Pre-2000 Opinions
Site.YearPre2000ChargingOrderOpinions
Pre-2000 Charging Order Opinions
Windom National Bank v. Klein, 254 N.W. 602 (Minn., 1934).
♦ Windom National Bank v. Klein (1934) centered on the crucial question of whether individual partners possess the legal authority to mortgage specific partnership property to secure their own personal debts. The Bender Brothers partnership, consisting of four brothers, operated a dairy farm in Minnesota. Windom National Bank, holding an unsatisfied judgment against two of the partners, obtained a charging order and the appointment of a receiver for their respective interests in the partnership under the provisions of the Uniform Partnership Act. The bank and the receiver subsequently sought to annul various chattel and real estate mortgages on partnership assets, such as livestock and land, which had been executed by individual partners for their private benefit. While the trial court initially sustained a demurrer against the complaint, the Supreme Court of Minnesota reversed that decision. Justice Stone explained that the Uniform Partnership Act introduced the concept of tenancy in partnership to replace common law principles that often led to inequitable results for firm creditors. According to the court, a partner's interest in specific partnership property is strictly non-assignable for individual purposes and is entirely exempt from the claims of a partner's separate creditors. The justices determined that any unilateral attempt to mortgage or dispose of specific partnership assets for personal liabilities is essentially void. Moreover, the court held that a receiver acting under a charging order is entitled to seek judicial relief to invalidate these unauthorized assignments to protect the partner's legitimate interest in the firm's profits and surplus. The decision emphasized that the primary purpose of the statute is to keep partnership property intact for the benefit of the firm and its creditors. By upholding the complaint, the court ensured that the integrity of partnership assets is protected against the private financial obligations of its individual members, reinforcing the statutory framework of the partnership entity. ♦
Tupper v. Kroc, 88 Nev. 146, 494 P.2d 1275 (Nev., 1972).
♦ Lloyd G. Tupper and Ray A. Kroc entered into limited partnerships to hold and lease real estate, with Tupper as general partner and Kroc as limited partner, each holding a fifty percent interest. Kroc alleged Tupper mismanaged and misappropriated partnership funds, leading to the appointment of a receiver and subsequent litigation. Kroc paid partnership debts when Tupper could not, accepting interest-bearing notes in return, and later obtained a summary judgment against Tupper. To satisfy the judgment, the court issued a charging order under NRS 87.280, directing the sale of Tupper’s partnership interests, which Kroc purchased at a sheriff’s sale. Tupper challenged the sale and the discharge of the receiver, arguing procedural errors, inadequate sale price, and violation of partnership agreements. The Nevada Supreme Court affirmed the trial court’s orders, holding that the charging order and sale were proper, the sale price was determined by public auction, and Tupper’s interest consisted only of profits and surplus, not partnership assets. The court rejected claims of procedural irregularity and found that after the sale, Tupper had no remaining rights or equity in the partnerships, justifying the termination of the receivership. ♦
Chrysler Credit Corp. v. Peterson, 342 N.W.2d 170 (Minn.App., 1984).
♦ Chrysler Credit sought to collect an unsatisfied judgment against Donald P. Peterson by obtaining a court order “charging” Peterson’s limited partnership interest in Cedar Riverside Properties, after learning through discovery that he owned four partnership units. Before the hearing on Chrysler Credit’s application, Peterson assigned his partnership interest to his wife and his attorney, and additional liens/security interests were placed on the units; Chrysler Credit argued these transfers were fraudulent and asked the court both to void them and to issue a charge order for the remaining debt. The trial court denied all requested relief, but the Court of Appeals affirmed in part and reversed in part: it agreed that whether the assignments were fraudulent could not be decided on motion and instead required a separate plenary action with the assignees joined as parties (since they might be bona fide purchasers). However, the appellate court held the trial court erred in denying the charge order merely because ownership of the partnership interest had not yet been determined. Reading Minnesota’s charge-order statute under the Uniform Limited Partnership Act together with remedies available to a judgment creditor under the Uniform Fraudulent Conveyances Act, the court concluded that when a judgment creditor alleges a fraudulent conveyance of a debtor’s limited partnership interest, the creditor is entitled to a charge order that attaches to whatever partnership interest is later determined to exist.Chrysler Credit sought to collect an unsatisfied judgment against Donald P. Peterson by obtaining a court order “charging” Peterson’s limited partnership interest in Cedar Riverside Properties, after learning through discovery that he owned four partnership units. Before the hearing on Chrysler Credit’s application, Peterson assigned his partnership interest to his wife and his attorney, and additional liens/security interests were placed on the units; Chrysler Credit argued these transfers were fraudulent and asked the court both to void them and to issue a charge order for the remaining debt. The trial court denied all requested relief, but the Court of Appeals affirmed in part and reversed in part: it agreed that whether the assignments were fraudulent could not be decided on motion and instead required a separate plenary action with the assignees joined as parties (since they might be bona fide purchasers). However, the appellate court held the trial court erred in denying the charge order merely because ownership of the partnership interest had not yet been determined. Reading Minnesota’s charge-order statute under the Uniform Limited Partnership Act together with remedies available to a judgment creditor under the Uniform Fraudulent Conveyances Act, the court concluded that when a judgment creditor alleges a fraudulent conveyance of a debtor’s limited partnership interest, the creditor is entitled to a charge order that attaches to whatever partnership interest is later determined to exist. ♦
City of Arkansas City v. Anderson, 752 P.2d 673 (Kan.,1988).
