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La Canada Hills Limited Partnership v. Kite - 9/10/2007

Arizona Court of Appeals Division Two Holds That Statute of Limitations Governing Settlement of a Partnership Account (Not Statute of Limitations for Action on a Debt Based on Written Contract), Applies to a Claim Seeking a Declaratory Judgment Regarding a Limited Partners’ Failure to Make Payments to a Limited Partnership.

Defendant purchased an interest in a limited partnership pursuant to a subscription agreement, but stopped making the required payments in 1993. The partners voted to dissolve the partnership in 2005. The partnership sued Defendant for declaratory relief and for breach of contract stemming from her breach of the subscription agreement between 1993 and 1995. The trial court granted Defendant’s motion for summary judgment, finding that both claims were barred by A.R.S. § 12-548 (six-year statute of limitations for action for debt based on a written contract). The partnership appealed.

The Arizona Appeals Court upheld the dismissal of the breach of contract claim but reversed the dismissal of the claim for declaratory relief. The claim for declaratory judgment was similar in substance, timing and purpose to an accounting action for settlement of a partnership account. Thus, A.R.S. § 12-544(2) is the applicable statute of limitations, and provides that the cause of action did not accrue until the cessation of partnership dealings. The applicable four-year limitations period therefore had not expired. The breach of contract claim, however, accrued when the partnership became aware of Defendant’s failure to make the required payments in 1993. The trial court therefore did not err in finding this claim barred by A.R.S. § 12-548.

Presiding Judge Eckerstrom wrote the opinion; Judges Espinosa and Vásquez concurred.

Posted On: 9/13/2007