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Gast v. PetsingerG.R. No. ###### June 21, 1974 J. Hoffman

petitioners Richard Gast (APPELLANT)respondents Robert Petsinger

summary Gast worked for LNG as a project engineer. Upon termination, he submitted a claim forbackpay and expenses which wasnt paid, so he filed a complaint. According to him, LNG wa limited partnership, but the limited partners acted as general partners, hence they were alliable. Court held that most of the limited partners did not exceed their authority as limited

partners and as provided by the Limited Partnership Agreement. They exercised their rightand did not take on the management of the partnership, which was reserved for the generalpartner. However, the Court remanded the case as regards two partners, Apt and Garwin, ffurther discussion to determine WON they were limited or general partners.

facts of the case Gast worked in LNG Services as a project engineer beginning 1968. Salary was $15K a year. From Oct 1969 to March 1971, when he severed his employment, he continued working without pay. Upon tender

notice of termination, he submitted a claim for backpay and expenses. This amount was never paid, so he filecomplaint.

His claim LNG Services is formally a limited partnership, the only general partner named therein being RobPetsinger. HOWEVER, the other named individual defendants, while ostensibly limited partners, were, by virtue

their participation in the enterprise, acting as general partners and should thus be liable for his claim. Defendaissued a general denial as regards this allegation.

Gast served written interrogatories on defendants. Defendants demanded specific proof of involvement of the limipartners in the activities of LNG and moved for summary judgment. Ct. granted motion for summary judgment.

Gast appealed said order, asserting that the answers to the interrogatories and his deposition established certinvolvement in the partnership by the defendants.

issueWON said defendants were in fact general partners. NO as to some --John J. McMullen Associates, Inc., J. Judson BroJohn C. Oliver, Jr., W.D. George, Jr., Alexander M. Laughlin, Charles Manning, and Joan M. Apt. None of them wshown to have engaged in any activity or participated beyond those lawfully and expressly stated in the LimiPartnership Agreement. As to Jerome Apt. Jr, and Dr. Leo Garwin, the case is remanded for further proceedings.

ratioFirst of all, the organization of LNG is in conformity with the Uniform Limited Partnership Act. Certificate is in gorder, and the LPA delineates the powers, rights and liabilities of the general and limited partners in express terms.

Rights and Powers of Limited Partners as per the LPA: (enumerating them just in case Sir asks)(a) the right to receive distributions from time-to-time and upon dissolution; (b) the right to prevent the transfer of assets and other "outside the ordinary business of the partnership" unless an aggregate of 50% in interest give written consent to the transfers or acts; (cright to examine the books and records of the partnership at the principal office of the partnership; (d)the right to attend meetings "fopurpose of receiving the report of the General Partner and for taking any action referred to . . ." in clause (b), supra; (e)the right to transell or assign their interests to third parties; (f) and, upon the death of a Limited Partner, to have his or her share of the profits distributions inure to his or her Estate.

Also, according to the LPA, management and control of LNGs day-to-day operations and maintenance ofpartnership property rests exclusively with the general partner. Control of business is in the hands of

general partner. Limited partners may have the powers enumerated above, BUT they are prohibited frtaking part in the conduct or control of the partnership and binding the same.

CONCLUSION -- None of the powers mentioned in the Limited Partnership Agreement (LPA) exceed the degreecontrol which converts the status of a limited partner to that of a general partner.

In two sections of the ULPA, the said statute clearly limits the liability of the limited partner A limipartner SHALL NOT BE LIABLE AS A GENERAL PARTNER unless, in addition to the exercise of his rigand powers as limited partner, he takes part in the control of the business.

In Freedman, a limited partnership was defined as an entity in which one or more persons, with unlimiliability, manage the partnership, while one or more other persons only contribute capital; the latter partn

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have no right to participate in management and operation of the business and assume no liability beyond capital contributed.

AS APPLIED each of the limited partners in this case contributed capital and enjoyed powers and rig(aforementioned) which have been consistent with the concept of limited partnership. They attended meetiand received reports, among others.

HOWEVER, Dr. Garwin and Jerome Apt, Jr., appeared to have acted in capacities which require discussand evaluation (hence it was remanded as to their case only)WHY? Dr. Garwin employed by LNG as an independent engineering consultant with respect to certprojects for which he was retained by the General Partner. Apt was also engaged as an independent consulta

How does one determine that an individual (in this case, the defendants) has taken control of a business?

Analyzing cases decided by the SC reveals that they were decided on their own facts and are of little useforming standards/rules. In each case, it was not the position of the limited partner that was statedpermissible, but the actual role and degree of participation that each had in relation to the general partner

Determination of control must thus be made on an ad hoc basis. For Apt and Garwins case, it has to be remanded mainly because it is stated in the deposition that

appearance of their names in the company brochures, the weight of their advice/recommendations in projeand managerial responsibilities contributed to a belief that they exercised control. Petsinger, the genpartner, merely denied the same.

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