranty. It asserts that the limited partnership named "Kinpit Associates" in the 1974 limited partnership agreement is not the same limited partnership which gave the Kinpit Associates guaranty and is sued herein as a defendant. Plaintiff contends that defendant Kinpit Associates is an entity formed in 2000, as evidenced by the certificate of limited partnership dated June 19, 2000 (certificate of limited partnership) and filed on June 22, 2000, and is not bound by a limited partnership agreement which was entered into years before its formation.
Partnership Law § 91(1) (b) requires that a certificate of formation of a limited partnership be filed in the office of the county clerk in which the principal office of the partnership is located. Plaintiff has failed to show any such filing was made with respect to the entity purportedly formed in 2000 and named "Kinpit Associates, L.P." Nor has plaintiff shown that the limited partnership formed in 1974 was ever dissolved (see Partnership Law § 113). In addition, to the extent a filing was made with the Secretary of State on June 22, 2000 relative to "Kinpit Associates, L.P.," such a filing is unrelated to limited partnership formation, but rather fulfills the requirement by which an entity may lawfully conduct business under an assumed name in New York (see General Business Law § 130 [1] [b]). Defendant Kinpit Associates has established it was formed in 1974 under the 1974 limited partnership agreement and operates as "Kinpit Associates, L.P." under the 1974 agreement. It has also established there is no subsequent agreement which superceded the 1974 agreement, and plaintiff has failed to prove there is any other limited partnership agreement relative to Kinpit Associates, L.P. Under such circumstances, plaintiff has failed to show the 1974 limited partnership agreement is inapplicable on the issue of whether defendant Stevens had the authority to bind the limited partnership to the guaranty.
The 1974 limited partnership agreement indicates that the character and purpose of the partnership is to acquire certain real property for the purpose of rehabilitating, developing operating and maintaining an apartment project. Paragraph 14 of the 1974 limited partnership agreement, in relevant part, provides:
"14. Management and Control
A. The General Partners shall manage and control the business and assets of the Partnership. . . . The General Partners shall not employ either the credit or the capital of the Partnership in any other than Partnership business."
. . .
C. The General Partners shall have all the rights and powers and be subject to all the restrictions and liabilities of a Partner in a Partnership without Limited Partners, except that the General Partners have no authority to:
. . .
7) Sell, refinance or otherwise dispose of the Limited Partnership Project or real estate without the approval of Fifty-One Percent (51%) of the Limited Partners."
To the extent defendant Kinpit Associates asserts defendant Stevens did not have authority to give the guaranty pursuant to paragraph 14(C)(7) of the 1974 limited partnership agreement, the guaranty did not serve to constitute a sale, refinance or other disposal of the apartment complex or real estate of defendant Kinpit Associates. Rather, it is to secure repayment of the advances on the line of credit to defendant Kinpit Realty not Kinpit Associates.
With respect to the issue of whether defendant Stevens had the authority to give the guaranty pursuant to paragraph 14(A), Mr. Nash states the business of defendant Kinpit Associates is limited to owning and operating the apartment complex, and that it received no benefit from the guaranty since the advances were used solely for the personal benefit of defendant Stevens. Plaintiff claims that defendant Kinpit Realty was a general partner of defendant Kinpit Associates and co-manager of the apartment complex with defendant Stevens at the time of the execution of the guaranty. Such claim, however, even if true, does not resolve the question of whether the giving of the guaranty by defendant Stevens was in furtherance of or connection with the business of Kinpit Associates. That a general partner may receive a personal benefit from a contract of guaranty given on behalf of a limited partnership, does not mean the limited partnership received a benefit. Plaintiff has failed to establish the purpose of the extension of credit to defendant Kinpit Realty or the manner in which the advances were used and therefore has failed to show defendant Stevens was authorized to bind defendant Kinpit Associates to the guaranty. Under such circumstances, plaintiff is not entitled to summary judgment in its favor as against defendant Kinpit Associates and defendant Kinpit Associates is entitled to summary judgment dismissing the complaint asserted against it.
With respect to defendants Kinpit Realty, St. Johns, and Stevens, plaintiff has made a prima facie showing of its entitlement to judgment in its favor as a matter of law against such defendants (see HSBC Bank USA, Nat. Assn. v Laniado, 72 AD3d 645 [2d Dept 2010]). Such defendants have failed to oppose the motion and demonstrate the existence of a triable issue of fact.
With respect to that branch of the motion by plaintiff for summary judgment dismissing the counterclaim asserted against it, New York law does not provide a single limitations period for breach of fiduciary duty claims, rather, the applicable statute of limitations for breach of fiduciary claims is dependent upon the substantive remedy sought (see Monaghan v Ford Motor Co., 70 AD3d 848 [2010]). If the relief sought is equitable in nature, the six-year limitations period applies (see CPLR 213[1]). On the other hand, if the relief sought is only money damages, a three-year statute of limitations applies (see CPLR 214[4]; see Monaghan, 70 AD3d at 850). In this instance, defendant Kinpit Associates seeks to recover damages on its counterclaim against plaintiff for aiding and abetting the breach of fiduciary duties by defendants Stevens and Kinpit Realty. Defendant Kinpit Associates alleges plaintiff aided and abetted defendants Stevens and Kinpit Realty in the breach of their fiduciary duties owed to it by issuing the line of credit and remitting advances to defendant Stevens and Kinpit Realty. To the extent the line of credit agreement was entered into in 2002, and this action was commenced on May 23, 2012, the counterclaim against plaintiff is barred by the expiration of the applicable statute of limitations (see Kaufman v Cohen, 307 AD2d 113 [2003]).
The motion by plaintiff is granted to only the extent of granting plaintiff summary judgment in its favor as against defendants Kinpit Realty, St. Johns, and Stevens, and dismissing the counterclaim asserted against it by defendant Kinpit Associates. That branch of the cross motion by defendant Kinpit Associates for summary judgment dismissing the complaint asserted against it is granted. That branch of the cross motion by defendant Kinpit Associates for summary judgment dismissing all cross claims asserted against it is denied. Defendant Kinpit Associates has failed to demonstrate any cross claims have been asserted against it.
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J.S.C.