Goggin v. Rulli

A-6150-96T5 (N.J. Super. App. Div. 1998) (Unpublished)
  • Opinion Date: November 13, 1998

PARTNERSHIPS; STATUTE OF FRAUDS—Partial performance of an agreement to form a real estate partnership negates any requirement that the partnership agreement be in writing under the real property Statute of Frauds.

Five individuals formed a partnership to engage in the business of real estate. The partnership purchased a condominium unit and each partner contributed an equal share of the down payment. The partnership intended to rent the property during the summer season. The partners also intended to use the property when it was not rented. The property was rented, but never generated profits. As a result, each partner contributed additional capital to meet the shortfall. One of the partners stopped making capital contributions near the end of 1992. Ultimately, the partnership sold the condominium at a loss. Then, one of the partners commenced a lawsuit to recover the share of contributions that the defaulting partner refused to make after 1992.

The partnership was evidenced by a written agreement providing, among other things, that the partnership was to engage in the business of real estate and would last for an indefinite term. Title to the property and the mortgage thereon were in the name of two individual partners, along with their wives, because they completed the initial documents to enter into the transaction. Nonetheless, the property was treated as partnership property at all times. One of the partners managed the finances and used a bank account in the name of the partnership to pay partnership obligations. He was not paid for his activities. An accountant prepared a partnership tax return and the defaulting partner took advantage of the loss deductions on his own tax return. The original partnership agreement did not make additional capital contributions mandatory, but a 1992 amendment did. The defaulting partner testified that although the original partnership agreement was notarized, he never signed it and his signature was a forgery. Nonetheless, the records showed that he made all requested contributions on a regular basis until the last part of 1992. In addition, the defaulting partner’s accountant had actually examined the books and records of the partnership.

The defaulting partner claimed that since the purchase of the partnership was to “engage in the business of real estate,” the partnership agreement had to be in writing and bear his signature to be valid. Therefore, his argument depended on his claim that his signature on the agreement was forged. Instead of finding that the partnership agreement was not a transaction in real estate, and was not subject to the Statute of Frauds, the Court relied on the principle that partial performance of an oral agreement relating to real property obviates the applicability of the Statute of Frauds. It found that the defaulting partner’s conduct of making payments and examining the books was “clearly referable to the execution of the contract and not to some other relation.” In addition, in 1992, he agreed to make additional contributions mandatory. The Court had ample evidence for it to conclude that the defaulting partner was liable for the unmade payments.