December 5, I989
Digest: A full-time judge may own an interest in a mortgage upon real property, provided that the judge takes no active role in the management of the investment and is not a general partner; filing of partnership tax return with IRS is not determinative of status under Rules of Judicial Conduct.
Rule: 22 NYCRR 100.5(c)(2)
A full-time judge inquires whether it is permissible to continue to hold a 50 percent interest with the judge’s brother in several purchase money mortgages on various pieces of commercial property. The mortgages were taken back by the two brothers as part of the consideration upon their sale of the realty. The judge takes no active part in the management of these investments, but has filed a partnership tax return together with the brother with the Internal Revenue Service.
Section 100.5(c)(2) of the Rules of the Chief Administrator (22 NYCRR 100.5[c]) provides in relevant part as follows :
(2) No full-time judge shall be a managing or active participant in any form of business enterprise organized for profit, nor shall he or she serve as an officer, director, trustee, partner, advisory board member or employee of any corporation, company, partnership or other association organized not for profit or engaged in any form of banking or insurance...further provided that nothing in this rule shall prohibit a judge from investing as a limited partnership as contemplated by article 8 of the Partnership Law, provided that such judge does not take any part in the control of the business of the limited partnership and otherwise complies with this Part [Emphasis supplied].
The financial activity described in the inquiry appears to be completely passive in nature and, if so, the judge may continue this involvement. In addition, since the judge does not actively participate in managing these mortgages, this involvement should not interfere with any adjudicative responsibilities. The Committee does not consider the fact that the judge filed a partnership tax return with the Internal Revenue Service as necessarily determinative of the question whether the
relationship constitutes a general partnership under the New York State Partnership Law. Rule 100.5(c)(2) forbids the judge’s membership in a general partnership but does not forbid the partnership.
Consequently, on the assumption that the judge is not a general partner under New York State law, the Committee answers the inquiry in the affirmative - the judge may continue to hold a 50 percent interest in the purchase money mortgages.