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Holzman v. De Escamilla - 86 Cal. App. 2d 858, 195 P.2d 833 (1948)

Rule:

Cal. Civ. Code § 2483 provides that a limited partner shall not become liable as a general partner unless, in addition to the exercise of his rights and powers as a limited partner, he takes part in the control of the business.

Facts:

Early in 1943, Hacienda Farms Limited ("HFL") was organized as a limited partnership with defendants Ricardo de Escamilla as the general partner and James L. Russell and H.W. Andrews as limited partners. The partnership went into bankruptcy in Dec. 1943, and plaintiff Lawrence Holzman was appointed and qualified as trustee of the estate of HFL. Subsequently, he filed a lawsuit in California state court e present action for the purpose of determining that Russell and Andrews, by taking part in the control of HFL's partnership business, had become liable as general partners to the creditors of HFL. The trial court found in favor of Holzman, holding that Russell and Andrews, together with Ricardo de Escamilla, were liable as general partners. Russell and Andrews appealed.

Issue:

Were Russell and Andrews liable as general partners to the creditors of HFL?

Answer:

Yes.

Conclusion:

The court of appeals affirmed the trial court's judgment. The court observed that the evidence showed Russell and Andrews visited HFL's farms about twice a week and consulted about the crops to be planted and that they had absolute power to withdraw all the partnership funds in the banks without the knowledge or consent of de Escamilla. The court ruled that the evidence sufficiently supported the conclusion that Russell and Andrews took part in the control of the business of the partnership and thus were liable as general partners.

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