Agency and Partnership Flashcards
Green, a judgment creditor of Amy, an individual partner, cannot attach and execute upon the partnership real estate.
A judgment creditor of an individual partner may not attach and execute upon partnership real estate to satisfy his claim against that partner.
Under the Uniform Partnership Act (UPA) (1914), partners are tenants in partnership in specific items of partnership property. UPA § 25 (1914). The incidents of this tenancy include an equal right to use the partnership property for partnership purposes. Id. § 25(2)(a). However, a partner’s interest in specific items of partnership property is not subject to attachment or execution except upon a claim against the partnership. Id. § 25(2)(c).
Under the Uniform Partnership Act (1997), the partnership is a legal entity distinct from its partners. UPA § 201(a) (1997). Partnership property is owned by the partnership and a partner is not a co-owner of such property. Id. § 501. Therefore, partnership property is not subject to execution by an individual partner’s creditors. Id. § 501 cmt.
Thus, Amy has no interest in partnership real estate that could be subject to attachment and execution by a judgment creditor such as Green.
Red should reduce his claim against Beck to a judgment and should then seek a charging order against Beck’s financial interest in the partnership.
A creditor of an individual partner who wants to pursue a partner’s financial interest in the part-nership must first reduce his claim to a judgment. A creditor of an individual partner who has reduced his claim to a judgment may seek a charging order against that partner’s financial interest in the partnership. UPA § 28 (1914); UPA § 504 (1997). The partner’s financial interest (called the “transferable interest in the partnership” under the 1997 Act) is the partner’s share of profits and losses and the right to receive distributions. See UPA § 26 (1914); UPA § 502 (1997). This financial interest is the only interest of a partner in the partnership that can be pursued by a credi-tor of an individual partner.
Thus, Red should reduce his claim against Beck to a judgment and should then seek a charging order against Beck’s financial interest in the partnership.
Another way Red might collect from Beck’s interest in the partnership is to convince Beck to assign him Beck’s interest in the partnership in which case Red would succeed to Beck’s financial interest in the partnership.
White, an assignee of Curt’s partnership interest, has received only Curt’s financial interest in the partnership; White has no right to inspect partnership books and records or to participate in the management of the partnership.
Generally a person may become a partner only with the consent of all the partners. UPA § 18(g) (1914); UPA § 401(i) (1997). Thus, a partner does not have the unilateral power to make someone a partner by transferring his or her partnership interest to them.
The assignee of a partnership interest receives only the financial interest of the partner. The 1997 Act refers to this financial interest as the partner’s transferable interest in the partnership. UPA § 502 (1997). “Section 502 continues the UPA Section 26 concept that a partner’s only transferable interest in the partnership is the partner’s share of profits and losses and right to receive distributions, that is, the partner’s financial rights.” An assignee does not acquire the right to inspect partnership books and records, or to participate (or interfere) in the management or conduct of the business.
In sum, because White is a mere assignee of Curt’s partnership interest, White has received only Curt’s financial interest in the partnership; White is not a partner and has no right to inspect part-nership books and records or to participate in the management of the partnership.
White may not force a dissolution and winding up of the partnership because it is a partnership for a term and the term has not yet been completed.
White is a transferee of Curt’s financial interest in the partnership. (See Point Three.) A trans-feree of a partner’s financial interest in a partnership may seek dissolution of the partnership if the partnership is a partnership at will or, if a partnership is for a term or a particular undertaking, the term or the undertaking has been completed. UPA § 32(2) (1914); UPA § 503(b)(3) (1997). Under the 1997 Act, the court will dissolve a partnership for a term and order a winding up at the request of a transferee of a partner’s financial interest after the expiration of the term and only if it is equitable to do so. See UPA § 801(6)(i) & cmt. 9 (1997).
In this case the partnership is a partnership for a term of 25 years, not a partnership at will, and the term has not yet expired. Therefore, a transferee of a partner’s financial interest may not seek dissolution and winding up of the partnership. Consequently, White cannot force a dissolution and winding up of the partnership.
