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AFFILIATED CAPITAL SERVICES v. WEST ATLANTIC ASSOCIATES

March 28, 1991

AFFILIATED CAPITAL SERVICES CORPORATION, PLAINTIFF,
v.
WEST ATLANTIC CITY ASSOCIATES, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Skretny, District Judge.

DECISION AND ORDER

INTRODUCTION

Now before this Court for decision is defendant Bruce Mahon's ("Mahon") Motion for Summary Judgment pursuant to Fed.R.Civ.P. 56.

Affiliated Capital ("plaintiff") sues defendants jointly and severally for breach of contract, unjust enrichment and fraud seeking compensatory and punitive damages. By its breach of contract and unjust enrichment claims, plaintiff seeks to recover a brokerage commission allegedly owed as a result of its arranging financing from E.F. Hutton ("Hutton financing") for a New Jersey hotel project ("Hotel Project"). Additionally, via its fraud claim, plaintiff alleges that defendants conspired to deprive plaintiff of its commission for arranging the Hotel Project financing.

Defendants are West Atlantic City Associates ("West Atlantic"), a limited partnership, West Atlantic City Hotel Associates ("Hotel Associates"), a limited partnership, Mahon, a West Atlantic general partner, Commercial Development Group, Inc. ("CDG"), a Hotel Associates general partner, and Gary L. Price ("Price") and James A. Webb III, ("Webb"), both general partners of West Atlantic and Hotel Associates.

Preliminarily, this Court notes that plaintiff predicates its breach of contract causes of action, claims one through four of the Third Amended Complaint, on West Atlantic's breach of four separate agreements (collectively "the Agreements"). Three of these agreements are brokerage agreements between plaintiff and West Atlantic: A First Brokerage Agreement ("First Agreement"), executed between West Atlantic and plaintiff in January 1986; a Letter Agreement dated August 4, 1986, signed by Price as agent of West Atlantic and executed with plaintiff; and a Second Brokerage Agreement ("Second Agreement") dated August 6, 1986, signed by Price, also as agent of West Atlantic and executed with plaintiff. In a fourth agreement, the Non-Circumvention Agreement, contained in the First Agreement and also executed between West Atlantic and plaintiff in January 1986, West Atlantic agreed ". . . not to deal with any lenders, investors, or investment companies . . . introduced to West Atlantic . . ." within five years of that agreement without advising plaintiff and involving plaintiff in any such transactions.

This case has been in its pretrial stage since February 1987, when plaintiff filed its Complaint. On April 18, 1989, plaintiff filed its Third Amended Complaint. On May 3, 1989, Mahon filed his separate Answer to the Third Amended Complaint. On May 26, 1989, the remaining defendants filed an Answer to the Third Amended Complaint. Also on May 26, 1989, Mahon filed the present motion seeking summary judgment on all causes of action as against him. As detailed below, on February 5, 1990, Judge Arcara ordered that New Jersey law be applied to limited issues in this case.*fn1 Finally, on January 29, 1991, I heard oral argument on the present motion.

In support of his motion, Mahon has submitted a Legal Memorandum ("Mahon Memo"); a Reply Memorandum ("Mahon Reply"); a Supplemental Memorandum ("Supp. Memo"); a Letter Brief ("Mahon Letter Brief"); a Statement of Material Facts Not In Dispute ("Mahon Fact Statement"); affidavit of Bruce Mahon with exhibits ("Mahon aff."); and the affidavit of John Curran, Esq. with exhibits ("Curran aff.").

In opposition to Mahon's motion, plaintiff has submitted a Legal Memorandum ("Plaintiff Memo"); a Reply Memorandum ("Plaintiff Reply"); a First Supplemental Legal Memorandum ("Plaintiff's 1st Supp. Memo"); a Second Supplemental Legal Memorandum ("Plaintiff's 2d Supp. Memo"); a Statement of Material Facts in Dispute ("Plaintiff Fact Statement"); and the affidavit of Michael Capozzi, III, with exhibits ("Capozzi aff.").

In ruling on this motion, I have considered all these submissions and oral argument. Because the following discussion incorporates the relevant facts, I proceed to the parties' substantive arguments without a more detailed fact recitation.

Conclusion: For the reasons set forth below, this Court denies Mahon's motion for summary judgment in part and grants the motion in part.

SUMMARY JUDGMENT

Pursuant to Federal Rule of Civil Procedure 56(c), summary judgment is appropriate where it is shown that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." The burden is upon the moving party to demonstrate the absence of a material factual dispute. Fed.R.Civ.P. 56(e). Once that burden is met, the non-moving party "must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). This Court must draw all reasonable inferences in favor of the non-moving party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59, 90 S.Ct. 1598, 1608-09, 26 L.Ed.2d 142(1970).

With this standard in mind, this Court will address the relevant legal issues.

