## Facts

- Frigidaire Sales Corporation contracted to sell appliances to Commercial Investors, a limited partnership.
- The contract was executed for Commercial Investors by Leonard Mannon and Raleigh Baxter acting as officers of Union Properties, Inc., the limited partnership’s sole corporate general partner.
- Mannon and Baxter each owned 50% of Union’s shares, served as Union’s directors and officers, and managed Union’s day-to-day operations.
- Mannon and Baxter also each held one limited partnership unit (out of 52) in Commercial Investors.
- Commercial Investors defaulted on installment payments beginning in November 1970.
- Frigidaire sued Union (as general partner) and also sued Mannon and Baxter individually, arguing they should be treated as general partners because they effectively controlled the partnership through Union and because of alleged thin capitalization.
- At contracting, Frigidaire knew Commercial Investors was a limited partnership, knew Union was the sole general partner, and knew Mannon and Baxter signed only in their corporate capacities.
- The trial court entered judgment against Union but dismissed claims against Mannon and Baxter individually; the Court of Appeals affirmed.

## Issues

1. Whether limited partners who are also officers, directors, and shareholders of a corporate general partner incur general-partner liability by participating in management through their corporate roles under former RCW 25.08.070.
2. Whether the corporate form of the general partner should be disregarded to impose personal liability absent fraud, misrepresentation, or misuse of the corporate entity.

## Decision

- The Washington Supreme Court affirmed dismissal of the individual claims against Mannon and Baxter.
- Limited partners do not become liable as general partners merely because they control or manage the limited partnership through their positions in a corporate general partner.
- The court declined to disregard the separate corporate existence of Union and declined to impose personal liability on Mannon and Baxter.
- The absence of creditor deception and Frigidaire’s knowledge of the entity structure supported enforcing the limited liability arrangement.

## Legal Principles

- Under former RCW 25.08.070, a limited partner becomes liable as a general partner only if the limited partner takes part in control in a manner that treats the limited partner as personally running the partnership.
- Control exercised solely in a corporate capacity as an officer, director, or shareholder of a corporate general partner is attributable to the corporation, not to the limited partner individually, for purposes of imposing general-partner liability.
- Courts generally respect separateness of a corporate general partner and do not impose owner/officer personal liability without fraud, misrepresentation, or facts justifying disregard of the corporate entity.
- A creditor that knowingly contracts with a limited partnership whose sole general partner is a corporation cannot later obtain personal liability from the corporation’s owners based only on that arrangement; any change to the statutory allocation of risk is for the legislature.

## Conclusion

The court held that limited partners who participate in management only through their roles in a corporate general partner do not lose limited liability under the statutory “control” rule, and that absent creditor deception or misuse sufficient to disregard the corporation, personal liability will not be imposed on the corporate general partner’s owners or officers.


Frigidaire Sales Corp. v. Union Props., Inc., 88 Wash. 2d 400, 562 P.2d 244 (1977)