Nichols v. Seale
12 U.C.C. Rep. Serv. (West) 711, 493 S.W.2d 589, 1973 Tex. App. LEXIS 2538 (1973)
Rule of Law:
When an individual signs a negotiable instrument using a corporate assumed name without explicitly indicating representative capacity, the instrument is ambiguous, and extrinsic evidence is admissible between immediate parties to prove the signer's corporate capacity, raising a fact issue sufficient to preclude summary judgment. An affidavit asserting the signer acted as a corporate officer, not personally, can constitute competent summary judgment proof as a factual inference.
Facts:
- Carl V. Nichols signed a promissory note on a printed form beginning with the language 'I, we or either of us.'
- The note was signed 'THE FASHION BEAUTY SALON' with 'Carl V. Nichols' typed below, and then 'Carl V. Nichols' handwritten below the typed name.
- Mr. Carls Fashion, Inc. was a Texas Corporation incorporated on January 14, 1960.
- Mr. Carls Fashion, Inc. did business under the assumed name 'The Fashion Beauty Salon' at 2115 Sherry Lane, Dallas, Texas.
- Carl V. Nichols served as President of Mr. Carls Fashion, Inc. from its incorporation date.
Procedural Posture:
- Plaintiff (payee) sued Carl V. Nichols 'individually and doing business as The Fashion Beauty Salon' in the trial court on a promissory note.
- Carl V. Nichols filed a sworn answer denying individual liability and alleging he signed on behalf of Mr. Carls Fashion, Inc.
- Plaintiff filed a motion for summary judgment against Nichols.
- Nichols filed an affidavit in response to plaintiff's motion for summary judgment.
- The trial court (court of first instance) rendered summary judgment against Carl V. Nichols.
- Nichols appealed the judgment to the Court of Civil Appeals (intermediate appellate court).
- The Court of Civil Appeals initially affirmed the trial court's summary judgment.
- Nichols filed a motion for rehearing with the Court of Civil Appeals.
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Issue:
Does an individual who signs a promissory note using a corporate assumed name, without explicitly indicating representative capacity, become personally liable as a matter of law, or is extrinsic evidence, including an affidavit stating the signer's corporate capacity, admissible to prove the true capacity and raise a fact issue sufficient to defeat a motion for summary judgment?
Opinions:
Majority - Guittard, Justice
No, Carl V. Nichols is not personally obligated as a matter of law, because the use of the assumed name 'The Fashion Beauty Salon' sufficiently 'names the person represented' (Mr. Carls Fashion, Inc.), creating an ambiguity that permits the admission of extrinsic evidence (such as Nichols' affidavit) to demonstrate that he signed in a representative capacity and not personally, thereby raising a genuine issue of material fact. The court held that under Tex.Bus. & Com.Code Ann. § 3.403(b) and § 3.401(b), the use of an assumed name for a corporation constitutes 'naming the person represented.' Since corporations are permitted to use assumed names, 'The Fashion Beauty Salon' was considered to name Mr. Carls Fashion, Inc. When an instrument names the represented person but does not show representative capacity, it creates an ambiguity regarding the signer's capacity, allowing for the admission of extrinsic evidence to explain the intention of the parties. The conventional printed language 'I, we or either of us' further increased this ambiguity. The court further held that Nichols' affidavit, stating he signed 'in the capacity of officer of such corporation and in behalf of such corporation and not in my personal capacity,' was a competent factual inference and a 'shorthand rendering of the facts,' not an inadmissible legal conclusion, for purposes of summary judgment. The court reasoned that a party's subjective intent, when material, can be established directly by their own testimony, and a corporate officer can testify concerning the corporation’s intention. Given the summary judgment standard of resolving doubts against the moving party, the affidavit was sufficient to raise a genuine issue of material fact, precluding summary judgment.
Analysis:
This case significantly clarifies the interpretation of UCC § 3.403(b) in Texas, establishing that the use of a corporate assumed name on a negotiable instrument, even without explicit indication of representative capacity, creates an ambiguity allowing extrinsic evidence to resolve liability between immediate parties. It provides important guidance on the type of evidence, particularly affidavits, that can defeat summary judgment motions, by differentiating between admissible factual inferences and inadmissible legal conclusions. This decision protects individuals from automatic personal liability where corporate intent can be reasonably inferred or proven through contextual evidence, thus promoting a more equitable application of commercial law based on actual intent rather than strict adherence to form.
