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Keywords

contractliabilityappealtrialpartnershipcorporation
liabilityappealtrialpartnershiprespondent

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Frigidaire Sales Corp. v. Union Properties, Inc., 88 Wash.2d 400, 562 P.2d 244

Facts

Frigidaire Sales Corporation entered into a contract with Commercial Investors, a limited partnership, where Leonard Mannon and Raleigh Baxter were limited partners and also officers, directors, and shareholders of Union Properties, Inc., the corporate general partner. After Commercial breached the contract, Frigidaire sued both Union Properties and the limited partners. The trial court ruled that the limited partners did not incur general liability for the partnership's obligations due to their control over Union Properties, and this decision was upheld by the Court of Appeals.

Respondents were also officers, directors, and shareholders of Union Properties, Inc., the only general partner of Commercial.

Issue

Whether limited partners can be held personally liable for the obligations of a limited partnership simply because they are also officers, directors, or shareholders of the corporate general partner.

Petitioner's sole contention is that respondents should incur general liability for the limited partnership's obligations under RCW 25.08.070, because they exercised the day-to-day control and management of Commercial.

Rule

A limited partner shall not become liable as a general partner unless, in addition to the exercise of his rights and powers as limited partner, he takes part in the control of the business.

A limited partner shall not become liable as a general partner unless, in addition to the exercise of his rights and powers as limited partner, he takes part in the control of the business.

Analysis

The court analyzed the relationship between the limited partners and the corporate general partner, concluding that the limited partners acted solely in their capacities as officers of Union Properties. The court emphasized that the limited partners did not form the corporate general partner for the sole purpose of operating the limited partnership and that their actions were separate from their personal affairs. The court found that the creditor was aware that it was dealing with Union Properties as the sole general partner and did not rely on the limited partners' control to assume personal liability.

However, they did so only in their capacities as agents for their principal, the corporate general partner.

Conclusion

The Supreme Court affirmed the Court of Appeals' decision, holding that the limited partners were not liable for the limited partnership's obligations.

The decision of the Court of Appeals is affirmed.

Who won?

Union Properties, Inc. and the limited partners prevailed because the court found that the limited partners did not incur personal liability for the partnership's debts due to their roles as corporate officers.

The trial court concluded that respondents did not incur general liability for Commercial's obligations by reason of their control of Commercial, and the Court of Appeals affirmed.

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