Opinion ID: 564416
Heading Depth: 2
Heading Rank: 2

Heading: Individual Liability of Corporate Officer Under New York Law

Text: 16 Under New York law, an agent who signs an agreement on behalf of a disclosed principal will not be individually bound to the terms of the agreement unless there is clear and explicit evidence of the agent's intention to substitute or superadd his personal liability for, or to, that of his principal. Mencher v. Weiss, 306 N.Y. 1, 4, 114 N.E.2d 177, 179 (1953). The rationale behind this rule is that, [i]n modern times most commercial business is done between corporations, not individual stockholders or officers of the corporation, who, in many instances, own little or no stock in the corporation. Salzman Sign Co. v. Beck, 10 N.Y.2d 63, 67, 217 N.Y.S.2d 55, 57, 176 N.E.2d 74, 76 (1961). An individual who is only an indirect beneficiary of the agreement thus should not be directly bound to the terms of the agreement absent clear evidence of an intent to create individual liability. 17 Applying this presumption, New York courts have found individual liability only in rare cases. For instance, in Paribas Properties, Inc. v. Benson, 146 A.D.2d 522, 536 N.Y.S.2d 1007 (1989) (1st Dept.), a New York court found personal liability only in the face of overwhelming evidence of the signatory's intention to assume personal liability, including: 1) the fact that the contract was only three pages long, and thus was not a trap for an unwary signatory; 2) that the paragraph that assigned personal liability appeared directly above the signature line; 3) that the signatory's name appeared in the agreement itself; 4) that the parties negotiated the agreement in depth; and 5) that the signatory was the president and principal shareholder in the corporation. See 146 A.D.2d at 525-26, 536 N.Y.S.2d at 1009-1010. 18 Unlike the situation in Paribas, the evidence of an assumption of individual liability is far from overwhelming here. While the Certificate employs the pronoun he with regard to the signatory, arguably connoting personal liability, it also states that he is a member of the Association, revealing that he must refer to TFM, because TFM, not Lerner, was the designated member of the Association. Moreover, the structure and content of the Certificate's signature lines also militate against individual liability. The signature lines first call for a printed designation of the firm name, TFM, and then, following the word by, a signature of an individual, Lerner. In legal parlance, the employment of the word by means [t]hrough the means, act, agency, or instrumentality of, see Black's Law Dictionary 182 (5th ed.1979), particularly when it is used preceding a signature. In other words, Lerner signed the agreement on behalf of TFM in his capacity as an agent of the corporation, and not on behalf of himself as an individual. Finally, our reading of Lerner's intent is also reinforced by the fact that, after he printed his name on the Certificate, he wrote it's [sic] President, signifying that he intended to sign the document in his official capacity. Taken together, all of these facts strongly suggest that Lerner did not intend to assume personal liability, and we therefore find that Lerner is not personally bound to the terms of the Certificate. 19 Accordingly, the judgment of the district court is reversed and the Union is hereby stayed from seeking arbitration against Lerner in his individual capacity. 20