January 13, 2014
MERRILL SEIDMAN, A GENERAL PARTNER, AND MERRILL SEIDMAN AND PHILIP B. GOODMAN T/A MS & RS INVESTMENT LIMITED PARTNERSHIP, A GENERAL PARTNER, COLLECTIVELY T/A JACOB AND MERRILL SEIDMAN PARTNERSHIP AND WASHINGTON SQUARE PARTNERS, L.P., Appellants
RONALD L. CAPLAN, PMC WASHINGTON SQUARE PARTNERS GP AND ROOSEVELT'S INC., Appellees MERRILL SEIDMAN, A GENERAL PARTNER, AND MERRILL SEIDMAN AND PHILIP B. GOODMAN T/A MS & RS INVESTMENT LIMITED PARTNERSHIP, A GENERAL PARTNER, COLLECTIVELY T/A JACOB AND MERRILL SEIDMAN PARTNERSHIP AND WASHINGTON SQUARE PARTNERS, L.P., Appellees
RONALD L. CAPLAN, PMC WASHINGTON SQUARE PARTNERS GP AND ROOSEVELT'S INC., Appellants
Appeal from the Judgment Entered January 23, 2013 In the Court of Common Pleas of Philadelphia County Civil Division at No. September Term, 2008, No. 2385.
BEFORE: BENDER, P.J., LAZARUS, J., AND FITZGERALD [*], J.
Merrill Seidman, the Jacob and Merrill Seidman Partnership (the Seidman Partnership), and Washington Square Partners (WSP) (collectively, the Seidman Parties) appeal from the judgment entered on January 23, 2013, following a non-jury trial and the denial of their post-trial motions. Ronald Caplan, PMC/Washington Square Partners GP, LLC, and Roosevelt's Inc. d/b/a Philadelphia Management Company (collectively, the Caplan Parties) cross-appeal. We affirm.
Ronald Caplan organized WSP in 1996 for the express purpose of purchasing and disposing of real property then known as the Farm Journal Building located at 230-234 Washington Square, Philadelphia, Pennsylvania. Caplan served as general partner to WSP. Caplan invited the Seidman Partnership to join WSP as a special limited partner and capital contributor. The Seidman Partnership contributed $200, 000 to WSP and facilitated an $800, 000 mortgage loan. Max Berger and David Nyberg joined WSP as limited partners but made no capital contribution.
WSP purchased the Farm Journal Building on December 20, 1996, and sold it six months later on June 18, 1997. On June 19, 1997, Caplan, on behalf of WSP, agreed to purchase another property, located at 1411 Walnut Street, Philadelphia, Pennsylvania, from S-L Walnut, L.P., another entity partially owned by Caplan.
Following the sale of the Farm Journal Building, the Seidman Partnership received a return of its capital investment. The partners agreed to defer receipt of proceeds from the sale in order to accomplish a tax-free exchange. Further, each of the limited partners agreed to reduce their interest in WSP from the date of the exchange to a de minimus percentage for the purpose of the tax-free exchange.
On December 18, 1997, WSP completed the purchase of the Walnut Street property, thus perfecting the exchange. On January 1, 1998, the Seidman Partnership assigned 19.5% of its interest to Caplan. On March 16, 1998, and March 19, 1998, the Seidman Partnership received distributions of the proceeds from the Farm Journal Building sale in the respective amounts of $400, 000 and $200, 000.
In December 1998, the WSP partners signed a new agreement, reallocating the interests of the partnership and restating the provisions governing the partnership. At this time, WSP admitted Crusader Bank (Crusader) as an investor limited partner. In exchange for a substantial amount of capital, Crusader received a 99.8% interest in WSP and access to certain historic tax credits generated by the Walnut Street property.
Once Crusader earned the tax credit, Caplan purchased Crusader's interest in WSP with his personal funds. However, the transaction was erroneously structured as a redemption of the interests by WSP. This error caused WSP accountants to reallocate the remaining partners' ownership interests. As a result, the Seidman Partnership was reported to own a 20% interest in WSP. Subsequent tax returns for 2004 and 2005 reflected this error. In 2006, when Caplan discovered the error, he directed that the tax statements be corrected, and he prepared an amended and restated agreement of the partnership, resetting the ownership interests so that the Seidman Partnerhsip had a .5% interest in WSP.
