This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.
Facts
The general partner of a limited partnership, Santa Fe Private Equity Fund II (SFPEF II), sought indemnification for partnership debts following the partnership's dissolution. The limited partners had unanimously voted to terminate the partnership due to financial losses and appointed a receiver to manage the dissolution. The receiver determined that the partnership's liabilities exceeded its assets, leaving a significant deficit. The general partner's indemnification claim was challenged as it conflicted with statutory provisions governing the distribution of assets in a dissolved limited partnership (paras 1-5).
Procedural History
- District Court, Santa Fe County: Approved the settlement agreement proposed by the receiver, which distributed the partnership's assets according to statutory priorities and barred the general partner's indemnification claim as untimely (paras 1, 5).
Parties' Submissions
- Appellant (General Partner): Argued that the indemnification clause in the partnership agreement entitled him to reimbursement for partnership debts he paid. He also claimed that the settlement agreement violated his procedural due process and equal protection rights and was barred by laches (paras 6, 9).
- Appellee (Receiver): Contended that the indemnification claim was untimely and that honoring it would contravene statutory provisions prioritizing the distribution of assets in a dissolved limited partnership (paras 5-6, 10-11).
Legal Issues
- Whether the indemnification clause in the partnership agreement is enforceable in light of statutory provisions governing the distribution of assets in a dissolved limited partnership.
- Whether the general partner's indemnification claim was timely.
- Whether the settlement agreement violated the general partner's procedural due process and equal protection rights.
Disposition
- The Supreme Court of New Mexico affirmed the district court's approval of the settlement agreement, holding that the indemnification clause was unenforceable and the claim was untimely (para 11).
Reasons
Per Baca J. (Herrera J. concurring, Ransom J. specially concurring):
The court held that the indemnification clause in the partnership agreement was unenforceable because it contravened the statutory order of priority for distributing assets in a dissolved limited partnership. Under Section 54-2-23 of the Uniform Limited Partnership Act, limited partners must be paid before general partners, and honoring the indemnification claim would require limited partners to contribute additional funds, violating public policy and statutory provisions (paras 8-11).
The court also found that the general partner's indemnification claim was untimely, as it was asserted more than a year after the notice of dissolution and the initial letter to the receiver. The settlement agreement was properly approved, as it complied with statutory requirements and did not violate the general partner's procedural due process or equal protection rights (paras 5-6, 11).
Special Concurrence by Ransom J.:
Justice Ransom agreed with the outcome but emphasized that the indemnification clause did not inherently conflict with the statutory provisions. Instead, the general partner's claim fell under a lower priority in the statutory order of distribution, making it subordinate to the limited partners' claims. He declined to address whether public policy prohibits varying the statutory order of priority through a partnership agreement (paras 13-14).