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Neustadter v. United Exposition Service Co.

Decided: July 10, 1951.


Haneman, J.s.c.


The facts as recited in the complaint in connection herewith are as follows:

On August 11, 1947, plaintiff entered into an agreement with the individually named defendants which resulted in the creation of the defendant partnership under the title of United Exposition Service Company.

One of the terms of said agreement was as follows:

"8. The partners hereby agree to contribute EIGHT THOUSAND DOLLARS ($8,000) on the signing of this agreement in the percentages as hereinbefore set forth. The balance of the Eighty Thousand Dollars ($80,000), or any additional sums, shall be contributed in the same ratio by the partners and shall be paid by the partners to the partnership in such amounts as shall be required for the conduct and operation of the business of the partnership within ten days after a call has been made upon the partners by the General Manager of the partnership, with the written consent of Samuel Katz. In the event that any partner shall fail or refuse to make the contribution to the capital investment of the partnership in accordance with the call of the General Manager, then, in that event, at the option of the majority in investment of the remaining partners, the book value of the interest of such defaulting partner may be retained as the investment of said partner, and his interest in the partnership shall be in the ratio of the book value which the interest of said partner bears to the whole value; or the book value of said partner's interest may be paid to said partner and he be retired, and his share offered in ratio to the investment of the remaining partners to said partnership and in the event that any such remaining partners fail or refuse to accept such additional share in the ratio to which he is entitled within ten days after receiving notice from the General Manager, then said share of such defaulting partner may be distributed pro rata among other partners who desire to avail themselves of this privilege. In all cases of voting, the majority in investment shall govern and not the majority of the number of the partners. All calls shall have attached thereto a copy of the written consent by Samuel Katz. If any partner shall have deposited the necessary money of a contemplated call then the notice to said partner shall be deemed to have been waived. A defaulting partner shall have no right to take a call after he has failed to avail himself of the call before the time specified herein

whether or not the proportionate share of the call allotted to him had been taken up by the other partners. In the event that any partner shall fail to take up any call, his interest in the partnership shall thereafter be fixed, and he shall not have the right to any proportionate share of any subsequent call that may be made."

On or about June 29, 1950, there was an alleged call for capital contribution of which plaintiff asserts she had no knowledge until July 24, 1950, at which time she forwarded her check for the amount of said call. This check was returned to her by Harry Katz by letter dated August 1, 1950, with the advice that in accordance with the above quoted section of the agreement, he, Helen Katz, Mabel Katz and Samuel Katz had decided to exercise their "option" to retain her interest.

Plaintiff seeks to enjoin defendants from so reducing her interest in the partnership and to force the defendants to accept her contribution. She contends that she is entitled to this relief since (1) she did not receive timely notice of the alleged call, and she immediately forwarded her contribution upon the receipt of actual notice thereof, and (2) the provisions requiring a contribution in accordance with the terms of the call were waived by the conduct of the parties.

The defendants, in addition to controverting the allegations of plaintiff and her conclusions as to the result thereof, affirmatively allege that this court has no jurisdiction over the partnership since there are no physical assets belonging to it within the State of New Jersey, and since two of the partners, i.e. , Mabel Katz and Harry Katz, were not actually served.

At the outset it is admitted that the plaintiff did not tender her contribution until July 24, 1950, which was not within the time provided by the partnership agreement, if the notice to her was a call for capital.

It is admitted that no formal calls under paragraph 8 of the agreement were ever made prior to that of June 29, 1950. The initial and only contributions to capital were made in 1947 at irregular intervals, over a period of months, upon informal oral advice from Harry Katz that funds would be

required by specific dates. Between April 30, 1948, and June 25, 1950, on a number of occasions the partners advanced additional funds from time to time, which were considered loans, in spite of the fact that the full balance of $80,000 had not been contributed. Both Samuel Katz and Harry Katz stated that the partners made such advances as loans rather than capital contributions; that they were interested in a return of the money advanced to the partnership. At no time prior to December 19, 1949, were any requests, demands or notifications for loans given by letter. In each instance the partners had agreed mutually to advance the sums required and were importuned to forward the same by oral contact from Samuel Katz or Harry Katz. As a result of a meeting held in December, 1949, the partners agreed to loan additional sums to the partnership upon the basis of $2,000 per one-eighth interest. Samuel Katz and Harry Katz then mailed to each partner a letter dated December 19, 1949, a copy of which follows:

"I have discussed with Sam our financial status in light of our activities for the next few months, and we have determined that for purchases of additional stock and operating expenses, the company will require an additional $8,000 of capital. According to the capital ratio, I am, therefore, ...

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