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Do both the attorney who represented the Partnership and the bank also have any liability?

Red Bank, NJ |

I am an equal Partner in a NJ Partnership. The Partnership Agreement requires "unanimous written consent" of Partners to purchase or sell property in the Partnership name. Without my knowledge or written consent, my Partners hired an attorney to help them borrow funds in the Partnership name from a local bank, purchase a piece of property in the Partnership name, sub-divide the property, and sell half the property.

What responsibility did the attorney and bank have to ask my Partners for a copy of the Partnership Agreement and are my Partners the only people liable for the actions that violated the Partnership Agreement or do both the attorney who represented the Partnership and the bank also have any liability?

Attorney Answers 2

Posted

It is unlikely that the bank's attorney has any liability.

As to the other attorney, it depends. Did the attorney represent the partnership or the individual partners? If the attorney represented the partnership, he or she may have violated a duty of care owed to you. If the attorney represented only the individual partners, then the attorney may not have owed any duty of care to you.

If this answer was helpful, please mark it as helpful or as a best answer. This answer is for general education purposes only. It neither creates an attorney-client relationship nor provides legal guidance or advice. The answer is based on the limited information provided and the answer might be different had additional information been provided. You should consult an attorney.

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6 comments

Asker

Posted

The Partnership hired the attorney who helped the Partnership sub-divide the property, sell the property, and obtain a $375k loan from the bank, all for the Partnership. Not the 4 Partners who signed the documents.

Asker

Posted

My Partnership hired the attorney who never saw the Partnerhip Agreement, he "assumed" that the Partners who signed the documents were the only Partners in the Partnership, as did the Senior Loan Officer at the bank. The bank did not have an attorney. The bank loaned the Partnership $1,000,000 with signatures of 3 & 4 partners, but never with my signature, and ever asking to look at the Partnership

Michael T Millar

Michael T Millar

Posted

The bank likely had no duty to individual partners. Indeed, one could argue that the bank was defrauded because the partners who did sign the loan papers did not disclose the existence of other partners. Whether or not the attorney owed each individual partner a duty of care will be a matter for a legal malpractice expert if you choose to pursue that claim.

Asker

Posted

I've already made the bank and the attorney's aware that they were "misled" by my Partners and that they might wish to pursue a claim against my Partners who purposely "misled" them. I think it will have more to do with the Judge who hears the case. What are the chances that he might agree that the bank and the attorney's failed in their duty to protect me as a Partner? The bank loaned the Partnership money that found it' way into my Partner's pockets and 25% of the Partnership funds used to repay the loan, with interest, came from me. The attorney's fee was paid with 25% of my money and he didn't protect my rights because he "believed" my Partners? “Individual and corporate consumers of legal services are increasingly recognizing that, just like when they purchase any other product or service, they are entitled to competent and effective counsel when they hire a lawyer."

Michael T Millar

Michael T Millar

Posted

I do a lot of consumer protection work. Consumer protection laws do not apply to professional services, including legal services. There is no clear cut answer as to the liability of the attorney. It will depend on the facts and whether an expert is willing to opine that the attorney owed you a duty of care, which he failed to do. Clearly, you have a cause of action against your partners.

Asker

Posted

Thanks for your input, have a great New Year!

Posted

Hi,

I agree that with respect to the lawyer it would come down to whom that lawyer actually represented. Clients are not always forthcoming with the lawyers they work with even though it is often counterproductive. Kind of like lying to your shrink; what's the point?

That said, the lawyer is not required to review any and all company documents on her own time and without compensation to ensure that two partners of a business have the express authority to bind the company or to hire a lawyer, etc. It is possible that the lawyer in question did not even know there was another partner. For example, if two partners came to me to draft a promissory note because they were borrowing money I am free to draft that note and be paid by them for it even if another partner would have a claim against them for borrowing the money in violation of the agreement. A smart lawyer will ask the question upfront to protect not their own interest (which is important) but to protect their client's interests.

It is highly unlikley (but not impossible) that the lawyer could be liable for anything here. I think the very specific facts will matter greatly.

You should consider consulting your own lawyer to explore all the options and arrive at a best course of action. I am a NJ licensed attorney and work in this are if you care to follow up.

Best regards,
Frank
Natoli-Lapin, LLC
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5 comments

Asker

Posted

4 different attorney's were hired by 3 of the 4 Partners to represent the Partnership in the sale and purchase of property and not a single one ever asked to look at the Partnership Agreement. They all knew me and 2 of the law firms had represented the Partnership when all 4 of us hired them previously, so there was no reason to believe that I was no longer a Partner. The VP/Senior Loan Officer at the bank who lent the Partnership over $1,000,000 in mortgages on the property never ask to see a copy of the PA, nor did the bank ask for a copy when the Partnership opened the bank accounts at the bank. Clearly, someone at the bank or one of the attorneys could easily have confirmed with the 3 that they were the only Partners and that there were no other Partners? A simple document search of the online records has 15 instances of my name listed as a Partner in the Partnership. I have spoken to all of the attorney's as well as the Loan Officer and they all say they just assumed that the 3 were the only Partners and never thought to ask if there were any other Partners or to see a copy of the PA. I find it difficult to believe that anyone can just waltz into a bank, open an account in a Partnership name, purchase checks, and borrow money without ever being asked to prove that the Partnership actually exists, who the Partners are, and what they can do in the Partnership name?

Frank A. Natoli

Frank A. Natoli

Posted

It sounds like you have a complaint against your partners at least. What are seeking from this forum exactly? Nothing precludes you from contacting a local civil litigator and exploring your court based options against all parties, which is what you should do if you feel you have been wronged. Based on the little I understand about the facts here a claim against the lawyer is not likely, but as I said it may very be an option. All the best, F.

Asker

Posted

The attorney's were compensated for their time and would also have been compensated had they simply stated that they would need to look over the Partnership documents. Suggesting that since the attorney "may not" be compensated for their time they have no duty to review Partnership documents sounds like a pretty lame excuse for not asking that the Partners who have hired him to represent the Partnership actually have the authority to do what they are asking the attorney to do for the Partnership.

Frank A. Natoli

Frank A. Natoli

Posted

You misunderstood my point there. If you came to me to draft a promissory note to borrow money from the partnership how do I even know you are who you say you are let alone that you have the express permission to bind the company? I don't and I am not obligated to explore databases, review any and all docs, verify your ID, etc in an effort to simply draft a promissory note. Even if I ask whether there are any issues with other partners and you say no, ti is not for the lawyer to prove you are correct. You would be liable to these other parties. If I call a painter to paint my house and he shows up and starts the work only to find out I don;t own the house who is liable? The painter sure is not. Your attitude is misplaced here. I have not concluded that the lawyers have no liability only that in my opinion this would not offer a cause of action, but again, not entirely clear. So go and flesh it out with your counsel.

Asker

Posted

Thanks for your input, have a great New Year!

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