"This matter came before this Court upon the Complaint of the Plaintiffs [Jackson Square, Ltd., and Housing Development Company, Inc.] for a Declaratory Judgment. Prior to the filing of the Complaint, a dispute had arisen between Housing Development Company, Inc., and the Defendant, Thomas S. Ford, as to which of them is the general partner of Jackson Square, Ltd., a Limited Partnership, more specifically the managing general partner of said limited partnership. It was alleged that the Defendant, Thomas S. Ford, had, at a limited partnership meeting on June 4, 1986, attempted to introduce and have passed a resolution, the effect of which would be to remove Housing Development Company, Inc. (HDC), as the managing general partner, and install Thomas S. Ford (Ford) as the managing general partner of said limited partnership. The Plaintiffs' Complaint requested that the Court determine that the Defendant Ford is not a general partner of Jackson Square, Ltd., and has not been such general partner since November 14, 1978. The Plaintiffs further requested that the Court determine that the resolution as presented by the Defendant on June 4, 1986, was improper and ineffective and therefore did not accomplish the removal of HDC as the managing general partner of Jackson Square
Ltd. The Plaintiffs further requested that the Court issue an Order prohibiting the Defendant from interfering with the partnership business and/or attempting to destroy the contractual relationship between Jackson Square, Ltd., and Housing Development Company, Inc.
"The Defendant, Thomas S. Ford, filed an Answer and Counterclaim with the Court, essentially alleging that he had properly and effectively removed HDC as the managing general partner of Jackson Square, Ltd., and that he had been properly and duly elected or installed as said managing general partner, with all rights of same accruing to him.
"On September 29, 1978, a Certificate and Agreement (Agreement) of limited partnership for Jackson Square, Ltd., was filed in the Office of the Judge of Probate for Madison County, Alabama. Copies of said limited partnership agreement were before the Court at trial, and the Court looks to said partnership agreement for resolution of the dispute before it.
"According to the Agreement, a general partner may be removed by one of two methods:
"1. ARTICLE 10.2(b): By the determination of 75% of the then Limited Partners' Partnership interests in the Partnership that the General Partner has defaulted in its performance of the duties prescribed in the agreement. This section further requires that the General Partner shall be given notice of such default in writing, specifying the exact nature of the default. This section goes on to set out numerous other events which are required to transpire before the General Partner can be removed. It is undisputed that HDC never received written notice of default from any one or number of the limited partners, so the Court can conclude that HDC was not effectively removed as General Partner pursuant to Article 10.2(b) of the Agreement.
"2. ARTICLE 12: By amendment of the Partnership Agreement Article 12.1 states that: 'Amendments to this Agreement may be proposed by the General Partner or by any Limited Partner.'
"It is undisputed that Thomas S. Ford was never a limited partner in Jackson Square, Ltd. Ford has predicated the validity of all his efforts to replace HDC as the managing general partner upon the assertion that he was and remains a general partner of Jackson Square Limited.
"The threshold question in the controversy then becomes: Was Thomas S. Ford a general partner of Jackson Square, Ltd., on June 4, 1986, the date of the meeting at which Ford attempted to divest HDC of its role as managing general partner and to assume that role for himself? More specifically, was he 'the general partner' as referenced in Articles 12.1 and 15.6 of the Agreement? This Court determines that he was not, and that he therefore had no power or authority to effect a removal or 'replacement' of HDC as managing general partner.
"It is undisputed that at the time of the execution of the Agreement on September 29, 1978, both HDC and Thomas Ford were the only general partners of Jackson Square, Ltd. They are both named in the agreement as general partners in the first paragraph of the agreement, and in Article 6.6 of the agreement. Furthermore, both their signatures appear on the agreement as general partner. Mr. J. Richard Bevill signed for Housing Development Company, Inc., as its President.
"Jackson Square, Ltd., is an FHA sponsored multi-unit apartment complex located in Huntsville, Alabama. The aim of Jackson Square's investors was to raise equity capital through the syndication of a limited partnership (Jackson Square, Ltd.). According to Ford's trial testimony, he, along with three (3) other persons initiated the development of these apartments and began the 'commitment' process with respect to their financing through the Department of Housing and Urban Development and through the Government National Mortgage Association. Ford further stated that he had invested in excess of $50,000.00 in the project prior to any involvement by HDC. Mr. Bevill's testimony reflected that Ford and the other 3 investors had taken
the commitment process through two stages before HDC became involved.
"In February of 1978, Ford, HDC, and other parties entered into a contract regarding, inter alia, the formation of Jackson Square as a limited partnership, the addition of HDC as a sponsor of the project with the Federal Housing Commissioner, and the installation of HDC as the managing general partner of the project. Ford and others were to remain as general partners. HDC was obligated, among other things, to develop the project and to arrange for its syndication. The terms and conditions of this contract are not the subject of the present action. Suffice it to say that HDC and Ford admit the execution of the contract and it appears, on its face, to be supported by sufficient consideration.
"As stated above, the September 29, 1978, limited partnership agreement named both HDC and Ford as general partners. Ford testified at trial that one reason for this was because the Department of Housing and Urban Development and the Government National Mortgage Association required the initial investor or applicant for commitment (Ford) to be so named, else the financing for the property would be jeopardized. Article 6.6 of the agreement states in part, as follows: 'Upon final endorsement of the project by the Secretary of Housing and Urban Development, Thomas S. Ford shall assign his interest as general partner to Housing Development Company for no consideration.'
"The condition precedent to Ford assigning his interest as a general partner to HDC was the final endorsement of the Jackson Square project by the Secretary of Housing and Urban Development. There is no dispute that such final endorsement took place on November 14, 1979. At that point in time, Ford came under a legal obligation to assign his interest as general partner to HDC. Ford's obligation as stated in the agreement is not conditioned upon any act to be performed by HDC. When one considers all the circumstances and conditions surrounding the negotiations and the stated intentions of the parties, it is obvious that HDC and Ford were relying on final endorsement from the Secretary of Housing and Urban Development in order to obtain permanent financing of the project. Testimony at trial indicated that Ford himself never expected, in 1978, to be or to become the managing general partner of Jackson Square Limited. His own testimony reflects that the naming of him in the limited partnership agreement was for the purpose of satisfying the requirements of the Department of Housing and Urban Development and the Government National Mortgage Association.
"The agreement also states that Ford shall assign his interest to HDC for no consideration. At trial, Ford testified that at the time he signed the agreement in 1978, he was unaware this provision was in the agreement, and he further stated that he never read this agreement--he just signed it. In the absence of any evidence whatsoever of undue influence, fraud, coercion, or of a lack of business sophistication on Ford's part, or any other compelling reason, the Court finds that this provision of the contract is valid and enforceable.
"The Court concludes that on and after November 14, 1979, the date of final endorsement of the project by the Department of Housing and Urban Development, Ford came under a duty to assign his interest as a general partner in Jackson Square Ltd., to HDC for no consideration. It is undisputed that he has never performed this act. It is undisputed that HDC has--never made demand on him to actually execute any such assignment. The agreement itself does not speak to a remedy or contingencies for Ford's failure to so act. Ford contends that, having never demanded of him that he perform his duty under the agreement, after 9 1/2 [sic] years, HDC is now estopped to assert that he possesses no interest as a general partner in Jackson Square...
