MURPHY, C.J., delivered the opinion of the Court.
This case involves an ill-fated business venture in Ocean City, Maryland, known as the Seventy-Sixth Street Limited Partnership (the Limited Partnership), which the parties
The Uniform Act provides for the formation of a limited partnership, consisting of one or more general partners and one or more limited partners, the latter not being bound by the obligations of the partnership. § 10-101. Persons desiring to form a limited partnership under the Act's provisions must, as a statutory prerequisite to formation, execute a certificate of limited partnership and record it with the clerk of the appropriate circuit court; the certificate must set forth a number of details of the partnership, including the identity of the partners, and the capital contributions to be made by each limited partner. § 10-102. Section 10-115 of the Act governs the withdrawal of the capital contributions made by limited partners; it generally provides that such contributions may not be returned until the liabilities of the partnership have been satisfied. Section 10-116 provides that a limited partner's liability, as set forth in the certificate of partnership, cannot be waived or compromised to adversely affect the right of a creditor of the partnership who extended credit to it after the certificate was filed, and before it was canceled or amended, to enforce his claims against the partnership.
The Limited Partnership evolved from these facts: John Fulton, an Ocean City real estate broker, and Victoria Rinaldi, his associate, devised a plan to commercially develop a tract of bayfront land located in Ocean City, which was then owned by the Seventy-Sixth Street Joint Venture (the Joint Venture). On October 10, 1972, Fulton and Rinaldi contracted to purchase the property from the Joint Venture for $450,000. The contract was signed by Fulton and Rinaldi as general partners of the Seventy-Sixth Street Limited Partnership, although no such partnership was then in existence. Under
To raise the money needed to purchase the property, Fulton and Rinaldi decided to create a limited partnership pursuant to which they would act as general partners, and sell 25 limited partnership units for $9,000 each, thereby generating $225,000. Of this amount, $185,000 would be used to pay the cash obligation under the contract. The balance would service the mortgages during the first year and pay settlement and other costs.
Lloyd Whitehead, of the law firm of Perdue, Owrutsky & Whitehead, was employed by Fulton to prepare the legal papers and documents necessary to effectuate the plan. In late January or early February of 1973, Whitehead drafted an instruction letter, a subscription agreement, a limited partnership agreement and a certificate of limited partnership, all to be used in the solicitation of prospective limited partners.
As originally drafted by Whitehead, the partnership agreement and the partnership certificate required that each limited partner make an initial capital contribution of $9,000 for each partnership unit purchased; it also called for a future contribution of $15,298 per unit, representing the per unit share of the mortgage debt to be created on the property to be acquired from the Joint Venture. This future contribution was to be paid in accordance with a mortgage payment schedule which was attached to the partnership agreement and listed the annual per unit payment, based on 25 contributing shares, for the years 1973 through 1981. The agreement specified that the dates on which these payments were due would be provided to the limited partners by the general partners or the escrow agent, Perdue, Owrutsky & Whitehead, not later than 90 days before the first such payment was required.
The proposed partnership agreement acknowledged that
Under the proposed partnership agreement, the general partners were authorized to take title to the Joint Venture property and to execute any documents on behalf of the partnership which related thereto, whether before or after the filing of the partnership certificate, as to which the limited partners "hereby ratify and confirm any such action by the General Partners." The agreement also provided that the limited partners consented to any mortgage by the general partners of the partnership's assets "on such terms and conditions as may be determined by the General Partners, and to any contract, agreement ... or arrangement with ... [others] as the General Partners may deem necessary to accomplish the purposes of this Partnership...." The general partners were empowered, in their absolute discretion, "to borrow money and as security therefor to mortgage or subject to other security device any part of the property of the Partnership; to ... refinance, recast, increase, modify ... or extend any such property ... upon such terms as they deem proper ... [and] to execute, acknowledge and deliver any and all instruments to effectuate the foregoing." The agreement designated the general partners as attorney and agent for the limited partners to execute and record on their behalf "all certificates or other instruments ... which the General Partner deems appropriate to qualify or continue the Partnership as a Limited Partnership ... [and] all instruments which the General Partner deems appropriate to effect a change or modification of the Partnership in accordance with the terms of this Agreement...."
