Nov 30, 2014

Legal Status of Limited Partnerships: A Case Commentary of Kucor Construction v. Canada Life Assurance Co., (1998)

Kucor Construction & Developments & Associates v. Canada Life Assurance Co., 1998 CanLII 4236 (ON CA)

FACTS:

Kucor Ltd. is a general partner of a newly created limited partnership. Kucor Ltd. (the corporation) is in charge of management, and the conduct and operation of the business of the limited partnership, including business relating to acquisition of land and the construction of apartment buildings. A mortgage is executed that describes Kucor Ltd. as the mortgagor and Maritime as the mortgagee executed by Kucor Ltd. in its capacity as the sole general partner. Each of the 23 limited partners signed a guarantee of the mortgage debt. The mortgage was then conveyed to a limited partnership (which was later nullified as a limited partnership has no capacity to hold land). The title went back to Kucor Ltd. who held it in trust for the benefit of all partners in the limited partnership. The limited partnership then tries to discharge the mortgage, but the mortgagee refuses to accept payment, claiming they are not allowed the right of prepay because of their status as a limited partnership.

ISSUE/HOLDING:

What is the legal status of a limited partnership? Can a limited partnership hold title to land? No – title to land can only be held through a general partner.

REASONS:

A limited partnership is a creature of statute and if the legislature wanted to create a legal entity they would have done so expressly (as they did with corporations in the Corporations Act). A limited partnership was not intended to have legal status.

It is through the general partner that the limited partnership acquires and conveys title to real property. This is done via personal liability/ risk.

In the Court's view, it was necessary to consider the deed a nullity: "[i]t should be regarded as an ill-conceived attempt to convey title to the limited partnership. As this could be accomplished either by a conveyance to the general partner, or to all partners, it should be considered as a deed by Kucor Ltd. to itself in its capacity as a general partner".

RATIO:

A limited liability partnership is not a separate legal entity at law from the people who comprise it. As such, it cannot acquire legal title to property.

NOTE: Partnerships and liability partnership are the same in terms of their 'legal personalities'.