What if the judgment debtor owns part of a property, business, or some other asset in a 50/50 general partnership with someone else? How can you get the debtor’s share of that asset to get your judgment back?
One of many articles of judgment: I am not a lawyer, and this article is my opinion based on my experience, please consult an attorney if you need legal advice.
Unless your judgment is against the partnership itself (a partnership debt), the exclusive remedy to recover the debtor’s share of the partnership is a collection order solely against the debtor’s rights and interests in the partnership.
Generally, the relationship between partners in a partnership is governed by a partnership agreement. Partnership agreements are usually in writing, however they can be verbal or implied. Partnerships can be formed for almost any reason to conduct any type of business.
Every state (in California, Corporate Code 16403) has laws and restrictions on partnerships. A typical law is that partnership agreements must be fair and cannot be restricted to any one partner, etc. Without a written legal partnership agreement, legal statutes theoretically govern partnerships.
Typically, a partnership authority is filed by at least two of the partners with the secretary of state. An association authority statement must contain the following:
1) The name of the company.
2) The street address of the headquarters, and also the office within the state, if any.
3) The names and addresses of all partners; or agents appointed by the partners to enter into transactions, sign documents, etc.
4) The name and address of the partners authorized to carry out transfers of real estate on behalf of the company.
5) The authority, or limits to the authority, of some or all of the partners to enter into transactions on behalf of the partnership.
6) The agent of notification of judicial processes. The agent must reside in the same state as the company itself. In California, this is covered by corporation code 1505.
In general, all partners are jointly and severally liable for the obligations of the partnership. Partnerships are liable for debts incurred by partners while running the partnership, but not for personal debts.
In California, and in almost all states, collection orders are the only remedy for judgment creditors to attempt to pursue their debtors’ interests or income (or liabilities) from their partnership interests.
For those with a lawsuit, it might be worth researching the timeline of when the partnership was formed, in relation to the lawsuit and the cause of action for the lawsuit. Unraveling a partnership formed for the purpose of getting rid of a creditor requires an expensive court battle.