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Law School Case Brief

Frigidaire Sales Corp. v. Union Props. - 88 Wash. 2d 400, 562 P.2d 244 (1977)

Rule:

Limited partnerships are a statutory form of business organization, and parties creating a limited partnership must follow the statutory requirements. Wash. Rev. Code ch. 25. In Washington, parties may form a limited partnership with a corporation as the sole general partner.

Facts:

Petitioner Frigidaire Sales Corporation ("Frigidaire") entered into a contract with Commercial Investors ("Commercial"), a limited partnership. Respondents Leonard Mannon and Raleigh Baxter were limited partners of Commercial. Mannon and Baxter were also officers, directors, and shareholders of respondent Union Properties, Inc. ("Union"), the only general partner of Commercial. Mannon and Baxter controlled Union, and through their control of Union they exercised the day-to-day control and management of Commercial. Commercial breached the contract, and Frigidaire brought suit in Washington state court against Union and Mannon and Baxter. Frigidaire sought to impose general liability against Mannon and Baxter for Commercial's contractual obligations. The trial court rendered judgment for respondents, concluding that Mannon and Baxter did not incur general liability for Commercial's obligations by reason of their control of Commercial. Frigidaire appealed, and the court of appeals affirmed. Frigidaire's petition for review was granted.

Issue:

Were Mannon and Baxter liable for their limited partnership's contractual obligations based upon their control of Union, the general partner of the limited partnership?

Answer:

No.

Conclusion:

The state supreme court affirmed the appellate court's judgment. The court ruled that Mannon and Baxter, as the limited partners in Commercial, did not incur general liability for Commercial's liabilities under § 25.08.070 simply because they controlled Union, Commercial's corporate general partner. The record showed that Mannon and Baxter did not form Union for the sole purpose of operating Commercial, but to create several business opportunities. Thus, their control of Union was not merely for the benefit of Commercial.

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