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T.R. Alter & Associates, Inc. v. Apollo Associates Ltd.

A-4324-01T5 (N.J. Super. App. Div. 2003) (Unpublished)

PARTNERSHIPS; PARTNERS; LIABILITY—Although a partnership’s creditor is normally limited to getting a conditional judgment against an individual partnership, where it is clear to the trial court that the partnership has no ability to pay, it is proper to issue an absolute judgment against the partner.

A real estate broker was entitled to a substantial commission from a limited partnership which the limited partnership failed to pay. The real estate broker sued both the partnership and its general partner. Judgment was granted in favor of the real estate broker and against the general partner. The general partner argued that New Jersey statutes require that a “judgment creditor of a partner shall not levy execution against the assets of the partner to satisfy a judgment based on a claim against the partnership unless the partner is personally liable for the claim ... and: (1) a judgment based on the same claim has been obtained against the partnership and writ of execution on the judgment has been returned unsatisfied in whole or in part[.]” The Court rejected that argument pointing out that another portion of the same statute “permits, pursuant to leave of court to the judgment creditor, ‘execution against the assets of a partner based on a finding that the partnership assets subject to execution are clearly insufficient to satisfy the judgment, that exhaustion of partnership assets is excessively burdensome, or that the grant of permission is an appropriate exercise of the court’s equitable powers[.]” Here, the limited partnership owned only one substantial asset, a single piece of real estate subject to a substantial mortgage. Further, it was undisputed that the partnership received “no disposable income from operations due to the financing arrangements with its mortgagee, and that it [had] not done so for several years.” All of its income was deposited into a lockbox account and was applied to interest on the debt and various enumerated expenses. Consequently, the Court felt comfortable in finding that the limited partnership had “no monies payable to it free of the loan arrangements until the loan [was] discharged. Moreover, the mortgagee [] asserted that [the limited partnership had] defaulted on its financing and [was] into foreclosure proceedings.” As a result, the Court was satisfied that summary judgment against the general partner was entirely appropriate.

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