Plaintiff and defendant formed a partnership to rent property to various tenants. When plaintiff asked defendant for his share of the rental profits and to inspect the accounting records, defendant claimed they had never been partners.
Importance of a Written Partnership Agreement
In this case, the agreement required that “[t]he partnership . . . maintain adequate accounting records” and granted each partner the right to access and inspect “[a]ll books, records, and accounts of the partnership . . . at all times.”
Litigation began and plaintiff was awarded rental income, his attorney was awarded fees, and the parties agreed to dissolve and liquidate the partnership. Litigation continued thereafter.
In ruling against the defendant who was an obstructionist throughout the term of the partnership (comprising many years), the court cited the doctrine of laches which I have written about in prior blogs. The doctrine of laches is “invoked to deny a party enforcement of a known right when the party engages in an inexcusable and unexplained delay in exercising that right to the prejudice of the other party.” “[L]aches is not governed by fixed time limits but instead relies on an analysis of time constraints that ‘are characteristically flexible.'” A judge may properly apply laches “when the delaying party had sufficient opportunity to assert the right in the proper forum and the prejudiced party acted in good faith believing that the right had been abandoned.” The judge should consider “the length of the delay, the reasons for the delay, and the ‘changing conditions of either or both parties during the delay.'”
At no point during these proceedings did defendant provide plaintiff access to the partnership records. After plaintiff filed a third lawsuit, again seeking access to the partnership records, defendant waited more than six years to begin providing some of the requested records. The court perceived no reasonable explanation for this delay, and was not persuaded by his reliance upon his former attorney’s conduct as an excuse.
As a result of this unjustified delay, plaintiff was prejudiced. Plaintiff waited years for defendant to start complying with court orders. The defendant paid a high price for his behavior.
To discuss your NJ partnership matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at firstname.lastname@example.org. Please ask us about our video conferencing or telephone consultations if you are unable to come to our office.
By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Partnership Attorney