♦ The Supreme Court of Kansas resolved a complex dispute regarding the priority of competing claims to partnership proceeds derived from a real estate sale. In 1984, the City of Arkansas City and Southwest National Bank obtained a judgment surpassing two million dollars against A. Scott and E. Sylvia Anderson. To refinance their debts in 1985, the Andersons executed an assignment of their interest in proceeds from a real estate option held by their partnership, Land Opportunities Co., to Hesston State Bank. While Hesston recorded this assignment with the county register of deeds in November 1985, it neglected to file a Uniform Commercial Code financing statement with the Secretary of State until July 1986. During the interim, the judgment creditors obtained a judicial charging order against the Andersons' partnership interests in November 1985 and formally served it on the partnership in January 1986. The core legal question was whether the assignment to Hesston or the charging order served by the creditors held priority. The court concluded that the assignment was not an absolute transfer but rather a security interest intended to secure a promissory note. Under the Kansas Uniform Partnership Act, the court noted that partners cannot assign specific partnership property independently; they may only assign their share of profits and surplus. Furthermore, the court established that a charging order issued under K.S.A. 56-328 creates a valid lien upon the debtor partner's distributive share of profits as of the date of service. Because the judgment creditors served their charging order months before Hesston perfected its security interest through the required Secretary of State filing, the creditors qualified as lien creditors with superior rights under the UCC. The court ultimately affirmed the trial court's summary judgment, confirming that the creditors' interest in the funds took precedence over the bank's unperfected security interest. ♦
Leventhal v. Five Seasons Partnership, 84 Md.App. 603 (1990). Charging Order and Receiver
♦ Judgment creditor Stephen Leventhal and receiver Stephen Trattner appealed after the Montgomery County Circuit Court dismissed with prejudice their complaint seeking dissolution and winding up of Five Seasons Partnership. Leventhal had obtained a charging order against the interests of judgment debtors Juan and Lelia Imas Gruner in various partnerships, including Five Seasons, and Trattner was appointed receiver under that order. Five Seasons, a Maryland general partnership, included as partners entities associated with the Gruners and an Argentine corporation (SKB) whose principals allegedly overdrew the partnership capital account by $300,000 and improperly received over $1 million, while partnership counsel held in escrow funds owed to Five Seasons by a related entity. The trial court dismissed on the view that the charging-order procedure was the proper remedy, but the Court of Special Appeals held this was error. Relying on Maryland’s Uniform Partnership Act and prior Maryland precedent (Rector v. Azzato), the appellate court explained that a receiver appointed under a charging order “stands in the shoes” of the debtor-partner and may seek court action, including dissolution and winding up; it also noted statutory authority allowing a holder of a charging order to petition for dissolution. The court reversed and remanded for the trial court to determine whether dissolution and/or winding up should be ordered, with costs assessed against appellees. ♦
Hellman v. Anderson, 233 Cal. App. 3d 840, 284 Cal. Rptr. 830 (Cal.App.Dist.3 08/26/1991).
