Legg v. Kelly

• Decision Date: 09 April 1982
• Citation: 412 So.2d 1202
• Parties: 33 UCC Rep.Serv. 1412 Joseph S. LEGG v. Edward KELLY, Jr. Joseph S. LEGG v. Mel LUCAS and Cliff Ellis. 80-502, 80-278.
• Court: Alabama Supreme Court

Page 1202

412 So.2d 1202

33 UCC Rep.Serv. 1412

Joseph S. LEGG v. Edward KELLY, Jr.

Joseph S. LEGG v. Mel LUCAS and Cliff Ellis.

80-502, 80-278.

Supreme Court of Alabama.

April 9, 1982.

Bob Sherling, Mobile, for Joseph S. Legg.

M. Lloyd Roebuck, Mobile, for Edward Kelly, Jr.

James D. Brooks and Carl Robert Gottlieb, Jr., Mobile, for Mel Lucas and Cliff Ellis.

ADAMS, Justice.

These consolidated appeals arise out of grants of summary judgment in favor of Edward Kelly, Jr., Mel Lucas, and Cliff Ellis (defendants). Joseph S. Legg (plaintiff) brought suit against corporate and individual defendants in the Circuit Court for Mobile County. Plaintiff's suit is based upon a contract in which defendant Athletic World Sporting Goods, Inc., (not a party to this appeal) agreed to purchase plaintiff's sporting goods store and assume responsibility for a debt owed by him. Individual defendants were stockholders and officers in the defendant corporation. Plaintiff alleged various theories of recovery against the defendants. After granting summary judgment in favor of Lucas, Ellis, and Kelly, the trial court entered final judgment as to these defendants pursuant to Rule 54(b), Alabama Rules of Civil Procedure. Plaintiff appealed.

By our review of the trial court's action, we conclude that with the exception of three counts of plaintiff's complaint concerning Kelly, it erred by granting summary judgment in favor of defendants. We, therefore, affirm in part, reverse in part, and remand this case. We will consider separately each count of plaintiff's complaint as it pertains to the defendants in reviewing the trial court's action.

We are obliged to note at the outset some fundamental principles concerning summary judgment. Recently, this court has observed:

In determining whether a summary judgment is proper, the ultimate question is whether there remains a genuine issue of material fact, and if there is one, summary judgment is inappropriate, Rule 56(e) ARCP; 6 Moore's Fed.Prac., par. 56.15 (2nd ed. 1971). Put in another way, "[W]here the evidentiary matter in support of the motion does not establish the absence of a genuine issue, summary judgment must be denied even if no opposing evidentiary matter is presented."

First National Bank of Birmingham v. Culberson, 342 So.2d 347, 351 (Ala.1977).

More recently, the court observed in Campbell v. Alabama Power Co., 378 So.2d 718, 721 (Ala.1979), that the scintilla evidence rule applies to summary judgment motions:

This rule must be considered in the context of the scintilla evidence rule applicable in Alabama. Thus, if there is a scintilla of evidence supporting the position of the party against whom the motion for summary judgment is made, so that at trial he would be entitled to go to the jury, a summary judgment may not be granted. Donald v. City National Bank of Dothan, 295 Ala. 320, 329 So.2d 92 (1976). Furthermore, all reasonable inferences from the facts are to be viewed most favorably to the non-movant. Tolbert v. Gulsby, 333 So.2d 129 (Ala.1976).

Harold Brown Builders, Inc. v. Jordan Company, 401 So.2d 36 (Ala.1981).

In the instant case, the defendants supported their motions for summary judgment with their depositions. Plaintiff did not respond, but instead chose to rely on his pleadings. In a similar situation, this court has observed:

Although an adverse party is not required to respond to a motion for summary judgment, this court has noted failure to do so may be perilous for the adverse party. Ray v. Midfield Park, 293 Ala. 609, 308 So.2d 686 (1975). By defendant's failure to respond to the motion, the trial court had no alternative but to consider the evidence presented by the moving party as uncontroverted. Donald v. City National Bank, 295 Ala. 320, 329 So.2d 92 (1976).

Harold Brown Builders, Inc. v. Jordan Company, supra.

Defendants made numerous contentions that the depositions supporting their motions for summary judgment, and the lack of opposing material from the plaintiff, work to resolve many disputed issues of fact in their favor, thereby justifying the trial court's actions. As discussed below, we find that even considering defendants' evidence as uncontroverted, the evidence they presented is insufficient to eliminate all disputed issues of fact created by plaintiff's complaint. Summary judgment in this case would be appropriate only if the depositions, taken as uncontroverted, resolved all remaining material issues of fact. Harold Brown Builders, Inc. v. Jordan Company, at 38.

