Court Opinion

ID: 9789374
Source: CourtListenerOpinion
Date Created: 2023-08-31 01:35:36.938382+00
Date Added: 2024-06-11T15:44:58.810542
License: Public Domain

McInturff, J.
(dissenting) — I dissent. The majority's opinion could be described as "the case of the missing corporation", for nowhere does the opinion state which corporation or trust is protecting Mr. Raugust from personal liability.5 " [Complexity in business relationships alone is not a basis for imposing liability" (majority opinion, at 59), nor is it a reason to foreclose liability. Although the majority is correct in its recitation of legal principles with respect to promoter liability, this fact alone, under the circumstances of this case, is not enough to reverse the judgment. The trial court also found Mr. Raugust to be personally liable under the principles of general partnership law. On that basis, I would support the trial court's judgment.
The majority indicates there is no contract language or *63testimony to support the finding Mr. Raugust "intended" to be a partner in the enterprise. But, when ascertaining liability under a contract, subjective intentions must give way to the express language of the document. As stated in Barclay v. Spokane, 83 Wn.2d 698, 700, 521 P.2d 937 (1974):
In interpreting a contract our purpose is to ascertain the intent of the parties, but that does not mean that we are to be guided by the unexpressed subjective intent of a party. Rather we are controlled by the objective manifestation of intent as expressed in the writing. Jacoby v. Grays Harbor Chair & Mfg. Co., 77 Wn.2d 911, 468 P.2d 666 (1970).
See also Donald B. Murphy Contractors, Inc. v. State, 40 Wn. App. 98, 696 P.2d 1270 (1985). Both of the amended AIA contracts involved in this action were signed in the following manner:
Owner /s/ Warren J. Mathwig [signature]
Vice-president-manager [handwritten]
Calvin W. Raugust, President]
Raugust-Mathwig, Inc., and Assoc.] — [typed]
North 807 Howard Street]
Spokane, Washington 99201]
The printed name of the limited partnership, Raugust-Mathwig, Inc., and Associates, must be disregarded for it was never perfected under RCW 25.10.080.6 A partner who engages in activities which promote the partnership without the protection of a perfected limited partnership agreement, bears the same liability as a general partner. Dwinell's Cent. Neon v. Cosmopolitan Chinook Hotel, 21 Wn. App. 929, 935-36, 587 P.2d 191 (1978). To secure the protection of a limited partnership, the statutory requirements must be met. See RCW 25.10.080; RCW 25.10.110; *64Frigidaire Sales Corp. v. Union Properties, Inc., 14 Wn. App. 634, 636, 544 P.2d 781 (1975), aff'd, 88 Wn.2d 400, 562 P.2d 244 (1977); Rathke v. Griffith, 36 Wn.2d 394, 396, 218 P.2d 757, 18 A.L.R.2d 1349 (1950). It is undisputed the limited partnership agreement (unlike the AIA contracts) was never signed nor the certificate filed. Thus, I conclude that neither individual was afforded the protection of the limited partnership.
The majority notes Mr. Molander stated he believed he was contracting with a corporation; therefore, he must be limited in his recovery to corporate funds. Yet, it is clear from the AIA contracts there was no corporate contracting party, only the name of a statutorily unperfected limited partnership. Nor does the majority cite any authority for its conclusion Mr. Molander must be limited to recovery only from corporate funds because he believed he was contracting with a corporation. Under the analysis of the majority, it would not be necessary to formally organize a limited partnership — merely to convince one's business associates that the partnership was in existence — in order to receive the protection of limited liability.
Finally, there is testimony from Mr. Molander that Mr. Raugust was described to him as a "partner" to Mr. Math-wig, and that Mr. Molander was not worried about collecting his fee because he knew Mr. Raugust was a "wealthy wheat farmer."7 There is substantial evidence to support the court's conclusion that the two men were partners: even *65though Mr. Raugust did not personally sign the contracts, he knew of them, was instrumental in obtaining the lower architectural fee,8 and had instructed Mr. Mathwig to execute the AIA contracts for him.9 These conclusions are readily apparent upon reviewing the corporate minutes of a special meeting of the directors of Raugust-Mathwig, Inc., dated and signed by Calvin Raugust:
The manager is to construct a sales mockup of Riviera Towers, as designed by the Molander Associates . . . The Molander Associates are to do drawings of two buildings, residential and office.
