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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. International Investors v. Business Park Fund (11/12/99) sp-5204

International Investors v. Business Park Fund (11/12/99) sp-5204

     Notice:  This opinion is subject to correction before publication in
the Pacific Reporter.  Readers are requested to bring errors to the attention of
the Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone
(907) 264-0608, fax (907) 264-0878.



             THE SUPREME COURT OF THE STATE OF ALASKA
                                 


INTERNATIONAL INVESTORS, a limited )
partnership; FINANCIAL FACTORS,    ) Supreme Court No. S-8648
LTD., an Alaska corporation; AUKE  )
BAY COMPANY PROFIT SHARING TRUST;  )
CREATIVE INVESTMENTS NO. 1, a      )
limited partnership; NATIONAL BANK ) Superior Court No.
OF ALASKA, as custodian for the    ) 3AN-94-09645 CI
H.P. Head Rollover IRA; and        )
NATIONAL BANK OF ALASKA, as        )
custodian for the R.E. Greisen     )
Rollover IRA,                      )
                                   )    
               Appellants,         )
                                   )    
     v.                            )    
                                   )
BUSINESS PARK FUND, an Alaska      )    O P I N I O N
limited partnership; LESLIE B.     )
PACE, individually and as a general)
partner of Business Park Fund;     )
RICHARD H. RAPP, individually and  )
as a general partner of Business   )
Park Fund; HERBERT E. ECKMANN,     )
individually and as a general      ) [No. 5204 - November 12, 1999]
partner of Business Park Fund;     )
PARTNERSHIP MANAGEMENT CORPORATION,)
individually and as a general      )
partner of Business Park Fund;     )
LAND TITLE COMPANY OF ALASKA, INC.,)
successor-in-interest to Broker's  )
Title Company; CURTIS L. ANDERSON; )
ROBERT O. ANDERSON; MARION A.      )
ARTURO; ABBIE G. ARTURO; PETER     )
A. BARKER; MARILYN H. BARKER;      )
MARILYN J. BEACH; DAVID W. BEACH;  )
DANIEL C. BEACH; RONALD D. BEACH;  )
JAMES A. BENNETT; CONNIE S.        )
BENNETT; OLE K. BEVOLDEN; HERDIS   )
BEVOLDEN; REX I. BISHOPP; RUTH M.  )
BISHOPP; ESTATE OF WILLIAM E.      )
BLACKMON; CHARLES A. BRODAHL;      )
ERDIE P. BRODAHL; ANN E. BURBANK;  )
RAYMOND W. BURBANK; WILLIAM J.     )
BURNISON; DAVID L. BYRD; SUE S.    )
BYRD; RICHARD M. CARLSON; CAROL B. )
CARLSON; HOWARD W. CASTLE; JAY     )
CASTLE; GUNTER CHRISTOPH; ALICE L. )
CHRISTOPH; ROBERT A. COATS;        )
WILLIAM FORTUNE COGHILL; GERALDINE )
STEPHENS COGHILL; WILLIAM FORTUNE  )
COGHILL AND GERALDINE STEPHENS     )
COGHILL REVOCABLE TRUST; DENNIS    )
COLLIGAN; DORIS S. COLLIGAN;       )
FRANK D. COX; ESTHER J. COX;       )
RONALD L. DAVIS; THERESA A. DAVIS; )
MICHAEL L. DELBECQ; MURIEL E.      )
DELBECQ; LOUIS A. DELBECQ;         )
WILLIAM M. DINKINS; EDITH S.       )
DINKINS; JEWELL D. DONCHAK; JOSEPH )
DONCHAK; L. CATHERINE DOOGAN; CAROL)
J. DOUTHIT; EVA ECKMANN; E.K.S.    )
PARTNERSHIP; NORA H. EKSTEDT;      )
DONALD V. ELLIOTT; TERRY A. ELLIS; )
THERESA A. ELLIS; CARROLL I.       )
ERICKSON; ROBERT C. FARKAS;        )
KATHLEEN A. FARKAS; GARY D.        )
FERGUSON; KUN YEA FERGUSON; THOMAS )
R. FINK; SYLVIA S. FINK; TODD E.   )
FISHER, CYNTHIA A. FISHER,         )
CAROLYN K. FOWLER; ROBERT A.       )
