Summary
holding that the information contained in the certificate of limited partnership binds the partnership and the partners with respect to third parties
Summary of this case from In re Securities Group 1980Opinion
May 14, 1991
Appeal from the Supreme Court, New York County (Carol Arber, J.).
Plaintiff instituted this action to foreclose a second and third mortgage in the consolidated sum of $450,000 covering two condominium apartment units. A title search disclosed that defendant Reinert was a general partner of defendant limited partnership. However, prior to the issuance of the mortgage loan, an agreement was executed conveying Reinert's general partnership interest to defendant Stuart Z. Hirschman and one John T. Miller. Whether plaintiff received a copy of this agreement or otherwise received actual notice that Reinert had resigned as a general partner before extending credit is a matter of dispute. Nevertheless, it is uncontroverted that the certificate of limited partnership was not amended to reflect any change in the composition of the partnership.
This appeal by defendant Reinert from the denial of his cross-motion raises the question of whether he may offer proof of plaintiff's actual knowledge of his status with respect to the partnership or whether he is precluded from raising the issue by the information contained in the certificate of limited partnership. Defendant argues that, pursuant to sections 27 Partnership and 95 Partnership of the Partnership Law, plaintiff is required to demonstrate its reliance upon his status as general partner in granting the mortgage in order to recover a deficiency judgment against him. Plaintiff contends that, pursuant to sections 91, 113 and 114 of the Partnership Law, the certificate is conclusive evidence of Reinert's status and, therefore, it is unnecessary to address the issue of reliance.
A limited partnership is strictly a creature of statute (Lanier v Bowdoin, 282 N.Y. 32, 38, rearg denied 282 N.Y. 611). Amendment of the certificate of limited partnership is mandatory upon the resignation of a general partner. Section 113 Partnership of the Partnership Law provides: "(2) A certificate shall be amended when * * * (e) A general partner retires, dies or becomes mentally ill, and the business is continued under section one hundred and nine". Section 109 states that retirement of a general partner dissolves the partnership unless its continuation is provided for in the certificate or upon the consent of all its members. Although the record before us is insufficient to determine the statutory basis, it is clear that the partnership continued to do business by entering into the mortgage agreement with plaintiff. Therefore, an amendment was required to be filed in accordance with section 114 of the statute (2 Rowley, Partnership § 53.20, at 585 [2d ed]).
We are not persuaded by defendant Reinert's argument that plaintiff must establish reliance in order to recover a deficiency judgment against him. The object of a limited partnership "`is to protect the special partner, and exempt him from a general liability and to place his capital alone at the peril of the business'" (Lanier v Bowdoin, supra, at 38, quoting Casola v Kugelman, 33 App. Div. 428, 433, affd sub nom. Casola v Vasquez, 164 N.Y. 608). The liability of a general partner to creditors of the partnership is independent of any falsehood contained in the certificate (2 Rowley, Partnership § 53.6, at 566 [2d ed]).
The limited partnership must comply with statutory filing requirements (M.I.F. Sec. Co. v Stamm Co., 94 A.D.2d 211, 213-214, affd in part 60 N.Y.2d 936). The certificate constitutes public notice of the existence of a limited partnership and the nature of each partner's participation as a general or limited partner (Partnership Law § 91; Hoffman v Eisenberg, 140 A.D.2d 306, lv denied 72 N.Y.2d 806) which is binding upon the partners. Where, as here, the liability of a limited partnership to a third party is in issue and the certificate of limited partnership materially contradicts an agreement by and among the partners, the partnership and its members are estopped to dispute the information contained in the certificate (see, Estate of Applebaum v Commissioner of Internal Revenue, 724 F.2d 375).
Concur — Rosenberger, J.P., Kupferman, Kassal and Rubin, JJ.