♦ The California Court of Appeal addressed whether a judgment debtor's interest in a general partnership could be foreclosed upon and sold to satisfy a money judgment when non-debtor partners do not consent. The case involved judgment creditors seeking to enforce a debt of over 440,000 dollars against John B. Anderson by foreclosing on his eighty percent interest in Rancho Murieta Investors. Although the creditors had previously obtained a charging order, it failed to satisfy the judgment because the partnership generated no profits. The appellate court held that while a partner's right in specific partnership property is exempt from execution for individual debts, their interest in the partnership-defined as the right to share in profits and surplus-is personal property subject to enforcement. The court concluded that Corporations Code section 15028 implicitly authorizes foreclosure and sale of this charged interest, as the statute references redemption before foreclosure. Crucially, the court departed from the precedent set in Crocker National Bank v. Perroton, which required the consent of all non-debtor partners for such a sale. Instead, the court established that partner consent is not an absolute requirement. Instead, trial courts must determine whether foreclosure would unduly interfere with the partnership's business operations. Because the interest being sold is limited to profits and surplus and does not include management rights or specific assets, many foreclosures may not disrupt the business. The court reversed the trial court's foreclosure order and remanded the case for a factual finding on the potential for undue interference, placing the burden of proof on the debtor. This ruling clarifies that judgment creditors have a viable path to reach partnership interests even over the objections of other partners, provided the equitable balance does not tip toward significant business disruption. ♦
Union Colony Bank v. United Bank, 832 P.2d 1112 (Colo., 1992).
♦ The Colorado Court of Appeals addressed a matter of first impression regarding the priority of competing charging orders against a debtor's partnership interest. Both Union Colony Bank and United Bank were unsecured judgment creditors of Stanley Davis, who held an interest in the Wilshire Land Company partnership. United Bank obtained its judgment first and attempted to satisfy it through writs of garnishment in April and May 1990. However, Union Colony obtained a judgment later in May and immediately secured a charging order against Davis's partnership interest. United Bank subsequently moved for a charging order in June, which the trial court granted nunc pro tunc to the date of United Bank's first garnishment attempt. The trial court then ruled that the two banks should share partnership distributions on a pro-rata basis. On appeal, Union Colony argued that pro-rata distribution was improper and that its charging order should have priority. The appellate court agreed and reversed the decision. The court reasoned that a charging order serves as a substitute for execution and that, in the absence of specific statutory guidance in the Uniform Partnership Act, priority should follow the established first in time, first in right principle applied to other personal property. The court held that a charging order creates a lien on the debtor's distributive share of partnership profits that attaches at the time the order is served on the partnership. Furthermore, the court determined that the trial court erred in backdating United Bank's charging order using the nunc pro tunc doctrine. It concluded that garnishment and charging orders are distinct legal remedies with different statutory foundations and characteristics; therefore, a charging order cannot be made effective as of the date of a prior, unsuccessful garnishment. Consequently, because Union Colony's charging order was served before United Bank's, Union Colony was entitled to full satisfaction of its judgment before any funds reached United Bank. ♦
Chandler Medical Building Partners v. Chandler Dental Group, 855 P.2d 787, 175 Ariz. 273 (Ariz.App.Div.1, 1993).
♦ The Arizona Court of Appeals addressed whether a partnership could sue its members for damages after they failed to meet capital contribution assessments. Chandler Medical Building Partners (CMBP) was formed to develop and operate a medical office building. When the partnership faced debt, it issued capital calls to its partners. Chandler Dental Group (CDG) failed to pay subsequent assessments, leading CMBP to treat them as withdrawn and file a lawsuit for breach of contract and damages under A.R.S. section 29-238. The trial court dismissed the action, prompting an appeal. The appellate court first examined whether a default occurred. Despite CDG's argument that they had a right to withdraw by refusing payment, the court found that the mandatory language in the partnership agreement, stating partners shall be obligated to pay, meant that non-payment constituted a contractual default. However, the court then analyzed the available remedies. It noted that under the Uniform Partnership Act, partnership rights are subject to any specific agreement between the parties. The court interpreted the agreement's pay or walk provision as providing an exclusive remedy: a partner failing to pay is treated as withdrawn and forfeits certain rights, but this process constitutes a dissolution explicitly permitted by the agreement rather than one in contravention of it. Consequently, the court held that the statutory claim for damages was precluded because the partnership was not for a particular undertaking and the agreement provided its own comprehensive consequences for withdrawal. The court concluded that such provisions make business sense by allowing partners to exit an investment while preserving the remaining partners' control over the venture. Thus, the lower court's dismissal of the claim for monetary damages was affirmed. ♦
First Union Nat'l Bank v. Craun, 853 F.Supp. 209 (W.D.Va. 1994).
