Liability of Limited Partners 8 Brookwood Fund ( Brookwood) was a limited partnership that was formed to invest in securities. The original certificate of lim-ited partnership was filed with the Westchester County, New York, clerk; it listed Kenneth Stein as the general partner and Barbara Stein as the limited partner. With-in the next four months, additional investors joined Brookwood as limited partners. However, no certificate amending the original certificate was filed to reflect the newly admitted limited partners. The newly added partners conducted themselves at all times as limited partners. The partnership purchased securities on margin ( i. e., it borrowed a percentage of the purchase price of the securities) from the securities firms Sloate, Weisman, Murray & Co., Inc. ( Sloate), and Bear Stearns & Co., Inc. ( Bear Stearns). One day, the stock market crashed, causing many of the securities that Brookwood had pur-chased to go down in value. The securities firms made margin calls on Brookwood to pay more money to cover the losses. When the margin calls were not met, Sloate and Bear Stearns immediately initiated arbitration pro-ceedings to recover the balance of $ 1,849,183 allegedly due after Brookwood’s accounts were liquidated. Nine days later, Brookwood filed a certificate amending the original certificate of limited partnership to reflect the recently added limited partners. Upon receiving the notice of arbitration, the recently added limited partners renounced their interest in the profits of the limited partnership. Can these limited partners be held individually liable for the partnership debts owed to Sloate and Bear Stearns?
