Court Opinion

ID: 9693747
Source: CourtListenerOpinion
Date Created: 2023-08-25 16:58:46.139197+00
Date Added: 2024-06-11T18:19:49.898634
License: Public Domain

DEL SOLE, Judge,
dissenting.
I must dissent from the Majority’s opinion, and would affirm the trial court’s order granting summary judgment in favor of Appellee.
In the instant case, the applicant for credit from Denlinger was Blue Mountain Development Co., Inc. As the majority notes, Mr. Dendler had recently incorporated his small, sole proprietorship construction business, and we may as*184sume that one of the reasons for forming such a corporation was to benefit from the limited liability afforded corporations in this Commonwealth. As we stated in Village at Camelback Property Owners' Association Inc. v. Carr, 371 Pa.Super. 452, 458, 538 A.2d 528, appeal granted 519 Pa. 668, 548 A.2d 257 (1988), affirmed 524 Pa. 330, 572 A.2d 1 (1990);
[ 0]ne of the central reasons for conducting business in corporate form is the avoidance of personal liability by those holding equity in the corporation and limitation of the risk of those persons to the value of their equity ... [B]ecause of this goal, our Business Corporations Law permits liability for corporate debt to be assessed against shareholders, officers and directors in only the most limited of circumstances.
It is also the settled law of this Commonwealth that a corporation is a creature of legal fiction which can act only through its officers, directors and other agents, Lokay v. Lehigh Valley Cooperative Farmers, Inc., 342 Pa.Super. 89, 97, 492 A.2d 405, 408 (1985), and that when, “a party contracts with a corporation through a corporate agent who acts within the scope of his authority and reveals his principal, the corporate principal alone is liable for breach of contract.” Daniel Adams Associates, Inc., v. Rimbach Publishing, Inc., 360 Pa.Super. 72, 519 A.2d 997, 1000-1001 (1987). Therefore when a corporation contracts with another company for credit through its officer, and the officer acts within the scope of that authority and reveals the corporate principal, it is reasonable to expect that the corporate principal alone and not the officer/signatory will be liable if there is a breach of contract.
It is undisputed that the credit application was signed by Mr. Dendler in his corporate capacity as president of Blue Mountain, and there was no separate signature of Mr. Dendler’s in his individual capacity. He was acting within the scope of his authority and revealed the identity of his principal. Furthermore, the named applicant was Blue Mountain Development Co., Inc., and Mr. Dendler filled in *185the application in the space provided for a corporate applicant, rather than in the other spaces provided for a partnership or an individual. Therefore, Mr. Dendler intended to bind the corporation, not himself, personally, and because a central benefit of incorporating was to avoid personal liability, he reasonably expected that in signing the application in his corporate capacity, he was binding the corporation and was not incurring personal liability.
The majority correctly sets forth a test regarding unconscionability as found in Witmer v. Exxon Corp., 495 Pa. 540, 541, 434 A.2d 1222 (1981). Later cases of this court, however, have expanded and explained this test to apply to a variety of circumstances, some of which are particularly relevant to the case before us.
In Germantown Manufacturing Co. v. Rawlinson, 341 Pa.Super. 42, 491 A.2d 138, 146-47 (1985), we discussed one type of unconscionability which may be classified under the rubric of “unfair surprise”.
This type of unconscionability involves contractual terms which are not typically expected by the party who is being asked to “assent” to them. An unexpected clause often appears in the boilerplate of a printed form and, if read at all, is often not understood. By signing such a form, a party is bound only to those terms which such party would reasonably expect such a printed form to contain. If the form contains a material, risk shifting clause which the signer would not reasonably expect to encounter in such a transaction, courts have held that the clause may be excised as it is unconscionable. This type of unconscionability is typically found only in consumer cases and courts have exhibited some reluctance to apply it in cases dealing with merchant-to-merchant contracts. A court must determine what a particular party, in the context of the particular transaction, reasonably expected beyond the “dickered” terms. Unread terms in the form that are consistent with that expectation should be operative: those that are inconsistent should be inoperative. The conspicuousness of the print as well as the character *186of the document would be considered. J. Murray, The Standardized Agreement Phenomenon in the Restatement (Second) of Contracts, 67 Cornell L.Rev. 735, 776 (1982).
In the instant case, Mr. Dendler could not reasonably expect that there would be a clause in the boilerplate of the printed form which would hold him personally liable for the debts of the corporation. He had signed the document in his corporate capacity and had applied for credit for the corporation in the space on the form provided for corporations, not in the space provided for individuals. Furthermore, there is no question that the clause in dispute is a material, risk-shifting clause. It completely negates the value of a corporation’s limited liability, and shifts the risk of default onto the officer who is acting for the corporation.
