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Eric Bram & Co. v. Berger

A-4474-01T3 (N.J. Super. App. Div. 2003) (Unpublished)

PARTNERSHIPS; PARTNERS; LIABILITY—Where there is no evidence that a partnership can’t pay a judgment, a court cannot issue an absolute judgment for the partnership debt against a general partner.

A real estate limited partnership concededly owed a brokerage commission. When the commission was unpaid, the broker and the limited partnership entered into a payment agreement and part of the required payments were personally guaranteed by a principal of the limited partnership and the general partner. The Court entered a judgment against the limited partnership, the individual principal, its general partner, and against a management company and another related entity. All of the judgment debtors appealed. The Appellate Division pointed out that “a contract creditor of a partnership may in a single action sue the partnership and its general partners for the debt ... [but] [i]nitially, judgment against the partners shall be limited to liability only, and shall not be entered as a final judgment for a sum certain until there is proof that the partnership cannot satisfy the judgment.” Here, there was no evidence that the limited partnership lacked sufficient assets to pay the judgment. Consequently, the lower court erred when it issued a judgment against the corporate general partner because “collection of the obligation from the general partner[] should have been deferred pending a demonstration that the assets of the partnership [were] insufficient.” As to the management company and another related entity, the Court also disagreed with the lower court. It found no evidence in the record that the management company and the other related entity had anything to do with the transactions in question. In doing so, it rejected arguments by the broker that there was ample evidence in other matters involving the same set of companies to show an entangled interrelationship which would be the basis for making the management company and the related entity liable for the debts of the limited partnership. The Court rejected that argument, pointing out that the record showed no evidence of such entanglement in this dispute.

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