The proposed partnership agreement and certificate set forth the names and addresses of Fulton and Rinaldi as
The instruction letter which Whitehead had prepared for the information of prospective limited partners set forth the steps to be taken by persons interested in investing in the venture. The letter directed prospective subscribers to execute the subscription agreement; that agreement specified that the subscriber had received and read the limited partnership agreement and the limited partnership certificate prior to executing the subscription agreement. The instruction letter directed prospective limited partners to sign "instruments of execution," which were therewith provided, these being separate documents to be separately appended to the partnership agreement and certificate; they disclosed the identity of the limited partners, and recited their acceptance and adoption of all the provisions contained in the partnership agreement and certificate. Finally, the instruction letter directed subscribers to send all the subscription documents to the Limited Partnership, together with a check in the amount of the initial capital contribution.
It was provided in the subscription agreement that at the time the Limited Partnership settled on the Joint Venture property, Fulton and Rinaldi, individually, would enter into a contract with the Limited Partnership to repurchase the property within one year thereafter, paying an amount therefor which would yield to the limited partners net proceeds of $100,000 in excess of their initial capital contribution. Thus, the subscription agreement led each subscriber to expect within a year a substantial return on his original $9,000 investment without ever being called upon to make any part of the additional $15,298 contribution specified in the partnership agreement and certificate.
Of the maximum 25 limited partnership units for sale, only 7 units were sold, including the 3 1/2 units purchased by the appellees in this case. The initial capital contribution of $9,000 for each subscribed partnership unit was duly paid to the Limited Partnership.
The appellee Weiss had been solicited by a real estate salesman employed by Fulton. He purchased a full share and signed the "instruments of execution" on February 7, 1973. He saw a copy of the partnership agreement and certificate and expected that the "instruments of execution" which he signed would be attached to these documents.
The appellee Anthony had been told of the opportunity to invest in the Limited Partnership by John Nason, one of Whitehead's law partners. He subscribed to one partnership unit in his own name and a second unit as a tenant in common with the appellee Christ. Anthony signed the "instruments of execution" for the share which he individually purchased on March 12, 1973. As to the unit owned in common with Christ, both men signed the documents on March 15, 1973.
Because the Limited Partnership sold only 7 partnership units, Fulton and Rinaldi were unable to raise the money necessary to settle for the Joint Venture property on March 15, 1973, as previously agreed. Fulton obtained an extension of the settlement date by one week to March 22, 1973. In the interim, he arranged, on behalf of the Limited Partnership, a two-year, $309,000 loan, from Commercial Credit Development Corporation (Commercial Credit). The loan was to be secured by a first mortgage on the land, with interest to float 5% over the prime interest rate. The Joint Venture agreed to accept a second mortgage on the property for $141,000.
The loan from Commercial Credit substantially increased the mortgage debt of the Limited Partnership over that projected in the original partnership agreement and certificate, necessitating the making of changes in these documents to reflect the increased liability to the limited partners. Fulton told Whitehead to make the necessary
The original partnership agreement and partnership certificate, which called for an additional contribution of $15,298, were revised by Whitehead on March 21 or 22, 1973. The revised documents reflected that each limited partnership unit was liable, over and above the $9,000 per unit initial capital contribution, for 4% of the total mortgage debt — an amount substantially greater than the $15,298 specified in the original documents. The schedule of mortgage payments which had been appended to the original partnership agreement, and which was structured to service the mortgage debt incurred under the original plan for financing the acquisition of the Joint Venture property, was removed from the revised document. The "instruments of execution" previously signed by each of the subscribing limited partners, which were to be appended to the original partnership documents, were attached to the revised partnership agreement and certificate. Based on these revised documents, Fulton and Rinaldi went to settlement on March 22, 1973.
