Is A $200,000 Check Given By A Partner to A Partnership A Loan Or Capital Investment Contribution?

In the business law and business litigation case of The Holder Group Inc. v. Bierman, 12-2-3980, App. Div. the issue is whether the $200,000 check given by plaintiffs Andrew Holder and The Holder Group to defendants’ company, Beech Realty, was a loan or a capital investment in a partnership. The judge held that it was a loan made by Holder as a partner to the partnership and entered judgment in favor of plaintiff. On appeal, plaintiff argued that the judge erred in reducing the amount due to him; defendants argued the judge erred in finding that the money was a loan. The panel affirmed the finding that the money was a loan, holding that it was supported by the judge’s credibility assessments that are entitled to substantial deference and documents in the record. However, the panel reversed and remanded for further proceedings to determine what amount, if any, is due to plaintiff, finding that the trial judge abused his discretion in determining the amount due plaintiff where he failed to identify any equitable principle, other than an inchoate sense of fairness, that provided a basis for reducing the amount of the loan to be repaid, the deductions were made without the benefit of an accounting to determine the amount, if any, available to satisfy the internal (partner) financial obligations and what other internal obligations remained outstanding, and there was no counterclaim and no legal basis for reducing plaintiff’s recovery by an amount due to a non-party.

Reference: Case & Analysis, New Jersey Law Journal (May 29, 2014).

Filed Under: Business Law; Business Entities, Loan vs. Capital Contribution

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