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NOBEL v. MORCHESKY

March 24, 1982

Sanford M. NOBEL and Carol Nobel Hirsh, trading as Menallen Coke Company of New Salem, Plaintiffs,
v.
T. J. MORCHESKY and Johnstown Bank and Trust Company, Administrators of the Estate of James A. Morchesky, Kenneth Morchesky, Better Mining Company, Inc., Charles W. Dahl and Mary O. Dahl, his wife, Defendants



The opinion of the court was delivered by: SIMMONS

This purported diversity action was brought July 28, 1978, by Plaintiffs Sanford M. Nobel and Carol Nobel Hirsh, residents of New York State, trading as Menallen Coke Company of New Salem, as alleged owners of rights to certain coal, against the Pennsylvania Defendants the Estate of James A. Morchesky, Better Mining Company, Inc., and Charles and Mary Dahl, purported owners of surface rights to said coal, seeking damages and injunctive relief for the allegedly wrongful removal of certain coal from a tract of land situate in Fayette County, Pennsylvania.

A non jury trial was held in this matter March 24-27, 1980, before the Honorable Judge Daniel Snyder, now deceased. Following the trial, no findings of fact or conclusions of law were entered by Judge Snyder, and on August 1, 1980, the parties stipulated that the case be submitted to the Honorable Judge Paul A. Simmons for decision based on the transcript of the trial previously held. Each side presented oral argument in support of its contentions on May 13, 1981, and thereafter submitted briefs. After reviewing the record, the oral arguments advanced, and studying the briefs, the Court was unable to determine whether the Court had proper diversity jurisdiction of the matter, and on September 10, 1981, the Court issued an Order reopening the case to take additional evidence and testimony pertaining to the issue of jurisdiction. Plaintiff was specifically ordered on September 10, 1981 to furnish to the Court a true and certified exemplification of the entire record of Max Nobel and Helen Nobel, Plaintiffs v. James A. Morchesky, et al., filed at No. 1997, Equity, 1977 in the Court of Common Pleas of Fayette County, Pennsylvania; a certified copy of the original articles of Limited Partnership of the Menallen Coke Company of New Salem, and certified copies of any amendments thereto; the names and addresses of all of the partners, general and limited, of Menallen Coke Company of New Salem from the inception of the partnership to date, and the dates of their membership in the partnership; and any and all documentary evidence verifying Paragraph 10 of the stipulated facts to the effect that Max Nobel and wife acted as straw parties for Menallen Coke Company of New Salem as grantees in the subject deed dated December 28, 1973. This information was later provided and made a part of the record as exhibits in this case.

 Because federal courts are courts of limited jurisdiction, it is the duty of the Court sua sponte to raise the question of whether diversity jurisdiction in fact exists. In this regard, it is crucial to note that federal jurisdiction cannot be conferred by stipulation, agreement or consent of the parties. Reale International, Inc. v. Federal Republic of Nigeria, 647, F.2d 330 (2d Cir. 1981); Occidental of Umm al Qaywayn, Inc. v. A Certain Cargo of Petroleum, 577 F.2d 1196, 1199 n.1 (5th Cir.) cert. denied, 442 U.S. 928, 99 S. Ct. 2857, 61 L. Ed. 2d 296 (1978); Basso v. Utah Power & Light, 495 F.2d 906, 909 (10th Cir. 1974); Lang v. Windsor Mount Joy Mutual Insurance Co., 507 F. Supp. 967 (E.D.Pa.1981); Coggins v. Carpenter, 468 F. Supp. 270 (E.D.Pa.1979); Barrett v. Covert, 354 F. Supp. 446, 450 (E.D.Pa.1973).

 "When the foundation of federal authority is, in a particular instance, open to question, it is incumbent upon the courts to resolve such doubts, one way or the other, before proceeding to a disposition of the merits." Carlsberg Resources Corporation v. Cambria Savings and Loan Association, 554 F.2d 1254, 1256 (3d Cir. 1977).

 As previously noted, the named Plaintiffs in this purported diversity action, Sanford M. Nobel and Carol Nobel Hirsh, are New York residents trading as Menallen Coke Company of New Salem. Menallen Coke Company is a limited partnership originally formed December 1, 1965, pursuant to Pennsylvania law, which has as its principal place of business New Salem, Menallen Township, Fayette County, Pennsylvania. At the time the original limited partnership was formed, the general partners were Max B. Nobel, a Pennsylvania resident, and Sanford M. Nobel and Carol Nobel Hirsh. The limited partners were Sanford M. Nobel as trustee for Andrew B. Nobel and Gary Nobel, minors. An amended certificate of the limited partnership was filed October 26, 1970 in Fayette County, adding as two additional limited partners Carol Nobel Hirsh as trustee for David Hirsh and Sanford M. Nobel as trustee for Philip Nobel.

