On appeal from Superior Court of New Jersey, Chancery Division, Bergen County, C-24-93.
Before Judges Wefing, Fall and Payne.
The opinion of the court was delivered by: Payne, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
In 1993, plaintiff Sebring Associates, a real estate partnership established in 1989 to develop property in Hackensack and later, Passaic, together with partners James N. Canino and Anthony R. Palmeri, brought an action in the Chancery Division to terminate the partnership interest of Eugene J. Coyle, a physician, and for damages. Coyle crossclaimed. Following an extended bench trial before Judge Marguerite Simon, on December 23, 1999, a judgment of dissolution pursuant to N.J.S.A. 42:1-32(c) and (d)*fn1 and certain damages were awarded. Coyle's counterclaim asserting his right to maintain his partnership interest under a theory of minority oppression was dismissed.
In a written opinion issued by the court on October 22, 1999, Judge Simon found that the dissolution of the partnership*fn2 was justified by Coyle's failure to meet cash calls, his taping of conversations with partners and his general refusal to accept responsibility for partnership matters.*fn3 Judge Simon also found that there was no equity in the partnership as of the date of its dissolution in December 1992.*fn4 In this regard, the judge relied on an appraisal by Cushman & Wakefield as of March 19, 1993 and revised on July 16, 1993 setting the fair market value of the Hackensack property at $27,500,000 and documents in the possession of First Fidelity Bank that disclosed that outstanding mortgage obligations due to it aggregated between $42 and $44 million. Although Judge Simon expressed some doubt as to the accuracy of those figures, she never suggested that any equity existed in the property at that time. No one has contended that there was any equity in the Passaic property, which has been regarded as a business failure almost from the outset.
In calculating damages, Judge Simon relied upon N.J.S.A. 42:1-38(2), which provided that when a partnership dissolution occurs as the result of the wrongful acts of a partner and the business is continued, the departing partner has the right as against his former co-partners"to have the value of his interest in the partnership, less any damages caused to his co-partners by the dissolution, ascertained and paid." N.J.S.A. 42:1-38(2)(c)(II). The judge determined that when the termination occurred, Coyle had withdrawn from the partnership $341,640 more than he had put into it, as reflected in the negative balance in his capital account.*fn5 As a consequence, Judge Simon found that the partnership was entitled as cash-call damages to reimbursement in an amount required to raise Coyle's capital account balance to zero, thereby bringing his contributions and withdrawals into equipoise. Although proofs of additional cash call damages were presented, Judge Simon did not consider them, apparently reasoning that a further damages award, when paid, would be the equivalent of a positive cash contribution by Coyle, raising his capital account above zero and, in a circular fashion, triggering a reimbursement obligation on plaintiffs' part.
Judge Simon thus awarded to Sebring $341,640 in cash-call damages plus prejudgment interest*fn6 of $140,121.15. See December 23, 1999 judgment at ¶ 5. In addition to this amount, Judge Simon awarded damages plus prejudgment interest to Sebring that were unrelated to cash calls totaling $107,875.91 for unpaid rent for a penthouse apartment occupied by Coyle; to Canino for payroll taxes and other obligations paid for Coyle's benefit in the amount of $9,165.93; to Canino for monies loaned in the amount of $28,202.85; and to Palmeri for payroll taxes and other obligations in the amount of $51,470.21.
Coyle appealed from Judge Simon's order of judgment; plaintiffs did not. We resolved the appeal in a published opinion written by Judge Baime. Sebring Associates v. Coyle, 347 N.J. Super. 414 (App. Div.), certif. denied, 172 N.J. 355 (2002). In his appeal, Coyle argued: (1) the Chancery Division failed to adhere to the partnership agreement in divesting his partnership interest; (2) proceeds of a $900,000 loan by Powder Mill Bank should have been considered a capital contribution by Coyle; (3) Canino and Palmeri were guilty of acts of minority oppression and should have been estopped from seeking to divest Coyle of his partnership interest; and (4) the matter should be remanded for recalculation of that interest. 347 N.J. Super. at 423.
We rejected all of Coyle's arguments with the exception of that related to the Powder Mill loan. In that regard, we noted that each of the partners had obtained $900,000 loans on Sebring's behalf from Powder Mill, a device necessitated by the need of Sebring for approximately three million dollars and the $900,000 limit imposed upon the bank's lending ability. Canino and Palmeri had settled their debts with Powder Mill, and each eventually was given full credit in his capital account for his $900,000 cash contribution. Coyle had not paid his obligation. However, the FDIC, which had later taken over the bank, had not filed suit against Coyle. We held that if the statute of limitations barred collection on the debt, the amount should be credited to Coyle's capital account, despite the default in his obligations, since the loan had benefitted Sebring. We stated:
Under these circumstances, we believe that the interests of justice militate in favor of according Coyle the benefit of the uncollectibility of the debt. While such a result would have the effect of rewarding Coyle for his obstinance and audacity, we are convinced that it represents the most equitable result.
[347 N.J. Super. at 433.]
However, because we could not determine from the record whether the loan was collectible, we remanded the matter so that a determination of the issue could be made. We stated further:
The Chancery Division's disposition of this issue will have no impact on its order dissolving the partnership. Even if it later appears that Coyle has a positive balance in his capital account, that would not excuse his lack of fidelity to the partnership in ...