Gilroy, Sims & Associates, Ltd., was a limited partnership engaged in real estate development. The original general partners were Richard Gilroy and William Smis. Thomas Green and John Murphy, Jr., were listed as limited partners, along with certain other individuals, on the certificate of limited partnership.
Green and Murphy took an active role in the day-to-day operations of the real estate developed by the limited partnership. Financing was obtained to construct the venture’s building in St. Louis in 1968, with a mortgage that was payable to American National Insurance Company over 27 years.
In 1976, Green and Murphy became general partners of Gilroy, Sims. They executed a Restated Agreement and agreed to “unlimited liability for the debts of the partnership.” In the fall of 1990, the partnership stopped making mortgage payments. After foreclosure by American National, a deficiency of $1,437,840 was outstanding.
Potential Decision: Green and Murphy believed they were absolved from any personal liability beyond the assets of the firm because they were limited partners when the debt was incurred in 1968. But this is not the right decision because Green and Murthy were already become the general partner of the organization in 1976 and they had executed a restated agreement and agreed to unlimited liability for the debts of the partnership. Thus from this point, these two partners are become the general partner and owns the unlimited liability for the partnership firm. Thus when the American National. Foreclosure the debt of $ 1,437,840, then these two partners Green and Murthy will also have their unlimited liability to pay back the dues of the firm, as they are now the general partner for the firm.