The disputed clause found in the document is part of the boilerplate language found on the back of the form. There is no bolding or underlining or variation in the typeface which distinguishes this clause from the rest of the small print on the back of the form, although, in contrast on the back, the part of the form which limits warranties is capitalized and printed in darker, thicker print. In general, this clause is a classic example of a physically inconspicuous provision in the boilerplate of a standard form.
Finally, in finding unconscionability we are asked to consider the character of the document. The document in question, a credit application form, is divided into sections applicable to various types of applicants: partnerships, corporations, and individuals. Therefore, we may characterize the document as a credit application form for corporations, or partnerships, or individuals. In filling out the section for corporations, it may be fairly said that Mr. Dendler was filling out a corporate credit application, and therefore a clause forfeiting the corporation’s limited liability may be said to be inconsistent with the character of the document.
For all these reasons, I would find that the clause in the form, holding Mr. Dendler personally liable for the debts of *187the corporation, is inoperative and falls under the category of unconscionability by unfair surprise.
The Germantown case, which sets out the standard for finding unconscionability by unfair surprise, is a consumer case and the question of whether merchant-to-merchant transactions may be unconscionable was not in issue. However, the Court did note that, “modern courts recognize that the signer may be theoretically and technically a merchant but functionally a consumer in terms of education, business acumen, and experience.” Germantown, supra, 341 Pa.Superior Ct. at 57, 491 A.2d at 146, n. 5. More importantly, in a recent case, Moscatiello v. Pittsburgh Contractors Equipment Company, 407 Pa.Super. 363, 595 A.2d 1190 (1991), we found unconscionability in a contract between merchants.
In Moscatiello, we held that clauses in a sales contract signed by Franco Moscatiello, as owner of a construction company and Pittsburgh Contractors Equipment Company [PCEC], which excluded consequential and incidental damages, and limited Moscatiello’s remedies to the return of the purchase price less wear and use of machine, was unconscionable and unenforceable because of the, “absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.” Id., 407 Pa.Superior Ct. at 373, 595 A.2d at 1195, quoting, Germantown, supra, 341 Pa.Superior Ct. at 55, 491 A.2d at 145.
The Moscatiello court cited the following language contained in Section 353 of J. Murray, Murray on Contracts, (2nd ed., 1974).
The parties will not be found to have agreed to an abnormal allocation of risk if the only evidence thereof is an inconspicuous provision on the boilerplate of a standard form. At a minimum, the reallocation must be physically manifested in a fashion comprehensible to the party against whom it is sought to be enforced. Id.
We held that Moscatiello had no reason to expect that the contract he signed contained a clause that was buried in the fine print on the reverse side which shifted to him the risk of economic loss resulting from the purchase of the ma*188chine. We also held that Moscatiello was not a dealer or manufacture of heavy equipment of any kind, nor was the Moscatiello corporation a substantial business concern, skilled in the negotiation of contracts for goods. In contrast, PCEC had negotiated many other contracts for the purchase of this type of equipment and was familiar with the “conditions” On the reverse side of its own form. We also concluded that PCEC clearly held the superior bargaining position. Id., 407 Pa.Superior Ct. at 376, 595 A.2d at 1196-1197. Therefore, this court found that Moscatiello, was “functionally a consumer in terms of education, business acumen and experience,” and the terms of the contract limiting damages from the malfunctioning of the machine were unreasonable and unconscionable. Id.
Like Moscatiello Co., Blue Mountain Development Co. was not a substantial business concern, in fact it was probably smaller than Moscatiello which was engaged in highway construction projects, while Blue Mountain was a small construction business which specialized in residential projects and had just recently incorporated. It was not skilled in credit purchases, for as the Majority notes, prior to incorporation it dealt only in cash purchases of building materials from Denlinger. Denlinger, on the other hand, is a dealer in construction supplies, with many salespeople, a credit department, and wide experience in extending credit to its buyers. Clearly there was a vast disparity between the two parties in terms of bargaining power and sophistication in conducting this type of business, and therefore even though both parties were merchants, for the purposes of this contract, I would find that Mr. Dendler was functionally a consumer.
Furthermore, like the form contract in Moscatiello, the disputed clauses were buried in the fine print on the reverse side of the application, and the clause materially shifted the risk of economic loss away from the corporation, and to the individual acting for the corporation. Therefore, like the court in Moscatiello, I would find that the clause in which *189Mr. Dendler assumed personal liability for the corporation’s debts, unenforceable and unconscionable.
I am in full agreement with the trial court which stated:
“Where someone is to be held personally liable for the debt of another, albeit a corporate obligation, that intent should be indicated in the most unequivocal and explicit language and especially by a separate signature in an individual capacity acknowledging such responsibility. Plaintiff in the present case is attempting to thwart the primary reason for incorporation of many small businesses—the avoidance of personal liability. While we are not here formulating a complete ban on such action, we are vigorously endorsing the principle that this will not be permitted except under the clearest circumstances and in the most unambiguous terms. (Trial Court Opinion at 4, May 20, 1991. (emphasis in original)).