Following the execution of the contracts, Mr. Raugust periodically reviewed Mr. Molander's work, attended meetings with him and allowed use of his name and credit history in the futile attempt to secure financing. Thus, he knew of the extensive work being done by Mr. Molander, yet never notified him to stop, even after his self-avowed separation from Mr. Mathwig in July 1977.10 Work halted on the office tower on approximately May 1, 1978, and continued on *66Riviera Towers until sometime in 1979.
The majority concludes the trial court failed to elaborate on the particular legal theory which resulted in a finding of personal liability against Mr. Raugust. Reference to conclusion of law 3.211 confirms that the trial court predicated liability upon theories of promoter and general partnership law, as well as unjust enrichment.
The fact Mr. Mathwig actually signed the AIA contracts, or the fact financing came from sources other than Mr. Raugust's personal account, does not absolve Mr. Raugust of liability as a general partner. The majority's reference to "postdisaster wishful thinking" is more correctly applied to Mr. Raugust's actions than to Mr. Molander's. Mr. Raugust had the opportunity to protect himself through a corporate shield by using the name of a corporation as the general partner on the AIA contracts. But Mr. Raugust did not do so. Hence, the liability under the contract rested upon the name of the limited partnership, which was never statutorily perfected, and two individuals. So in essence, Mr. Molander contracted with two individuals and an unper-fected limited partnership. Under these circumstances those two individuals were general partners, thus personally liable.
Since the bulk of the architectural work was done after Mr. Molander received assurances by letter from Mr. Smalley regarding financing, it is important to address Mr. Raugust's liability based on that particular letter. The question is whether Mr. Raugust knew the letter had been sent. The trial court concluded, and the majority defers to its conclusion, that he, in fact, did know of the letter *67although his memory of the event may have been "clouded". However, the majority finds this misrepresentation insufficient to impose personal liability on Mr. Rau-gust. While, arguably, his neglect to inform Mr. Molander of the erroneous information may not be sufficient to pierce a corporate veil, piercing the veil is not an issue here. Liability is founded on a general partnership theory; there is no Raugust corporation or trust specifically named in the contract; thus, there is no veil to be pierced.
Because I find liability based on general partnership law, discussion concerning unjust enrichment is unnecessary, but there are other issues which should be addressed.
Mr. Raugust's next principal argument concerns Mr. Molander's right to recover $89,62112 incurred in fees prior to the execution of the amended contract. It is suggested that this amount is barred by the statute of frauds. RCW 19.36.010 provides:
Contracts, etc., void unless in writing. In the following cases, specified in this section, any agreement, contract and promise shall be void, unless such agreement ... be in writing, and signed by the party to be charged therewith, or by some person thereunto by him lawfully authorized, that is to say: ... (2) Every special promise to answer for the debt, default, or misdoings of another person;
Morrison-Knudsen Co. v. Hite Crane & Rigging, Inc., 36 Wn. App. 860, 863-64, 678 P.2d 346, review denied, 101 Wn.2d 1020 (1984), disposes of this issue:
in determining whether a promise falls within the statute, our courts distinguish between collateral and original promises. If the promise was collateral, it is within the statute of frauds; if original, the statute does not apply. A promise is considered original when the promisor receives some consideration or benefit from the promise. ... If the leading object is to benefit the promisor, it does not *68matter if the effect of the promise is to pay the debt of another.
(Citations omitted.) The Morrison-Knudsen court then outlines three basic fact patterns, including one similar to the Raugust-Mathwig-Molander situation, where the statute of frauds would control unless Mr. Raugust received a direct benefit from Mr. Molander. That benefit was the completion of the plans by Mr. Molander based upon his prior architectural work which would have enabled the development to proceed to fruition. Thus, when Mr. Rau-gust allowed the services to continue, there was a direct benefit to him which removed the agreement from the statute of frauds. Additionally, this sum was contained in the amended AIA contracts, which we have held to be personal liabilities of Mr. Raugust. I find no error.
