Ferrarell v. Robinson

• Decision Date: 16 February 1970
• Docket Number: No. 1,CA-CIV,1
• Citation: 11 Ariz.App. 473,465 P.2d 610
• Parties: Joseph D. FERRARELL and Daisy Ferrarell, his wife, Appellants, v. Donald E. ROBINSON and Jane Doe Robinson, his wife; Leo Kramer; and Universal Surety Company, Appellees. 876.
• Court: Arizona Court of Appeals

Page 610

465 P.2d 610

11 Ariz.App. 473

Joseph D. FERRARELL and Daisy Ferrarell, his wife, Appellants, v. Donald E. ROBINSON and Jane Doe Robinson, his wife; Leo Kramer; and Universal Surety Company, Appellees.

No. 1 CA-CIV 876.

Court of Appeals of Arizona, Division 1, Department B.

Feb. 16, 1970.

Rehearing Denied March 13, 1970.

Review Denied April 7, 1970.

Charles Christakis, Phoenix, for appellants

Guy V. LoStracco and Ross Anderson, Phoenix, for appellees Donald E. Robinson and Jane Doe Robinson.

Lewis, Roca, Beauchamp & Linton, by John P. Frank and Gerald K. Smith, Phoenix, for appellees Kramer and Universal Surety Co.

HAIRE, Judge.

The plaintiffs, husband and wife, sued the following defendants for breach of contract and fraudulent misrepresentation: Realty Investment Consultants, Inc. (hereinafter R.I.C., Inc.); Leo Kramer, the president and designated broker of R.I.C., Inc.; Donald E. Robinson, a salesman employed by R.I.C., Inc.; and Universal Surety Co., the surety of Kramer and R.I.C., Inc. The fraudulent misrepresentation claim was dismissed at the conclusion of plaintiffs' case and is not an issue on this appeal. Trial to the court resulted in a judgment for plaintiffs against only R.I.C., Inc. Plaintiffs appealed from the judgment in favor of the remaining defendants.

Inasmuch as the trial court did not make findings of fact and conclusions of law, this court must view the evidence in a light most favorable to the position of the appellees and uphold the judgment of the trial court in their favor if there is any reasonable evidence in support thereof. Beaty v. Jenkins, 3 Ariz.App. 375, 414 P.2d 763 (1966).

R.I.C., Inc., was incorporated on February 20, 1963. In early May 1963 plaintiffs entered into agreements authorizing R.I.C., Inc., to act as their agent in acquiring specified land and constructing two fourplex apartment units upon it. At or near the time the agreement was signed, plaintiffs paid $3,000.00 to defendant R.I.C., Inc., leaving a balance of $65,000.00 due on the contract price.

Thereafter R.I.C., Inc., deposited $100.00 in escrow to purchase certain specified land, but for reasons hereinafter set forth that purchase was never consummated. Likewise, though R.I.C., Inc., had construction plans drawn up and approved, no construction work was ever done. The $3,000.00 paid by plaintiffs was placed in the general account of R.I.C., Inc., and that account was depleted by July 1, 1963. Shortly thereafter, because of financial difficulties, R.I.C., Inc., ceased doing business. In September 1963 plaintiffs became concerned because no work had been done, so they called R.I.C., Inc., and were advised by an answering service that R.I.C., Inc., was no longer in business. Plaintiffs then instituted this action to recover the $3,000.00 they had paid R.I.C., Inc.

In the trial court plaintiffs recovered judgment against R.I.C., Inc., and it is not disputed on this appeal that R.I.C., Inc.,

breached its contract with plaintiffs. The questions to be determined herein relate to the other defendants' liability, if any, for that breach.