                  BREACH OF CONTRACT (FIRST THROUGH FOURTH
                             CLAIMS FOR RELIEF)

In claims one through four of the Third Amended Complaint, plaintiff alleges Mahon's liability, as a West Atlantic general partner, for West Atlantic's breach of four separate agreements: the First Agreement, the Letter Agreement, the Second Agreement and the Non-Circumvention Agreement.

Mahon moves for summary judgment on all plaintiff's breach of contract claims. Mahon contends that he withdrew from West Atlantic before West Atlantic's liability under any of the agreements attached, and, therefore, he could have no liability under the Agreements as a West Atlantic general partner.

Plaintiff responds that Mahon never legally withdrew from West Atlantic and that, therefore, Mahon remains personally liable to plaintiff for West Atlantic's contractual liabilities at least until West Atlantic concluded doing business. At minimum, plaintiff argues, the issue of Mahon's withdrawal remains a question of fact which defeats Mahon's summary judgment motion as to Mahon's liability for West Atlantic's breaches.

On February 5, 1990, Judge Arcara ordered that New Jersey law be applied to determine the issues of Mahon's withdrawal from West Atlantic, including the time such withdrawal, if any, occurred and, if this Court concludes Mahon withdrew from West Atlantic, Mahon's obligations under the Agreements, if any, as a withdrawing partner. This Court first addresses the issue of Mahon's withdrawal from West Atlantic. This Court will then discuss the issue of Mahon's liability under the Agreements.

A. Mahon's Withdrawal From West Atlantic

New Jersey Limited Partnership Law, as amended, governs the issue of Mahon's withdrawal from West Atlantic. Specifically, N.J.STAT.ANN. § 42:2A-31 (West 1990) ("§ 42:2A-31") contains an explicit list of events or actions by a general partner any of which, in the absence of written approval of all partners, can constitute the general partner's withdrawal from the limited partnership.

This Court concludes that a question of fact exists as to whether Mahon withdrew from West Atlantic in accordance with § 42:2A-31, and sections referenced therein, and if Mahon withdrew, as to when Mahon withdrew.*fn2

As discussed below, for purposes of the present motion because Mahon's withdrawal from West Atlantic and when such withdrawal may have occurred remain questions of fact, this Court must deny Mahon' s summary judgment motion with respect to all of plaintiff's breach of contract claims. However, this Court feels compelled to address two issues relating to Mahon's alleged withdrawal which the parties have raised in their papers and which, if addressed now, will assist ultimate resolution of this case on the merits.

First, this Court notes that, under New Jersey law, the withdrawal of a general partner from a limited partnership does not necessarily effect a dissolution of the partnership, although both parties' papers imply a partner's withdrawal tantamount to a dissolution. Under N.J.STAT. ANN. § 42:2A-51(c) (West 1990), a general partner's withdrawal from a limited partnership effects a dissolution of the limited partnership unless certain specified conditions are met or the certificate of limited partnerhsip provides that ". . . the business of the limited partnership [is] to be carried on by the remaining general partner or partners and that partner or partners do so . . ." However, since, although referring to dissolution only generally, the parties did not brief New Jersey's dissolution law, this Court renders no opinion whether Mahon's withdrawal, if any, effected a dissolution of West Atlantic.

Second, both parties have addressed the issue of whether plaintiff received notice of Mahon's alleged withdrawal from West Atlantic. While Mahon contends that plaintiff was advised orally in approximately June or July of 1986 of Mahon's withdrawal from West Atlantic (Mahon Memo, pp. 27-28, citing Capozzi deposition testimony), plaintiff contends that it received no notice that Mahon withdrew from West Atlantic (Plaintiff Memo, pp. 25-26, citing Capozzi aff.). The parties are in direct contradiction as to whether plaintiff ever received proper legal notice of Mahon's alleged withdrawal. Therefore, even were this Court to conclude that Mahon withdrew and that such withdrawal effected a dissolution of West Atlantic, a question of fact exists as to whether plaintiff received adequate notice so as to extinguish Mahon's liability to plaintiff.

Therefore, this Court denies Mahon's motion for summary judgment with respect to the issue of Mahon's withdrawal from West Atlantic and when such withdrawal may have occurred.*fn3

Having reached this conclusion, this Court now addresses the issue of Mahon's liability for West Atlantic's alleged breaches of the Agreements, claims one through four of the Third Amended Complaint.

  i. Mahon's Liability Under The First Agreement &
  Non-Circumvention Agreement, Plaintiff's First &
  Second Claims For Relief, Respectively

The parties do not dispute that plaintiff and West Atlantic executed the First Agreement and Non-circumvention Agreement in January 1986, well before any alleged withdrawal by Mahon from West Atlantic occurred.

However, Mahon argues he has no liability under the First and Non-circumvention Agreements since, Mahon contends, according to those agreements' own terms, West Atlantic's liability to plaintiff was contingent upon the closing of the Hotel Project financing and title passing. Since the loan closing did not occur until approximately December 17, 1986, well after Mahon contends to have withdrawn from West Atlantic, Mahon argues he has no liability as a West Atlantic ...


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