GARRETT; DOROTHY D. GARRETT;       )
ROLAND E. GOWER, M.D., P.C. PROFIT )
SHARING TRUST; ROLAND E. GOWER,    )
J.D., P.C. MONEY PURCHASE PENSION  )
TRUST; FRANK B. GREGORY; MERADA A. )
GREGORY, GENE E. GRIFFIN, MARSHA   )
K. GRIFFIN; IRVIN W. HALE; WANDA   )
M. HALE; ROBERT L. HALL; JOHN R.   )
HALL; JRRL ENTERPRISES; ROBERT L.  )
HANSON; WILLA M. HANSON; JAMES C.  )
HARLE; MICHAEL T. HART; GEORGETTE  )
M. HART, HART FAMILY REVOCABLE     )
TRUST; ROBERT G. HENKE; CHARLOTTE  )
M. HENKE; ALYS P. HOPKINS; HAROLD  )
J. HOPKINS, DR. WARD A. HULBERT;   )
I.M.A. MONEY PURCHASE PENSION &    )
PROFIT SHARING PLANS: FBO RICHARD  )
F. BUCHANAN; I.M.A. PENSION FUND;  )
FBO GEORGE L. STEWART ACCOUNT;     )
WARREN R. JACKSON; MARGARET L.     )
JACKSON, Personal Representative   )
of the Estate of Warren R.         )
Jackson; JASI COMPANY; THERESA     )
JELACIC; WAYNE D. JENSEN; RITA J.  )
JENSEN; CURTIS D. JENSEN; DEBORAH  )
L. JENSEN; GEORGE J. JOHNSON;      )
PATRICIA M. JOHNSON; DANIEL B.     )
JORDAN; MARIAN M. JORDAN; DANNY    )
T. KARA; JANIS M. KARA; PATRICIA   )
I. KIER; JACOB C. KNAPP; MILDRED   )
C. KNAPP, KAARE KRAAKMO; ERHARD    )
KRINKE; KJELL KRISTIANSEN; MARIT   )
KRISTIANSEN; JANE LANGSTON; ALFRED )
N. LANUM; JULIANNE M. LANUM;       )
BARBARA J. LAVISH; DOUGLAS W.      )
LINDSTRAND; PATRICIA F.            )
LINDSTRAND, DUANE C. LUEDKE,       )
SHIRLEY M. LUEDKE; JACK MCLEAN;    )
JOSEPHINE MCLEAN; GARY R. MASOG;   )
VERNA J. MATHEWS; LLOYD L.         )
MATHEWS; FRANCES MCDOWELL; WILLIAM )
F. MCDOWELL; LEONARD MICHELS;      )
ANITA MICHELS; RONALD D. MOON,     )
KATHERINE L. MOON; HOWARD L.       )
MORGAN; MARGO J. MORGAN; DOROTHA   )
L. MUIR; ROBBIE JAY MUIR; JOHN H.  )
NABORS, JR., individually; MARY B. )
NABORS, individually; MARY B.      )
NABORS FAMILY TRUST; MARY B.       )
NABORS and JOHN H. NABORS,         )
Trustees under the Mary B. Nabors  )
Family Trust; DAVID C. NELSON;     )
JUDITH A. NELSON; NORMAN NEULS;    )
MARJORIE M. NORMAN; RICHARD A.     )
NORMAN; KENNETH D. OWSICHEK;       )
LORANE W. OWSICHEK; VALBORG PACE;  )
EVONNE H. PHILLIPS; PACIFIC LAND   )
COMPANY; GERALD G. PALMER; ALICE   )
J. PALMER; KENNETH W. PITCHER;     )
MARY L. PITCHER; DONALD C.         )
PRIDEMORE; WANDA J. PRIDEMORE;     )
RICHARD H. RAPP, JR.; RICHARD H.   )
RAPP; JANE S. RAPP; MARLENE        )
RAPP, REDI ELECTRIC, INC. PROFIT   )
SHARING TRUST; JOHN J. REPASKY;    )
BARBARA J. REPASKY; M. DALE RILEY; )
OWEN F. SAUPE; BERNICE I. SAUPE;   )
THOMAS B. SCHAAFASMA; ROBERT H.    )
SCHAEFFER; ROSE L. SCHAEFFER;      )
JAMES L. SCHEFFEL; MARY ELLEN      )
SEGELHORST; N.E. SEGELHORST;       )
ROLAND F. STICKNEY; PHYLLIS A.     )
STICKNEY; LINDA J. STIFFLER f/k/a/ )
LINDA J. BLACKMON; DONALD L.       )
STIFFLER; STANLEY L. SUTTON; LAURA )
E. SUTTON; JOSEPHINE C. THORSON;   )
WALKER & WALKER REVOCABLE          )
TRUSTS; LEMOINE A. WEBBER; JUANITA )
WEBBER; HENRY T. WEIL; BARBARA     )
L. WEIL; MILLARD LEE WOODSON;      )
GEORGIA B. WOODSON; JOYCE E.       )
ZERKEL, individually; JOYCE E.     )
ZERKEL Declaration of Trust; K.    )
GENE ZERKEL, individually; K.      )
GENE ZERKEL Declaration of Trust;  )
DEXTER C. ZERNIA; 3 D COMPANY,     )
                                   )
               Appellees.          )
___________________________________)



          Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Anchorage,
                        John Reese, Judge.


          Appearances: James N. Reeves, Dorsey & Whitney
LLP, Anchorage, for Appellants.  Richard A. Helm, Andrew D.
Steiner, Helm & Associates, Anchorage, for Appellees N.E. and Mary
Ellen Segelhorst.  Tonja J. Woelber, Anchorage, for Appellees Todd
E. and Cynthia A. Fisher.  John R. Strachan, Anchorage, for
Appellees represented by Duane C. Luedke.  Steven S. Tervooren,
Hughes, Thorsness, Powell, Huddleston & Bauman, LLC, for Appellee
Robert A. Coats.


          Before:   Matthews, Chief Justice, Eastaugh,
Bryner, and Carpeneti, Justices. [Fabe, Justice, not
participating.]


          MATTHEWS, Chief Justice.      


I.   INTRODUCTION
          The Business Park Fund, a limited partnership, defaulted
on a note payable to International Investors.  International sued
the Business Park Fund's limited partners, seeking to collect their
unpaid capital subscriptions.  The superior court entered a final
judgment releasing the limited partners from all liability, ruling
that International could not enforce the note directly against
them.  We reverse because limited partners are liable to unpaid
creditors for the amount of their obligation to the partnership,
including unpaid contributions.
II.  FACTS AND PROCEEDINGS
     A.   Facts
          On April 3, 1981, Richard Rapp and Leslie Pace jointly
purchased a parcel of Anchorage property from International.  Rapp
and Pace bought the property for a small amount of cash and a
promissory note of $4,342,400 which was secured by a deed of trust
on the property.  The note was payable in semi-annual installments
of over $200,000 after a balloon payment. 
          On August 1, 1981, Rapp, Pace, and Herbert Eckmann,
formed Business Park Fund (BPF), a limited partnership.  They were
the general partners.  BPF's stated purpose was the ownership and
development of the property.  The partnership agreement authorized
the sale of 148 limited partnership units and required for each
unit the payment, over time, of $110,400 in capital contributions,
plus assessments.  Six thousand dollars were to be paid initially,
and semi-annual installments were to be paid over the subsequent
nineteen years.
          To secure payment of limited partners' contributions, the
agreement granted BPF a security interest in each unit.  The
partnership's remedies against defaulting limited partners included
suing for unpaid contributions and selling or purchasing their
units.
          The agreement gave the general partners exclusive
authority to conduct the partnership business.  It authorized them
to lease, "sell, purchase, exchange, develop or convey title to
Partnership property,"to lend and borrow money, and to encumber
partnership property.  The liability of each limited partner for
BPF's debts was capped by the amount of the partner's promised
capital contribution.
          The agreement was filed as an Agreement and Certificate
of Limited Partnership on October 7, 1981.  The next day, Rapp and
Pace deeded the property to BPF.  The deed provided that it was
"subject to"International's deed of trust securing the promissory
note.
          The September 1987 installment payment on the note was
not made, and real estate taxes were then in default.  Interna-

