Thus, the first issue to be addressed is whether the sale of a limited partnership interest amounts to a "return of capital." Whitley v. Klauber, 51 N.Y.2d 555, 435 N.Y.S.2d 568, 416 N.E.2d 569 (1980), appears to be a case on point. There, the New York Court of Appeals held that, for purposes of Section 106(4), the sale of a partnership interest pursuant to a tender offer does indeed amount to a return of capital.

Thus, the first issue to be addressed is whether the sale of a limited partnership interest amounts to a "return of capital." Whitley v. Klauber, 51 N.Y.2d 555, 435 N.Y.S.2d 568, 416 N.E.2d 569 (1980), appears to be a case on point. There, the New York Court of Appeals held that, for purposes of § 106(4), the sale of a partnership interest pursuant to a tender offer does indeed amount to a return of capital.

However, the case law that does exist rejects defendants' construction of § 46(a). In the leading cases of Whitley v. Klauber, 51 N.Y.2d 555, 435 N.Y.S.2d 568, 416 N.E.2d 569 (1980), and Kittredge v. Langley, 252 N.Y. 405, 169 N.E. 626 (1930), reh'g denied 253 N.Y. 555, 171 N.E. 780 (1930), the New York Court of Appeals held that a creditor may recover, in the name of the limited partnership, from the limited partners. While the cases were considered under § 106(4) of New York's Partnership Law, § 106(4) is sufficiently similar to § 46(a) for this court to adopt the reasoning and holding of those cases.

Plaintiff argues that the $425,000 payment to Stern is governed by the DCL's six-year statute of limitations, as it was made, pursuant to a contractual obligation, in October 2004, after Stern had sold his partnership interest. Plaintiff further argues that the court erroneously made factual determinations as to the conflicting evidence concerning the payment and misinterpreted Whitley v. Klauber, 51 N.Y.2d 555, 435 N.Y.S.2d 568, 416 N.E.2d 569 (1980). These positions, to the extent not mooted by the foregoing discussion, are unavailing.

Our holding with respect to the lease claims is compelled by the language of Section(s) 106(1)(b) and 106(3), and we believe that the courts in New York would reach the same result. In Whitley v. Klauber, 51 N.Y.2d 555, 435 N.Y.S.2d 568, 416 N.E.2d 569 (1980), New York's highest court explained the "strong" and "crystal clear" creditor protection policy underlying New York Partnership Law Section(s) 106, although in a different context. In light of the strong statutory policy to protect creditors, the court broadly construed Section(s) 106(4).Whitley involved a partnership in which all of the general and limited partners sold their partnership interests to a third party in exchange for some stock.

First, those cases dealt with the liability of general partners — they did not take into account the public policy behind Section 106(4) of the New York Limited Partnership law; i.e., the protection of creditors. See Whitley v. Klauber, 51 N.Y.2d 555, 563, 435 N.Y.S.2d 568, 416 N.E.2d 569 (1980). Second, the limited partners in the these adversary proceedings made public commitments (made legally binding on them by statute) to be responsible for the obligations of their partnerships and in conjunction with their withdrawal, they were specifically warned in writing that "existing creditors . . . may have the right to make a direct claim [against you] for up to the amount of [your] Additional Capital Commitment if [TSG, TSG80 and TMG] do not pay such creditors."

State courts outside of New Jersey applying similar provisions have gone even further, stating that a creditor need only bring suit "in the right of the partnership itself to recover the funds necessary to discharge its liability to plaintiff." Whitley v. Klauber, 51 N.Y.2d 555, 435 N.Y.S.2d 568, 575, 416 N.E.2d 569, 576 (1980); see also Kittredge v. Langley, 252 N.Y. 405, 169 N.E. 626 (1930); Retzke v. Larson, 166 Ariz. 446, 803 P.2d 439 (Ct.App. 1990) (ruling that a creditor could maintain a garnishment action against a limited partner without any indication that the creditor was proceeding on behalf of the limited partnership); Donroy, Ltd. v. United States, 301 F.2d 200, 205 (9th Cir. 1962) (holding that under California's codification of the predecessor to subsection (a), the liability of a limited partner to a partnership may, under certain circumstances, be enforced by a creditor). The court in Neuner relied on the fact that often the general partner may lack the capacity or the will to pursue wrongful distributions to limited partners, thus leaving a creditor without remedy in the very situation where this statute would be most needed.

I am not so sure. "Poverty" may well be a human condition in its "primary sense," ibid., but I doubt that using the word in connection with an artificial entity departs in any significant way from settled principles of English usage. One certainly need not search long or far to find examples of the use of "poor" in connection with nonhuman entities — and, indeed, in connection with the very entities listed in 1 U.S.C. § 1. No less a figure than Justice Holmes had occasion to write that the issuance of stock dividends renders a corporation "no poorer" than it was before their distribution, Towne v. Eisner, 245 U.S. 418, 426 (1918), and other judges have used the word "poor" (or one of its derivatives) in a similar fashion, see, e.g., Ordinetz v. Springfield Family Center, Inc., 142 Vt. 466, 468, 457 A.2d 282, 283 (1983) ("[A] nonprofit corporation may be . . . wealthy or impoverished"); In re Whitley v. Klauber, 51 N.Y.2d 555, 579, 416 N.E.2d 569, 581 (1980) (Fuchsberg, J., dissenting) ("[T]he corporation is no richer or poorer for the transaction"). More important for our purposes, Congress itself has used the word "poor" to describe entities other than natural persons, referring in at least two provisions of the United States Code to the world's "poorest countries" — a term that is used as a synonym for the least developed of the so-called "developing" countries.

1987); Krofcheck v. Ensign Co., 169 Cal.Rptr. 516, 112 Cal.App.3d 558 (1980). If Bramlett had not participated in the litigation but had been a general partner, case law suggests that he could not be collaterally estopped, at least not beyond his interest in the partnership property. See Resolution Trust Corp. v. Teem Partnership, 770 F. Supp. 1439 (D.Colo. 1991) (general partner not estopped by judgment against partnership and other partners); Arkoma Coal Corp. v. Alexander, 593 F. Supp. 1524 (W.D.Ark. 1984) (investors not estopped by judgment rendered against their joint venturer); Harrison Nat'l Bank v. Lion Varnish Work, Inc., 97 N.Y.S.2d 71 (N.Y.City.Ct. 1950); compare Whitley v. Klauber, 51 N.Y.2d 555, 435 N.Y.S.2d 568, 416 N.E.2d 569 (1980) (limited partners collaterally estopped by judgment against limited partnership as to liability for partnership property, needed to satisfy existing creditor, that had been paid to limited partners). An analogous situation that has been more frequently litigated is the ability of a creditor, having obtained a judgment against a debtor, to preclude a guarantor from contesting the validity and amount of the debtor's obligation.

It is a violation of due process to preclude a litigant from asserting claims on the basis of a prior proceeding to which the litigant was not a party. ( Hansberry v Lee, 311 US 32; Pennoyer v Neff 95 US 714; Gramatan Home Invs. Corp. v Lopez, 46 NY2d 481; Whitley v Klauber, 51 NY2d 555; Parklane Hosiery Co. v Shore, 439 US 322; Matter of People v Applied Card Sys., Inc., 11 NY3d 105; Bigelow v Old Dominion Copper Mining Smelting Co., 225 US 111; Hannah v Larche, 363 US 420; Ohio Bell Telephone Co. v Public Util. Comm'n of Ohio, 301 US 292; Morgan v United States, 304 US 1.) II. The Insurance Department's decision cannot preclude the assertion of common-law rights and causes of action, which must be preserved in the absence of explicit derogation by the Legislature.