Umans v. PWP Services, Inc.

Citations: 439 A.2d 21; 50 Md. App. 414; 1982 Md. App. LEXIS 220Docket: 162, September Term, 1981

Court: Court of Special Appeals of Maryland; January 7, 1982; Maryland; State Appellate Court

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In the case of George Umans et al. v. PWP Services, Inc. et al., the Court of Special Appeals of Maryland addressed a dispute involving a nonprofit organization, Parents Without Partners, Inc. (PWP), and its member, George Umans. Umans, a long-time member and former president of a local chapter, developed an insurance program for PWP members in 1966, managing it until 1977. An agreement was made on October 5, 1977, establishing Umans as the employee of PWP Plan Administrator, Inc. and allowing him to operate the insurance program through a for-profit entity, PWP Services, Inc.

Under the contract, Umans and the Administrator were responsible for managing the insurance program, with Services entitled to 5% of the gross premiums in exchange for providing PWP's member list for soliciting insurance. The appellants were required to use their best efforts to sell insurance to PWP members and were to receive all profits from these sales after paying the agreed percentage to Services. They also had obligations to provide quarterly and annual accounting of the insurance sold and related finances to Services.

The contract stipulated that the first quarterly report was due on January 30, 1978, but no report was submitted by that date. Services inquired about the missing report, and eventually, Umans submitted a handwritten interim report on June 15, 1978, covering the period from the contract's effective date. The absence of timely accounting was specified in the agreement as grounds for termination.

A modified report covering November 1, 1977, to June 30, 1978, was submitted by the appellant, followed by a third report in 1978 that differed significantly from the first two regarding profits and amounts due to Services. The first report indicated gross premiums of approximately $258,000, the second $236,000, and the third $284,000. Appellant engaged Mr. James LaGrone, a certified public accountant, to prepare the annual audit due June 30, 1978. Upon review, LaGrone and his employee found that the appellant's bookkeeping was inadequate for an accurate certified accounting. 

In September 1978, the Board of Directors met with the appellant, who acknowledged serious bookkeeping issues but expressed hope for resolution. Mr. Paul Moss, the treasurer of Services, later investigated and discovered that collected funds had not been properly deposited and identified discrepancies amounting to $20,000 in the reports. The Board reviewed the findings and Moss's suggestion of potential misappropriation of funds. Consequently, they concluded that the appellants breached their contract by failing to submit the required reports, leading to the termination of the contract on November 7, 1978.

The Board then entered an Extension Agreement for the appellants to operate the insurance program for an additional four months, which was extended to June 30, 1979. Following these events, Judge John F. McAuliffe ruled that the appellants breached the contract and that the appellees were not precluded from asserting this breach by estoppel or waiver. The trial judge's findings regarding the breaches and the lack of estoppel or waiver were upheld.

The appellants claim that the determination of estoppel or waiver is a factual issue, a position supported by the precedent in Bargale Industries v. Robert Realty. The trial judge ruled there was no waiver or estoppel, and evidence in the record supports this conclusion, making it not clearly erroneous under Md. Rule 1086. Additionally, the appellants sued Paul Moss for defamation and for intentional interference with contractual relations alongside PWP. The trial judge dismissed the claims against Moss based on a lack of personal jurisdiction. The appellants assert this was an error, arguing that Moss is subject to jurisdiction under three provisions of the Maryland Long Arm Statute, which allows jurisdiction for individuals conducting business or causing tortious injury within the state. The process for applying this statute involves determining if the statute authorizes jurisdiction and whether such jurisdiction complies with the Due Process Clause of the Fourteenth Amendment. The court found that Moss's only contacts with Maryland were as a corporate officer, which generally does not establish personal jurisdiction. This aligns with established legal principles that corporate actions do not expose individuals to personal jurisdiction. As a result, there is no need to evaluate the sufficiency of Campbell's contacts, as they were also corporate in nature.

In Chancellor v. Lawrence, 501 F. Supp. 997 (N.D. Ill. 1980), the court addressed the appellants' reliance on the ruling in Topik v. Catalyst Research Corporation, 339 F. Supp. 1102 (D.C. Md. 1972), which recognized a fiduciary relationship exception between shareholders and directors. The court clarified that this exception does not apply in the current case. Additionally, the court distinguished this case from others, such as Groom v. Margulies and Feldman v. Magnetix Corporation, where the corporation and the individual were considered virtually the same. The court affirmed the judgments and ordered the appellants, George Umans and PWP Plan Administrator, Inc., to bear the costs. 

The excerpt also details the terms of an agreement requiring the Administrator to provide quarterly and annual certified accountings related to financial transactions with Services and its affiliates. These accountings must include specifics on insurance plans sold and revenues received, with quarterly reports due on March 30, June 30, September 30, and December 30, and an annual report due by February 15. The Administrator is responsible for the costs of these accountings unless they exceed $2,000, in which case the excess will be covered by Services.