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The CIT Group/Equipment Financing, Inc. v. Delsea Precision

A-2133-02T2 (N.J. Super. App. Div. 2004) (Unpublished)

PARTNERSHIPS; SECURITY INTERESTS—Despite “good intentions,” when a sole remaining partner sells a partnership asset in violation of a security agreement and for which a valid security interest exists, the partner is guilty of conversion.

A partnership entered into a loan and security agreement with a capital leasing service for a loan to fund the partnership’s purchase of a piece of equipment. The provider had a perfected security interest, giving it a lien on the equipment. When the partnership’s sole remaining partner sold the equipment without the knowledge or consent of the leasing company in violation of the security agreement, he “exercised an unauthorized act of dominion over [the provider’s] property,” and became liable for it, even though he claimed to have “good intentions.” According to the Court, the partner was not considered a buyer in the ordinary course of business and did not have the full ownership rights necessary to sell the equipment. Consequently, he was guilty of conversion.

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