Corporations_corporate president_personal liability for purchase of goods and services
A defendant in a contract action entered into the contract for her own benefit and could
not use the corporation of which she was president and majority owner as a shield. Although
there was evidence to the contrary, there was evidence supporting the trial court's finding of fact
that defendant personally contracted for the goods and services at issue.
SIGMON, CLARK, MACKIE, HUTTON, HANVEY & FERRELL, P.A., by
Warren A. Hutton, for plaintiff appellee.
LECROY AYERS & WILLCOX, PLLC, by M. Alan LeCroy, for defendant
appellant.
TIMMONS-GOODSON, Judge.
Judy Roebuck d/b/a Roebuck Hosiery (“defendant”) appeals from
a judgment of the trial court granting damages resulting from a
breach of contract, the interest thereon, and attorney's fees to
Nutek Custom Hosiery, Inc. (“plaintiff”). For the reasons stated
below, we affirm the judgment of the trial court.
The pertinent facts of the instant appeal are as follows.
Plaintiff is a hosiery company owned by Quince Lee Spencer
(“Spencer”). Defendant is the majority owner of the hosiery
company, Roebuck Sports, Inc. (“Sports”).
Sports incorporated on 3 August 1981 and administratively
dissolved on 1 April 1998. Defendant has acted as Sports'registered agent since 1994. Defendant became president of Sports
in 1998.
In October of 1999, defendant requested Spencer's help in
obtaining yarn to fulfill her business obligations. Defendant and
Spencer testified that they knew each other personally before the
onset of this litigation. Spencer further testified that he had
knowledge of defendant's current financial difficulties and agreed
to procure yarn for her at no additional cost. Defendant requested
that plaintiff provide additional services. Plaintiff complied and
charged defendant commercially reasonable rates for said services.
Defendant failed to pay either plaintiff or Spencer the invoiced
amount of $10,066.75 for the yarn and services.
Plaintiff filed a complaint alleging that defendant purchased
goods and services from plaintiff and failed to pay for said goods
and services. The matter came on for hearing before the trial
court on 23 May 2002, at which time the trial court entered the
following pertinent findings of fact:
6. In 1999, the Defendant contracted with
the Plaintiff through Plaintiff's President,
Quince Spencer.
7. The Defendant told Mr. Spencer that she
needed him to obtain yarn for a new business
venture because she could not obtain credit to
purchase yarn herself.
8. Mr. Spencer, through Nutek Custom
Hosiery, Inc., did comply with the request of
the Defendant as a favor.
9. Invoices were submitted to the Defendant
for payment.
. . . .
13. Roebuck Sports, Inc. operated in Valdese,
North Carolina.
14. The building Roebuck Sports, Inc.
occupied and equipment used by Roebuck Sports,
Inc. were sold.
. . . .
16. The checks which the Defendant produced
showing payment to the Plaintiff in the name
of Roebuck Sports, Inc. showed addresses of
Valdese, North Carolina as well as an[sic]
Hickory, North Carolina address where the “new
business” was located.
17. The Defendant used Wilson Hosiery Mill,
Inc. invoices and/or delivery tickets in order
to save money. Wilson Hosiery Mill, Inc. was
the name of Roebuck Sports, Inc. prior to its
change of name.
. . . .
18. Quince Spencer did personally loan
certain money to Roebuck Sports, Inc. and the
Defendant in the past, and at such time the
Defendant personally signed, and as President
of Roebuck Sports, Inc. signed as guarantors.
19. Roebuck Sports, [Inc.] has not been made
a party to this matter. . . .
20. $10,066.75 is due and owing the Plaintiff
upon the terms [of the invoice].
After concluding as a matter of law that defendant breached her
contract with plaintiff, the trial court entered judgment in favor
of plaintiff for the principal sum claimed and interest thereon,
and reasonable attorney's fees. Defendant appeals this judgment.
____________________________________________________
Defendant argues that the trial court erred by: (1) failing to
dismiss this action for failure to join Roebuck Sports, Inc., as a
necessary party; and (2) finding as fact that defendant acted onher own behalf in contracting with plaintiff for the goods and
services invoiced. For the reasons stated hereafter, we affirm the
judgment of the trial court.
The dispositive issue on appeal is whether the trial court's
finding of fact that defendant acted on her own behalf in
contracting with plaintiff was supported by competent evidence in
the record.
The standard of review for findings made by a trial court
sitting without a jury is whether any competent evidence exists in
the record to support said findings. Hollerbach v. Hollerbach, 90
N.C. App. 384, 387, 368 S.E.2d 413, 415 (1988). Findings of fact
and conclusions of law allow meaningful review by the appellate
courts. O'Neill v. Bank, 40 N.C. App. 227, 231, 252 S.E.2d 231,
234 (1979). Findings of fact are conclusive if supported by
competent evidence, irrespective of evidence to the contrary.
Associates, Inc. v. Myerly and Equipment Co. v. Myerly, 29 N.C.
App. 85, 89, 223 S.E.2d 545, 548 (1976).
Corporate officers and directors are generally not liable for
the debts of their corporation. N.C. Gen. Stat. . 55B-9(b) (2001).
When a corporate officer acts as an agent for the corporation and
enters into a contract with a third party, providing notice that he
is acting as the agent for the corporation, the corporate officer
is not personally liable for corporation obligations arising from
said contract. See Baker v. Rushing, 104 N.C. App. 240, 248, 409
S.E.2d 108, 112-13 (1991). However, if the corporate officer
enters into a contract allegedly for the benefit of thecorporation, but fails to inform the third party of his agency
status, or if the corporate officer enters into a contract with a
third party for the officer's own benefit, the corporate officer
may not use the corporation name as a shield to personal liability.
See generally id., Embree Construction Group v. Rafcor, Inc., 330
N.C. 487, 499-500, 411 S.E.2d 916, 924 (1992).
The court found as fact that defendant acted in her personal
capacity when contracting with plaintiff. There is competent
evidence in the record to support said finding. See Hollerbach, 90
N.C. App. at 387, 368 S.E.2d at 415. First, defendant informed
plaintiff that the yarn was needed for a “new business” venture.
Second, defendant sought Spencer out because Spencer had personally
loaned money to defendant and Sports in the past. Third,
defendant's name was listed on the invoice as the party to whom the
products and services were sold. At no time did defendant sign or
indicate that she was doing business in a representative capacity.
The trial court made findings of fact that defendant used
Wilson Hosiery Mill, Inc. invoices and/or delivery tickets in order
to save money. Although Sports' place of business was in Valdese,
North Carolina, three of the four checks in the record showed
Sports' address as Hickory, North Carolina, the location of
defendant's “new business.”
The record also reveals that plaintiff and defendant were
friends prior to the agreement. Plaintiff and defendant testified
that plaintiff charged defendant only the purchase price of the
yarn and a reasonable fee for the additional services defendantrequested. Plaintiff did this as a “favor” for defendant. We hold
that defendant entered into the contract with plaintiff for her own
benefit and she will not be permitted to use the corporation as a
shield to her personal liability. Although we note that there is
evidence to the contrary, we conclude that there is competent
evidence in the record to support the court's finding of fact that
defendant personally contracted with plaintiff for the goods and
services at issue. Thus, the assignment of error is overruled.
Having found competent evidence in support of the
determination of the trial court that defendant was personally
liable, it is unnecessary to address defendant's remaining
assignment of error regarding joinder of Sports as a necessary
party.
Affirm.
Judges HUNTER and ELMORE concur.
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