Whitehead was present at the settlement with Fulton and Rinaldi; Commercial Credit and the Joint Venture were each represented by counsel. Fulton and Rinaldi signed the partnership agreement and certificate at settlement. According to Whitehead, neither counsel for Commercial Credit nor the Joint Venture examined the partnership documents; he acknowledged, however, that "it was necessary to have the Certificate at the time of settlement," which included the instruments of execution signed by the limited partners. Counsel for the Joint Venture was uncertain whether he inspected the partnership documents; he said that it was "likely" that he checked the papers and knew that the general and limited partners "were good." He said that as security for the second mortgage, he relied "on the fact that there were certain signers on the Limited Partnership." Whitehead did not tell counsel for Commercial Credit or the Joint Venture that the original partnership documents had been revised. The Limited Partnership executed the required
Shortly after the settlement was concluded, Whitehead learned that the limited partners had not been notified by Fulton of the changes made to the partnership documents. He therefore prepared a document entitled "Notice to Limited Partners of Right to Rescind Limited Partnership Subscription of Seventy-Sixth Street Limited Partnership and of Right to Receive Refund of Limited Partnership Capital." The document related that the partnership agreement and certificate had been revised. It outlined the details of the newly substituted method of financing the purchase of the property. It stated that the property had a total indebtedness against it of $450,000, and that this resulted in an increase of each limited partner's potential risk from $15,298 to $22,425 (the latter figure being based on certain assumptions regarding the prime interest rate). The document was sent to each limited partner, and required an election to rescind or not to rescind his subscription.
Anthony elected not to rescind the share which he individually owned. Anthony and Christ elected to rescind the share held in common and they received a return of their $9,000 initial capital contribution. Hammond elected to rescind as to his one-half share and $4,500 was returned to him. Weiss never received the document and therefore made no election.
Neither the partnership agreement nor the certificate was amended to reflect these changes in the capital structure of the Limited Partnership and none of its creditors was notified.
Fulton and Rinaldi did not perform their contract to purchase the property from the Limited Partnership, and after approximately one year it defaulted on the mortgages. Commercial Credit foreclosed its first mortgage and obtained
Gerald Klein was subsequently appointed as receiver for the Limited Partnership and vested with authority to take possession of partnership property, collect its debts, and recover all capital contributions receivable from the limited partners. Commercial Credit and the Joint Venture filed their claims with the receiver. The receiver sued the limited partners on behalf of the creditors for 4% of the mortgage debt for each unit owned, and for recovery of the initial capital contributions which had been returned to appellees Hammond, Anthony and Christ. The cause of action was based upon the revised partnership documents, which were appended as exhibits to the declaration. The receiver claimed that Weiss was liable for $23,428, representing a 4% share of the mortgage debt; that Anthony was liable, as to his separate unit, for the same amount; that Christ and Anthony, as to their joint unit, were liable for $23,428, plus $9,000 representing the initial capital contribution refunded to them; and that Hammond was liable for $23,428, less $3,500 received from his cotenant who settled with the receiver, plus $4,500 in the returned initial capital contribution.
At the trial before the Circuit Court for Worcester County, the appellees adduced evidence through Whitehead of the alteration of the original partnership agreement and certificate and of the substitution and use of the revised partnership documents in their place. The receiver subsequently moved to exclude this evidence on the ground that the appellees had not, in answering his interrogatories and requests for admissions of fact, revealed the existence of the original partnership documents — a fact of which the receiver had no prior knowledge. The trial court (Everngam, J.) overruled the motion, and after considering all the evidence received at the trial, held that the limited partners were not liable to the receiver for any of the amounts claimed. The court said that the appellees agreed to become limited
The receiver appealed from the trial court's judgment exonerating the limited partners of all liability for any of the amounts claimed. We granted certiorari prior to decision by the Court of Special Appeals to consider the important issues raised by the appeal.