♦ The U.S. District Court for the Western District of Virginia considered whether a post‑judgment charging order against a debtor’s limited partnership interests could take priority over a security interest perfected after judgment but before the charging order was entered. The plaintiff bank obtained a consent judgment against Nancy Craun and sought a charging order under Virginia law to reach her interests in two limited partnerships, while one partnership claimed priority based on an earlier assignment and a later‑perfected security agreement securing an antecedent debt. The court held that although Virginia law permits issuance of a charging order without first issuing a writ of execution, a charging order alone does not establish priority over a perfected security interest when no execution has issued. The court reasoned that priority would have been fixed had the creditor issued and delivered a writ of execution before the security interest was perfected, but absent execution the debtor remained free to encumber her intangible distribution rights. Accordingly, the court entered the agreed charging order but denied the bank’s request to give it priority over the perfected security interest, underscoring that a judgment, without execution, does not itself secure priority over later‑perfected liens. ♦
Madison Hills LTD v. Madison Hills, Inc., 644 A.2d 363 (Conn.App. 06/06/1994).
♦ The Appellate Court of Connecticut addressed the novel issue of how a judgment creditor may enforce a debt against a partner's interest in a limited partnership, specifically focusing on the availability of strict foreclosure. The plaintiff sought to enforce a judgment against the defendant corporation, a general partner, by obtaining a charging order and subsequent strict foreclosure of the defendant's partnership interest. The trial court granted the charging order and ordered that the interest be foreclosed unless redeemed by a specific date. On appeal, the court first examined whether the remedy provisions of the Uniform Partnership Act (UPA) apply to limited partnerships governed by the Uniform Limited Partnership Act (ULPA). The court concluded that because the ULPA lacks specific enforcement mechanisms for charging orders, the UPA's provisions fill this gap as they do not conflict with the ULPA. Central to the court's reasoning was the interpretation of the term foreclosure within the UPA. By analyzing common legal definitions, historical usage, and other state statutes such as the Uniform Commercial Code and mortgage laws, the court determined that foreclosure encompasses both foreclosure by sale and strict foreclosure. This interpretation ensures that foreclosure is not rendered superfluous within the statutory text. Furthermore, the court rejected the defendant's challenges regarding the admissibility of expert testimony on the valuation of partnership assets, ruling that the trial court did not abuse its discretion as the expert provided a sufficient factual basis for his opinion. Ultimately, the Appellate Court affirmed the trial court's judgment, establishing that strict foreclosure is a permissible remedy for judgment creditors seeking to satisfy debts through a partner's interest. This landmark decision clarifies the intersection of partnership law and creditor remedies in Connecticut, balancing the rights of creditors with the operational integrity of partnerships. ♦
Nigri v. Lotz, 453 S.E.2d 780 (Ga.App. 02/01/1995).
♦ The Court of Appeals of Georgia addressed an appeal concerning the collection of a judgment debt through a debtor's partnership interests. Nigri, holding a judgment debt of over four hundred thousand dollars against Lotz, sought to charge Lotz's limited partnership interests and obtain a court order transferring those interests to him as partial satisfaction of the debt. The trial court issued a charging order under OCGA section 14-9A-52, which redirected distributions meant for Lotz to Nigri, but it denied the request for a direct transfer of the partnership interests. Nigri appealed, arguing that the court failed to properly link the interests to his claim and improperly refused the transfer. Regarding the first point, the appellate court found that the trial court had indeed enforced Nigri's rights by issuing the charging order, which allowed for the collection of financial distributions up to the unsatisfied judgment amount. On the second point, the court examined the nature of limited partnership interests as intangible personal property. It determined that while a charging order entitles a creditor to profits and surplus, it does not automatically confer the status of a limited partner or transfer title to partnership assets. The court noted that although the statute grants broad authority to make necessary orders, including the potential for a judicial foreclosure sale if distributions are insufficient, Nigri had specifically requested an immediate transfer instead of a foreclosure sale. Because Nigri did not pursue the correct procedural remedy of a judicial sale, the appellate court held that the trial court did not err in refusing the requested transfer. Ultimately, the court affirmed the judgment, clarifying that a charging order is the primary remedy and that any subsequent transfer through sale would only grant the purchaser the financial rights of an assignee rather than full partner status. ♦
Christensen v. Oedekoven, 95 Wy. 3 (Wyo.App., 1995).