tional threatened collection proceedings against Pace and Rapp. 
Pace and Rapp, individually, and with Eckmann, on behalf of BPF,
entered into a "Memorandum of Agreement"with International in
January of 1988.  International promised forbearance from fore-

closure, extended the time for payment of the September arrearages
and back taxes, reduced the amount of the installment due in March
of 1988 and extended the time for payment of the balance of the
March installment.  The Memorandum of Agreement recited that BPF
had assumed the note and that Pace and Rapp and BPF were jointly
and severally liable on the note.
          Note modifications were made in 1989 and 1993, waiving
prior defaults, extending the payment schedule, and changing the
interest rate.  By 1994, when this suit was brought, Pace, Rapp and
BPF were again in default on the note.
          In the late 1980s a number of limited partners defaulted
on their obligations to make capital contributions.  BPF's practice
was either to buy back the units in default with an offset bid
representing unpaid capital contributions or take unit assignments
in lieu of foreclosure, releasing the unit owners from further
obligations to make capital contributions.  BPF filed a number of
amended Certificates of Limited Partnership reflecting that the
former owners of the defaulted units re-acquired by BPF were no
longer partners.  The first amended certificate was filed May 10,
1988.  Between then and the commencement of this suit, amended
certificates covering more than half of the partnership units were
filed.  One, filed August 1, 1994, also eliminated all future
liability for capital contributions for all partners who were
current on their contributions through March 1994.
     B.   Proceedings
          On August 15, 1995, International filed its first amended
complaint in its suit for foreclosure of the deed of trust and
sought a deficiency judgment against BPF's past and present limited
partners.  Some limited partners moved to dismiss the complaint,
arguing that the statute of limitations had expired.  The superior
court ruled that International could recover contributions owed by
the limited partners that became due within six years before the
complaint was filed, but that recovery of contributions due before
then was barred.
          International moved for partial summary judgment on the
issue of whether BPF had assumed the promissory note.  In response,
various limited partners filed cross-motions for summary judgment.
The superior court issued an omnibus order ruling that (1) BPF had
assumed the note in January of 1988, not, as International
contended, in 1981; (2) those limited partners who had assigned
their interest to BPF prior to the assumption of the note were not
liable to International; and (3) the liability of the remaining
limited partners was "co-extensive with their capital
contributions."
          In response to motions regarding the meaning of the
omnibus order, the superior court entered final judgment under
Civil Rule 54(b) in favor of all limited partners, dismissing
International's claims against them.  The court also awarded
attorney's fees to the limited partners, including full fees to
some of them.
          International appeals. 
III. DISCUSSION
     A.   Standard of Review
          A summary judgment may be affirmed if no genuine issues
of material fact exist and the moving party is entitled to judgment
as a matter of law. [Fn. 1]  Whether genuine issues of material
fact exist is reviewed de novo. [Fn. 2]  Questions of law are also
reviewed de novo, and we will adopt the rule of law "most
persuasive in light of precedent, reason, and policy."[Fn. 3]
     B.   Summary of the Parties' Contentions and Our Resolution of
Them

          International makes four arguments on appeal.  It
contends: (1) that the superior court erred in ruling that the
limited partners' unpaid capital contributions could not be
enforced by a partnership creditor; (2) that the superior court
erred in its ruling concerning the statute of limitations; (3) that
the superior court erred in ruling that the note was assumed in
January of 1988 rather than in 1981; and (4) that the superior
court erred in awarding full attorney's fees to certain of the
limited partners.
          Three separate briefs on behalf of different groups of
limited partners were filed.  Viewed collectively, these briefs
respond to all of International's arguments except for its argument
concerning the statute of limitations.  
          In addition, the brief of appellees N.E. and Mary Ellen
Segelhorst argues that there are alternative grounds for affirming
the dismissal.  They contend that in 1988 they were validly
released by BPF from their obligation to make future capital
contributions and that this release is binding on International. 
They also contend that the modifications of the note after the
filing of the amended certificate deleting them as limited partners
relieved them of any liability they might otherwise have had. 
International has responded to the Segelhorsts' contentions.
          For the reasons that follow, we conclude that
International is correct with respect to its first two arguments
concerning direct liability and the statute of limitations, that it
is not necessary to decide its third argument as to whether BPF
assumed the note in 1981 rather than in January of 1988, and that,
as to International's fourth argument, the award of attorney's fees
must be reversed since the appellees are not prevailing parties. 
With respect to the Segelhorsts' alternative grounds, we conclude
that they do not support affirmance of the judgment.
     C.   A Creditor of a Limited Partnership May Sue Limited
Partners for Their Unpaid Capital Contributions

