Good News for a Client Has Everyday Lessons
by
Kelly Michelle Davis on Jan. 23, 2017
Business Business Organization Lawsuit & Dispute Lawsuit
Summary: Personal liability caused by failure to follow corporate formalities
Recently we received good news for one of our clients: we had been waiting on the opinion for an appeal of the original trial where our client was awarded damages. The really good news is that our client won their appeal and the other side lost their appeal.
I really wanted to share this information with you because the details of the appeal relate to items that often arise in everyday construction business practices. This case was originally about a construction dispute between a contractor and an owner relating to oral change orders. Sound familiar? The dispute was not settled and it eventually ended up in court. We prevailed on behalf of the contractor and against the Defendant, personally, as well his business.
When the owner originally signed the contract, he signed it personally and not on behalf of his company. He filed the appeal claiming that he was personally “immune” and that it should only be the business that was liable. One line of the court’s opinion basically settles this issue, and should serve as fair warning on how to sign documents for your business: “A person who fails to disclose that he is signing a contract as an agent may be held liable on the contract”. So, the moral here is to always sign as an agent of the business. One way to do this is to make sure your title in your company is listed on the document (President, CEO, Vice President…) and that you list the full name of your company including its designation of LLC or Inc.
We also counter-appealed, claiming that the original trial court wrongfully denied the contractor pre-judgment interest. We argued that under the Prompt Payment Act of the Texas Property Code, we were entitled to eighteen percent pre-judgment interest. The 5th Court of Appeals reviewed the facts of this case and found that the court erred in failing to award interest pursuant to the Prompt Payment Act, and that the Owner was not relieved of his obligation to pay pre-judgment interest on the amount awarded by the trial court.
If you would like to read the full opinion of the Court of Appeals of the Fifth District of Texas at Dallas you can find it here: http://law.justia.com/cases/texas/fifth-court-of-appeals/2013/05-11-00759-cv.html