the Peterson Group, Inc., PGI Development Group, LP, and Wellington Yu v. PLTQ Lotus Group, L.P. and Cubo Group, L.L.C.
417 S.W.3d 46 | Texas Court of Appeals, 1st District (Houston) | 2013
What This Case Means for Subcontractors
Peterson Group and Wellington Yu were sued for breach of a real estate development agreement through their limited partnership, PGI Development. The trial court tried to hold them personally liable by piercing the corporate veil and treating them as alter egos of PGI. The Texas Court of Appeals reversed this decision, ruling that Texas law does not allow courts to pierce the veil of a limited partnership—the statutory liability protections for limited partners are absolute and cannot be overridden by equitable doctrines. This protects subcontractors and other parties from being able to reach the personal assets of limited partners, even in fraud or breach cases.
Key Takeaways
- •Limited partnership structures provide stronger liability protection than corporations—courts cannot pierce the veil even for fraud or breach of contract claims
- •If you contract with a limited partnership, you cannot pursue the personal assets of limited partners; you are limited to partnership assets
- •When structuring contracts with development entities, verify the entity type and understand that limited partnerships have statutory liability shields that courts will enforce
We conclude that the trial court erred by finding Peterson Group and Yu are alter egos of PGI.
Frequently Asked Question
Can I sue the owners personally if a limited partnership breaches our construction contract?
No. Texas courts will not pierce the veil of a limited partnership to hold owners personally liable, even for fraud or breach of contract. Your claims are limited to the partnership's assets. This is different from corporations, where veil-piercing may be possible in certain circumstances.
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