Next, Mr. Raugust states the court erred in requiring him to appear in Spokane County Superior Court for a hearing pursuant to RCW 6.32.190,13 when he neither resided nor maintained a business in Spokane County. State ex rel. McDowell v. Superior Court, 152 Wash. 323, 277 P. 850 (1929) determined that the examination of a judgment debtor is not an independent action, but is ancillary to and a continuation of the original action. When Mr. Raugust did not challenge venue in the original action, he waived it. CR 12(h)(1).14 Additionally, the property was located in Spokane County and the business between Rau-gust and Mathwig was conducted here. I find no error.
*69Finally, Mr. Molander raises two issues on cross appeal. He first questions the court's decision to deny prejudgment interest on the sum computed as due and owing on work done subsequent to the execution of the amended AIA contract. Reviewing the court's first supplemental opinion and the findings of fact, I note the following: (1) The sum of $63,521.26 noted on exhibit 3, dated March 2, 1977, as the amount past due for services on Riviera Towers. (2) The sum of $26,100 noted on exhibit 4, dated March 2, 1977, as the amount past due for services on the office tower. Those sums totaled $89,621.26, from which the court subtracted a payment made after March 2, 1977, of $63,900, leaving a balance due of $25,721.26. In conclusion of law 6.2, the court noted this balance was a liquidated amount and prejudgment interest would be owed thereon from that date at the legal rate. The only dispute by Mr. Raugust is that there was no "billing" to set accrual of interest into motion. However, with respect to the balance due on work prior to March 2, 1977, that amount was clearly set forth in the amended AIA contracts which I have previously determined were reviewed by Mr. Raugust.
Mr. Molander contends prejudgment interest is due on the value of the work done after March 2, 1977, a balance due of $361,724 on the Riviera Towers project, and $46,492 due on the office tower. He argues these amounts could be determined solely with reference to the AIA contract and for that reason, prejudgment interest should have been allowed. Silverdale Hotel Assocs. v. Lomas & Nettleton Co., 36 Wn. App. 762, 677 P.2d 773 (1984); Langston v. Huffacker, 36 Wn. App. 779, 790, 678 P.2d 1265 (1984). It is true the court arrived at the Riviera Tower fee by reference to the fee schedule outlined in the AIA contract. However, the figure was based on a construction estimate of $13,397,211 submitted by the Goebel Construction Co. Mr. Molander was unable to state the date he received that *70particular estimate.15 Thus, the court had no date from which to commence computing the interest. Pursuant to Refrigeration Eng'g Co. v. McKay, 4 Wn. App. 963, 486 P.2d 304 (1971), the lack of such a date is fatal to an award of prejudgment interest.
With reference to the office tower, the court notes in its opinion that work stopped May 1, 1978, at which time the estimated cost of construction was $3,874,397. Based on the fee schedule contained in the AIA contract, the additional sum owed for work completed after March 2, 1977, was $46,492. Although Mr. Raugust has assigned error to this conclusion, his argument is based on the contention he is not personally liable for any of the amounts due, rather than the specific damages mentioned, or the date prejudgment interest commences.
Reference to the AIA contract section 6.5 discloses "Payments due the Architect under this Agreement shall bear interest at the legal rate commencing sixty days after the date of billing." (Italics mine.) The only billing made by the Molanders for services after March 2, 1977, was dated May 1, 1981, and contains amounts which differ significantly from the judgment awarded by the court. I find insufficient notice to Mr. Raugust of the amounts due in order to begin accrual of prejudgment interest. I would affirm the court's ruling prejudgment interest is due only on the prior balance of $25,721.26, contained in the March 2,1977 contracts.
The court awarded interest of 6 percent and denied Mr. Molander's request for 12 percent, to which he assigns error based upon Smith v. Olympic Bank, 103 Wn.2d 418, 425, 693 P.2d 92 (1985), which held: "The rate of prejudgment interest is governed by RCW 19.52.010 which was amended *71on July 21, 1981 to allow a rate of 12 percent interest instead of 6 percent." Therefore, whatever prejudgment interest is awarded to plaintiffs should be at the rate of 6 percent until July 25, 1981, and from July 26, 1981, and thereafter such prejudgment interest should be at the rate of 12 percent. Mr. Raugust concedes this is the correct interest rate. Therefore, I would modify the trial court's award to reflect the increased interest rate as of July 26, 1981.
Review denied by Supreme Court September 2,1986.

