Opinion ID: 1403026
Heading Depth: 3
Heading Rank: 3

Heading: A Creditor of a Limited Partnership May Sue Limited Partners for Their Unpaid Capital Contributions

Text: The Alaska Revised Limited Partnership Act, AS 32.11, is, with some changes, the Revised Uniform Limited Partnership Act of 1976 With the 1985 Amendments (ULPA 1985) propounded by the National Conference of Commissioners on Uniform State Laws. The 1976 version of the ULPA (without the 1985 amendments) was in effect in Alaska until July 1, 1993, when ULPA 1985 replaced it. But the provisions of ULPA 1976 governing pre-July 1, 1993 partnership contributions, including promised contributions, remained in effect. [4] As this case concerns contributions promised before 1993, it is governed by Alaska's ULPA 1976, particularly former AS 32.10.160. [5] A defining characteristic of a limited partnership is that limited partners are not liable for the obligations of the partnership. [6] But limited partners are liable to partnership creditors to the extent that they have not paid promised capital contributions. This rule is reflected in former AS 32.10.160(c), which recognizes the right of a creditor of a partnership ... to enforce such liabilities. Case law interpreting ULPA 1985, 1976, or the 1916 Limited Partnership Act confirms the right of creditors to proceed against limited partners to the extent of their unpaid contributions. [7] Secondary authorities agree: Unpaid contributions of limited partners are obligations to the partnership and are generally enforceable by the ... creditors of the partnership. [8] Some of the limited partners argue that AS 32.10.160(a) means that a creditor cannot proceed directly against a limited partner because it provides that a limited partner is liable to the partnership for unpaid contributions. But this liability is not said to be exclusive. In view of the language of subsection.160(c), recognizing the right of a creditor to enforce such liabilities, the only sensible construction of subsection .160(a) is that it does not imply that limited partners are only answerable to the partnership for unpaid contributions. Case law confirms the correctness of this interpretation. [9] Some of the limited partners also argue that the limited partnership agreement limits their liability for unpaid contributions. They contend that the partnership's remedy was limited to forfeiture of a limited partner's previous contributions, and that International seeks super third-party beneficiary status by claiming relief broader than the forfeiture of contribution remedy. But the partnership agreement does not suggest that the partnership's exclusive remedy against defaulting limited partners is forfeiture of their units. The limitation of liability for partnership debts in the agreement is expressed in terms of the amount committed by the Limited Partner as the capital contribution as set forth in Section 8. (Emphasis added.) Section 8, in turn, commits limited partners to contribute $6,000 initially plus semi-annual payments until the year 2001, yielding total payments of $110,400, plus assessments. The agreement also provides that the partnership's general partners may, in their sole discretion, utilize any one or more of the agreement's remedies against limited partners delinquent in their contribution payments. One of these enumerated remedies permits general partners to [s]ue for the unpaid amount of the annual payments and assessments, due or to become due.  (Emphasis added.) Thus, nothing in the partnership agreement restricts limited partners' obligations to payments already made. The liability of each limited partner is, to use hornbook language, for ... any contribution that he has promised but not yet made. [10]