The receiver presents these principal questions:
(A)
Limited partnerships were unknown at common law; they are exclusively a creature of statute, their main purpose being to permit a form of business enterprise, other than a corporation, in which persons could invest money without becoming liable as general partners for all debts of the
The first limited partnership statute in the United States was enacted by New York in 1822; Maryland adopted a similar statute by ch. 97 of the Acts of 1836. These early statutes required the recording of a partnership certificate giving notice to the public of the exact terms of the partnership, including the amount of the capital contributions of the limited partners, so that the public could deal with the partnership "advisedly." Lineweaver v. Slagle, 64 Md. 465, 2 A. 693 (1886). The fundamental difference between the liability of general and limited partners under these statutes was "that the former are responsible in solido for the debts and obligations of the firm, as in the case of ordinary partnerships, without regard to the amounts contributed by them to the social capital; whilst the latter is not personally liable if the statute has been complied with, because his cash contribution is substituted for a personal liability." Safe Deposit Co. v. Cahn, 102 Md. 530, 546, 62 A. 819 (1906). Strict compliance with all statutory provisions was deemed essential to create a limited partnership under these early statutes, since they were in derogation of the common law. As a consequence, even minor or trivial infractions of the statute were held by some courts to subject the limited partners to unlimited liability as general partners. Rowley, supra, at § 53.0; A. Bromberg, Crane and Bromberg on Partnership §§ 26, 32 (1968). Because the strict construction of these statutes inhibited the effective accomplishment of the purpose for which they were intended, the National Conference of Commissioners on Uniform State Laws proposed the adoption in 1916 of a Uniform Limited Partnership Act. Maryland enacted the Uniform Act by ch. 280 of the Acts of 1918, and the statute with minor
Decisions interpreting the Uniform Act recognize that a limited partnership consists of general partners who conduct the business and who have unlimited liability to creditors for its obligations, and of limited partners who have no right to participate in the management of the business, and whose liability is limited to the amount of their capital contribution. See, e.g., McCully v. Radack, 27 Md.App. 350, 340 A.2d 374 (1975); Garbo v. Hilleary Franchise Systems, Inc., 479 S.W.2d 491 (Mo. App. 1972); Freedman v. Tax Review Bd. of City of Philadelphia, 212 Pa.Super. 442, 243 A.2d 130 (1968); Riviera Congress Associates v. Yassky, 268 N.Y.S.2d 854, 25 A.D.2d 291, aff'd, 18 N.Y.2d 540, 277 N.Y.S.2d 386, 223 N.E.2d 876 (1966); Hoefer v. Hall, 75 N.M. 751, 411 P.2d 230 (1965); Vulcan Furniture Manufacturing Corp. v. Vaughn, 168 So.2d 760 (Fla. App. 1964); Ruzicka v. Rager, 305 N.Y. 191, 111 N.E.2d 878 (1953); Lanier v. Bowdoin, 282 N.Y. 32, 24 N.E.2d 732 (1939). As the Official Comment to § 1 of the Uniform Act makes clear, a limited partner, though so called by custom, is not "in any sense" either a partner or a principal in the business or transactions of the partnership; his liability, except for known false statements in the certificate of partnership, is to the partnership, and not to its creditors. See 6 Uniform Laws Annotated, Uniform Limited Partnership Act § 1 (Master ed. 1969). Succinctly put, a limited partnership interest in a business is in the nature of an investment. In re Panitz & Co., 270 F.Supp. 448 (D.Md. 1967), aff'd sub nom. Hammerman v. Arlington Fed. Sav. & Loan Ass'n, 385 F.2d 835 (4th Cir.1967). Section 10-116 (a) of the Uniform Act delineates the extent of the limited partner's investment in the business; it makes him liable to the partnership:
