Holzman v. De Escamilla

Brief Fact Summary. The appointed trustee of a bankrupt estate, Plaintiff Lawrence Holzman, brought this action to hold Defendants, Ricardo de Escamilla et al., liable as general partners of the business at issue.

Synopsis of Rule of Law. A limited partner will be held liable as a general partner if the limited partner acts to take part in the control of the business

Facts. Defendants were partners raising crops on farmland in Sand Diego. The business named de Escamilla as a general partner and the other two defendants, James Russell and H.W. Andrews, were listed as limited partners. However, when decisions were made regarding what to plant, the limited partners chose the crops. The limited partners were able to draw on the business accounts while de Escamilla was required to get one of their signatures on any checks on the accounts. The limited partners checked in on the business twice a week. The business went bankrupt, and Plaintiff was appointed as trustee.

Issue. The issue is whether Russell and Andrews should be held liable as general partners in the bankrupt business.

Held. Although Russell and Andrews are listed as limited partners, their conduct made them as accountable as general partners. Russell and Andrews took part in controlling the business, and that control holds them liable as general partners.

Discussion. The evidence clearly indicated that the listed limited partners had more control than the listed general partner. The partners could not escape liability by simply labeling themselves as limited partners.