The Seidman Parties commenced this action in September 2008, asserting numerous individual and derivative claims, including breach of fiduciary duty, breach of contract, conversion, unjust enrichment, tortious interference with contractual relations, aiding and abetting tortious interference, and civil conspiracy. Central to the Seidman Parties' claims was their contention that the Seidman Partnership owned a 20% interest in WSP. The Seidman Parties also filed a petition for audit and accounting, which was later withdrawn after a stipulation of the parties was filed and approved by the trial court. The trial court dismissed the claims for conversion and tortious interference on the basis of preliminary objections filed by the Caplan Parties. The trial court also entered partial summary judgment in favor of the Caplan Parties, dismissing the claims for aiding and abetting tortious interference and civil conspiracy.
In September and October 2011, the remaining claims were tried non-jury. In August 2012, the trial court issued extensive findings of fact and conclusions of law. Most significantly, the trial court found that the Seidman Partnership interest in WSP was .5%, not 20%. In addition, the trial court found in favor of the Seidman Parties on the breach of contract claim, based on Caplan's failure to provide the Seidman Partnership with annual financial statements. The trial court awarded the Seidman Parties damages, representing interest accrued on a deposit account controlled by Philadelphia Management Company and distributions associated with refinancing secured by WSP through Sovereign Bank. The trial court found in favor of the Caplan Parties on all remaining claims.
The parties filed post-trial motions, which were denied by the trial court. Judgment was entered, and thereafter, the Seidman Parties timely appealed; the Caplan Parties cross-appealed. The parties complied with Pa.R.A.P. 1925(b), and the trial court issued an opinion.
The Seidman Parties raise the following issues on appeal:
1. As a matter of fact and law, did the Trial Court ignore competent and uncontroverted evidence, abuse its discretion and/or commit errors of law by (a) drawing its August 20, 2012 Findings of Fact and Conclusions of Law; (b) denying [the Seidman Parties'] Motion For Post-Trial Relief; and (c) thereby failing to conclude that:
(i) [the Seidman Partnership] owns a twenty (20%) percent ownership [i]nterest in WSP, retroactive to September 1, 2004, the date WSP purchased and redeemed Crusader Bank's 99.8% [i]nterest in WSP, thereby entitling [the Seidman Partnership] to 20% of all profits, credits, allocations and distributions of WSP retroactive to September 1, 2004[, ] and continuing into the future;
(ii) that even if the "Turnover Date" occurred, any possible effect thereof was eliminated by [Caplan's] agreement, retroactive to January 1, 2006, confirming that all allocations and distributions by WSP were to be made to the partners strictly in accordance with their then respective [i]nterests in WSP, and therefore 20% to [the Seidman Partnership]; [and]
(iii) that since a "Partnership Interest" is recognized as personal property under sections 8503 and 8561 of the Pennsylvania Revised Uniform Limited Partnership Act, 15 Pa.C.S. § 8501, et seq. ("RULPA"), [the Caplan Parties] collectively breached their contractual and fiduciary duties to [the Seidman Partnership] by allowing  Caplan to convert and divert all of [the Seidman Partnership's] personal property [i]nterest in WSP, but for .5%, (i.e. 19.5%) to himself?
2. Are [the Seidman Parties] entitled to a recalculation and award of full and complete damages consistent with the entry of a judgment notwithstanding the verdict as requested in their Motion For Post-Trial Relief?
3. Are [the Seidman Parties] entitled to the appointment of an accountant to conduct an audit and prepare audited financial reports relating to WSP, to ascertain all damages [the Seidman Parties] suffered as a result of the actions by [the Caplan Parties] warranting entry of a judgment notwithstanding the verdict.