The creation of a limited partnership is not a mere private, informal, voluntary agreement as in the case of a general partnership, but is a public and formal proceeding which must follow the statutory requirements of the Uniform Act. 2 J. Barrett and E. Seago, Partners and Partnerships, Law and Taxation, ch. 13, § 2.1 (1956); 2 Z. Cavitch, Business Organizations § 39.01 (3) (1977); Crane and Bromberg on Partnership § 26. The Act prescribes, § 10-102 (b) of the Corporations Article, that a limited partnership is formed "if there has been substantial compliance in good faith" with the requirements contained in § 10-102 (a). That subsection mandates that a certificate of partnership be signed by the parties, acknowledged, and recorded with the clerk of the court. It requires that the certificate set forth 14 designated partnership details, including the name of the partnership, the character and location of the business, the identity of the general and limited partners, the term of the partnership, the cash contributions made by the limited partners, and such additional contributions, if any, which the limited partners have agreed to make in the future. The certificate is a statutory prerequisite to creation of a limited partnership and until it is filed, the partnership is not formed as a limited partnership. The principal function of the certificate is to give third persons notice of the essential features of the limited partnership. Of course, whether a limited partnership has been formed is of particular importance in determining whether a person has achieved the status of a limited partner with the attendant limitation of his liability to third persons dealing with the partnership. See Hoefer v. Hall, 75 N.M. 751, 411 P.2d 230 (1965); Holvey v. Stewart, 265 Or. 242, 509 P.2d 17 (1973); Frigidaire Sales Corp. v. Union Properties, Inc., 88 Wn.2d 400, 562 P.2d 244 (1977); Brown v. Brown, 15 Ariz.App. 333, 488 P.2d 689 (1971); Rowley, supra, § 53.2; Business Organizations, supra, at § 39.05.
(1)
The receiver contends that the trial court abused its discretion in admitting evidence of the alteration of the partnership agreement and certificate when the fact of such alteration had been withheld by the appellees in their responses to pretrial interrogatories and requests for admissions of fact. He claims that the failure of the appellees to reveal this information was highly prejudicial and compromised his ability to counter what became the appellees' principal defense — that the partnership agreement and certificate attached to the receiver's declaration as an exhibit were not the original documents upon which they agreed to be bound.
The receiver's discovery efforts were well calculated to flush out the existence of all pertinent documents pertaining to the obligations of the limited partners. It is equally clear that the appellees' pretrial responses to the receiver's attempted discovery efforts did not provide the requisite information. While the appellees' explanation for their failure to disclose the information until trial is tenuous at best — being based essentially on a claim of ignorance of its existence — we nevertheless conclude that the trial judge did not, in the circumstances of this case, abuse his discretion in admitting the contested evidence.
Whitehead testified for the appellees that he prepared a first draft of the agreement and certificate in January or February of 1973, and a second draft on March 21 or 22, 1973. He was asked to explain the structural basis of the limited partnership as reflected in these documents. The receiver objected on the specific ground that the limited partnership certificate was a plain, unambiguous and integrated document, and that any explanation which varied the terms of the recorded certificate was irrelevant and inadmissible; the objection was overruled. Whitehead explained that under the first draft the future contribution of each limited partner was $15,298, but that a subsequent modification of the method of financing necessitated changes in the additional
It was not until the next day that the receiver made a motion to strike the original partnership documents and Whitehead's testimony concerning them that the discovery issue was first raised. At that time, the receiver contended that this evidence should not be admitted because the appellees had not revealed the existence of the original set of documents.
Since all of the receiver's objections were specifically based on relevancy grounds, he is thereby limited in his claim of error on appeal and ordinarily is deemed to have waived other grounds not mentioned. von Lusch v. State, 279 Md. 255, 368 A.2d 468 (1977). Maryland Rule 522 d 2. The receiver's objection on the ground that the appellees did not make adequate disclosures during the discovery process should have been made at the time the evidence was offered, and not in a subsequent motion to strike. It appears that the trial judge, in denying the receiver's motion, concluded that it had not been timely entered.
