Appeals from the Superior Court of the District of Columbia; (Hon. Harriett R. Taylor, Trial Judge), (Hon. William C. Gardner, Motions Judge), (Hon. Stephen F. Eilperin, Motions Judge)
Before Steadman, Farrell, and Wagner, Associate Judges.
The opinion of the court was delivered by: Wagner
WAGNER, Associate Judge: Appellants, Joan Bingham and PFP, Inc. (PFP) appeal from a judgment against them, jointly and severally, in favor of appellee, Goldberg. Marchesano. Kohlman. Inc. *fn1 (GMK) for $74,195.48, as damages for breach of contract following a non-jury trial. The dispute arose out of GMK's unsuccessful efforts to collect from appellants sums claimed under a contract with PFP for advertising and marketing services rendered by GMK associated with launching The Washington Weekly (WW), a newspaper originated by appellants and others. The trial court found that Washington Weekly Limited (WWL), a limited partnership, assumed the assets and liabilities of PFP and held that appellant Bingham, who was officially a limited partner in WWL, should be treated as a general partner pursuant to D.C. Code § 41-207 (1981) because she exercised control over partnership activities.
Appellants argue that the trial court erred first in imputing PFP's liabilities under the contract to the partnership, and secondly, in holding Bingham personally liable when, they contend, she was acting solely as agent for the general corporate partner of WWL and because there was no evidence that GMK relied on Bingham's involvement as a partner in WWL, which did not even exist at the time the parties entered the contract. Alternatively, Bingham argues that, assuming liability could be imputed to the partnership and that she became a general partner as of June 18, 1984, she can not be held personally liable for debts which accrued prior to that date. Appellants also challenge the trial court's pretrial imposition of sanctions against them. In its cross-appeal, GMK argues that the trial court erred in: (1) denying its claim for judgment for services rendered after June 30, 1984; (2) precluding it from asserting quantum meruit as an alternate theory of liability for services rendered after June 1984; (3) denying the full amount of attorney's fees and costs GMK requested for sanctions; and (4) denying its motion for additional sanctions. We reject the arguments made in the cross-appeal. With respect to the direct appeal, we hold that the trial court erred in imputing PFP's liabilities to the partnership and then to Bingham personally. Therefore, the judgment against Bingham is vacated in all respects. Otherwise, the judgment and orders appealed from are affirmed. *fn2
A. Formation of the Corporation and Limited Partnership
We recount in some detail the facts because they are essential to an understanding of the issues raised and the Disposition reached. In June 1983, Jeffrey Stein, a journalist, interested appellant, Joan Bingham, in starting a weekly Washington newspaper, and they developed a prospectus to present to other potential investors. *fn3 Subsequently, Bingham, Mortimer Zuckerman, and Anne Peretz invested $50,000 in seed money to explore the feasibility of publishing the paper. *fn4 They enlisted the support of other investors and formed PFP, Inc., a corporation, to carry out the idea.
At an organizational meeting in September 1983, Bingham, Zuckerman, and Martin Peretz were named interim directors. James Glassman, who became acting publisher of the newspaper during the pre-publication phase, was named secretary. Bingham was voted PFP's president, and Glassman was voted to serve as its vice president, treasurer and secretary. The corporation authorized the acceptance of an offer of purchase of the following number of shares of stock at a par value of $1.00 each by the following individuals: Bingham, 17,500; Anne Peretz, 13,750; and Zuckerman, 18,750. In December 1983, the shareholders authorized an increase in PFP's shares in order to fund the next phase of the project, which included development of an organization to produce the paper and to undertake a subscription drive. Bingham purchased $427,500 in shares; Anne Peretz, $125,500; Peretz Family Investments, $100,000; Zuckerman, $100,000; *fn5 and Martin Peretz, $7,000.
In April 1984, PFP signed a lease for rental of office space for the operation at 2028 P Street, N.W. in Washington, D.C. Stein, Bingham, Glassman, and James Rice, who was hired as associate publisher and general manager of the paper in early 1984, signed the lease "corporately and personally." Bingham became publisher and moved into the new offices around the time the first issue of WW was published in June 1984.
James Glassman testified that the limited partnership, WWL, was formed to raise additional capital for the project. The partnership agreement was entered in the District of Columbia on March 1, 1984. Initially, PFP was listed as the general partner, and Susan Greenberg was listed as the sole limited partner. Appellant Bingham signed the certificate and agreement of limited partnership as president of PFP, the corporate general partner. *fn6 On June 18, 1984, the partnership agreement was amended, and several new limited partners were added. *fn7 Appellant Bingham was listed in an annex to the agreement as the general partner whose total capital commitment was $1,022,727, with an initial capital contribution of $200,000. However, Bingham signed the amended filing as president of the general partner, PFP, and the body of the amended agreement specifies that PFP, Inc., a District of Columbia corporation, is the only general partner. *fn8 The agreement was amended a second time on June 21, 1984 to add another limited partner, but the apparent error in the previous annex listing Bingham as a general partner was not corrected.