4.Did the Trial Court abuse its discretion and/or commit an error of law in denying [the Seidman Partnership's] Motion To Assess Reasonable Expenses by:
a. imposing an unreasonable burden of proof of the reasonable expenses incurred, including attorneys' fees, not required by RULPA, and thereby allowing the other partners of WSP to enjoy a financial windfall through no effort or expense on their part and to the detriment of [the Seidman Partnership]; and
b. dismissing and refusing to consider, without comment, the proposed equitable application of either the "common fund/common benefit/lodestar method" or the "common fund/common benefit/percentage of recovery" method of calculating and awarding reasonable expenses including attorneys' fees to [the Seidman Partnership]?
Seidman Parties' brief at 8-9. In their cross-appeal, the Caplan Parties raise the following issues:
1.Did the Trial Court err in granting [WSP] an award of $1, 684, 842 in interest where [the Seidman Partnership's] interest claim is not a proper derivative claim?
2. Did the Trial Court abuse its discretion in not requiring [the Seidman Parties] to post security under 15 Pa.C.S. § 8594(b) on the alleged basis that [the Caplan Parties] failed to show that [the Seidman Partnership] interest had a fair market value less than $200, 000, where [the Caplan Parties] had introduced unrebutted evidence showing that [its] interest was only worth $12, 260.63?
Caplan Parties' brief at 7.
In addressing these issues, our review is limited to
a determination of whether the findings of the trial court are supported by competent evidence and whether the trial court committed error in the application of law. Findings of the trial judge in a non-jury case must be given the same weight and effect on appeal as a verdict of a jury and will not be disturbed on appeal absent error of law or abuse of discretion. When this Court reviews the findings of the trial judge, the evidence is viewed in the light most favorable to the victorious party below and all evidence and proper inferences favorable to that party must be taken as true and unfavorable inferences rejected. The [trial] court's findings are especially binding on appeal, where they are based upon the credibility of the witnesses, unless it appears that the court abused its discretion or that the court's findings lack evidentiary support or that the court capriciously disbelieved the evidence. Conclusions of law, however, are not binding on an appellate court, whose duty it is to determine whether there was a proper application of law to fact by the [trial] court. With regard to such matters, our scope of review is plenary as it is with any review of questions of law.
Piston v. Hughes, 62 A.3d 440, 443 (Pa.Super. 2013) (quoting Shaffer v. O'Toole, 964 A.2d 420, 422-23 (Pa.Super. 2009) (internal quotation omitted); see also Quimby v. Plumsteadville Family Practice, Inc., 907 A.2d 1061, 1074 (Pa. 2006) ("A lower court's grant or denial of a judgment n.o.v. will be disturbed only for an abuse of discretion or an error of law.") (citing Adamski v. Miller, 681 A.2d 171, 173 (Pa. 1996)). Also subject to an abuse of discretion standard of review are a trial court's decisions whether to appoint an accountant to conduct an audit, see Stotsenburg v. Frost, 348 A.2d 418, 421 (Pa. 1975), and whether to award reasonable expenses, see In re Padesanin, 937 A.2d 475, 483 (Pa.Super. 2007).
We have reviewed the certified record, the briefs of the parties, the applicable law, and the opinion authored by the Honorable Arnold L. New of the Court of Common Pleas of Philadelphia County, entered June 13, 2013. The principal dispute between the parties was whether the Seidman Partnership maintained a 20% interest in WSP following the sale of the Farm Journal Building, the perfection of a tax-free exchange, and the distribution of the profits associated with the sale, or whether its interest was reduced thereafter to a de minimus .5% interest. In this regard, the trial court found that the Seidman Partnership agreed to remain limited partners with Caplan in WSP, holding a .5% interest, in exchange for a tax deferral after the sale of the Farm Journal Building. Its finding is supported by documentary and testimonial evidence, in particular the testimony of the Seidman Partnership's accountant, Philip Goodman, whom the trial court found to be credible. Thus, we discern no abuse of the court's discretion.
We conclude that Judge New's opinion is dispositive of the issues presented in this appeal. Accordingly, we adopt the opinion as our own for purposes of further appellate review.