Court Opinion

ID: 9683996
Source: CourtListenerOpinion
Date Created: 2023-08-24 13:42:39.949967+00
Date Added: 2024-06-11T18:17:51.760032
License: Public Domain

PRESLAR, Chief Justice
(dissenting).
I respectfully dissent and would reverse and remand the summary judgment as to the Appellees Crombie, Sanders and Kahn only. The basic setup here is that we have some twenty-two limited partners. Three of those limited partners formed themselves into a corporation to be the general partner under the Texas Uniform Limited Partnership Act. Art. 6132a, Tex.Rev.Civ. Stat.Ann. As noted by the majority, this Act provides for both a general partner and a limited partner or partners, and the first question which must be determined here is whether or not a corporation can be the general partner. I am unable to agree with the majority that a corporation can be a general partner. The general rule in most jurisdictions and in Texas'is that a corporation cannot be a partner. Luling Oil & Gas Co. v. Humble Oil & Refining Co., 144 Tex. 475, 191 S.W.2d 716 (1945). The case of Port Arthur Trust Company v. Muldrow, 291 S.W.2d 312 (Tex.1956), annotated in 60 A.L.R.2d 913, cited by the majority, is the only decision my research has found which holds that a corporation can be a partner under the Limited Partnership Act. That case differs from the one before us in a very important respect, which is, that there the corporation was a limited partner whereas here the corporation acts as the general partner. In that case, it was recognized that as a general rule a corporation may not enter into a partnership because such action is against public policy. The *426Court’s reasoning in excepting the case from the general rule is subject to question, since the corporation was the limited partner which would make it subject to the control of the general partner. Yet, the Court said that reasons for the general rule would not apply to the case before it since the corporation would be a limited partner and as such it would have no control except over its own assets. In the case, before us, the corporation is the general partner, yet, being created solely to operate the partnership, it must be directed to that end rather than any corporate purpose. The directors and officers are placed in conflicting positions here, in that as such officers and directors of the corporation they owe a duty to the corporation, while at the same time as the general partner they owe a duty to act in the interest of the limited partnership. The rule of law is well established that a general partner is bound in fiduciary relationship with the limited partners. McGlynn v. Schultz, 90 N.J.Super. 505, 218 A.2d 408 (1966), affirmed 95 N.J.Super. 412, 231 A.2d 386 (1967). The Texas Uniform Limited Partnership Act provides that two or more “persons” may form a limited partnership and in the Port Arthur case it was held that “persons” included a corporation. This is a general rule of construction where a statute does not provide otherwise, but I feel that it has no application here because the Statute does provide otherwise as to a general partner because by Sec. 21 thereof it has a special provision that the partnership is dissolved upon the “retirement, death or insanity of a general partner.” These being things which do not happen to corporations and there being absolutely no mention of corporations anywhere in the entire Act, I would not construe “persons” to include a corporation as a general partner. It is my conclusion that a corporation may not be a general partner under the Act and particularly where, as here, it is not an independent corporation but is composed entirely of limited partners. It would seem to present conflicts and be against public policy.
If we assume that a corporation composed of limited partners can be a general partner in a limited partnership, we then reach the question of whether the three Appellees here involved exercised such control through the corporation as made them liable as general partners. Unlike the cases cited by the majority, the question is not one of the degree of control exercised, for it is undisputed that they exercised full control. The evidence is that the corporation was created for the sole purpose of operating the limited partnership.' Here, the Appellees were in full and complete control and the question is whether that exercise of control fails to make them general partners for the reason that it was done through a corporation. The fiction of the corporate entity has its place and purpose, but I cannot believe that it was intended to be used in the Limited Partnership Act in the manner here employed. The Act provides great benefits to the business world and the businessman but it also provides for corresponding liability. That liability is evaded or diminished by the plan here brought forth by ingenious businessmen. Under this plan, the liable general partner could be a corporation with assets of $1,000.00, which would operate a limited partnership of millions of dollars. The Act definitely requires liability and responsibility in that it provides for a general partner. I would not neutralize that portion of the Act by affirming the judgment before us. Appellees are saying that they did not exercise control over the partnership — that the corporation did. I find it difficult to separate their acts for they were at all times in the dual capacity of limited partners and .officers of the corporation. Apparently the corporation had no function except to operate the limited partnership and Appellees were obligated to their other partners to so operate the corporation as to benefit the partnership. Each act was done then, not for the corporation, but for the partnership. Indirectly, if not directly, they were exercising control over the partnership. Truly “the corporation fiction” was in this instance a fic*427tion. This being a summary judgment case in which the burden of proof was on Ap-pellees to sustain their defense, I would hold that they have not met that burden. The summary judgment evidence before the Court was the affidavits and the depositions of the defendants here involved. In their affidavits, the Appellees stated that they had invested money in the limited partnership, that such investment was the extent of their participation, that Inter-lease Corporation, as the sole general partner of Fidelity, handled all of the business of Fidelity, and that none of the limited partners in any way participated in the operations of the partnership. It is clear that these affidavits contained mere conclusions and thus they are not competent evidence to support the summary judgment. Hidalgo v. Surety Savings and Loan Association, 487 S.W.2d 702 (Tex.1972). Clearly, a fact question is present and thus Appellees fail to prove their defense as a matter of law and the summary judgment should be reversed.