Margolin v Margolin Lowenstein & Co., LLP
Annotate this CaseDecided on August 8, 2006
Supreme Court, Nassau County
Sheilah Margolin, Individually and as Executrix of the Estate of Martin J. Margloin, Deceased, Plaintiff,
against
Margolin Lowenstein & Company, LLP, LAWRENCE G. CEASAR, and ALVIN SMILOW, Defendants.
18375-03
COUNSEL FOR PLAINTIFF
Ackerman, Levine, Cullen, Brickman & Limmer, LLP
175 Great Neck Road
Great Neck, New York 11021
COUNSEL FOR DEFENDANT
Weinstein, Kaplan & Cohen, P.C.
1325 Franklin Avenue - Suite 210
Garden City, New York 11530
Leonard B. Austin, J.
Defendants move pursuant to CPLR 3212 for summary judgment dismissing the complaint.
In this action for dissolution of a professional accounting partnership, the surviving spouse, as executrix of the Estate of Martin J. Margolin, seeks to recover the value of her deceased husband's interest in the firm of Margolin Lowenstein & Company, LLP.
BACKGROUND
On or about December 29, 1989, Plaintiff's decedent Martin J. Margolin ("Margolin") and Defendant Lawrence G. Ceasar ("Ceasar") executed a written agreement memorializing their partnership in the entity then known as Margolin Lowenstein & Company ("the Firm"). The agreement sets forth the proportional interest of each partner in the Firm (Margolin: a two-thirds [2/3] interest; and Ceasar: a one-third [1/3] interest) as well as various other provisions relative to the payments to be made upon the death of a partner. Defendant Alvin Smilow ("Smilow"), who did not become a partner until January, 1991, was not a party to that agreement.
The Firm became a limited liability partnership in 1995 and its name was changed to Margolin Lowenstein & Company, LLP, as it is presently known. Although a new written partnership agreement reflecting the addition of Smilow as a partner was never executed, the partnership interests were apparently apportioned as follows:
Margolin sixty (60%) percent; Ceasar thirty (30%) percent; and Smilow ten (10%) percent.
Sometime between 1991 and 1998, Margolin purportedly ceded an additional five (5%) percent of his interest to Smilow whereupon Margolin's interest was reduced to fifty-five (55%) percent. Ceasar maintained his thirty (30%) percent interest; and Smilow's interest increased to fifteen (15%) percent.
After Margolin's death on April 7, 2002, a dispute arose between his Estate and the surviving partners regarding Margolin's continuing ownership of fifty-five (55%) percent of the firm as reflected in a letter from the attorney for the Estate to Defendants' attorney dated December 30, 2002, which maintained that:
"the Estate continues to own 55% of the practice and accordingly is entitled to its share of the income and assets of the Practice."
As pointed out by Plaintiff, the letter is silent as to the amount of decedent's capital [*2]account or the value of his partnership interest (buy-out-price). A disagreement about these items arose after the filing of the Estate Tax Return.
Defendants contend that, based upon the formula set forth in the 1989 Partnership Agreement, the value of decedent's partnership interest is $790,726. Plaintiff disputes that calculation contending that Margolin held a fifty-five (55%) percent not fifty (50%) percent interest which "should have been valued at far more than the $831,289 value reflected on Schedule F [Form 706] of the Estate Tax Return, which amount Plaintiff asserts was based on figures provided by the Firm.
In moving for summary judgment, Defendants argue that: (1) the total buy-out price to be paid to the Estate of Margolin was ascertained in accordance with the 1989 Partnership Agreement; (2) the numbers provided by the firm for both Margolin's Capital Account ( $184,034.00) and his salary and profit distributions are consistent with prior returns submitted by the Firm, such as K-1's for 1999, 2000, 2001; and (3) no further payment beyond the $750,000 proceeds of the Prudential life insurance policy paid to the Estate, plus $37,500, representing salary and profit distributions for the fiscal year immediately preceding Margolin's death, are due the Estate.
DISCUSSION
A.The Partnership Agreements
Review of both the fully executed 1989 Partnership Agreement and the unsigned 1998 Draft Agreement establishes that the buy-out calculation in each agreement relative to payments due to the legal representative of a deceased partner are virtually identical. The formula, as set forth in ¶ 1.2 of the 1989 Partnership Agreement, provides that the estate of the deceased partner was entitled to:
The balance of the deceased partner's capital account (as reflected on the balance sheet of the firm for the last day of the month preceding the date of death)
PLUS
The value of the deceased partner's interest in the Firm's outstanding receivables and goodwill (based upon fees billed and collectible)
MINUS
The aggregate net proceeds, received by the deceased partner's beneficiary, of any life insurance policies on
his life owned by the Firm.
Further, both agreements provide that the Estate of the deceased partner was to receive an additional payment in an amount equal to twenty-five (25%) percent of his salary and profit distributions made during the fiscal year immediately preceding his death.