LIABILITY OF ROBINSON

Defendant Robinson, a salesman employed by R.I.C., Inc., was first contacted by plaintiffs in response to a newspaper advertisement relating to income property. It is not disputed that he was the employee of R.I.C., Inc., who negotiated with plaintiffs, nor that on behalf of R.I.C., Inc., he signed the agreements with plaintiffs. Both of those agreements, that is, the 'Contract' (Exhibit 6) and 'Agent's Authorization' (Exhibit 4), were expressly made in the name of R.I.C., Inc., and defendant Robinson's signature indicated that he signed on behalf of R.I.C., Inc. Further, the acknowledgments on both indicated that defendant Robinson signed as an 'Authorized Consultant' of R.I.C., Inc. Such signatures raise at least an inference that the principal only, and not the agent, is a party to the contract. Restatement (Second) of Agency Sec. 156, Comment A (1958).

One who signs an agreement as the agent of a fully disclosed principal is not a party to that agreement and thus incurs no personal liability for the principal's breach of that agreement. Geyer v. Huntingdon County Agricultural Association, 362 Pa. 74, 66 A.2d 249 (1949); Restatement (Second) of Agency Sec. 320 (1958); 3 C.J.S. Agency § 215 (1936); 3 Fletcher, Cyclopedia of the Law of Private Corporations Sections 1117--1118 (Perm. ed. 1965). Plaintiffs have not brought to our attention, nor are we aware of, facts in the instant case which would remove defendant Robinson from the shelter afforded by the foregoing general rule. Further, we have not found any evidence whatever of any wrongful acts on the part of defendant Robinson. We are therefore of the opinion that the trial court acted properly in entering a judgment in favor of defendant Robinson.

LIABILITY OF KRAMER

Plaintiffs, in attempting to hold defendant Kramer personally liable, again seek to impose responsibility upon an individual for an alleged corporate wrong. It is clear, however, that defendant Kramer, either as an officer or director cannot be held liable on the contracts of R.I.C., Inc., where, as here, there is no evidence that he undertook to bind himself individually on those contracts. Watkins v. Cotton, 180 Okl. 73, 67 P.2d 957 (1937); S & H Concrete Construction Co. v. Genova, 384 S.W.2d 816 (Mo.App.1964); Cf. Jolles v. Holiday Builders, Inc., 222 Ga. 358, 149 S.E.2d 814 (1966).

It is also clear that private property of a corporate shareholder (here defendant Kramer cannot usually be reached to satisfy corporate debts. Art. IV of the R.I.C. Articles of Incorporation contain the statutorily required (A.R.S. Sec. 10--122, subsec. 9) statement exempting its shareholders' private property from liability for corporate debts. A corporation is a legal entity doing business in its own right and on its own credit as distinct from the credit of its shareholders. Employer's Liability Assurance Corp. v. Lunt, 82 Ariz. 320, 313 P.2d 393 (1957). Plaintiffs contend however, that this is an instance in which the corporate entity should be disregarded and liability imposed upon the shareholder.

The pertinent facts on this issue are as follows: Defendant Kramer with one Arthen incorporated R.I.C., Inc., on February 20, 1963. Each became a director and each at the outset held two offices. Kramer was elected president and treasurer; Arthen was elected vice-president and secretary. Kramer purchased 50,000 shares of stock in R.I.C., Inc., in exchange for accounts receivable, furniture and equipment, personal services to the corporation and some cash. No contention is made that these assets constituted inadequate consideration for the issuance of the stock to Kramer. It is not apparent from the corporate records that anyone but Kramer ever owned shares in R.I.C., Inc. Although it appears from the evidence that the business of the corporation was a continuation of a previously existing business conducted through a partnership, there is no showing that plaintiffs were in any way misled because of this. The plaintiffs had not previously dealt with the partnership, and in fact this partnership was no longer in existence when plaintiffs came to Arizona. All of paintiffs' agreements and contacts were with the corporation.

As previously stated, the mere fact that Kramer was an officer and the sole shareholder in R.I.C., Inc., does not in and of itself make this situation one in which the corporate form should be disregarded. Cooper v. Industrial Commission, 74 Ariz. 351, 249 P.2d 142 (1952). The evidence would have to show that the corporation was not only influenced and governed by defendant Kramer, but that there was also such a unity of interest and ownership that the individuality or...