Plaintiff's first count alleges, in pertinent part, that Kelly is personally liable on a promissory note that he signed. The note is part of the agreement by which plaintiff sold his sporting goods business. Athletic World assumed payment of an obligation owed by plaintiff. A default occurred and plaintiff seeks to hold Kelly personally liable for $57,513.71, the amount plaintiff alleges he ultimately paid under his prior obligation. Plaintiff maintains that Kelly agreed to assume personal liability, and signed the note in a like manner. Kelly disputes that and insists his signature on the note was made in a representative capacity for Athletic World. Kelly's signature appears on the note in the following manner:

                      ATHLETIC WORLD SPORTING GOODS, INC.  (L.S.)
                      -----------------------------------
                         (Debtor)
                 BY:  /s/ Edward Kelly Jr.                 (L.S.)
                      -----------------------------------
                         (Debtor)
                

Kelly contends that the trial court properly entered summary judgment in his favor and urges us to adopt the reasoning of Southeastern Financial Corporation v. Smith, 397 F.Supp. 649 (D.Ala.1975), rev'd on other grounds, 542 F.2d 278 (5th Cir. 1976) (Smith ). Smith held that an individual who signed a check, drawn on a corporation's account, with "by" preceding his signature, signed in a representative capacity which thereby prevented his being held personally liable. We need not decide whether to adopt the reasoning of Smith. That case is factually distinguishable from the present one. Although "by" preceded Kelly's signature, the signature line bore the designation of "debtor" and thereby, at least, the instant case is distinguishable from Smith. Code 1975, § 7-3-403, addresses the problem of an agent incurring personal liability when signing a note on behalf of his principal. Interpreting that section, this court has observed:

The purpose of Code 1975, § 7-3-403 is to encourage certainty and definiteness in the law of commercial paper. See Rotuba Extruders, Inc. v. Ceppos, 46 N.Y.2d 223, 413 N.Y.S.2d 141, 385 N.E.2d 1068 (1978). The taker of a negotiable instrument should be able "to tell at a glance whose obligation they hold."

Wurzburg Brothers, Inc. v. Coleman, 404 So.2d 334 (Ala.1981) (citation omitted).

Viewed in that light, we cannot agree with Kelly that Athletic World is the only debtor and that he executed the note on its behalf. Kelly's interpretation of the note flies in the face of the "certainty and definiteness" sought by § 7-3-403. His signature on a line designated for a debtor, absent an indication of his purported representative capacity, is consistent with the signature of an individual assuming personal liability on the instrument.

We also are unable to accept Kelly's argument that he is not personally liable under the note because he did not sign as a guarantor on the reverse of the instrument. That argument presupposes Kelly had not personally obligated himself when he signed as a debtor.

Lastly, on this count, Kelly argues that his testimony at deposition was sufficient to justify the entry of summary judgment. Kelly testified that he signed the note in a representative capacity. In view of our holding above, we cannot accept Kelly's argument. His testimony denying personal liability was insufficient to eliminate the issue of fact as to the capacity in which he signed the note. Kelly's testimony merely creates an issue of fact. Accordingly, we hold that the trial court erred by entering summary judgment in Kelly's favor. We note that any issue of parol evidence offered to negate Kelly's personal liability must be resolved in harmony with Wurzburg Brothers, Inc. v. Coleman, supra. However, because that problem is not before us, we make no further comment thereon.

Count two of plaintiff's complaint alleges defendants are liable personally for Athletic World's agreement to assume plaintiff's outstanding debt in the amount of $60,000.00. The complaint alleged that the assumption of plaintiff's debt was part of the agreement for the sale of plaintiff's sporting goods business. Plaintiff theorizes that defendants are liable personally because they failed to operate Athletic World as a corporation by not following its by-laws and articles of incorporation, and that they acted in their individual capacities when conducting the corporation's business. Lucas and Ellis contend that summary judgment was entered properly as to this count because no evidence was presented to the trial court establishing the contents of Athletic World's by-laws and articles of incorporation. Their contention overlooks the fact that it was not incumbent on plaintiff to produce evidence at the time of summary judgment concerning the contents of the by-laws and articles of incorporation. Plaintiff's allegations are questions of fact properly resolved at trial. Even reviewing the depositions of Lucas and Ellis, and considering them uncontroverted, we are unable to find that it was necessary for plaintiff to offer evidence in support of his allegation that defendants failed to operate Athletic World as a corporation. The contents of their depositions are insufficient to establish the absence of a genuine issue of material fact. Therefore, the trial court erred by entering summary judgment in favor of the defendants. However, because plaintiff has not addressed the issue of the propriety of the trial court's grant of summary judgment in...