Corbel Construction v. Bridgemarket Associates

1/4/90 N.Y.L.J. p.21 (Sup. Ct. N.Y. Cty.)

We represented: Defendant

Baer, J.

DECISION and ORDER Plaintiff moves to vacate a stipulation of discontinuance and for summary judgment against the individual defendants.

Defendant Bridgemarket Associates is a general partnership. The four individual defendants are general partners of Bridgemarket. Plaintiff brought this action by way of a motion for summary judgment in lieu of complaint. A stipulation of settlement was thereafter signed whereby Bridgemarket undertook to pay plaintiff $67,256.70 by a date certain. Bridgemarket executed a confession of judgment in said amount that was to be held in escrow pending Bridgemarket's payment by the date certain. A stipulation of discontinuance that was to be without prejudice was signed.

The money was not paid by the due date. By letter agreement, a further opportunity to pay was afforded. Plaintiff reserved its rights to seek remedies against the individual defendants. Again, the money was not paid. Plaintiff now seeks to obtain its money via a judgment against the individual defendants.

Defendants argue that the plaintiff should proceed with the confession of judgment, the remedy provided in the settlement in the event of a default. Defendants argue that plaintiff cannot impose liability on the individual defendants in advance of so doing and without commencing an action against the partners individually. Plaintiff, on the other hand, contends that it never waived its rights against the individuals, that the latter are named parties herein, that one of them was served and that all appeared by present defense counsel. Plaintiff states that the partnership has failed to meet its obligations in the past and that executing on the judgment against it would be a futile exercise.

A partnership may be sued in the partnership name. (CPLR § 1025.) Service upon the partnership will subject its assets to the claims of the plaintiff. Service upon the partnership, however, will not subject to execution the personal assets of partners who were not served. (Gateley v. Deters, 128 Misc.2d 209, 489 N.Y.S. 2d 684 (Sup. Ct. 1985); Bensaull v. Fanwood Estates, 128 Misc.2d 110, 488 N.Y.S.2d 944 (Sup. Ct. 1984); Martinoff v. Triboro Roofing Co., 228 N.Y.S.2d 139 (Sup. Ct. 1962).)

With regard to substantive liability, a partner is jointly liable for the contractual obligations of the partnership. If the assets of the partnership are insufficient, the partners will be individually liable. The judgment creditor, however, must look to partnership property in the first instance. (Midwood Development Corp. v. K 12th Associates, 146 A.D.2d 754, 537 N.Y.S.2d 237 (2d Dep't 1989).) Thus, it has been held that in cases in which the plaintiff does not allege that the partnership is insolvent or that partnership property is insufficient to pay partnership debts and there is no effective remedy without resort to individual property, the complaint against the individual partners can be dismissed. (Helmsley v. Cohen, 56 A.D.2d 519, 391 N.Y.S.2d 522 (1st Dep't 1977); Stern v. Low, 27 A.D.2d 756, 277 N.Y.S.2d 756 (2d Dep't 1967); Murphy v. Gutfreund, 624 F.Supp. 444, 448 (S.D.N.Y. 1985); Owen Steel Co. v. George A. Fuller Co., 563 F.Supp. 298, 300 (S.D.N.Y. 1983); Cunard Line Ltd. v. Abney, 540 F.Supp. 657, 659-660 (S.D.N.Y. 1982); Wisnouse v. Telsey, 367 F.Supp. 855 (S.D.N.Y. 1973) (Weinfeld, J.).) See Seligman v. Friedlander, 199 N.Y. 373, 376, 380 (1910) ("The theory of the law was that the joint liabilities should be paid from the joint property if possible and not until that remedy was exhausted, or resort thereto shown to be useless, could payment from the individual property be exacted … When a partnership debt is incurred it presumptively creates partnership assets and should in reason be paid therefrom and not until they are exhausted should individual property be proceeded against.")

In this case it is conceded that the partnership has not paid all the monies due despite being given opportunities to do so. In its papers plaintiff assumes that the partnership is effectively insolvent or unable to pay its debt and that there is no remedy absent resort to the property of the partners, but plaintiff has not actually demonstrated this to be so. That the partnership has not paid does not necessarily mean that it is judgment-proof. Plaintiff has produced no facts bearing upon the financial condition of the partnership other than the fact of non-payment. Even it the partnership cannot pay the entire debt, it may be able to pay some portion of it after execution. Accordingly, the motion should be denied at this time. If necessary, plaintiff may renew the motion and the individual defendants may then respond thereto. Defendants' suggestion that plaintiff must bring a separate action is not explained and it is obvious that the individual defendants are named herein, but defendants may be hinting at the view that some of the partners were never served individually and did not appear herein. (See State v. Mayflower Nursing Home, 144 A.D.2d 657, 535 N.Y.S.2d 377 (2d Dep't 1988); Martinoff v. Triboro Roofing Co., supra). If the individual defendants have this or some other purported defense, they may try to assert it if plaintiff returns to court seeking relief against them, failing which the individuals would be obligated to pay whatever sum remains unpaid by the partnership obligation.