Betz v. Chena Hot Springs Group, No. 6057

CourtSupreme Court of Alaska (US)
Writing for the CourtBefore BURKE; BURKE
Citation657 P.2d 831
Docket NumberNo. 6057
Decision Date23 December 1982
PartiesRobert K. BETZ, Appellant, v. CHENA HOT SPRINGS GROUP, A Limited Partnership, Appellee.

Page 831

657 P.2d 831
Robert K. BETZ, Appellant,
v.
CHENA HOT SPRINGS GROUP, A Limited Partnership, Appellee.
No. 6057.
Supreme Court of Alaska.
Dec. 23, 1982.

Page 832

Robert C. Erwin, Erwin, Smith & Garnett, Anchorage, for appellant.

Mary A. Nordale, and Millard F. Ingraham, Fairbanks, for appellee.

Before BURKE, C.J., and RABINOWITZ, CONNOR, MATTHEWS and COMPTON, JJ.

OPINION

BURKE, Chief Justice.

The Chena Hot Springs Group [CHS] owns and manages the Chena Hot Springs Resort. CHS is a limited partnership with three general partners, Mr. Betz, Mr. Kinn, and Mr. Cotting. Pursuant to procedures set out in the amended partnership agreement, Mr. Betz was voted out as a general partner on August 1, 1980. He now seeks to invalidate his forced retirement or to dissolve the partnership and apply a different valuation method in the buyout of his partnership interest. CHS seeks to uphold the retirement, to continue the business, and to enjoin Betz from communicating with its creditors.

Betz was personally liable for a significant amount of the debts incurred by CHS, and, as a result, he began communicating with CHS creditors to explain that he was no longer a partner and that the partnership would be dissolved because of his

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retirement. The original complaint in this matter was initiated by CHS to enjoin Mr. Betz from communicating with its creditors and threatening its business interests. Mr. Betz counterclaimed to dissolve the partnership and to receive his partnership interest. Pending the outcome of the trial, the parties stipulated to a limitation on communication with creditors. On cross motions for summary judgment, the trial court ruled for CHS on all issues and enjoined Mr. Betz from communicating with CHS creditors. This appeal followed. We affirm.
I

In Alaska, a limited partnership is formed by meeting the prerequisites of AS 32.10.010. 1 The statute requires, among other things, that a limited partnership certificate be recorded before formation is considered complete. Betz first argues that, because the partnership failed to record the certificate, the requirements of AS 32.10.080 2 prevail over the provisions in the partnership agreement. AS 32.10.080 provides that the partnership may not be continued upon the retirement of a general partner unless the right to do so is given in the certificate or a unanimous vote by the limited partners is taken. There being no certificate here and the partnership having taken only a two-thirds vote, Betz argues that his retirement pursuant to the agreement's procedures must be invalidated and the business discontinued. His argument presents us with the question of the effect of a partnership agreement upon the relationship of the partners when a limited partnership certificate is not filed.

The purpose of the recording requirement is to provide notice to the firm's creditors of a limited partner's circumscribed liability. Brown v. Brown, 15 Ariz.App. 333, 488 P.2d 689, 695 (Ariz.App.1971); Klein v. Weiss, 284 Md. 36, 395 A.2d 126, 136 (Md.App.1978); Holvey v. Stewart, 265

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Or. 242, 509 P.2d 17, 18 (1973). When a certificate is not filed, most courts hold that a general partnership is formed, with each partner being fully liable for debts of the partnership. See, e.g., Peerless Mills, Inc. v. American Telephone & Telegraph Co., 527 F.2d 445, 448-49 (2d Cir.1975); Klein v. Weiss, 395 A.2d 126 at 136; Dwinell's Central Neon v. Cosmopolitan Chinook Hotel, 21 Wash.App. 929, 587 P.2d 191, 195 (Wash.App.1978). While a partner's rights vis-a-vis a creditor may be affected, failure to record the certificate does not, in and of itself, alter the rights of a partner vis-a-vis other partners as set out in a partnership agreement. Brown, 488 P.2d at 695; Hoefer v. Hall, 75 N.M. 751, 411 P.2d 230, 233 (N.M.1965), reh'g denied, 75 N.M. 756, 411 P.2d 233 (1966).

The failure to record the certificate, then, does not void the continuation requirements of the limited partnership agreement and the partners must be bound by the agreement in their relations among one another. The agreement here provides that upon notice by the general partners of their intent to continue the business, and a two-thirds vote of approval by the limited partners, the business may be continued. Thus, the requirements of AS 32.10.080 need not be followed. The record indicates that the vote to continue the partnership was taken in accordance with the procedures set forth in the partnership agreement. This being the case, the partnership may continue.

Betz next argues that the partnership agreement provides that the vote to continue may be taken only when a general partner dies, is incapacitated, or voluntarily retires. Because it does not expressly provide for continuance when a general partner is involuntarily retired, he argues that the partnership must be dissolved upon his retirement. This argument requires that we interpret the original agreement in light of its amendment. The original partnership agreement of August 1, 1977 provided that, if a general partner voluntarily retired, the partnership would be dissolved unless the remaining general partners notified the limited partners of their intention to continue the business and two-thirds of the limited partners agreed to continuance. 3 These procedures did not include a means of continuing the business upon involuntary retirement of a general partner.

To set out the procedures for involuntary retirement of a general partner and to provide a measure for the outgoing partner's interest, the partnership agreement was amended on December 31, 1978. 4 The amendment "amends and supplants" the 1977 agreement, but unfortunately does not specifically amend the original continuance procedures to provide for a continuance

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vote upon the involuntary retirement of a general partner.