The agreements differ, however, in that the 1989 Agreement states that Mr. Margolin had a two-thirds (2/3) interest in the outstanding receivables and goodwill of Margolin, Lowenstein & Company while the 1998 Draft Agreement pegs that interest at fifty-five (55%). Additionally, Exhibit B annexed to the 1989 Agreement lists the specific insurance policies on the life of each of the two partners (Margolin and Ceasar) owned [*3]by the Firm for the purpose of applying the proceeds to be used to reduce the amount of the buy-out amount owed to the deceased partner's estate. No such exhibit is attached to the Draft Agreement.
B. Legal Analysis
The proponent of a motion for summary judgment must make a prima facie showing of entitlement to summary judgment as a matter of law tendering sufficient evidence to eliminate any material issues of fact from the case. Giuffrida v Citibank Corp., 100 NY2d 72, 81 (2003). Failure to make such a showing requires denial of the motion regardless of the sufficiency of the opposing papers. Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 (1985). The party opposing summary judgment is entitled to all favorable inferences that can be drawn from the evidence submitted and the papers will be scrutinized carefully in a light most favorable to the non-moving party. Negri v. Stop & Shop, Inc., 65 NY2d 625 (1985); and Louniakov v. M.R.O.D. Realty Corp., 282 AD2d 657 (2nd Dept. 2001). Summary judgment should only be granted where there are no issues of material fact and the evidence requires the court to direct judgment in favor of the movant as a matter of law. Friends of Animals, Inc. v Associated Fur Mfrs. Inc., 46 NY2d 1065, 1067 (1979); Andre v. Pomeroy, 35 NY2d 361 (1974); and Mosheyev v. Pilevsky, 283 AD2d 469 (2nd Dept. 2001).
As between themselves, the powers, rights, duties and liabilities of partners are determined by the partnership agreement. Bogoni v. Friedlander, 197 AD2d 281, 290 (1st Dept.), lv. to app. den., 84 NY2d 803 (1994). The partnership agreement is the basic document setting forth the rights and duties of the partners among themselves. In re Sturman, 222 B.R. 694, 711 (S.D.NY 1998). Where it is evident that a written partnership agreement is a complete expression of the parties' intentions, the language of the partnership agreement controls and will not be questioned. Silverman v. Caplin, 150 AD2d 673 (2nd Dept.), app. dism., 74 NY2d 793 (1989).
Here, the Court is confronted with two agreements one fully executed and the other a draft of a purported later agreement. On this issue, Plaintiff maintains, that a question of fact exists as to which agreement, if either, applies. This Court agrees.
Moreover, Plaintiff contends that in applying the formula contained in both agreements with regard to the buy-out price, Defendants used incorrect variables; misstated the amount of decedent's capital as $184,034.00 instead of $32,896; miscalculated the "annual fees" earned by the firm for the three full fiscal years preceding Margolin's death by subtracting the uncollected fees for that period from the one year average of collected fees, instead of from the full three year total of collected fees; and applied an incorrect percentage rate to determine Margolin's partnership interest. Additionally, Plaintiff argues that the payment of an amount equal to twenty-five (25%) percent of Margolin's salary and distributions made during the fiscal year immediately preceding his death, as required by ¶ 1.4 of the buy-out provision in both agreements, should be excluded from the calculation of the value of Margolin's interest as it is neither part of his capital account nor on account of his interest in receivables and good will.
Given that the Prudential life insurance policy issued in 1997, nearly eight years after the 1989 Partnership Agreement, is neither listed in Exhibit B of that Agreement or mentioned in the 1998 Draft Agreement, Plaintiff maintains a further question exists as [*4]to whether the $750,000 proceeds paid to the Estate was intended by the parties to be credited to any amount due as and for decedent's partnership share.
Pursuant to CPLR 4519 (Dead Man's Statute), testimony of an interested witness concerning a personal transaction between the witness and the decedent is not permitted. Phillips v. Kantor & Co., 31 NY2d 307, 313 (1972). By its very language, the statute's exclusion is directed toward testimony during ". . . the trial of an action or the hearing upon the merits of a special proceeding . . ." CPLR 4519. Evidence excludable under the statute at trial may, however, still be considered so as to defeat a summary judgment motion (Estate of Lockwood, 234 AD2d 782 [3rd Dept. 1996], citing Matter of Alden, 52 AD2d 1051 [4th Dept. 1976]), although it may not be used to support a motion for summary judgment, particularly if that is the only evidence supporting the motion. Phillips v Kantor & Co., supra. The Dead Man's Statute does not, per se, prohibit the introduction of documentary evidence against a deceased's estate. For instance, an adverse party may introduce a document authored by a decedent, as long as the document is authenticated by a source other than an interested witness's testimony concerning a transaction or communication with the deceased. Acevedo v Audubon Management, Inc., 280 AD2d 91 (1st Dept. 2001).
Here, under the circumstances presented, Defendants' motion for summary judgment must be denied. The issue of the value of the Estate of Margolin's interest in Margolin Lowenstein & Company, LLP must be determined at trial.
Accordingly, it is,
ORDERED, that Defendants' motion for summary judgment is denied.
This constitutes the decision and Order of the Court.
Dated: Mineola, NY _____________________________
August 8, 2006 Hon. LEONARD B. AUSTIN, J.S.C.
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
