The opinion of the court was delivered by: CHIN
This diversity case was tried to the Court without a jury on August 24 and September 12, 1995. Both parties are pro se. Pursuant to Rule 54 of the Federal Rules of Civil Procedure, the following constitute my findings of fact and conclusions of law.
Plaintiff Bernard Rosenbach's mother, Mae Rosenbach, died in 1961. Mr. Rosenbach was one of the beneficiaries of his mother's estate. Defendant Aaron Green, Mr. Rosenbach's brother-in-law, was appointed the executor of the estate. After the final distribution of the assets of the estate, Mr. Rosenbach asked Mr. Green's brother to invest his share of the estate and Mr. Green's brother did so, in conservative investments such as certificates of deposit.
B. The Real Estate Venture and the $ 297,888.10 "Loan "
In 1982, Mr. Green entered into a contract to acquire certain real property at 43 West 61st Street, which he intended to develop, together with a joint venturee, into residential condominium apartments. Pursuant to the limited partnership agreement, Mr. Green was required to provide $ 500,000 as a capital investment. Mr. Rosenbach agreed to invest the money that he had invested through Mr. Green's brother in the project.
Mr. Rosenbach and Mr. Green decided that Mr. Rosenbach would invest by lending the money to Mr. Green to enable him to meet the capital funds requirement; both agreed that this would be better for Mr. Rosenbach than if he participated as a limited partner. Mr. Rosenbach consequently transferred $ 297,888.10 to Mr. Green, who in turn used the funds toward meeting the $ 500,000 capital fund. Mr. Green also executed a promissory note, dated December 12, 1982, in favor of Mr. Rosenbach. (PX J). The note stated that it was payable "June 15, 1983 after date" at European American Bank, Franklin Square, New York. The blank in the form for the rate of interest was not filled in. Mr. Green testified that he saw this as a "personal obligation" irrespective of whether the real estate venture turned a profit.
On or about June 15, 1983, Mr. Green executed a second note, in the amount of $ 300,000, which apparently was intended to supersede the first note. No additional funds were paid to Mr. Green for the second note. At trial, Mr. Rosenbach took the position that the second note was of no force and effect, and Mr. Green was willing to accept that. The second note, however, did provide for interest (two percent over Chemical Bank's prime rate) as well as a percentage of any distributions from the real estate venture.
Unfortunately, the project did not generate a profit. In the fiscal year 1993, Mr. Green was required to contribute an additional $ 334,000 in capital to the project. The last partnership report shows an accumulated loss as of September 1993 of $ 180,738. There were also accounts payable due and owing at that time. At no time did Mr. Green receive any distribution from the project. Although his office did receive an "overhead contribution" from approximately 1982 to approximately 1986, those funds were used to provide, among other things, construction management and sales services. Mr. Green did not receive any salary from these funds. Mr. Green's capital investments of $ 500,000 (of which $ 297,888.10 came from Mr. Rosenbach) and $ 334,000 were never returned to him.
Over the course of two and a half years, Mr. Green made payments totaling approximately $ 80,000 to Mr. Rosenbach on account of the "loan."
At trial, Mr. Green testified that he felt obliged to pay to Mr. Rosenbach the sum of $ 220,000, which reflected the principal that he "borrowed" in 1982 less the $ 80,000 in payments. Essentially, he testified that although the original intent was that Mr. Rosenbach was in effect a limited partner, entitled to his share of profits and responsible for his share of losses to the extent of his initial investment, he nonetheless felt obliged for personal reasons to repay Mr. Rosenbach his loan of $ 297,888.