Given such an ambiguity in the agreement, the primary function of judicial interpretation should be to ascertain and give effect to the intent of the parties. Wright v. Vickaryous, 598 P.2d 490, 497 (Alaska 1979); Western Airlines, Inc. v. Lathrop Co., 535 P.2d 1209, 1214 (Alaska 1975). Betz argues that this ambiguity prevents the application of the continuance procedures for voluntary retirement to his involuntary retirement. We disagree.

The purpose of the original continuance procedures was to provide a means of continuing the business should a general partner voluntarily retire. The purpose of the amendment was to provide for the involuntary retirement of a general partner. The intent of the parties to permit continuation of the partnership upon involuntary retirement is clear. Had the firm intended automatic dissolution upon a general partner's involuntary retirement, the elaborate buyout provisions in the amendment would have been unnecessary. The provisions comprehend only one intention: that the partnership would continue and the remaining partners would purchase the retiring partner's interest. A court should not interpret an agreement in a manner which would give meaning to one part of an agreement at the cost of annulling another part. McBain v. Pratt, 514 P.2d 823, 828-29 (Alaska 1973). To accept Betz's reasoning here would be to annul the buyout provisions which clearly contemplate continuance of the partnership.

Betz also argues that the partnership did not show reasonable cause to retire him and, therefore, the retirement decision should be invalidated. The partnership agreement, as amended, does not require that reasonable cause be shown in a retirement vote. Rather, the agreement permits the majority general partners to involuntarily retire a general partner if they determine it to be in the "best interest" of the firm, provided two-thirds of the limited partners approve the...

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17 practice notes
  • Fujimoto v. Au, No. 22406.
    • United States
    • Supreme Court of Hawai'i
    • February 22, 2001
    ...contractual acts. Id.; Heritage Hills v. Zion's First National Bank, 601 F.2d 1023, 1026 (9th Cir.1979); Betz v. Chena Hot Springs Group, 657 P.2d 831, 834 (Alaska 1982); Brown, 488 P.2d at 695; Porter v. Barnhouse, 354 N.W.2d 227, 231 (Iowa 1984); 19 P.3d 738 Hoefer, 411 P.2d at 233; Rivie......
  • Russell v. Municipality of Anchorage, No. S-1782
    • United States
    • Supreme Court of Alaska (US)
    • October 9, 1987
    ...issue of material fact exists and the moving party is entitled to judgment as a matter of law. Alaska R.Civ.P. 56(c). 12 Bookman, 657 P.2d at 831. 13 Cf. Paredes v. Nagle, 27 F.E.P. Cases 1345 (D.D.C.1982) (time for filing EEOC complaint begins running when the plaintiff obtains information......
  • Lake & Peninsula Borough Assembly v. Oberlatz, Nos. S–14945
    • United States
    • Supreme Court of Alaska (US)
    • July 11, 2014
    ...Dep't of Health & Soc. Servs., Office of Children's Servs., 177 P.3d 1181, 1184 (Alaska 2008) (citing Betz v. Chena Hot Springs Grp., 657 P.2d 831, 837 (Alaska 1982)). “Under the abuse of discretion standard, ‘an injunction will not be disturbed unless contrary to some rule of equity, or th......
  • Brooks v. Horner, No. S–15341.
    • United States
    • Supreme Court of Alaska (US)
    • March 13, 2015
    ...537 (Alaska 2011) (quoting Alaska Plastics, Inc. v. Coppock, 621 P.2d 270, 278 (Alaska 1980) ); see also Betz v. Chena Hot Springs Grp., 657 P.2d 831, 835 (Alaska 1982) (noting that “[a]bsent bad faith, breach of a fiduciary duty, or acts contrary to public policy, we will not interfere wit......
  • Request a trial to view additional results
17 cases
  • Fujimoto v. Au, No. 22406.
    • United States
    • Supreme Court of Hawai'i
    • February 22, 2001
    ...contractual acts. Id.; Heritage Hills v. Zion's First National Bank, 601 F.2d 1023, 1026 (9th Cir.1979); Betz v. Chena Hot Springs Group, 657 P.2d 831, 834 (Alaska 1982); Brown, 488 P.2d at 695; Porter v. Barnhouse, 354 N.W.2d 227, 231 (Iowa 1984); 19 P.3d 738 Hoefer, 411 P.2d at 233; Rivie......
  • Russell v. Municipality of Anchorage, No. S-1782
    • United States
    • Supreme Court of Alaska (US)
    • October 9, 1987
    ...issue of material fact exists and the moving party is entitled to judgment as a matter of law. Alaska R.Civ.P. 56(c). 12 Bookman, 657 P.2d at 831. 13 Cf. Paredes v. Nagle, 27 F.E.P. Cases 1345 (D.D.C.1982) (time for filing EEOC complaint begins running when the plaintiff obtains information......
  • Lake & Peninsula Borough Assembly v. Oberlatz, Nos. S–14945
    • United States
    • Supreme Court of Alaska (US)
    • July 11, 2014
    ...Dep't of Health & Soc. Servs., Office of Children's Servs., 177 P.3d 1181, 1184 (Alaska 2008) (citing Betz v. Chena Hot Springs Grp., 657 P.2d 831, 837 (Alaska 1982)). “Under the abuse of discretion standard, ‘an injunction will not be disturbed unless contrary to some rule of equity, or th......
  • Brooks v. Horner, No. S–15341.
    • United States
    • Supreme Court of Alaska (US)
    • March 13, 2015
    ...537 (Alaska 2011) (quoting Alaska Plastics, Inc. v. Coppock, 621 P.2d 270, 278 (Alaska 1980) ); see also Betz v. Chena Hot Springs Grp., 657 P.2d 831, 835 (Alaska 1982) (noting that “[a]bsent bad faith, breach of a fiduciary duty, or acts contrary to public policy, we will not interfere wit......
  • Request a trial to view additional results

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