On appeal from Superior Court, Chancery Division, Bergen County.
Botter, Antell and Furman. The opinion of the court was delivered by Botter, P.J.A.D.
The death of H. Jerome Sisselman (Jerome) on August 20, 1980 created various issues as to its effects, such as the dissolution or continuation and management of certain partnerships in which Jerome had an interest, among which were Bergen County Associates (BCA) and Sisselman Israel Associates (SIA). These two partnerships own the bulk of land in the Berry's Creek Center project, approved by the Hackensack Meadowlands Commission, a massive residential, commercial and recreational development to be constructed on 300 acres of land. The issues were presented in two consolidated actions in which the trial judge entered partial summary judgment determining, among other things, that:
(1) BCA and SIA are partnerships in dissolution;
(2) BCA is reconstituted under the terms of the partnership agreement; its ordinary business is to be governed by majority vote of the partners of such reconstituted partnership and the actions taken by a majority of its partners at the February 13, 1981 meeting which are consistent with the partnership agreement are binding upon the minority partners; and
(3) The Sisselman Trust for the Benefit of H. Jerome Sisselman (the Trust) terminated upon Jerome's death.
Leave to appeal was granted to appellants Selig and his mother Lorraine, who are Jerome's son and widow, to review
only these portions of the summary judgment. Although the legal issues can be decided without reference to the particular individuals involved, some background may be helpful in understanding the dispute.
BCA was formed in 1952. The partnership agreement was amended from time to time, the last being by agreement of December 22, 1977. Prior to Jerome's death the partners and their respective interests were as follows: Jerome (8.254%); Jerome's wife Lorraine (8.254%); the Trust (20.06%); Sisselman Trust for the Benefit of Lorraine (20.06%); Jerome's son Selig and Selig's wife Deanna (5.036%); S.J. and D.K. Sisselman Trust (4.0%); Helene Goldfinger and her son Alexander M. Goldfinger, Jr. (25.3%), and Samuel G. Blumenfeld and his wife Florence (9.036%). (The Goldfingers and Blumenfelds are not members of the Sisselman family.) The partnership agreement provided in paragraph 5 that all partners designated and appointed Jerome, Lorraine, Selig, Alexander M. Goldfinger, Jr. and Samuel Blumenfeld as "general managers" and as "managing partners" of the business of BCA, with authority to execute all contracts, deeds, checks and other documents in conducting such business.
SIA was formed on May 4, 1972. The partners and their interests were: Jerome (31%); Selig (35%), and three of Jerome's daughters, Harriet Cohen (11.333%), Rachel Araten (11.333%) and Abigail Trenk (11.333%). Jerome's remaining children, Naomi Wilzig and Sonia Donnenberg, were not included in SIA. SIA's main asset is 180 acres of land in East Rutherford. The partnership agreement named Jerome and Selig as "managing partners" and "general managers" of SIA's business with full authority to act for the partnership.
On June 15, 1951 Lorraine established the Trust mentioned above. (Jerome established a trust for the benefit of Lorraine at the same time.) Jerome was to receive certain income during his lifetime and, upon his death, the remainder was to be divided into six equal parts for the benefit of their six children (their
son Selig and five daughters), to be paid directly to such children who had reached age 30 at the time of Jerome's death. Provision was made for the benefit of the surviving issue of any child of the settlor who died before the Trust terminated. All six Sisselman children survived and were more than 30 years of age at Jerome's death. Therefore, they would receive their shares outright if the Trust terminated upon that event. As noted above, the Trust had a 20.06% interest in BCA. In fact, after Jerome's death his daughters took the position that the Trust terminated and they succeeded to their respective portions of the Trust's interest in BCA.
The first issues we will consider pertain to the question of the continuation of the partnerships and the business of BCA and SIA and the management of those businesses. In June 1980, about two months before Jerome died, SIA and BCA executed an agreement with Rose Associates for the joint development of the Berry's Creek Center project. Appellants urge that the vastness of this project, involving property and construction whose value will exceed $1 billion, demonstrates the need for certainty and continuity in the partnership enterprises and their management. They argue that the BCA and SIA agreements should be construed to prevent dissolution of those partnerships notwithstanding the death of Jerome. Alternatively, they contend that even if the partnerships are in dissolution, the managing partners designated in the BCA and SIA partnership agreements should continue as managing partners. As such, they urged the trial court to invalidate action taken by Jerome's daughters and the Blumenfeld and Goldfinger interests in reconstituting the BCA partnership and, as successor partners with aggregate interests exceeding 50% of BCA, in voting to designate Blumenfeld and Goldfinger as the sole managing partners of BCA, stripping Selig and his mother of their previous managerial authority.
The attorneys for Jerome's daughters support the ruling of the trial judge, namely, that BCA is in dissolution, but that a new partnership "was reconstituted" to continue BCA's business,
and that the majority vote of the new partners controls. At oral argument their position with respect to SIA was that there is no successor partnership because the successor partners did not reconstitute the partnership. The attorneys for the Goldfingers and Blumenfelds urge that the death of Jerome and, upon the termination of the Trust, the admission of Jerome's daughters into partnership with the surviving partners of BCA caused the dissolution of BCA. They contend that upon Jerome's death the "new and surviving partners" of BCA were obligated to form a reconstituted partnership, the management of which is to be governed by the general provisions of the Uniform Partnership Law as enacted in this State, N.J.S.A. 42:1-1 et seq.
The Uniform Partnership Law establishes general rules governing the rights and duties of partners in relation to the partnership and each other, "subject to any agreement between them." N.J.S.A. 42:1-18. Unless otherwise agreed, all partners "have equal rights in the management and conduct of the partnership business," N.J.S.A. 42:1-18(e); no person can become a partner without the consent of all partners, N.J.S.A. 42:1-18(g), and any difference as to "ordinary matters" of partnership business may be decided by a majority of the partners. But "no act in contravention of any agreement between the partners may be done rightly without the consent of all the partners." N.J.S.A. 42:1-18(h).
Dissolution of a partnership is defined as "the change in the relation of the partners caused by any partner ceasing to be associated in . . . carrying on" the partnership business. N.J.S.A. 42:1-29. Dissolution is distinguished from termination of the partnership business; despite dissolution, the partnership continues for the purpose of winding up partnership affairs. N.J.S.A. 42:1-30; Scaglione v. St. Paul-Mercury Indem. Co. , 28 N.J. 88, 102 (1958). Generally, therefore, dissolution affects future transactions, but as to all past transactions the partnership continues until they are concluded. Id. Thus, subject to
the prior payment of his separate debts, the property of a deceased partner is liable for all obligations of the partnership incurred while he was a partner. N.J.S.A. 42:1-36(4).
The causes of dissolution are established by N.J.S.A. 42:1-31.*fn1 N.J.S.A. 42:1-32 also provides for dissolution by court order for various reasons, including such circumstances as insanity or willful breach of the partnership agreement which prevent a partner from performing his role in the partnership. Analysis of § 31 strongly suggests that dissolution occurs automatically upon the death of any partner, N.J.S.A. 42:1-31(4), or by the express will of a partner at any time, even in contravention of the partnership agreement, N.J.S.A. 42:1-31(2) (subject to damages for breach of the agreement, N.J.S.A. 42:1-38(2)(a)(II)).*fn2
This is contrasted with subsection 1 of § 31 which provides for dissolution in certain circumstances if not in violation of the agreement. In other words, the statute deems the death of a partner cause for dissolution ...