Summer 2003-11 Supreme Court ratifies limited liability of partners in special partnership

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Number 52
Summer 2003

Supreme Court ratifies limited liability of partners in special partnership

Even though the members of a partnership may ultimately be liable personally if the entity's assets turn out to be insufficient to cover its obligations, the opposite is true in the case of a special partnership. Asoc. Residentes San Pedro Estates v. Morales Ramírez et al., 2003 TSPR 15.

The suit

Asociación de Residentes de San Pedro Estates, Inc., a residents' association that took corporate form, filed suit against the individual partners of San Pedro Estates I, S.E., a special partnership constituted pursuant to the laws of Puerto Rico. The special partnership allegedly owned a number of properties for which it had the obligation to pay association fees, but had not done so.

The plaintiff alleged that the defendant partners were liable for the partnership's obligation up to a sum equal to the amount that each had contributed to the partnership's capital, in the event that the entity's net assets were insufficient to cover the debt.

The defendants moved for the dismissal of the complaint, but the motion was denied by the trial court. The Puerto Rico Court of Appeals affirmed the denial, which prompted the defendants to appeal to the Supreme Court. The Supreme Court reversed the decisions of the two lower courts.

The decision

Although the Supreme Court expressed no grounds to support the reversal, two justices, Efraín Rivera Pérez and Baltazar Corrada del Río, wrote a conforming opinion that did.

The partnership, the justices explained, is a legal person separate and apart from the individual partners. The purpose of the special partnership legislation is precisely to encourage development of certain economic areas and activities in which such entities may engage. Contrary to the case of members of regular partnerships, those of special partnerships enjoy limited liability. That is to say, the justices concluded, that the only thing that the partners stand to lose is the sum that they already invested to capitalize the partnership. n

The statute in question reads as follows:

"Notwithstanding anything to the contrary expressed anywhere in this [Civil Code], the partners that compose a 'special partnership' . . . will not be liable with their personal assets for the debts and obligations of the partnership, beyond their contribution to the special partnership, in the event that the assets of the special partnership be insufficient to cover them."

© 2003 Goldman Antonetti