In Re: Leah Beth Woskob, Debtor Alex Woskob Helen Woskob the Estate of Victor Woskob v. Leah Beth Woskob

305 F.3d 177, 2002 U.S. App. LEXIS 19751, 2002 WL 31102682
CourtCourt of Appeals for the Third Circuit
DecidedSeptember 20, 2002
Docket01-1482
StatusPublished
Cited by30 cases

This text of 305 F.3d 177 (In Re: Leah Beth Woskob, Debtor Alex Woskob Helen Woskob the Estate of Victor Woskob v. Leah Beth Woskob) is published on Counsel Stack Legal Research, covering Court of Appeals for the Third Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In Re: Leah Beth Woskob, Debtor Alex Woskob Helen Woskob the Estate of Victor Woskob v. Leah Beth Woskob, 305 F.3d 177, 2002 U.S. App. LEXIS 19751, 2002 WL 31102682 (3d Cir. 2002).

Opinions

FUENTES, Circuit Judge.

Leah Woskob, the Debtor in bankruptcy, appeals from an order of the District Court determining that she did not timely exercise her option to purchase her late husband Victor’s interest in their real estate partnership, the Woskob Legends Partnership (the “Legends Partnership”). Under the partnership agreement, Leah had 30 days from the date of an act of dissolution or 90 days from the death of a partner to exercise the option. She ultimately exercised it about two weeks after her husband died in an accident.

The Bankruptcy Court held that Leah had properly exercised the option. On appeal, the District Court reversed the Bankruptcy Court’s decision, determining that the partnership had already been dissolved well before Victor’s death by any one of the following three events: (1) Victor’s exclusion of Leah from partnership proceeds; (2) Leah’s exclusion of Victor from management and income during their pending divorce action; and (3) Victor’s bankruptcy filing. Accordingly, the District Court held that Leah had not timely exercised her option to purchase Victor’s interest.

We conclude that none of the three events cited by the District Court caused the dissolution of the partnership, and that the partnership was dissolved only upon Victor’s death. Thus, we will vacate the order of the District Court and will remand the case so that the District Court can properly determine, consistent with this opinion, whether Leah validly exercised her option to purchase Victor’s interest in the partnership following his death.

I.

Leah and Victor Woskob formed the Legends Partnership in 1996 for purposes of constructing, owning, and operating the Legends, an apartment building in State College, Pennsylvania. Leah and Victor, who were then married, each held a 50% interest in the partnership under the terms of the Partnership Agreement. As partners, Leah and Victor retained A.W. & Sons, a business owned by Victor’s parents, to construct and later manage the Legends property.

In January of 1997, Leah and Victor separated, and Leah filed for divorce. During the divorce proceedings, Victor prevented Leah from receiving any distributions from the Legends Partnership. However, on April 15, 1997, the Pennsylvania Court of Common Pleas of Centre County granted Leah’s petition for special relief and awarded her the exclusive right to manage and derive income from the Legends. On June 20, 1997, Leah terminated the management agreement with [180]*180A.W. & Sons and hired another management company. On that same day, Victor filed a bankruptcy petition under Chapter 11 of the Bankruptcy Code. He stated in the petition that he owned 50% of the partnership. Victor voluntarily withdrew the petition nine months later. The partnership tax returns for 1997 and 1998, both signed and filed by Leah, continued to list both Victor and Leah as general partners of the Legends Partnership.

On January 12, 1999, Victor died in an automobile accident. In his will, he had named his four children as beneficiaries of his estate (the “Estate”). He had also named his parents, Alex and Helen Wos-kob (the “Woskobs”), as executors. Within fifteen days of Victor’s death, Leah notified the Woskobs that she intended to dissolve the Legends Partnership and to purchase Victor’s interest in the partnership pursuant to Paragraph 19 of the Partnership Agreement, which states in relevant part:

Buy-Sell on Death of Partner
XIX. The surviving Partner has the option to dissolve the Partnership on the death of a Partner. The surviving Partner shall have the right within ninety (90) days from the date of death of the deceased Partner to purchase the interest of the deceased Partner in the Partnership and to pay to the personal representative of the deceased Partner the value of that interest as provided in Paragraph 18 of this Agreement.... The estate of the deceased Partner shall be obligated to sell his or her Partnership interest as provided in this Agreement. ... If the surviving Partner does not elect to purchase the interest of the deceased Partner, the Partnership shall terminate.

App. at 2:327-28. Based on the written opinion of the partnership’s accountant, Leah advised the Woskobs that Victor’s interest was negative in the amount of $33,944 and, thus, that the Estate was not entitled to any payments for the purchase of Victor’s partnership interest. The Wos-kobs opposed the sale of the Legends Partnership to Leah.

On April 16,1999, Leah filed a complaint for declaratory judgment in the Common Pleas Court, seeking an order declaring that the Estate’s interest in the partnership terminated because it had been purchased by Leah pursuant to the terms of the Partnership Agreement. The Wos-kobs filed a separate complaint in the same court on June 11, 1999, alleging that the partnership had been dissolved in 1997 prior to Victor’s death in 1999. Accordingly, they requested the appointment of a receiver to wind up the affairs of the partnership, a complete accounting of the partnership’s affairs, and the fixing of damages for amounts alleged to have been wrongfully taken from the partnership by Leah.

After Leah filed a voluntary petition for bankruptcy under Chapter 11 of the Bankruptcy Code, both actions were removed to the United States Bankruptcy Court for the Middle District of Pennsylvania. The Woskobs contended that Leah’s attempt to purchase Victor’s interest after his death in 1999 was untimely because the Legends Partnership had already been dissolved in 1997 by any one of three events, including (1) Victor’s alleged exclusion of Leah from partnership after the marital separation, (2) the order of the Court of Common Pleas granting Leah the exclusive right to manage and derive income from the Legends, and (3) Victor’s bankruptcy filing. If the partnership had been dissolved in 1997, then Leah’s attempt to purchase Victor’s interest in 1999 would have been untimely pursuant to Paragraph 17 of the Partnership Agreement, which reads:

[181]*181Option to Purchase Terminated Interest

XVII. On dissolution of the Partnership by the withdrawal or other act of a Partner, the remaining Partner, on 'unit-ten notice to the other Partner within thirty (SO) days of the dissolution, may continue the Partnership business by purchasing the interest of the other Partner in the assets and goodwill of the Partnership. The remaining Partner shall have the option to purchase the interest of the withdrawing Partner by paying to this Partner or the Partner’s personal representative the value of the interest determined as provided in Paragraph 18 of this Agreement.

App. at 2:327 (emphasis added).

On June 14, 2000, the Bankruptcy Court ruled in favor of Leah, finding that the partnership was dissolved only upon Victor’s death in 1999, and that Leah properly exercised her option to purchase Victor’s interest in the partnership.

The Estate filed notices of appeal in both cases with the United States District Court for the Middle District of Pennsylvania. The District Court disagreed with the Bankruptcy Court as to the date of dissolution, finding that any one of the three events cited by the Woskobs was sufficient to cause the dissolution of the partnership in 1997. Accordingly, the District Court held that Leah’s attempt to exercise her option to purchase Victor’s interest in 1999 was untimely and reversed and remanded the two cases to the Bankruptcy Court.

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305 F.3d 177, 2002 U.S. App. LEXIS 19751, 2002 WL 31102682, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-leah-beth-woskob-debtor-alex-woskob-helen-woskob-the-estate-of-ca3-2002.