♦ Addresses whether a judgment creditor of an individual partner has the statutory right to redeem partnership real estate after a foreclosure sale. The case arose after Barkley Herefords, a general partnership, defaulted on a loan secured by its ranch. John Gilbert Oedekoven purchased the ranch at the foreclosure sale. Robert F. Christensen, acting as an assignee of a money judgment against individual partner Charles Barkley, subsequently attempted to redeem the property under Wyoming law. Oedekoven filed suit to quiet title, asserting that Christensens redemption was void because the judgment was against Barkley personally rather than the partnership entity. To safeguard his investment, Oedekoven also obtained an assignment of a partnership debt and redeemed the property himself. The district court ruled in favor of Oedekoven, finding Christensens redemption invalid. Upon appeal, the Wyoming Supreme Court affirmed the lower court's decision. The Court's analysis focused on Wyoming Statute 1-18-104, which allows redemption by a judgment creditor of the person whose real estate has been sold. The Court held that when property is titled in a partnership's name, the partnership entity—not the individual partners—is the person whose real estate is sold. Under existing partnership statutes, a partner’s interest in specific partnership property is not subject to attachment or execution for personal debts. Therefore, Christensen was not a judgment creditor of the actual property owner and lacked the authority to redeem the ranch. The Court emphasized that a creditor of an individual partner must utilize a charging order to reach a partner's interest in the partnership, a remedy distinct from the redemption pursued here. This opinion confirms that partnership assets are legally distinct from the personal assets of partners, protecting partnership property from the separate creditors of its members. ♦
Dispensa v. University State Bank, 951 S.W.2d 797 (Tex.App., 1997).
♦ Dispensa sought appellate review by writ of error of a trial court’s post‑judgment charging order that attempted to apply his partnership interest in Gulf Properties Partnership toward satisfaction of University State Bank’s unsatisfied default judgment on a promissory note (about $281,000). After the bank obtained a default judgment in 1990 and later pursued collection efforts in 1995, the trial court—following a noticed hearing that Dispensa did not attend—issued an order directing the partnership to pay Dispensa’s share of profits (and other monies due him) to the bank until the judgment was satisfied. The court of appeals dismissed the appeal for lack of jurisdiction, holding the charging order was interlocutory and thus not appealable because it did not dispose of all issues raised at that stage of the enforcement proceeding (notably, it failed to address the bank’s request for an accounting and did not mention the separate turnover/receiver application) and lacked the clarity and definiteness required of a final, appealable order (it did not specify Dispensa’s partnership interest, provide a method to determine it, or state how and when payments should be made). ♦
91st Street Joint Venture v. Goldstein, 691 A.2d 272, 114 Md.App. 561 (Md.Sp.App., 1997).
♦ The Maryland Court of Special Appeals examined whether a circuit court properly exercised its discretion by vacating a charging order and refusing to ratify a receiver’s transfer of a debtor’s joint venture interest. The litigation began after the appellants secured a judgment against Edward S. Goldstein following an arbitration dispute. The trial court subsequently issued a charging order against Goldstein’s 0.2022 percent interest in the joint venture and appointed a receiver to facilitate its transfer if the judgment was not satisfied. Although Goldstein posted a cash bond to stay enforcement during an unsuccessful appeal, the receiver later assigned his interest to the appellants once the stay was lifted. Goldstein objected, filing exceptions and depositing the remaining funds necessary to fully satisfy the judgment, leading the trial court to vacate the assignment. On appeal, the Court of Special Appeals held that a charging order issued under Section 9-505 of the Corporations and Associations Article is a flexible, supplemental enforcement tool rather than a final judgment. The court determined that any transfer of a partnership interest pursuant to such an order must follow the procedural rules governing judicial sales, which include the debtor’s right of redemption and the necessity of court ratification for the sale to be final. The appellate court concluded that the trial court did not abuse its discretion in prioritizing the satisfaction of the debt through cash over the forced sale of the business interest, especially since the charging order remained subject to revision. While the court modified the lower court’s order to strike the phrase nunc pro tunc because the vacation did not involve the correction of a clerical error, it otherwise affirmed the decision, reinforcing that judicial supervision is essential to ensure fairness in the collection process through charging orders. ♦
Baybank v. Catamount Construction, Inc., 141 N.H. 780, 693 A.2d 1163 (1997).