One of the fundamental and principal objectives of the discovery rules is to require disclosure of facts by a party litigant to all of his adversaries, and thereby to eliminate, as far as possible, the necessity of any party to litigation going to trial in a confused or muddled state of mind, concerning the facts that give rise to the litigation. Balto. Transit v. Mezzanotti, 227 Md. 8, 174 A.2d 768 (1961). Of course, interrogatories are continuing in nature and there is ordinarily an obligation continuing to the time of trial to communicate any new information in the possession of the party examined; indeed, to permit a party to sit idly by, knowing that a previous answer he has given to an interrogatory is not truthful in the light of his present
(2)
The receiver contends that the lower court erred in concluding that a condition precedent to any obligation on the part of the appellees to pay their capital contributions under the partnership documents was the sale of all 25 limited partnership units. He argues that failure of full subscription to the partnership units sought to be sold did not release those who did subscribe since there was no contractual commitment to full subscription and no appropriate reservation in either the original or the revised partnership documents. We agree.
The partnership agreement defines a "Limited Partnership Unit" in terms of the required initial and additional capital contributions, and provides that "The capital of the Partnership shall consist of a maximum of two (2) General Partnership Units and twenty-five (25) Limited Partnership
The partnership agreement makes reference to limited partners "additional" to those executing the agreement; it also provides that the partnership would begin on the date the agreement was executed. The clear import of these provisions is that the Limited Partnership would commence, and the obligation to make the initial capital contributions would become effective, on the date of the agreement, even though all 25 units had not been sold at that time. It is true that the mortgage payment schedule originally attached to the agreement calculated future contributions of the limited partners on the basis of the sale of 25 units; however, the schedule did not condition the capital obligation on the sale of all units.
Neither the original nor the revised partnership certificate contained any condition that all units had to be sold before the limited partners would become obligated to pay their capital contributions. Indeed, the certificate made no reference to any number of partnership units to be sold, and did not contain any condition with respect to the obligation of the limited partners to make additional contributions, as required by § 10-102 (a) (7) of the Uniform Act, if any such conditions were to be imposed.
As heretofore indicated, the purpose of recording the partnership certificate is to acquaint third persons dealing with the partnership with its essential features, including its capital structure. Obviously, to give effect to alleged conditions not set out in, or at variance with, the certificate and partnership agreement is to fatally undermine the operation of the Uniform Act.
The appellees urge that we apply the common law rule, recognized in Wright v. Lewis, 161 Md. 674, 158 A. 704 (1932), that an inherent condition of a pre-incorporation subscription
(3)
The receiver contends that the lower court was in error in its apparent holding that the failure of the general partners to make calls for the additional contributions upon the limited partners, as contemplated by the partnership documents, barred enforcement of those obligations.
Both the original and revised partnership agreement and certificate required additional contributions in accordance with a mortgage payment schedule to be provided by the general partners. The only difference between the original and revised versions is that the former required 4% of a specified mortgage debt, per limited partnership share, to a maximum of $15,298.06, while the latter required a 4% per share payment of an unspecified mortgage debt. No payment schedule relating to the Commercial Credit first mortgage or the Joint Venture second mortgage was ever provided to the limited partners, and no request or demand was ever made upon the limited partners prior to the foreclosure of the Commercial Credit mortgage. No calls were ever made, according to Whitehead, because the amounts that would have been realized from the limited partners could not have been sufficiently supplemented by the general partners to meet the partnership's obligations.
We think that the failure of the general partners to make
(4)
The receiver contends that the limited partners were bound by the recorded certificate of limited partnership, even though it was revised by the general partners and Whitehead without their consent, because the general partners and Whitehead were their agents with authority to revise and record the certificate on their behalf.
