| Vick v Albert |
| 2008 NY Slip Op 00336 [47 AD3d 482] |
| January 17, 2008 |
| Appellate Division, First Department |
| Jonathan E. Vick et al., Appellants, v Richard Albert et al.,Respondents, et al., Defendants. Jonathan E. Vick et al., Respondents, v Richard Albert et al.,Appellants, et al., Defendants. |
—[*1] Robert A. Ross, Huntington, for respondents/appellants.
Partial judgment, Supreme Court, New York County (Karla Moskowitz, J.), entered July 14,2006, after a nonjury trial, dismissing plaintiffs' cause of action for partition, unanimouslyaffirmed, without costs. Judgment, same court and Justice, entered February 26, 2007, to theextent appealed from as limited by the briefs, awarding plaintiffs the principal sum of $1,198,409with respect to the decedent's interest in the Albert Greenberg & Vick partnership (AGV) and$171,484 with respect to her interest in the Godwin Realty Associates partnership, unanimouslyaffirmed, without costs.
Defendants' evidence established that the property for which partition was sought wasactually owned by AGV and not held by tenancy in common. Even if we consider, arguendo, thepresumptions that a holder of title is the owner and that a property disposition to several personscreates a tenancy in common, the former was overcome by the rule that partnership property maybe held in the name of a partner, as we noted on the prior appeal (17 AD3d 255 [2005]), and thelatter was overcome by defendants' substantial evidence to the contrary. The parties' treatment ofthe property inter se was more probative of their intent to own it as a partnership than any [*2]representations in loan documents or leases. In any event, thepresumption in Estates, Powers and Trusts Law § 6-2.2 (a) negates the existence of a jointtenancy, but not ownership by a partnership.
The partnership interests were properly valued without factoring in tax depreciation, sinceuse of this method would have given defendants a windfall as to the appreciated property.
Nor were plaintiffs bound by the discounted values set forth in the estate tax return they filed.In Naghavi v New York Life Ins. Co. (260 AD2d 252 [1999]), where the insurer haddisclaimed based on a misrepresentation in its insured's application for insurance, this Court heldthe insured bound by the earned income declared in his income tax return because his applicationdefined earned income in terms of amounts "reportable for personal federal income taxpurposes." Here, in contrast, no document incorporates by reference the value set forth in theestate tax return for the purpose of partnership interest valuation. In Acme Am. Repairs, Inc. v Uretsky (39AD3d 675 [2007], lv dismissed 9 NY3d 979 [2007]), the Second Department,relying upon Naghavi, held a party bound by the admission in an estate tax return she hadsigned that contained an appraisal stating that a lease and its extension were in existence. It wasreasonable under those circumstances to deem the representation in the estate tax return anadmission of the existence of the lease, which was the very issue in that case. However, since thepurposes of estate tax valuation and partnership interest valuation differ, there is no basis here fordeeming the representation in the estate tax return an admission as to value with regard to thepartnership interest.
We agree with Supreme Court's conclusion that minority lack of control and decreasedmarketability discounts in valuing the decedent's interests in the partnerships are unavailable,albeit not for the reason stated. Discounts are not barred by Partnership Law § 73, whichprovides that a deceased partner's estate shall receive the value of her interest "as an ordinarycreditor"; this addresses not valuation but the method of collecting the value of the deceasedpartner's interest vis-à-vis creditors of the partnership and of the individual partners(see Shubert v Lawrence, 27 AD2d 292, 297 [1967]).
Nor, contrary to plaintiffs' contention, does the buyout of a deceased partner's interestimplicate all of the factors that our courts have relied upon in denying discounts in the corporateminority or dissenting shareholder contexts (see Matter of Penepent Corp., 96 NY2d 186,194 [2001]; Matter of Friedman v Beway Realty Corp., 87 NY2d 161, 167, 169-170[1995]). A partnership minority discount would not contravene the distinctly corporate statutoryproscription (Business Corporation Law § 501 [c]) against treating holders of the sameclass of stock differently, or undermine the remedial goal of the appraisal statutes to protectshareholders from being forced to sell at unfair values, or inevitably encourage oppressivemajority conduct. Nor would a decreased marketability discount implicate these policy concerns,as it applies equally to all partnership interests, not those of the deceased partner only (seeMatter of Blake v Blake Agency, 107 AD2d 139, 149 [1985], lv denied 65 NY2d609 [1985]; see also Matter of Fleischer, 107 AD2d 97, 101 [1985]; Hall v King,177 Misc 2d 126, 134-135 [1998]).
However, application of the discounts sought by defendants would deprive plaintiffs of thevalue of the decedent's proportionate interest in a going concern, since they would not receivewhat they would have received had the entire entity been sold on the open market unaffected by adiminution in value as a result of a forced sale (see East Park Ltd. Partnership v Larkin,167 Md App 599, 619-620, 893 A2d 1219, 1231 [2006], cert denied 393 Md 243, 900[*3]A2d 749 [2006]; Winn v Winn Enters., Ltd.Partnership, 100 Ark App 134, —, — SW3d —, —, 2007 Ark AppLEXIS 693, *10-11 [Ct App 2007]). The unavailability of the discounts is particularly apt here,where the business consists of nothing more than ownership of real estate (see Cohen vCohen, 279 AD2d 599 [2001]; Matter of Cinque v Largo Enters. of Suffolk County,212 AD2d 608 [1995]; East Park, 167 Md App at 610, 893 A2d at 1226 [fair value ofpartnership interest equals amount partners would receive if property sold at arm's length]), andwhere the valuation ensues from the death of a partner and not as the result of any misconduct ofa withdrawing partner in causing dissolution (cf. Anastos v Sable, 443 Mass 146,150-151, 819 NE2d 587, 591 [2004]). In this regard, we note that Haymes v Haymes(298 AD2d 117, 119 [2002], lv denied 100 NY2d 509 [2003]), in which we appliedminority interest and decreased marketability discounts to the valuation of partnership interests inan equitable distribution matter, should not be understood as an imprimatur on such discounts asa matter of law, but only as addressing the trial court's resolution of a conflict in experttestimony, and is therefore limited to its particular facts.
Defendants sufficiently demonstrated entitlement to the minor credits for profits paidbetween March 1, 1999 and the decedent's death.
Plaintiffs' submissions are dehors the record and therefore have not been considered (see News Am. Mktg., Inc. v LepageBakeries, Inc., 16 AD3d 146, 149 [2005]).
We have considered the parties' other contentions in support of their request for affirmativerelief and find them unavailing. Concur—Friedman, J.P., Marlow, Nardelli and Catterson,JJ.