♦ Baybank, a judgment creditor of two limited partners (the Connors), sought to satisfy its judgment by obtaining a charging order against their interests in a limited partnership (East Street) and additional relief, including appointment of a receiver and dissolution of the partnership to liquidate partnership real estate. The trial court granted the charging order and ordered dissolution and a receiver, reasoning that creditor remedies in the Uniform Partnership Act (RSA 304–A), including broad equitable relief, could be imported into the Uniform Limited Partnership Act (RSA 304–B). On appeal, the New Hampshire Supreme Court held that a court may look to the UPA to provide enforcement mechanisms (such as a receiver or foreclosure/sale of the charged interest) when the ULPA’s charging-order provision is otherwise inadequate and not inconsistent, because the charging-order remedy is intended to protect partnership operations by diverting a debtor-partner’s distributions without allowing seizure of partnership assets. However, the court ruled that the particular additional relief ordered here—especially dissolution—was unauthorized: Baybank lacked standing to seek judicial dissolution under RSA 304–B:45 (reserved to applications by or for a partner), and Baybank’s attempt effectively sought access to partnership assets, contrary to the purpose of charging orders. The court therefore affirmed the charging order, reversed the dissolution order, vacated the receiver order, and remanded for further proceedings consistent with its opinion. ♦
Givens v. National Loan Investors, L.P., 724 So.2d 610 (Fla.App. Dist.5 12/18/1998).
♦ The Florida Court of Appeals for the Fifth District examined a critical question regarding the enforcement of judgments: whether Florida's Revised Uniform Limited Partnership Act allows a judgment creditor who has obtained a charging order against a debtor's limited partnership interest to then proceed with a foreclosure via an execution sale. The litigation began following a deficiency judgment obtained by National Loan Investors against Charles Givens Jr. after a mortgage foreclosure. National subsequently acquired charging orders against Givens' interests in two distinct limited partnerships and petitioned the court for an order to transfer and liquidate those interests to satisfy the outstanding debt. Although the trial court initially ruled that Florida law permitted such an execution sale, the appellate court disagreed and reversed the order. The appellate court's decision rested primarily on the plain language of Section 620.153 of the Florida Statutes, which governs the rights of judgment creditors against partners. The statute stipulates that a creditor may charge the partnership interest but explicitly states that the creditor holds only the rights of an assignee. The court reasoned that since an assignee's rights are limited and do not include the authority to manage the partnership or force a sale of the underlying interest, the statute necessarily precludes judicial foreclosure. The court highlighted that nothing in the Act authorizes such a remedy and that foreclosure would be inconsistent with the statutory limitations. Citing previous bankruptcy court decisions and legal analysis from the Florida Bar Journal, the court affirmed that the charging order is intended to be a restrictive remedy. This distinction makes limited partnerships a powerful tool for asset protection compared to general partnerships. By strictly adhering to the statutory text, the court concluded that National was entitled only to the rights of an assignee and nothing more, thereby invalidating the trial court's authorization of an execution sale. This ruling reinforces the intent of the legislature to protect the stability of limited partnerships from the disruptive effects of creditor-forced liquidations and sales. ♦
Prodigy Centers/Atlanta No. 1 L.P. et al. v. T-C Associates, Ltd, et al., 501 S.E.2d 209 (Ga.Sup., 1998).
