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Fleischhauer v. Pengue

A-6624-06T3 (N.J. Super. App. Div. 2009) (Unpublished)

PARTNERSHIPS — When a partnership’s remaining partners choose to continue their partnership after another partner withdraws, the remaining partners must bear post-withdrawal expenses related to the partnership’s assets even though those expenses would have been allocated, proportionately, to the withdrawing partner had they been incurred before the withdrawal took place.

Three individuals each had a one-third interest in a real estate partnership. A dispute arose and one of the partners withdrew from the partnership. He sued the other two partners, seeking judicial determination as to the assets of the partnership and the value of his interest in those assets. The lower court: (i) awarded the partner a one-third interest in a particular project; (ii) required reimbursement to the partner for the partnership’s “soft” expenses that were paid following his withdrawal from the partnership; (iii) awarded the partner damages of one-third the performance bond on another project; and (iv) awarded the partner prejudgment interest. The other partners appealed.

The Appellate Division held that the lower court’s findings were supported by “adequate, substantial and credible evidence” and affirmed the lower court’s decision. With respect to the award to the partner for his interest in one of the partnership projects, the Court held the lower court “thoroughly canvassed the relevant evidence, considered the expert testimony and weighed the difficulties in developing the asset.” It also ruled that because the remaining partners chose to continue the partnership they were obligated to reimburse the former partner for their expenditure of his portion of partnership funds after he withdrew from the partnership. Further, the Court upheld the lower court’s determination as to the partner’s share of the performance bond because the bond was an asset of the partnership at the time he withdrew from the partnership. Thus, he was entitled to a one-third interest in that asset. Finally, the Court noted that the lower court’s authority to award interest in favor of a withdrawing partner is firmly supported by statute.

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