Washington Medical Center v. Henry C. Book Reviews

Washington Medical Center v. Henry C. by Court of Appeals of the District of Columbia Book Summary

FARRELL, Associate Judge : This appeal and cross-appeal arise from the trial court's judgment, following a bench trial, for
punitive and compensatory damages against Washington Medical Center (WMC), the managing general partner of an ill-fated limited
partnership formed for the purpose of developing certain real property, and its president, Deyerberg, for breach of fiduciary
duties to the other partners, including Holle. WMC filed for bankruptcy when the joint venture went awry, and that fact gives
rise to two of its primary claims on appeal. It contends that when it filed its bankruptcy petition and was made a "debtor-in-possession"
by the bankruptcy court, that status extinguished any fiduciary duties it owed to the other partners and any liability under
state law for breach of those duties. WMC also contests the trial court's refusal to apply principles of res judicata and
collateral estoppel to bar Holle from litigating issues and claims addressed in WMC's bankruptcy proceeding. It further challenges
the award of punitive damages, asserting that the court erred in finding that WMC's filing of an action for an accounting
and winding up of partnership affairs, naming as defendant Holle but none of the other partners, was a breach of fiduciary
duty and part of a pattern of willful misconduct toward Holle. On his cross-appeal, Holle asserts that the court erroneously
denied his claim against WMC for certain rental payments for real property owned by the partnership stemming from WMC's status
as assignee of the leasehold. We reject WMC's argument concerning the effect of WMC's status as debtor-in-possession on its fiduciary duties as managing
partner. We find no indication that Congress intended the changes in a corporate debtor's status worked by the filing of a
bankruptcy petition to absolve a partner of the duties of good faith and fair dealing owed to fellow partners during the
winding up phase. We also reject WMC's arguments of claim and issue preclusion. We further hold that, although a partner indisputably
has a right to seek an in-court accounting for legitimate reasons, the trial Judge's finding that WMC's suit was motivated
by animus toward Holle and part of a concerted attempt to force Holle to abandon legitimate claims is supported by record
evidence and that punitive damages accordingly were proper. Finally, we agree with Holle's contention on cross-appeal that
the trial Judge erroneously rejected the claim for unpaid rent. We therefore remand solely for a determination of damages
on that issue.

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