Business Associations – Uniform Limited Partnership Act – Activites Making a Limited Partner Liable as a General Partner

Marback Motor Co., a limited partnership, was formed in 1951 pursuant to the California Uniform Limited Partnership Act. Defendant limited partner held a chattel mortgage on partnership assets and owned the building in which the business was located. He had authority to co-sign checks of the partnership, but checks could be drawn on the firm’s account without his signature and he could not withdraw funds himself. In August 1953, without a prior dissolution of the limited partnership, defendant bought some assets of the firm at a purchase price found to represent the fair market value of the properties. At the time of sale the firm had more than sufficient assets to pay all creditors. The limited partnership then went out of active business and defendant took over operation of a similar business on the same premises under a different name. In 1954, the limited partnership was adjudicated bankrupt. Actions were brought by the trustee of the bankrupt limited partnership and a creditor’s executor seeking to hold defendant as a general partner. Held, defendant did not exercise such control over the business as to become liable as a general partner under the California Uniform Limited Partnership Act. Grainger v. Antoyan, (Cal. 1957) 313 P. (2d) 848.