          The Alaska Revised Limited Partnership Act, AS 32.11, is,
with some changes, the "Revised Uniform Limited Partnership Act of
1976 With the 1985 Amendments"(ULPA 1985) propounded by the
National Conference of Commissioners on Uniform State Laws.  The
1976 version of the ULPA (without the 1985 amendments) was in
effect in Alaska until July 1, 1993, when ULPA 1985 replaced it. 
But the provisions of ULPA 1976 governing pre-July 1, 1993
partnership contributions, including promised contributions,
remained in effect. [Fn. 4]  As this case concerns contributions
promised before 1993, it is governed by Alaska's ULPA 1976,
particularly former AS 32.10.160. [Fn. 5]
          A defining characteristic of a limited partnership is
that limited partners are not liable for the obligations of the
partnership. [Fn. 6]  But limited partners are liable to
partnership creditors to the extent that they have not paid
promised capital contributions.  This rule is reflected in former
AS 32.10.160(c), which recognizes the right of "a creditor of a
partnership . . . to enforce such liabilities."
          Case law interpreting ULPA 1985, 1976, or the 1916
Limited Partnership Act confirms the right of creditors to proceed
against limited partners to the extent of their unpaid
contributions. [Fn. 7]  Secondary authorities agree: "Unpaid
contributions of limited partners are obligations to the
partnership and are generally enforceable by the . . . creditors of
the partnership."[Fn. 8]
          Some of the limited partners argue that AS 32.10.160(a)
means that a creditor cannot proceed directly against a limited
partner because it provides that "a limited partner is liable to
the partnership"for unpaid contributions.  But this liability is
not said to be exclusive.  In view of the language of subsection
.160(c), recognizing the right of a creditor to enforce such
liabilities, the only sensible construction of subsection .160(a)
is that it does not imply that limited partners are only answerable
to the partnership for unpaid contributions.  Case law confirms the
correctness of this interpretation. [Fn. 9] 
          Some of the limited partners also argue that the limited
partnership agreement limits their liability for unpaid
contributions.  They contend that the partnership's remedy was
limited to forfeiture of a limited partner's previous
contributions, and that International seeks "super third-party
beneficiary status"by claiming relief broader than the "forfeiture
of contribution"remedy.
          But the partnership agreement does not suggest that the
partnership's exclusive remedy against defaulting limited partners
is forfeiture of their units.  The limitation of liability for
partnership debts in the agreement is expressed in terms of "the
amount committed by the Limited Partner as the capital contribution
as set forth in Section 8." (Emphasis added.)  Section 8, in turn,
commits limited partners to contribute $6,000 initially plus semi-
annual payments until the year 2001, yielding total payments of
$110,400, plus assessments.  The agreement also provides that the
partnership's general partners may, in their sole discretion,
utilize "any one or more"of the agreement's remedies against
limited partners delinquent in their contribution payments.  One of
these enumerated remedies permits general partners to "[s]ue for
the unpaid amount of the annual payments and assessments, due or to
become due." (Emphasis added.)
          Thus, nothing in the partnership agreement restricts
limited partners' obligations to payments already made.  The
liability of each limited partner is, to use hornbook language,
"for . . . any contribution that he has promised but not yet made."
[Fn. 10]
     D.   A Creditor's Suit Against a Limited Partner Is Governed
by the Same Period of Limitations as That Applicable to a Suit
Against the Partnership

