Wolf v. Little John Corp. of Liberia

• Citation: 585 S.W.2d 774
• Decision Date: 31 May 1979
• Docket Number: No. 17228,17228
• Parties: 27 UCC Rep.Serv. 740 Russell C. WOLF, Appellant, v. LITTLE JOHN CORPORATION OF LIBERIA et al., Appellees. (1st Dist.)
• Court: Texas Court of Appeals

Page 774

585 S.W.2d 774

27 UCC Rep.Serv. 740

Russell C. WOLF, Appellant, v. LITTLE JOHN CORPORATION OF LIBERIA et al., Appellees.

No. 17228.

Court of Civil Appeals of Texas, Houston (1st Dist.).

May 31, 1979.

Rehearing Denied July 12, 1979.

W. James Kronzer, Kronzer, Abraham & Watkins, Maurice A. Lehmann and Firman A. Hickey, Jr., Houston, for appellant.

Bean & Manning, Jack B. Manning, Houston, for appellees.

Before COLEMAN, C. J., and DOYLE and WALLACE, JJ.

WALLACE, Justice.

This is an appeal in a suit on a promissory note. Trial was to a jury which answered all issues adverse to plaintiff. Prior to trial, summary judgment had been entered against Little John Corporation of Liberia.

Plaintiff herein, Russell C. Wolf, (Wolf) was holder of the subject note. The suit named Little John Corporation of Liberia, John W. Mecom (Mecom, Sr.) and John W. Mecom, Jr. (Mecom, Jr.) as defendants. Wolf alleged that Little John Corporation of Liberia was the alter ego of Mecom, Sr. and also of Mecom, Jr.; that Mecom, Sr. promised to personally pay the note when he had no intention to do so; that Mecom, Jr. failed to advise Wolf that there were two corporations named Little John Corporation, both of which were owned by Mecom, Sr., and that such failure constituted fraud. The issues submitted to the jury and answered adversely to Wolf were (1) Little John Corporation (Liberia) was the alter ego of Mecom, Sr., (2) Little John Corporation (Libera) was the alter ego of Mecom, Jr., (3) promise by Mecom, Sr., to personally pay the note, (4) Little John Corporation of Liberia was insolvent when note was executed and (5) failure of Mecom, Jr., to identify which Little John Corporation was the maker of the note was material. The last three issues above were each the first in a series necessary to establish fraud.

Appellant assigns seven points of error. The first four are directed to the personal liability of Mecom, Jr., under Texas Business and Commerce Code. The remaining three points are directed toward the factual

sufficiency of the evidence to support the jury finding on alter ego.

LIABILITY UNDER TEXAS BUSINESS AND COMMERCE CODE

The note in question was for the amount of $113,451.00, was dated June 18, 1968, and signed "Little John Corporation By John W. Mecom, Jr., President." Consideration was a personal note from Mecom, Sr., to Wolf for $50,000.00 dated January 1, 1963, and the unpaid portion of a series of notes from Pan American Industries, Inc., to Wolf in the original amount of $70,115.00. Pan American Industries, Inc., was owned by Mecom, Sr. and Wolf.

Mecom, Sr., was engaged in an effort to borrow approximately $50,000,000.00 as part of a refinancing plan for his various enterprises. Frank A. Learman was working for Mecom, Sr., as a financial consultant to structure the refinancing program. At the suggestion of Learman the note in question was prepared and executed. As part of the transaction, all of Wolf's interest in Pan American Industries, Inc., was transferred to Mecom, Sr. There were two corporations named Little John Corporation. One was a Delaware corporation and the other was a Liberia corporation. Wolf was unaware that two corporations named "Little John Corporation" existed. The record shows that Wolf took the note with knowledge that Little John Corporation was the principal maker and Mecom, Jr., signed it in a representative capacity. Wolf contends that Mecom, Jr., is liable on the note as a matter of law under Section 3.403 of Tex.Bus. & Comm.Code. His contention is based on the premise that when there exist two principals with identical names and the note does not indicate the one intended to be named, that is equivalent to naming no principal. This is a case of first impression.

Tex.Bus. & Comm.Code, Section 3.403 states:

(a) A signature may be made by an agent or other representative, and his authority to make it may be established as in other cases of representation. No particular form of appointment is necessary to establish such authority.

(b) An authorized representative who signs his own name to an instrument

(1) is personally obligated if the instrument neither names the person represented nor shows that the representative signed in a representative capacity;

(2) except as otherwise established between the immediate parties, is personally obligated if the instrument names the person represented but does not show that the representative signed in a representative capacity, or if the instrument does not name the person represented but does show that the representative signed in a representative capacity.

(c) Except as otherwise established the name of an organization preceded or followed by the name and office of an authorized individual is a signature made in a representative capacity.

Wolf urges that section 3.403(b)(2) should be interpreted in its broadest sense in order to sustain his contention that the note in effect does not name a principal. Section 3.403(c) must also be considered in interpreting section 3.403(b)(2). When the two are considered together we find that the drafters of the code anticipated the present situation when they provided:

(c) . . . the name of an organization preceded or followed by the name of an authorized individual is a signature made in a representative capacity.

Therefore, even though there is ambiguity or confusion as to the actual identity of the principal, if the note contains the name of an organization followed by the name of an authorized individual, plus his office, there is a prima facie showing that the individual signed in a representative capacity, and is thus not personally liable on the note.

This brings us to the question of whether Mecom, Jr., was authorized to sign the note in question. He was president of both Little John Corporations. He and his two sisters were the only directors of both The first three points of error are overruled.

corporations. A resolution of the board of directors of Little John Corporation (without indicating which one) authorizing Mecom, Jr., to execute the note in question was executed by all three directors. In a separate memorandum Wolf acknowledged reading the resolution which stated that consideration to Little John Corporation for the note was credit to the corporation on a debt it owed to Mecom, Sr. This resolution and the memorandum executed by Wolf were placed in the records of Little John Corporation (Liberia). This is evidence that Mecom, Jr., was authorized to sign the note as president of Little John Corporation (Liberia). Mecom, Jr.'s lack of authority was an independent ground of recovery for Wolf. As such, Wolf had the burden of proving that Mecom, Jr., was not authorized to sign the note. No such issue was requested by Wolf and was therefore waived. Rule 279, T.R.C.P.; Wichita Falls & Oklahoma Ry. Co. v. Pepper, 134 Tex. 360, 135 S.W.2d 79 (194...