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Pat McGowan, Val Somers, and Brent Robertson were general partners

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Pat McGowan, Val Somers, and Brent Robertson were general partners of Vermont Place, a limited partnership formed for the purpose of constructing duplexes on an undeveloped tract of land in Fort Smith, Arkansas. The general partners appointed McGowan and his company, Advance Development Corporation, to develop the project, including contracting with materials people, mechanics, and other suppliers. None of the limited partners took part in the management or control of the partnership. Eight months later, Somers and Robertson discovered that McGowan had not been paying the suppliers. They removed McGowan from the partnership and took over the project. The suppliers sued the partnership to recover the money owed them. The partnership assets were not sufficient to pay all their claims. Who is liable to the suppliers? National Lumber Company v. Advance Development Corporation, 293 Ark. 1, 732 S.W.2d 840, Web 1987 Ark. Lexis 2225 (Supreme Court of Arkansas)
Submitted: 2 years ago.
Category: Business Law
Expert:  Roger replied 2 years ago.

Hi -

 

Under the law of partnership, all partners were jointly and severally liable for the debts, because the acts of one partner, acting within the apparent scope of his authority, bound the entire partnership. The court found that the trial court did not clearly err in determining that the mechanic's liens, held by the suppliers, were inferior to the construction mortgages perfected by the banks. The mortgages were recorded prior to the commencement of the construction of the improvements on each project site, so they were prior to the suppliers' liens, relating to construction materials obtained thereafter. Further, the mortgages were valid under Ark. Stat. Ann. § 51-605, because the "aggregate sum" requirement in the mortgage satisfied the requirement that the mortgage record the banks' obligation to advance money. However, several of the liens were invalid because the liens were not timely filed under Ark. Stat. Ann. § 51-613.

The court affirmed Vermont Place's liability to the banks, as priority creditors by virtue of their mortgages, and then to several of the suppliers, as holders of valid mechanic's liens.

 

Thus, Vermont Place is liable to the suppliers.

Roger, Attorney
Category: Business Law
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Experience: BV Rated by Martindale-Hubbell; SuperLawyer rating by Thompson-Reuters
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