 On May 21, 1978, Max B. Nobel purported to resign as managing and general partner of the limited partnership, Menallen Coke Company. See Court Exhibit AAA-4.

 The Court had previously found on October 30, 1981, that diversity jurisdiction was lacking since the attempted withdrawal of Pennsylvania resident Max Nobel, general partner, from the limited partnership, Menallen Coke Company of New Salem, did not comport with the requirements of the Pennsylvania Uniform Limited Partnership Act and was an abortive attempt to collusively create diversity of citizenship. It followed then that Max Nobel, a resident of Pennsylvania, was and is, at all relevant times a member of said limited partnership and is a real Plaintiff party in interest. Because Max Nobel is a Pennsylvania citizen and resident, and all of the Defendants are Pennsylvania citizens and residents, there is no true diversity of citizenship.

 This finding of no diversity of citizenship was based on the evidence submitted in the October 30, 1981 hearing, and further review of this evidence and the applicable Pennsylvania law convinces the Court that this ruling was proper and was mandated by the evidence.

 The Pennsylvania Uniform Limited Partnership Act of 1975, set forth in 59 Pa.Cons.S. § 501 et seq. (Purdon Cum. Pocket Part 1981-82), states when and how a certificate of limited partnership should be amended. Section 542(b)(5) provides that a certificate of limited partnership shall be amended when "A general partner retires, dies, or becomes insane, and the business is continued under section 534 (relating to effect of retirement, death, or insanity of a general partner)." (Emphasis added).

 Section 543(a)(2) requires that an amendment to a certificate of limited partnership shall be signed by all members. Section 543(d)(1)(i) further provides that a certificate of limited partnership is amended or cancelled only when there is filed in the Pennsylvania Department of State a writing in accordance with section 543(a). (Emphasis added).

 The document purporting to affect Max Nobel's resignation from the limited partnership was executed May 21, 1978, and sworn to May 22, 1978, but was never filed or recorded in the office of the Department of State and/or the Prothonotary of Fayette County, Pennsylvania. (Exhibit AAA-4). A certificate of summary of record concerning the limited partnership (Exhibit AAA-1) was executed May 21, 1978, and was filed with the Department of State May 31, 1978, which made no reference of any kind to Max Nobel as a general partner of the limited partnership, or as a resigning partner of the limited partnership. Filed with the Pennsylvania Department of State and contemporaneously with that summary of record of the limited partnership, was an amended certificate of limited partnership for Menallen Coke Company of New Salem, executed May 21, 1978. Neither the summary of record of the limited partnership nor the amended certificate of the limited partnership was signed by Max Nobel as a general partner of the limited partnership as required by section 543(a)(2), although both documents were signed by Sanford M. Nobel and Carol Nobel Hirsh as general partners. Max Nobel, as a general partner of the limited partnership, was required by the Pennsylvania Uniform Limited Partnership Act, 59 Pa.Cons.S. § 543(a)(2), to sign the amendment to the certificate of limited partnership, which purported to evidence his retirement from said partnership. Because he failed to sign said amended certificate of limited partnership that indicated his retirement from the same, Max Nobel must presently be treated as a general partner of the limited partnership, since no properly amended certificate of limited partnership signed by Max Nobel has been filed with the Pennsylvania Department of State as required by the Pennsylvania Uniform Limited Partnership Act. See § 543(d)(1)(i).

 The original certificate of limited partnership in this case is not considered to have been lawfully amended until all members, including Max Nobel, general partner, have signed the same, and then only after the properly executed certificate has been recorded with the Pennsylvania Department of State.

 Plaintiff argues that only the signature of the continuing members is required to make a certificate of amendment to a limited partnership effective. This argument of Plaintiff offends all of the public policy considerations that require full public disclosure in matters involving the withdrawal of general partners from a limited partnership. If a general partner with unlimited liability could retire from a limited partnership without anyone knowing of it, injustice would certainly result. In fact, in this case, a party searching the records in the office of the Pennsylvania Department of State would never know that Max Nobel was a general partner at any time whatsoever in the subject limited partnership, Menallen Coke Company of New Salem. There is no way that a potential litigant or creditor investigating the Menallen Coke Company of New Salem records filed with the Pennsylvania Department of State could obtain knowledge that Max Nobel was ever a general partner of the limited partnership. Plaintiff argues that anyone searching the limited partnership records would also search the county where the partnership has its place of business. But, a search of the Fayette County ...


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