Weeks v. Kerr

• Decision Date: 12 December 1985
• Docket Number: No. 4-883A285,4-883A285
• Citation: 486 N.E.2d 10
• Parties: Larry WEEKS, Appellant (Defendant Below), v. Richard W. KERR, Appellee (Plaintiff Below).
• Court: Indiana Appellate Court

Page 10

486 N.E.2d 10

Larry WEEKS, Appellant (Defendant Below), v. Richard W. KERR, Appellee (Plaintiff Below).

No. 4-883A285.

Court of Appeals of Indiana,

Fourth District.

Dec. 12, 1985.

James S. Kowalik, Hopper & Opperman, Indianapolis, for appellant.

Richard A. Clem, Alden & Clem, Indianapolis, for appellee.

YOUNG, Presiding Judge.

Larry Weeks appeals an adverse judgment in favor of Richard Kerr, in the latter's suit for commissions due under an employment contract. We reverse.

Weeks and Bruce Richardson each held a half-interest in Baker-Roberts Construction Co., Inc. In March 1979, they purchased a business called Joe's Mobile Homes, the assets of which were to be held by the corporation.

Richardson handled the daily operation and management of Joe's Mobile Homes, controlling the company's books and records. Kerr, retained as sales manager of the on-going business, was compensated on a commission basis. Richardson agreed with Kerr regarding the sales manager's compensation and expenses, increasing Kerr's commission from 25% to 30% at one point.

Weeks, president of Baker-Roberts, did not participate directly in the management of Joe's Mobile Homes. He testified that the management of the business was Richardson's job, and he considered himself merely an investor. As such, he realized only losses from the venture.

With the business sustaining losses, Richardson disappeared, taking with him the corporate records. Kerr initiated this suit against Richardson, Weeks, and the corporation, and obtained a judgment against Weeks individually for $14,835.54 in unpaid commissions plus costs.

Weeks presents three issues on appeal, one of which proves dispositive: Did the trial court err in imposing personal liability for a corporate obligation?

In determining whether the trial court's judgment is contrary to law, we consider the evidence in the light most favorable to the appellee and will reverse only if the evidence leads to but one conclusion, and the trial court has reached the opposite result. Woodward Ins., Inc. v White (1982), Ind., 437 N.E.2d 59. Under the facts of the present case, we conclude that the debt to Kerr pursuant to his employment contract with Baker-Roberts represents an obligation of the corporation for which Weeks may not be held personally liable.

Generally, directors and officers of a corporation are not individually liable for the debts and contracts of the corporation. See Martin v. Platt (1979), 179 Ind.App. 688, 386 N.E.2d 1026; 19 Am.Jur.2d Corporations Sec. 1341. As no constitutional, statutory, or charter provision imposes personal liability in this case, two major exceptions to the general rule are relevant here. The first requires a showing that the officer has personally guaranteed the corporation's obligation so as to assume liability as a guarantor. H. Henn & J. Alexander, Laws of Corporations Sec. 230 (3rd ed. 1983). Alternatively, if the officer has demonstrated disregard of the corporate form, treating the corporation essentially as a conduit for personal business affairs, the court may likewise disregard the corporate entity to avoid injustice. 1 W. Fletcher, Cyclopedia on Corporations Sec. 41.10 (1983). The plaintiff in this case, however, has made neither requisite showing to justify imposition of personal liability as to Weeks.

This court has considered a situation closely analogous to the present case in Highfield v. Lang (1979), 182 Ind.App. 77, 394 N.E.2d 204, involving a employee's suit against corporate officers to recover on dishonored commission checks signed by the officers. Affirming the trial court's conclusion of nonliability on the part of the defendant corporate vice-president, Judge Garrard relied heavily upon the plaintiff's knowledge...