Levine v. Guidera, 24 N.Y.2d 305 (1969)
When a partnership agreement specifies compensation for certain services, a question of fact exists as to whether additional compensation is warranted for services falling outside the scope of the agreement’s specified duties.
Summary
This case involves a dispute among partners regarding a fee taken by the general partners for negotiating the sale of partnership property. The limited partners argued that the fee was improper because the partnership agreement limited compensation to specific management duties. The Court of Appeals reversed the grant of partial summary judgment to the limited partners, holding that a triable issue of fact existed as to whether the services rendered fell outside the scope of the partnership agreement and, if so, whether failure to obtain prior approval precluded compensation.
Facts
A limited partnership, Madison Discount Co., was formed to hold title to a shopping center. The general partners, Guidera and Goodman, were responsible for managing the property. The partnership agreement provided a $1,200 annual management fee for specific duties: preparing statements, collecting rents, making disbursements, and general maintenance. The primary lessee defaulted and the partners decided to sell the property. Guidera and Goodman negotiated the sale and took a $10,000 fee without prior authorization from the limited partners. The limited partners objected to the fee.
Procedural History
The limited partners sued the general partners. The Special Term granted partial summary judgment to the limited partners, concluding the fee was improper given the limitations in the partnership agreement. The Appellate Division affirmed. The Court of Appeals then reviewed the Appellate Division’s decision.
Issue(s)
Whether a material issue of fact exists regarding whether the services performed by the general partners in negotiating the sale of the partnership property were outside the scope of the management services covered by the compensation provision of the partnership agreement, thus entitling them to additional compensation.
Holding
No, because the language in the partnership agreement regarding compensation for management services raises a triable issue as to whether the negotiation services performed by the defendants are beyond the bounds of the agreement and hence compensable.
Court’s Reasoning
The Court reasoned that the prohibition on compensation beyond what was stated in the agreement had to be read in context. The $1,200 annual fee was designated for “ministerial work” related to managing the property under a net lease. The Court emphasized that the general partners were responsible for preparing statements, making disbursements, collecting rent, and hiring an accountant. However, the unexpected default by the lessee forced the partners to sell the property, necessitating significant negotiations. The court posed the question of whether the $1,200 management fee was intended to cover the difficult and time-consuming negotiations involving the sale of the property, spanning “five and one half” months and involving multiple offers. The Court noted, “The limitation in the agreement regarding compensation for management services raises a triable issue as to whether the negotiation services performed by the defendants are beyond the bounds of the agreement and hence compensable.” The Court also acknowledged the general principle that partners are not typically entitled to compensation for services, but clarified that this principle usually applied when partners had equal interests and responsibilities. The Court found that the interests and liabilities of the general partners and special partners were not equal, which is why the agreement limited compensation to the management of the premises. The Court stated that, “Whether then the defendants are entitled to compensation for other services presents an issue of fact.”