The amended agreement of June 18th provides for PFP to exercise the "power and authority to do or cause to be done any and all acts deemed by the general partner to he necessary" for the management and control of the affairs of the partnership. *fn9 The partnership agreement precludes limited partners from participating in the management of the partnership and from representing, signing, or binding the general partner or the partnership.
The amended agreement also provided for the general partner to make its capital contribution of $1,022,727, as set forth in the annex to the agreement, in the following way: (1) the newspaper properties, upon formation; *fn10 (2) from March 1, 1984, the partnership's formation date, through June 18, 1984, the effective date of the amended partnership agreement, the amount of cash necessary to maintain partnership operations; (3) from the effective date, amounts up to $300,000 as necessary to maintain the partnership's operations until October 1, 1984; and (4) additional cash "as necessary to meet the General Partner's Capital commitment" and to maintain its interest in the partnership at 45% as limited partners made capital contributions. The partnership was to pay "all salaries and associated costs of employees and all other goods or services reasonably required in the management and publication of The Washington Weekly." Under the partnership agreement, all of the partnership's assets were to be applied to payment of such expenses before recourse could be had to the general partner, PFP.
James Glassman, the acting publisher through the pre-publication phase, testified at trial that PFP did not transfer any of its liabilities to the limited partnership for business and tax reasons. *fn11 He also testified that PFP retained $78,872.74 in cash when it transferred the newspaper properties to the partnership. Glassman said he believed that PFP paid some bills generated by the project even after the partnership's formation and that the partnership may also have paid some bills. He explained that some of the funds raised from PFP shares, which were sold to Bingham, Zuckerman, and the Peretzes in and after December 1983, were invested into the partnership as the corporate general partner's additional capital contributions.
Glassman also testified that as acting publisher in the start-up phase of the paper, he was the principal decision-maker, subject to the control of PFP's Board of Directors. He stated that Joan Bingham was the most active of the three principal investors and that she also had decision-making authority. However, Glassman said that in the event he had a disagreement with Bingham, the issue had to be resolved by PFP's Board, which could overrule Bingham. According to Glassman, Bingham's interest was principally on the editorial side during the start-up phase, and she would not spend any money without asking him first because of her limited business experience.
Jeffrey Stein, WW's editor, left WW in October 1984 because of disagreements over editorial policies. *fn12 He testified that there were three principal owners of the paper, Bingham, Martin Peretz, and Zuckerman, all of whom had strong views on its editorial content. He said that decision-making at WW, including hiring, firing, and leasing decisions, was a collaborative process, but that Glassman was the principal operations officer. According to Stein, he suggested to Bingham that she take responsibility for the book review section of the newspaper. Bingham also made out checks, according to Stein, and there was evidence that James Rice also signed some checks for WWL. Kristine Kohiman, GMK's media director and executive vice president, described James Glassman as the head or point-man at the newspaper. *fn13 She testified that Glassman told her that Bingham had to sign-off on the creative materials developed by GMK.
In late 1983, prior to the formation of the limited partnership, but after PFP's incorporation, James Glassman held preliminary Discussions with GMK's chairman, Norman Goldberg, about hiring GMK to assist with advertising and marketing the newspaper. According to Goldberg, Glassman told him that a group of investors, including Bingham, Zuckerman, and Peretz, were backing The Washington Weekly. Goldberg said he believed Glassman mentioned having some interest in it also. *fn14 Goldberg testified that "I thought it was a partnership of people. It was a group of investors in the way said it." Subsequently, Goldberg testified that Glassman never described the relationship as a partnership; however, he was confronted with an affidavit in which he averred, "Mr. Glassman referred to the group's organization as a partnership on more than one occasion, and we believe that to be the case." Goldberg then said that Glassman referred to the group as a partnership, explaining that he viewed a group of investors and a partnership to be synonymous.
Goldberg testified that he heard the name "PFP" around December 1983, although be did not know the exact legal nature of the entity. He said he never heard of the partnership's name, WWL, until after GMK filed suit. Goldberg said that he relied on Glassman during the contract negotiations. He also testified that he met Bingham for the first time after GMK was hired. *fn15 He admitted that Bingham never represented herself to be a partner of Glassman, Martin Peretz, and Zuckerman.
After several meetings, GMK sent Glassman a written document signed by Carole Marchesano, President of GMK, covering its proposed advertising and marketing services for the six months from January 1, 1984 through June 30, 1984. After a couple of weeks, Kristine Kohlman, GMK's executive vice president and media director, called Glassman to inquire about the status of the proposal, and Glassman explained that he would return it with an addendum. Glassman and Marchesano subsequently signed the addendum which essentially placed the contract on a month-to-month basis rather than on a six-month term as proposed originally. *fn16 Glassman wrote to GMK on January 20, 1984 stating that he could not "sign anything that commits PFP long-term" ...