Business Associations, Pages 177–180

Kessler v. Antinora

Superior Court of New Jersey, Appellate Division, 1995

Facts:

The parties entered a partnership to build a single-family house. Plaintiff was to provide the money, and defendant was to act as general contractor. Profits were to first repay plaintiff and then be divided: 60% to plaintiff and 40% to defendant.

They did not consider what would happen in the case of a loss, but a loss is what happened. Plaintiff then sued defendant to recover 40% of his losses.

Procedural History:

The Law Division judge granted summary judgment for plaintiff.

Issue:

Is defendant liable to plaintiff for his losses because plaintiff was supposed to be paid first from the profits?

Rule:

LexisNexis IconWestLaw LogoGoogle Scholar LogoPage 178
N.J.S.A. 42:1-18

The rights and duties of the partners in relation to the partnership shall be determined, subject to any agreement between them, by the following rules:

  1. Each partner shall be repaid his contributions, whether by way of capital or advances to the partnership property and share equally in the profits and surplus remaining after all liabilities, including those to partners, are satisfied; and must contribute towards the losses, whether of capital or otherwise, sustained by the partnership according to his share in the profits.
. . . .

Reasoning:

The parties' agreement only concerned itself with profit. They clearly intended that plaintiff would only be repaid by the sale of the house, not by defendant. Both parties contributed to the partnership, and both have suffered loss, which would be nigh-impossible to quantify. If the parties did not plan ahead for loss, the law should not try to speculatively reconstruct their non-existent intent of what to do in this case.

Holding:

No, defendant is not liable to plaintiff for his loss. Reversed for entry of summary judgment for defendant.