(1) Where a partnership contract is rescinded on the ground of fraud or misrepresentation of one of the parties, the party entitled to rescind is, without prejudice to any other right, entitled:
(a) To a lien on or right of retention of the surplus of the partnership property after satisfying the partnership liabilities to third persons for any sum of money paid by such party for the purchase of an interest in the partnership and for any capital or advances contributed by such party; and
(b) To stand, after all liabilities to third persons have been satisfied, in the place of the creditors of the partnership for any payments made by such party in respect of the partnership liabilities, subject to the limitations in section 7-60-115, if the partnership was a limited liability partnership at the time of its dissolution; and
(c) To be indemnified by the person guilty of the fraud or making the representation against all debts and liabilities of the partnership.
Source: L. 31: p. 669, § 39. CSA: C. 123, § 39. CRS 53: § 104-1-39. C.R.S. 1963: § 104-1-39. L. 95: (1)(b) amended, p. 780, § 8, effective May 24. L. 2004: (1)(a) and (1)(b) amended, p. 1430, § 94, effective July 1.
ANNOTATION
This section means that even though the partnership contract is procured by the fraud of one of the partners nevertheless the partnership entity is created, and until it is dissolved, the defrauded partner is liable for debts of the partnership to third persons incurred during the life of the partnership. Van Andel v. Smith, 248 F.2d 915 (10th Cir. 1957).
And the phrase "without prejudice to any other right" does not permit the defrauded partner to plead the fraud as a bar to liability to creditors, for, if that were true, paragraphs (a), (b), and (c) of subsection (1) would be meaningless. Van Andel v. Smith, 248 F.2d 915 (10th Cir. 1957).
This section does not authorize the imposition of a lien on partnership property at the request of a limited partner. Central Allied Profit Sharing v. Bailey, 759 P.2d 849 (Colo. App. 1988).