Boyle v. Cancro

A-6957-96T5 (N.J. Super. App. Div. 1999) (Unpublished)
  • Opinion Date: February 9, 1999

PARTNERSHIPS; RECORDS—A general partner that breaches its duty to maintain proper financial records may be barred from collecting a share of distributions if it would thereby benefit from the inadequate records.

An individual was a general partner of a limited partnership that leased a property to a restaurant owned by that individual. The rent payable was determined in part by the profits of the restaurant. One of the landlord’s limited partners questioned the profitability of the restaurant and sought access to business records pursuant to the partnership and lease agreements. The individual general partner, who was solely responsible for keeping and maintaining the records, denied this access even after a court order requiring it. Consequently, the Court appointed a special fiscal agent, but the partnership’s records were so grossly negligently maintained that accurate financial information could not be generated. For this and related reasons, the individual general partner was removed and the special fiscal agent was installed by the lower court as the general partner. Ultimately, the property was sold, but the lower court determined that the individual general partner would not be entitled to any part of the proceeds because to do so “would amount to unjust enrichment.” The proceeds were ordered to be divided among the remaining partners. The Appellate Division held that the lower court properly exercised its equitable powers. Inasmuch as the individual general partner’s failure to maintain accurate records precluded the limited partners from obtaining an accounting, the Appellate Division agreed that the individual general partner should not be entitled to receive a share of the proceeds because to do so would allow him to benefit from his failure to keep required records and his failure to account for the partnership’s finances.