Baird Ward Printing Co., Inc. v. Great Recipes Pub. Associates
| Decision Date | 14 April 1987 |
| Docket Number | No. 85-6033,85-6033 |
| Citation | 811 F.2d 305 |
| Parties | BAIRD WARD PRINTING COMPANY, INC., Plaintiff-Appellant, v. GREAT RECIPES PUBLISHING ASSOCIATES, and Jerang, Inc., Defendants, Jerome Shapiro, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Steven A. Riley, argued, Delta Anne Davis, Bass, Berry & Sims, Nashville, Tenn., for plaintiff-appellant.
W. Harold Bigham, Nashville, Tenn., Barbara J. Moss, argued, for defendant-appellee.
Before: MARTIN, GUY and NORRIS, Circuit Judges.
Plaintiff, Baird Ward Printing Company, Inc., appeals from the district court's holding that Jerome Shapiro is not personally obligated to pay the sums called for by the printing contracts which it seeks to enforce. Plaintiff brought a breach of contract action against Shapiro, Jerang, Inc., and a New Jersey limited partnership, Great Recipes Publishing Associates. The limited partnership and Jerang, Inc. subsequently filed for reorganization pursuant to Chapter 11 and the litigation is stayed as to them.
In order to publish a monthly recipe magazine, Shapiro, as general partner, along with twenty-five limited partners, formed the limited partnership, Great Recipes Publishing Associates. The partnership agreement provided the general partner with "exclusive power and authority" to manage the business of the partnership, and included a provision authorizing Shapiro to act as the attorney-in-fact for the limited partners in a number of areas, without their consent. The agreement also provided that Shapiro could not assign his interest unless his successor as general partner assumed his partnership obligations, maintained adequate net worth, and caused itself "to be substituted properly" for Shapiro.
Acting as general partner, Shapiro negotiated a June 28, 1982 contract with plaintiff to publish the October, 1982 edition of the magazine. Plaintiff was represented in the negotiations by Louis Berizzi, a salesman employed by Arcata Graphics, plaintiff's parent corporation. The October edition was printed and mailed at a cost of $166,652.82 to the partnership.
Concerned about his exposure to personal liability as general partner, Shapiro, on June 29, 1982, incorporated Jerang, Inc., a New Jersey corporation. Shapiro was the president and sole shareholder of Jerang. Initially capitalized with $53,000, Jerang's capitalization eventually was increased to in excess of $250,000.
An amendment to the limited partnership agreement dated July 2, 1982, substituted Jerang, Inc. for Shapiro as general partner. Shapiro signed the amended agreement as president of Jerang, as general partner, and as attorney-in-fact for each of the limited partners. He did not obtain written consent of the limited partners to execute the amended agreement.
Shapiro again negotiated with Berizzi for the printing of the November and December editions. Although he testified that he told Berizzi that he was entering this contract on behalf of Jerang, Inc., the substituted general partner of the limited partnership, Berizzi denied that he was told this. That contract and all subsequent contracts for the remaining printed issues were signed by Shapiro as president of Jerang, Inc., general partner. Shapiro also testified that he told Nat Oberman, assistant credit officer at Arcata, that he was signing as president of Jerang. Oberman in turn told Art Atkinson, the credit officer, about that discussion.
Following the printing of the November and December issues of the magazine, the limited partnership had accumulated a debt of approximately $700,000. Plaintiff initiated a meeting to discuss the debt and it was decided that payment would be possible only if the partnership continued to publish the magazine and expand its circulation. It was also decided that future payments would be credited to the oldest invoices first. 1 As further issues were printed, the partnership made payments, but the total debt continued to hover near $700,000. Because the payments from the partnership were sufficient to cover the cost of the October edition, the district court held that Shapiro's obligation on the contract for that edition had been satisfied.
At trial plaintiff contended that Shapiro was personally liable for the full amount of the debt owed by the partnership. Four theories were offered to support this contention: first, that the amended partnership agreement and substitution of general partner were ineffective because Shapiro did not properly withdraw and because Jerang, Inc. was not properly substituted; second, that Shapiro should be estopped from denying that he was liable for the debt of the partnership because he continued to represent himself as the general partner since he had not given notice of the substitution to Baird Ward; third, that Jerang, Inc.'s corporate veil should be pierced; and finally, that Shapiro was guilty of fraud. The parties agreed that under Tennessee's choice of law rules, New Jersey law controls the first three arguments, while Tennessee law is to be applied to the fraud argument.
The district court, sitting without a jury, found that plaintiff was on notice of the substitution of Jerang, Inc. for Shapiro as general partner of the limited partnership prior to contracting for the November and December, 1982 issues. As a consequence, the court ruled that the estoppel and fraud arguments failed for lack of an essential element, and that there was insufficient basis to pierce the corporate veil of Jerang, Inc. Finally, the trial court concluded that, by granting Shapiro their power of attorney, the limited partners had authorized him to amend the agreement, and had, in effect, given their written consent to the substitution.
Plaintiff renews its four-pronged argument, in this appeal.
Initially, we address the fraud and estoppel arguments as they turn on whether the district court erred in its factual finding that Baird Ward was sufficiently on notice of the general partner substitution prior to the contract for printing the November and December, 1982 issues. The appropriate standard for our review of such a finding is contained in Fed.R.Civ.P. 52(a), which provides: "Findings of fact ... shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses."
It appears that several events led the district court to find that plaintiff was on notice of the substitution. First, the court concluded that Berizzi, despite his denial, was advised by Shapiro that Jerang, Inc. was the substituted general partner of the partnership. This conclusion is buttressed by Shapiro having signed as president of Jerang when entering the contract for the November and ...
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Brook Valley Ltd. P'ship v. Mut. of Omaha Bank
...on cases where nonpartners unsuccessfully challenged partnership agreement compliance. For example, in Baird Ward Printing v. Great Recipes Pub. Assoc., 811 F.2d 305 (6th Cir. 1987), the U.S. Court of Appeals for the Sixth Circuit determined that a creditor of a limited partnership did not ......