          The trial court ruled that the six-year statute of
limitations contained in former AS 09.10.050 applied to
International's claims against limited partners.  The court ruled
that any contribution due but not paid more than six years before
the suit was commenced would be barred.
          International challenges this ruling.  It argues that the
period of limitations for its claims against limited partners
should be the same as the period governing its claim against the
partnership.  Since International and BPF last agreed to extend the
note in 1993 and part payments were made in 1993, the suit against
the partnership was timely. [Fn. 11]  In support of its position
International refers by analogy to the law of third-party
beneficiaries as reflected in section 309 of the Restatement
(Second) of Contracts.  Generally the right of a third-party
beneficiary to enforce a promise made by a promisor to a promisee
is not subject to the defenses that the promisor might have if the
claim were brought by the promisee. [Fn. 12]  Comment (c) to
section 309 explains that "the beneficiary's right is direct, not
merely derivative . . . ." Illustration 11 shows that statute of
limitations defenses are covered by the rule expressed in section
309(3): 
               A, a bank, goes out of business,
transferring assets to B, another bank, in consideration of B's
promise to pay A's deposit liabilities.  The applicable statute of
limitations does not bar deposit liabilities of a going bank until
six years after demand.  In an action by C, a depositor of A, it is
no defense to B that C's claim against A is barred by the statute
of limitations.

          Authorities have recognized that a creditor of a limited
partnership seeking enforcement of a limited partner's promise to
make capital contributions is a third-party beneficiary of the
limited partner's promise to the partnership. [Fn. 13] 
International's citation to section 309 of the Restatement (Second)
of Contracts therefore seems apt.  To use the terms of the
Restatement, International, beneficiary, has claims against limited
partners, promisors, who, in turn, might have a valid statute of
limitations defense if the claim were brought by BPF, promisee. 
But "the right of [International] against [the limited partners] is
not subject to [the limited partners'] defenses against [BPF]."
[Fn. 14]
          In addition, International's position is logical.  To the
extent that a limited partner has not made capital contributions,
the limited partner is liable to partnership creditors directly
just as a general partner is.  Since a partnership, at least in its
external relations, is not an entity separate from its general
partners, [Fn. 15] it follows that the time for accrual of a
creditor's claim should be the same whether the claim is asserted
against a partnership or a general partner.  If so, the same result
should obtain when the claim is asserted against a limited partner
who has unpaid capital contributions.
          Practical reasons also suggest that the same period of
limitations should govern claims against limited partnerships and
limited partners.  Otherwise a creditor who has liberally extended
due dates on a partnership debt might find itself without any
effective remedy because the partnership has allowed the limita-

tions period governing its enforcement of limited partners'
contribution obligations to expire.  The result, effectively, would
be a waiver of the partners' contribution obligations without the
notice protection inherent in the requirement of a filed amended
certificate provided in subsection .160(c). [Fn. 16]
     E.   International's Other Points on Appeal
          International argues that the court should have concluded
that BPF assumed the note in 1981 rather than in 1988.  We do not
think that it is necessary to rule on this question, for
International has not established that it is of any consequence in
this case.  Under subsection .160(c) the release from liability of
a limited partner to a creditor is dependent on the time a
certificate of amendment is filed.  No certificate of amendment was
filed in this case prior to January 1988, when the note clearly was
assumed. 
          International's argument concerning the award of
attorney's fees to the appellees need not be considered.  The award
must be reversed since the appellees are no longer the prevailing
parties in view of our decision on the other issues in this case.
     F.   Alternative Grounds for Affirmance - Segelhorst Appellees

          Through 1987 the Segelhorsts made contribution payments
of $61,000 on their two limited partnership units.  In July of 1988
they conveyed their units to BPF using an "Assignment in Lieu of
Default Remedies." In exchange, BPF released them from their
obligation to make future contributions.  The assignment was signed
by Pace as general partner of BPF and "as Attorney-in-Fact for all
Limited Partners." An amended certificate was filed in 1988,
showing that the Segelhorsts were no longer limited partners.
          The Segelhorsts claim that the waiver that they obtained
from BPF discharges them from any liability to International. 
Alternatively, they argue that the modification of the note after
the amended certificate was filed released them from any liability. 
Although these claims were not ruled upon by the superior court,
the Segelhorsts are correct in asserting that this court may affirm
on grounds which were not relied on by the superior court. [Fn. 17]
          1.   The release of the Segelhorsts from the obligation
to make future capital contributions was not binding on
International.

