Business Law Case 11

Business Law Case 11 - Court of Appeals Plaintiff wins...

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Banyei Isoh William H. Proctor 10/31/09 Conklin Farm V. Leibowitz Supreme Court of New Jersey, 1995 140 N.J. 417, 658 A.2d 1257 Facts: Three individuals formed a partnership called LongView to acquire Conklin Farm. The three individual’s names were Paula Hertzberg, Elliot Leibowitz, and Joel Leibowitz. The day the partnership was formed they executed a promissory note in favor of Conklin for 9 million dollars. The note was signed by all three partners. On March 15, 1990 Joel Leibowitz assigned his thirty percent to his wife who had agreed to be bound by all the terms of the partnership agreement. LongView had a project for condominium that failed and defaulted on the note. In March 1991 LongView filed for bankruptcy. All three partners were discharged of any personal liability on the Conklin note. Conklin sued Doris Leibowitz saying that she was liable for 30% of the accrued interest. Issue: Was Doris Leibowitz liable for the preexisting debt that had been accrued? Holding: Trial Court, Defendant wins, Leibowitz not personally liable
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Unformatted text preview: Court of Appeals, Plaintiff wins; Ruling Reversed Supreme Court, Defendant wins, Ruling from appellate court Reveresed Reason: An incoming partner is not liable at all for preexisting debt. When an new partner is allowed in, the old partnership is terminated and a new one is created. The creditors of the new partnership take precedence over all the old creditors. As a result of Doris Leibowitz not signing or guaranteeing payment of the note, she is not liable to having to pay the note back. She cannot be liable as an incoming partner for a preexisting debt. The interest that had accrued on the account was interest on a note that was a preexisting debt. Rule of Law: A new partner is not personally liable for preexisting debt including interest on a preexisting note. Ms. Leibowitz was an incoming partner which left made her not liable to cover all the charges from the note and the interest that had accrued....
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This note was uploaded on 05/06/2010 for the course BUAD Buad 381 taught by Professor Proctor during the Spring '10 term at Morgan.

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