Although footnote 2 in the majority opinion indicates Raugust-Mathwig, Inc., was to be a general partner, the opinion does not state whether it is this corporation or one of Mr. Raugust's many trusts, which provides the corporate shield.

RCW 25.10.080 provides in pertinent part:
"(1) In order to form a limited partnership two or more persons must execute a certificate of limited partnership. The certificate shall be filed in the office of the secretary of state and set forth: . . .
” (2) A limited partnership is formed at the time of the filing of the certificate of limited partnership . . ."

Mr. Molander testified:
"Q. I want to clear that up. The $500,000 — was this mentioned before you signed the 1977 contracts?
"A. Oh, yes.
"Q. And, was this, in your view, one of the reasons you did not question what entity you were dealing with in 1977?
"A. Yes, it didn't make any difference to me.
"Q. After learning of Mr. Raugust's financial involvement?
"A. That's right.
"Q. Did you know of Mr. Raugust or his background at that time — who he was or where he came from?
"A. At that time? Yes, I did.
*65"Q. And, what was your impression of Mr. Raugust? I'm speaking now, not of him as a person, but simply what was your perception of him as an individual who could stand in the stead of a partner?
"A. I knew him to be, in layman's terms, a wealthy wheat farmer, and an investor."

Mr. Mathwig testified:
"I was told to change the contracts from the corporation to this new corporation and, also, I was told if I could get it from 7 percent down to 6 percent, why, we should do that. . .
"Q. So as of February, 1977, you discussed with Mr. Raugust the need for negotiating and executing new architect contracts?
"A. Yes . . ."

The court questioned Mr. Mathwig:
"Q. Before the contracts were executed, Mr. Raugust instructed you to sign them?
"A. Yes, he said, "you sign them" and I signed them. His name was on them and I told him his name was on them and he said, "sign them" and I said, "I'll sign as manager and vice-president," and that's what I was instructed to do and I signed everything, Your Honor."

In response to questions by the court, Mr. Raugust testified:
*66"Q. Was there a point you divorced yourself from all these things and if so, when was it?
"A. July 1,1977/

Conclusion of law 3.2 states:
"Because the limited partnership above-referred never legally existed, Calvin W. Raugust was personally liable as a promoter of this entity — which was, in effect, a general partnership."

See exhibit 3, amended ALA contract, p. 2, totaling $63,521.26 due and owing for architectural work done on Riviera Towers and exhibit 4, amended AIA contract, p. 2, totaling $26,100 due and owing for architectural work done on the office tower.

RCW 6.32.190 provides in part:
"A judgment debtor who resides or does business in the state cannot be compelled to attend pursuant to an order made under the provisions of this chapter at a place without the county where his residence or place of business is situated."

CR 12(h)(1) provides:
"A defense of. . . improper venue,... is waived (A) if omitted from a motion in the circumstances described in section (g), or (B) if it is neither made by motion under this rule nor included in a responsive pleading or an amendment thereof permitted by rule 15(a) to be made as a matter of course."

We note exhibit 108 is a cover letter from Robert Goebel, president of Goebel Construction, dated October 17, 1978, addressed to Mr. Mathwig, with the identical bid attached. However, Mr. Molander stated he received this bid in the spring bf 1979.