          Subsection .160(c) provides that a waiver of the
liabilities of a limited partner by the partnership does not affect
the right of a creditor to enforce such liabilities if the creditor
"extended credit . . . after the filing and before a cancellation
or amendment of the certificate . . . ." The Segelhorsts contend
that the January 1988 modification of the note was not an extension
of credit by International since no new money was lent.  They also
argue that the 1988 modification was simply an extension of the
time for payment as contemplated under the original terms of the
note.  They argue that a clause in the note prevents the 1988
modification from being considered an extension of credit within
the meaning of subsection .160(c).  The clause provides:  "The
undersigned, whether principal, surety, guarantor, endorser, or
other party hereto, . . . agree that this note or any payment
thereunder may be extended from time to time . . . without in any
way affecting the liability of such parties." (Emphasis added.) 
Finally, the Segelhorsts argue that even if the 1988 modification
were to be considered an extension of credit, the only credit
extended was the amount of the arrearage, not the whole amount of
the note.  The arrearage was eventually paid and "therefore any
extension of credit has been satisfied."
          We believe that the modification agreement of January
1988 was an extension of credit.  While no case law construing the
meaning of the term "extended credit"in the context of ULPA has
been found, the term is commonly understood to encompass agreements
which defer payment or enforcement of an existing debt.  A federal
criminal statute, 18 U.S.C. sec. 891(1), defines "to extend credit"
to
mean "to make or renew any loan, or to enter into any agreement,
tacit or express, whereby the repayment or satisfaction of any debt
or claim, whether acknowledged or disputed, valid or invalid, and
however arising, may or will be deferred." Similarly, a number of
cases construe terms similar to "extended credit"to include
deferral of debt or forbearance from debt collection. [Fn. 18]  We
believe that these authorities reflect a general consensus as to
what constitutes an extension of credit which is applicable to ULPA
1976 and the January 1988 agreement.
          The clause in the note stating that the time for payment
can be extended without "affecting the liability of"makers or
guarantors is intended to negate the possibility that an extension
might release parties from liability. [Fn. 19]  If this clause
actually resulted in the release of otherwise liable parties, as
the Segelhorsts argue, this would be directly opposite to what was
intended.  In our view, the clause cannot reasonably be read as
negating the effect of the term "extended credit"in subsection
.160(c). 
          The Segelhorsts' third argument, that the effect of the
extension of credit terminated when the 1988 arrearages were paid,
also lacks merit.  No authority is cited to support this point. 
Subsection .160(c) requires only an extension of credit.  It does
not suggest that the effect of an extension of credit which takes
the form of forbearance can later be eliminated by partial payments
while the overall debt remains unpaid. 
          2.   Modification of the note after the certificate of
amendment was filed did not discharge the Segelhorsts.

          Here the Segelhorsts argue that they were discharged
because the note was twice modified after the amended certificate
was filed eliminating them as limited partners.  They contend that
"the obligation in place when the Segelhorsts were part of the
limited partnership . . . has been replaced." We reject this
argument as well.
          The "obligation in place"when the Segelhorsts were
limited partners was the 1981 note.  The latter two modifications
to the note made clear that they were merely amendments and did
"not constitute either a new debt or a new deed of trust note."
The note was thus not replaced, and it expressly provided that it
could be amended without releasing parties liable on it. 
IV.  CONCLUSION
          For the above reasons we REVERSE the judgment of the
superior court and REMAND this case for further proceedings
consistent with the views expressed herein.


                            FOOTNOTES


Footnote 1:

     See Voight v. Snowden, 923 P.2d 778 (Alaska 1996).


Footnote 2:

     See Nielson v. Benton, 903 P.2d 1049, 1052 (Alaska 1995).


Footnote 3:

     Guin v. Ha, 591 P.2d 1281, 1284 n.6 (Alaska 1979).


Footnote 4:

     Ch. 128 SLA 1992 sec. 3(a).


