## Facts

- Judgment creditors obtained stipulated judgments totaling over $440,000 against John B. Anderson after he defaulted on a settlement resolving claims including breach of contract and fraud.
- Anderson was a partner in a California general partnership, Rancho Murieta Investors (RMI), with nondebtor partner Eric J. Tallstrom.
- After unsuccessful collection efforts, the creditors obtained a charging order against Anderson’s partnership interest under California’s partnership statutes.
- The creditors sought, and the trial court granted, an order authorizing foreclosure and sale of Anderson’s partnership interest.
- Anderson appealed; Tallstrom and Anderson’s major creditor, Eureka Federal Savings and Loan Association, intervened and also appealed.

## Issues

1. Whether California law permits foreclosure and sale of a judgment debtor’s partnership interest when the partnership is not itself a judgment debtor.
2. Whether foreclosure and sale may be ordered without the consent of a nondebtor partner.
3. Whether the trial court erred by ordering foreclosure without an evidentiary basis to determine whether foreclosure would unduly interfere with partnership business.

## Decision

- The Court of Appeal reversed the foreclosure order and remanded.
- The court held that a debtor-partner’s partnership interest, defined as the right to share in profits and surplus, may be foreclosed upon and sold to satisfy a judgment even without other partners’ consent.
- The court required a trial-court determination, supported by evidence, whether foreclosure would unduly interfere with the partnership’s business before exercising equitable power to order foreclosure.
- Because the record contained no evidentiary showing on interference with partnership operations, the foreclosure order was premature.

## Legal Principles

- A partner’s “partnership interest” for judgment-enforcement purposes is the economic interest (right to share in profits and surplus), distinct from rights in specific partnership property and from management rights.
- California’s charging-order scheme authorizes foreclosure and sale of a charged partnership interest in appropriate circumstances; statutory silence does not impose a categorical consent requirement for foreclosure.
- Consent of nondebtor partners is not a prerequisite to foreclosure, but the court must consider the practical effect of foreclosure on the partnership’s ongoing business.
- Foreclosure of a charged partnership interest is an equitable remedy; a court should not order it without findings on whether it would unduly interfere with partnership operations.

## Conclusion

The court recognized statutory authority to foreclose and sell a debtor-partner’s economic interest without other partners’ consent, but reversed and remanded because the trial court ordered foreclosure without evidence and findings on whether the sale would unduly interfere with the partnership’s business.


Hellman v. Anderson, 233 Cal. App. 3d 840 (Cal. Ct. App. 1991)