Baltzell-Wolfe Agencies, Inc. v. Car Wash Investments No. 1, Ltd

In Baltzell-Wolfe Agencies, Inc. v. Car Wash Investments No. 1, Ltd. (1978), 58 Ohio App.2d 70, 389 N.E.2d 517, Baltzell-Wolfe sold insurance policies to Car Wash Investments No. 1, Ltd., Car Wash Investments No. 2, Ltd., and Auto Wash and Fuel. Baltzell-Wolfe, 58 Ohio App.2d at 71. At the time Baltzell-Wolfe sold the policies, the three limited partnerships' general partners were individuals. Id. However, around January 1, 1976, the general partners withdrew and Chapel Management Co., a corporation with which they were associated, was substituted as the sole general partner. Id. The limited partnerships failed to pay insurance premiums during 1976, so Baltzell-Wolfe brought suit against the partnerships and the original general partners, individually. Id. The referee recommended that, since plaintiff extended credit to the limited partnerships prior to the withdrawal of the individual partners as general partners and the substitution of Chapel Management, plaintiff was entitled to actual notice of the substitution. Id. Furthermore, the referee found that since no actual notice was given, the individual partners continued to be liable as general partners for plaintiff's extension of credit to the partnerships. Id. Objections to the report and recommendation were overruled by the trial court, and it granted judgment against the partnerships and the individual partners. Id. On appeal, defendant-partners argued that the filing of their amended certificates of limited partnership gave plaintiff constructive notice that they were no longer general partners. Id. at 72. The Court of Appeals for the Tenth District did not dispute that the filing gave constructive notice, but stated that the issue before it was whether plaintiff was entitled to actual notice. Id. In reaching its decision, the Court noted that no applicable revised code section applied; and therefore, the rules of law and equity governed. Id. at 73, citing R.C. 1775.04. The Court, then, however, turned to R.C. 1775.34, which provided for partnership liability by a partner following dissolution, and held: Where credit is extended to a limited partnership after a change of general partners by a creditor having no notice or knowledge of such change of general partners, and who had extended credit to the partnership prior to such change, the withdrawing general partners are liable to the creditor for such credit extended despite the substitution of a new general partner. Id. at 74. The Court, thus, rejected defendant-partners' argument that constructive notice by filing was sufficient to avoid liability for plaintiff's continuation of credit. Id. at 75.