By: David M. Elliott
Those who sign in a representative capacity on behalf of a corporation or other entity need to take note of the holding in Reginald M. Mudd et al v. Rexford L. Goostree, Jr. et al, Tennessee Court of Appeals Case No. M2012-00957-COA-R3-CV, decided April 5, 2013. In a suit to recover rent due and owing under a lease agreement in which a corporation was named as a tenant, the Tennessee Court of Appeals affirmed judgment in favor of a landlord against an individual who had signed a lease in the space of the signature box designated "Tenant." Even though the corporation was named as Tenant in the lease, at the signature box, Mr. Goostree signed as follows: Tenant: REX GOOSTREE, JR. by Rex Goostree, Jr. (italics where handwritten). The Court held that this was "a clear and unambiguous designation of [Mr. Goostree] as the Tenant on the lease agreement." The Court decided not to entertain other evidence of the parties' intent, indicating that "only if a contract is ambiguous does a Court look beyond the four corners of the document and consider evidence of the parties' intentions." Not only is Mr. Goostree liable for the lease and late fees, but also for the Landlord's attorneys' fees at trial and on appeal.
Representatives of entities need to be very careful in signing documents that purport to bind the entity, especially in light of the Mudd holding. In the signature line, the name of the entity should be listed, and the individual should indicate how he or she is signing in the representative capacity, e.g. "President" or "Chief Manager." The Court decided that the contract was not ambiguous and decided not to "Muddy" the waters by looking at other evidence of the parties' intent. For this reason, extreme care should be utilized when signing documents on behalf of entities; otherwise individual signators maybe stuck in the Mudd!
David Elliott has been practicing business law for over 16 years. He has come across many documents where individual signators have not been as careful as they should.
This blog is not intended to create an attorney/client relationship or provide legal advice. Please contact the author if you have any questions or comments regarding the subject matter.