As we have already noted, a limited partner under the Uniform Act (see Official Comment to § 1 thereof) is not "in any sense" either a partner or a principal in the business or transactions of the partnership. Rather, he is an investor in the partnership venture, without authority to participate in the management of the business; his liability is limited to the amount of his stated capital contribution. The relationship between the general and limited partner is a fiduciary one — a relation of trust — similar to that existing between a corporate director and a shareholder. See Miller v. Schweickart, 405 F.Supp. 366 (S.D.N.Y. 1975); Allen v. Steinberg, 244 Md. 119, 223 A.2d 240 (1966); Lichtyger v. Franchard Corp., 18 N.Y.2d 528, 277 N.Y.S.2d 377, 223 N.E.2d 869 (1966). Hence, the general rule would appear to be that the principal-agent relationship which exists between the parties of an ordinary partnership is not per se present between general and limited partners in a limited partnership.
The partnership agreement in the present case specified that the limited partners appointed the general partners as their attorney and agent to execute and record:
Despite the broad sweep of the powers which the limited partners agreed to vest in the general partners under the partnership agreement, we hold that the general partners did
Nor is there any basis for holding that the general partners were clothed with apparent authority to alter the documents. Apparent authority results from certain acts or manifestations by the alleged principal to a third party leading the third party to believe that an agent had authority to act. Reserve Ins. Co. v. Duckett, 240 Md. 591, 214 A.2d 754 (1965). See also B.P. Oil Corp. v. Mabe, 279 Md. 632, 370 A.2d 554 (1977). While the appellees did permit the general partners to handle the documents, generally the law will not imply authority to alter from an agency involving the mere handling of an instrument. 4 Am.Jur.2d Alteration of
Neither were the appellees bound by the terms of the altered certificate simply because it was recorded. While the recording requirement was meant to protect the public, the Uniform Act does not hold a limited partner liable for any statement contained in a recorded certificate. Section 10-106 of the Uniform Act provides:
It is thus clear that a limited partner bears responsibility for a false statement in a certificate only if he knew the statement to be false. Walraven v. Ramsay, 335 Mich. 331, 55 N.W.2d 853 (1952). There was no false statement as to the contribution of limited partners at the time the instruments of execution were signed by the appellees, nor is there any evidence that they subsequently became aware of the false statement before the creditors had relied upon the certificate, if in fact they did.
Nor was Whitehead the agent of the limited partners. He represented the general partners and the Limited Partnership. His actions with respect to the partnership agreement and certificate were not, therefore, those of an agent acting on behalf of the limited partners.
The receiver next argues that even if the general partners had no authority to revise the partnership documents, they were nevertheless enforceable according to their original tenor, and the limited partners are therefore liable to the
A partnership is, of course, a contractual relation to which the principles of contract law are fully applicable. Collier v. Collier, 182 Md. 82, 32 A.2d 469 (1943); Abbott v. Hibbitts, 142 Md. 7, 119 A. 650 (1922); 59 Am.Jur.2d Partnership §§ 19, 33 (1971). An agreement to form a partnership may be made by the parties but such an agreement does not of itself create a partnership. Maxa v. Jones, 148 Md. 459, 129 A. 652 (1925). One of the essential elements for formation of a contract is a manifestation of agreement or mutual assent by the parties to the terms thereof; in other words, to establish a contract the minds of the parties must be in agreement as to its terms. Maryland Supreme Corp. v. Blake Co., 279 Md. 531, 369 A.2d 1017 (1977); Post v. Gillespie, 219 Md. 378, 149 A.2d 391 (1959). The failure to agree on or even discuss an essential term of a contract may indicate that the mutual assent required to make or modify a contract is lacking. L & L Corp. v. Ammendale, 248 Md. 380, 236 A.2d 734 (1968). Whether a partnership exists is always a matter of fact which must depend on the intention of the parties. Miller v. Salabes, 225 Md. 53, 169 A.2d 671 (1961); M. Lit, Inc. v. Berger, 225 Md. 241, 170 A.2d 303 (1961); Townsend v. Appel Sons, Inc., 164 Md. 255, 164 A. 679 (1933).
