Paddock, Smith & Aydlotte v. WAAY Television

• Decision Date: 17 February 1982
• Citation: 410 So.2d 106
• Parties: PADDOCK, SMITH & AYDLOTTE; William Y. Aydlotte; & James F. Paddock v. WAAY TELEVISION. Civ. 2956.
• Court: Alabama Court of Civil Appeals

Page 106

410 So.2d 106

PADDOCK, SMITH & AYDLOTTE; William Y. Aydlotte; & James F. Paddock v. WAAY TELEVISION.

Civ. 2956.

Court of Civil Appeals of Alabama.

Feb. 17, 1982.

Charles R. Perry and Peter J. Anderson of Peterson, Young, Self & Asselin, Atlanta, Ga., and Robert H. Ford and Keith S. Jones

of Brinkley, Ford & Fleming, Huntsville, for appellant.

C. Howard Grisham of Bailey & Grisham, Huntsville, for appellee.

PER CURIAM.

This is an action upon a contract by WAAY Television (appellee) against William Y. Aydlotte and James F. Paddock (appellants). The trial court, after an ore tenus hearing, found for the appellee. The appellants appeal to this court. For the reasons stated below we reverse.

The record reveals the following: During 1979, the appellee-WAAY, through its media representative in Atlanta, Georgia, entered into a contract with Paddock, Smith & Aydlotte, an advertising agency located in Atlanta. The contract required the appellee to broadcast a series of commercials prepared by the agency on behalf of one of the agency's clients. The contract referred to the agency as "Paddock, Smith & Aydlotte." Nowhere in the contract was there any indication that the agency was a corporation. Furthermore, the appellee's media representative and advertising sales manager both testified that, at the time appellee entered the contract, they were not aware that the agency was a corporation.

Pursuant to the contract, WAAY aired the commercials during the 1980 Winter Olympics. After airing the commercials, however, the appellee-WAAY was unable to obtain payment for the air time it had provided. Appellee then instituted this action against the agency and against Aydlotte and Paddock individually in an attempt to obtain payment for the services it rendered. The agency was ultimately dismissed as a defendant and final judgment was entered against the individual defendants in the amount of $2,524.38 plus interest.

On appeal, the appellants contend that Paddock, Smith & Aydlotte was a duly formed corporation and, consequently, the corporation and not the appellants individually is liable on the debt. This contention is supported by undisputed evidence that the agency was duly incorporated pursuant to the laws of the State of Georgia and, furthermore, that under Ga.Code Ann. § 106-301 (1968), the agency was authorized to do business under the trade name of Paddock, Smith & Aydlotte.

Appellee-WAAY, through able counsel, contends, on appeal, that the trial court's judgment should be affirmed because the individual appellants are personally liable on the debt due to their failure to disclose that their business was a corporation.

In Alabama, where a trial court hears evidence ore tenus, its judgment comes to the appellate court cloaked with a presumption of correctness. E.g., Pipes v. Adams, 381 So.2d 86 (Ala.Civ.App.1980); Alabama Farm Bureau Mutual Insurance Co. v. Davis, 354 So.2d 15 (Ala.Civ.App.1978). The ore tenus presumption, however, has no application where, as here, the facts are undisputed. Hendrix, Mohr & Yardley, Inc. v. City of Daphne, 359 So.2d 792 (Ala.1978); Taylor v. Godsey, 357 So.2d 979 (Ala.1978). When the facts are undisputed, the appellate court must determine whether the trial court misapplied the law to the undisputed facts. Home Indemnity Co. v. Reed Equipment Co., 381 So.2d 45 (Ala.1980).

The issue which the trial court determined and which, in light of the above, this court must now determine is whether these individual appellants are liable for the debt of the corporation because the appellee's representatives were not aware they were dealing with a corporation. We hold that the individuals are not liable for the debts of the corporation.

This court has been cited no Alabama authority nor have we found any ourselves that would be dispositive of the issue before us. The issue has, however, been addressed in other jurisdictions.

The case most clearly on point is Kitchell Corp. v. Hermansen, 8 Ariz.App. 424, 446 P.2d 934 (1968). The Kitchell Corporation had entered into a contract with an entity named in the contract as "Hermansen and Horwitz and Company." In an attempt to recover on the contract, Kitchell brought this action against Hermansen and Horwitz individually. After noting that "Hermansen and Horwitz and Company" was duly incorporated and, further, that there was no reliance by Kitchell Corporation upon the individual liability of the officers of "Hermansen and Horwitz and Company," the Arizona Court of Appeals held that the defendants were not individually liable for the debts of the corporation.

The New York case of Hamilton v. Davis, 90 N.Y.S. 370 (App.Term 1904) is also instructive. The case is factually very similar to Kitchell. The plaintiff and defendants entered into a contract that did not disclose that the defendants were doing business as a corporation. In fact, the court noted that the name used in the contract indicated that the defendants were doing business as a partnership. Hamilton differs from Kitchell, however, in that in Hamilton there was evidence that the defendants had deliberately concealed that they were doing business as a corporation. Furthermore, there was evidence that the plaintiff was induced to contract with the defendants upon the faith of their liability as individuals. Based upon these facts, the court in Hamilton held that the defendants would be estopped to deny liability as partners.

The above cases appear to stand for the principle that, even though an entity is unaware that it is dealing with a corporation, unless there is some proof of detrimental reliance upon the individual liability of members of the corporation, the individuals will not be liable for the debts of their corporation. See Bank of Dillon v. Murchison, 213 F. 147 (4th Cir. 1914); De Maria & Janssen, Inc. v. Baum, 227 Mo.App. 212, 52 S.W.2d 418 (1932); Mechanicville War Chest, Inc. v. Butterfield, 110 Misc. 257, 181 N.Y.S. 428 (1920). See also 19 C.J.S. Corporations § 1136 (1940).

This principle is not without support in Alabama. In Christian & Craft Grocery Co. v. Fruitdale Lumber Co., 121 Ala. 340, 25 So. 566 (1899), the plaintiff grocery company sought to enforce personal liability against certain individual defendants contending that it had dealt with the defendants as a...