Footnote 5:

          Former AS 32.10.160 (repealed 1992) provided:

               (a)  A limited partner is liable to the
partnership
               (1)  for the difference between the
limited partner's contribution as actually made and that stated in
the certificate as having been made, and
               (2)  for any unpaid contribution that the
limited partner agreed in the certificate to make in the future at
the time and on the conditions stated in the certificate.
               (b)  A limited partner holds as trustee
for the partnership
               (1)  specific property stated in the
certificate as contributed by the limited partner, but that was not
contributed or that has been wrongfully returned, and
               (2)  money or other property wrongfully
paid or conveyed to the limited partner on account of the limited
partner's contribution.
               (c)  The liabilities of a limited partner
as set out in this section can be waived or compromised only by the
consent of all members; but a waiver or compromise does not affect
the right of a creditor of a partnership, who extended credit or
whose claim arose after the filing and before a cancellation or
amendment of the certificate, to enforce such liabilities.
               (d)  When a contributor has rightfully
received the return in whole or in part of the capital of the
person's contribution, the contributor is nevertheless liable to
the partnership for a sum, not in excess of such return with
interest, necessary to discharge its liabilities to all creditors
who extended credit or whose claims arose before the return.
     


Footnote 6:

     See AS 32.11.120(a).


Footnote 7:

     See e.g., In Re Sharps Run Assocs., 157 B.R. 766, 772 (D.N.J.
1993); Federal Deposit Ins. Corp. v. Bachman, 894 F.2d 1233, 1237-
38 (10th Cir. 1990);  Nashville City Bank & Trust Co. v. Massey,
540 F. Supp. 566, 579 (M.D. Ga. 1982);  Engleman v. Malchow, 205
P.2d 413 (Cal. App. 1949); Klein v. Weiss, 395 A.2d 126, 139 (Md.
App. 1978); Indiana Mortgage & Realty Investors v. Spira-Mart, 320
N.W.2d 320, 321-22 (Mich. App. 1982).


Footnote 8:

     III Alan R. Bromberg & Larry E. Ribstein, Bromberg & Ribstein
on Partnership sec.sec. 12.08(a), (c), 15.16(b) (1999). 


Footnote 9:

     See cases cited supra note 7.


Footnote 10:

     Harold Gill Reuschlein and William A. Gregory, The Law of
Agency and Partnership 445 n.31 (2d ed. 1990).


Footnote 11:

     See AS 09.10.200 (acknowledgment in writing of continuing
contract starts statute running anew); AS 09.10.210 (part payment
starts statute running anew).


Footnote 12:

     Restatement (Second) of Contracts sec. 309(3): "[Subject to
exceptions] the right of any beneficiary against the promisor is
not subject to the promisor's . . . defenses against the promisee
. . . ."


Footnote 13:

     III Alan R. Bromberg & Larry E. Ribstein, Bromberg & Ribstein
on Partnership sec. 12.08(c) (1999); see also Continental Waste
Sys.,
Inc. v. Zoso Partners, 727 F. Supp. 1143, 1149-50 (N.D. Ill. 1989);
Builders Steel Co. v. Hycore, Inc., 877 P.2d 1168 (Okla. App.
1994).


Footnote 14:

     Restatement (Second) of Contracts sec. 309(3).


Footnote 15:

     Williams v. Mammoth of Alaska, Inc., 890 P.2d 581, 584 (Alaska
1995).


Footnote 16:

     See infra Parts III.E and III.F.1.


Footnote 17:

     See O'Callaghan v. State, 920 P.2d 1387, 1390 n.1 (Alaska
1996); Ransom v. Haner, 362 P.2d 282, 285 (Alaska 1961).


Footnote 18:

     See In re Duncan, 123 B.R. 383 (C.D. Cal. 1991) ("extension of
credit"includes "renewal"of debt); Nordic Bank PLC v. Trend
Group, Ltd., 619 F. Supp. 542 (S.D.N.Y. 1985) (forbearance is an
extension of credit under 12 U.S.C. sec. 1972(1)); see also 15
U.S.C.
sec. 1601(a) (governing practices of "firms engaged in the
extension
of consumer credit"); 15 U.S.C. sec. 1602(e) (defining "credit"as
including "the right granted by a creditor to a debtor to defer
payment of debt"). 


Footnote 19:

     See State v. McKinnon, 667 P.2d 1239, 1243-44 (Alaska 1983)
(discussing the common law rule that a surety is discharged from
liability if time of payment is extended without the surety's
consent).