That the appellees intended to enter into a limited partnership to acquire the Joint Venture property for investment purposes is entirely clear. It was based upon the understanding, clear from the original proposed partnership
The provision of § 10-102 (b) that a limited partnership is formed only if there has been "substantial compliance in good faith" with the requirements of § 10-102 (a) implicates two separate and distinct matters, although "substantial compliance" and "good faith" are closely related and seldom will one exist without the other. Rowley on Partnership, supra, at § 53.2. That the revised certificate was in proper form and in substantial compliance with the statutory requirements is plain. As to the "good faith" requirement, Rowley indicates that it may be satisfied where the parties honestly attempt to follow the provisions of the Act to the end that third persons will have notice of the essential features
We think the unauthorized changes in the substituted certificate were not mere false statements within the contemplation of § 10-106(a), but were of such a fundamental character as affected the formation of the limited partnership itself. We hold, therefore, that the filing of the revised certificate did not comply with the "good faith" requirement of § 10-102 (b) and that consequently no limited partnership was created under the statute.
The Uniform Act does not provide an explicit rule of law which is ultimately dispositive of this controversy. Section 10-127 of the Act specifies, however, that "[i]n any case not provided for in this title the rules of law and equity, including the law merchant, shall govern." The Uniform Partnership Act, Title 9, §§ 9-109 through 9-703 of the Corporations Article, provides in § 9-101 (f) that its provisions are applicable to limited partnerships "except insofar as the statutes relating to such partnerships are inconsistent with this title." Since § 9-702 (b) of the Uniform Partnership Act provides that "[t]he law of estoppel shall apply under this title," this provision is plainly applicable to limited partnerships. More specifically, § 9-308 (a) entitled "Partner by estoppel" provides:
The lower court did not consider these estoppel principles in exonerating the appellees from all liability to the receiver. Of course, it had no occasion to do so because the receiver's action was based on the validity of the revised partnership documents, it not being known to the receiver or counsel for the appellees until trial that the original partnership documents were in existence. Whether Commercial Credit made its mortgage loan to the Limited Partnership on the basis of the underlying collateral and the general liability of Fulton and Rinaldi, without regard to the participation of the limited partners, was not an issue in the case to which evidence was addressed at trial. The same is true with respect to the second mortgage of the Joint Venture. Although no such finding was necessary to its decision, the lower court expressed the belief that the Joint Venture, in extending credit, detrimentally relied upon a representation that the limited partners were members of the Limited Partnership, while Commercial Credit did not. In view of the pleadings and the posture of the case at trial, the receiver had no reason to anticipate a need to produce evidence of reliance upon the participation of the limited partners in the partnership venture, and he did not do so. Of course, the facts upon which to rest an estoppel must be proved; they will not be presumed. Miller v. Salabes, 225 Md. 53, 169 A.2d 671 (1961).
(5)
The appellee Anthony defends the lower court's judgment exonerating him from liability for the initial contribution refunded to him on the ground that the three-year period of limitations had run against the receiver before suit was filed. None of the other appellees advances this contention; as to them there is no dispute that they executed the partnership documents under seal and that the 12-year limitation period prescribed in Code (1974), § 5-102 of the Courts and Judicial Proceedings Article is applicable.
While there are several reasons for holding Anthony's claim to be without merit, the short answer is that he did execute the documents under seal. The partnership share in question — that jointly subscribed to by Anthony and Christ — shows that the single signature line on the instruments of execution appended to the certificate and agreement contained the word "Seal." This was consistent with the
The law with respect to the effect of a corporate seal on contracts is different. See Gildenhorn v. Columbia R.E. Title, 271 Md. 387, 317 A.2d 836 (1974); Federalsburg, supra.
Case remanded without affirmance or reversal pursuant to Maryland Rule 871 a for further proceedings in accordance with this opinion; costs to abide the result.
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