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ACLI GOVT. SECS., INC. v. RHOADES

February 17, 1993

ACLI GOVERNMENT SECURITIES, INC., Plaintiff,
v.
DANIEL RHOADES and MILTON BRATEN, Defendants. ACLI GOVERNMENT SECURITIES, INC., now known as Fuji Securities, Inc., Petitioner, v. DANIEL RHOADES, MILTON BRATEN, LEWIS HENKIND, and HOLLY VENTURES, a purported partnership, Respondents.



The opinion of the court was delivered by: MORRIS E. LASKER

LASKER, D.J.

 ACLI Government Securities, Inc., now known as Fuji Securities, Inc. ("ACLI"), moves for a judgment pursuant to Fed.R.Civ.P. 37 and 69(a) and CPLR 411 and 3017(b), declaring that an entity named "Holly Ventures," a purported partnership among the respondents Daniel Rhoades, Milton Braten and Lewis Henkind, is not a partnership, and for an Order directing the sale at public auction of each of the one-third interests of Rhoades and Braten in Holly Ventures and the distribution of the proceeds of that sale to ACLI in partial satisfaction of ACLI's outstanding judgments against Rhoades and Braten.

 ACLI initially maintained that this Court had ancillary jurisdiction to grant the relief requested because this is a special proceeding brought pursuant to Fed.R.Civ.P. 69(a) to enforce a judgment of this Court. Respondents challenged this contention and ACLI subsequently moved to amend its Petition to allege diversity of citizenship as a basis for jurisdiction. The respondents have not objected to the amendment which is accordingly granted.

 I.

 Burden of Proof

 Relying on Allen Chase & Co. v. White, Weld & Co., 311 F. Supp. 1253, 1259 (S.D.N.Y. 1970); Ramirez v. Goldberg, 82 A.D.2d 850, 852, 439 N.Y.S.2d 959, 961 (2d Dep't 1981), ACLI argues that the burden of proving the existence of a partnership is on the party asserting its existence, in this case the respondents. Respondents point out that in those cases the party who was held to have the burden of proving the existence of the partnership was not only the party seeking to establish its existence, but also the plaintiff. Respondents argue that, accordingly, these cases do not support ACLI's claim that the burden of proving a partnership falls on the party asserting its existence when that party, as is the case here, is not the plaintiff.

 Other cases, however, confirm the merit of ACLI's position. Hanlon v. Melfi, 102 Misc. 2d 170, 423 N.Y.S.2d 132, 134 (Sup. Ct. Suffolk Cty 1979) ("The burden, of course, of establishing the existence of an oral partnership by a fair preponderance of the evidence rests upon the party claiming the partnership ( Kahn v. Kahn, 3 A.D.2d 820, 160 N.Y.S.2d 972 (1st Dept. 1957))." See also In re Wells' Will, 36 A.D.2d 471, 321 N.Y.S.2d 200, (4th Dep't 1971), aff'd, 29 N.Y.2d 931, 329 N.Y.S.2d 322, 280 N.E.2d 95 (1972) (objectants to will seeking to establish partnership with decedent had burden of proving its existence). In sum, under New York Law, respondents have the burden of proving that Holly Ventures is a partnership.

 II.

 Indicia of Partnership.

 ACLI contends that respondents have not met their burden of proving that Holly Ventures is a partnership. In M.I.F. Securities Co. v. R. C. Stamm & Co., 94 A.D.2d 211, 463 N.Y.S.2d 771 (1st Dep't 1983), aff'd in relevant part, 60 N.Y.2d 936, 471 N.Y.S.2d 84, 459 N.E.2d 193 (1983), the Appellate Division stated that "whether partnership status is enjoyed turns on various factors including sharing in profits and losses, exercising joint control over the business, and making capital investment and possessing an ownership interest in the partnership." Similarly, in Tenney v. Insurance Co. of North America, 409 F. Supp. 746 (S.D.N.Y. 1975), the District Court stated that:

 
In New York . . . there are several significant indicia of the existence of a partnership relationship among various owners of interests in a business venture. These include (1) the pro-rata sharing of profits and losses of the enterprise, (2) the pro-rata contribution to the capital of the enterprise, (3) the joint ownership and interest in the enterprise's assets by all investors, (4) the intention of the parties that they be partners, and (5) the partners all having some voice in the management of the enterprise.

 Id. at 749. In that case, the District Court found that the plaintiff was a partner because she satisfied "most of the criteria." Id.. The issue for determination is whether respondents have met their burden of proving that Holly Ventures satisfies a sufficient number of these factors to be deemed a partnership.

 a. Pro rata sharing of Profits and Losses.

 An undertaking to assume the losses and to share the profits is an "indispensable essential[]" of a partnership. In re Wells' Will, 36 A.D.2d 471, 321 N.Y.S.2d at 206. The only evidence on this point which the respondents have produced is the statement of Lewis Henkind that "we agreed that our partnership would own the land, and we would share all profits and losses of the partnership equally." (Henkind ...


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