♦ The Supreme Court of Georgia addressed a certified question from the United States Court of Appeals for the Eleventh Circuit regarding whether a partnership interest in a limited partnership qualifies as a chose in action under Georgia law. The dispute centered on a priority conflict between a judgment creditor, T-C Associates, and the Internal Revenue Service, which had filed a federal tax lien against the debtor, Prodigy Child Development Centers. Although T-C Associates obtained its judgment in 1992, it did not record the lien until 1994, after the IRS had already filed its notice. The central issue was whether the judgment lien automatically attached to the debtor's interests in two limited partnerships or if the interest constituted a chose in action requiring additional legal steps to perfect. The Georgia Supreme Court defined a chose in action as personal property where the owner possesses a right to future possession or a right to immediate possession that is being wrongfully withheld. Examining the Georgia Revised Uniform Limited Partnership Act and the Uniform Limited Partnership Act, the court noted that a partnership interest refers to a partner's financial rights, including shares of capital, profits, and distributions. Since these rights are essentially contractual or statutory claims to payment, the court determined they fit the definition of a chose in action. Furthermore, the court emphasized that both partnership statutes require judgment creditors to initiate collateral proceedings, such as obtaining a charging order or serving a process of garnishment, to reach these interests. Because these specialized procedures are the same ones required to attach a lien to a chose in action, the court concluded that a partnership interest is indeed a chose in action under Georgia law. This ruling confirmed that a general judgment lien does not automatically attach to partnership interests without specific collateral action. ♦
Lauer Construction Inc. v. Schrift, 123 Md.App. 112, 716 A.2d 1096 (Md.Sp.App. 09/02/1998).
♦ The Maryland Court of Special Appeals addressed the issue of whether a judgment creditor possesses the authority to force a sale of a debtor general partner interest in a limited partnership under Section 10-705 of the Corporations and Associations Article. The dispute arose after Lauer Construction obtained a judgment for over 58,000 dollars against Claude and Carol Schrift, who were general partners in Gibsons Lodgings Limited Partnership. While the circuit court initially issued a charging order and appointed a receiver, it later denied the creditor request for a judicial sale, concluding that such a remedy was not specifically authorized by Title 10 of the Maryland Code, which governs limited partnerships. On appeal, the Court of Special Appeals reversed the lower court decision. Judge Eyler, writing for the court, clarified that the definition of partner under the Revised Uniform Limited Partnership Act includes both general and limited partners, thereby making Section 10-705 applicable to the Schrifts interest. The court further reasoned that although Section 10-705 remains silent regarding specific enforcement mechanisms like judicial sales, Section 10-108 mandates that the provisions of the Uniform Partnership Act apply to limited partnerships when they are consistent with Title 10. Because the property interest chargeable under both acts is essentially the same, the court determined that the enforcement remedies provided in Section 9-505, including the power to order a sale of the partnership interest, must be available to creditors of a limited partnership. The court supported its conclusion by examining the legislative history and official comments of the statutes, which suggested that broad judicial powers were intended to remain intact. Ultimately, the court held that the forced sale of a general partner interest is a permissible remedy for judgment creditors, provided it follows established legal procedures. ♦
Deutsch v. Wolff, 7 S.W.3d 460 (Mo.App.W.D.,1999).
♦ The Missouri Court of Appeals affirmed a trial court’s entry of a charging order appointing a receiver for Eugene Wolff’s interest in the D&W Scheutz Road Limited Partnership. This order was designed to aid Geraldine Deutsch and other respondents in executing a previous three-million-dollar judgment against Wolff for breach of fiduciary duty and accountant's malpractice. Wolff, who had served as an accountant and trustee for the Deutsch family since 1948, was found by the trial court to have engaged in extensive self-dealing, including overpaying himself approximately one point five million dollars in trustee fees and improperly claiming ownership interests in trust-owned properties. On appeal, Wolff argued that the trial court exceeded its statutory authority by ordering the potential sale of his underlying partnership interest and by granting the receiver management powers. The appellate court disagreed, explaining that Missouri law distinguishes between non-economic rights and economic interests in a partnership. It held that while partnership property itself is protected from individual creditors, a partner’s economic interest in profits and surpluses is personal property subject to sale under a charging order. Furthermore, the court ruled that a receiver is an agent of the court, and Missouri statutes explicitly grant courts the discretion to empower receivers with the authority to manage partnership affairs when justified by a partner's prior misconduct or mismanagement. The court noted that such management authority is temporary and intended to protect the assets from further waste or misappropriation until the judgment is satisfied. Consequently, the court found substantial evidence to support the charging order and concluded that the trial court correctly applied the law in authorizing the receiver to act free from Wolff’s interference. The judgment was affirmed in all respects. ♦