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Wurzburg Bros., Inc. v. Coleman
Citations: 404 So. 2d 334; 32 U.C.C. Rep. Serv. (West) 182; 1981 Ala. LEXIS 3765Docket: 80-508
Court: Supreme Court of Alabama; September 4, 1981; Alabama; State Supreme Court
The case Wurzburg Brothers, Inc. v. James F. Coleman addresses the liability of James H. Coleman, who signed a note for Coleman American Moving Services, Inc. without indicating his representative capacity. Wurzburg Brothers, the plaintiff, sold supplies to Coleman American, which defaulted on payments and subsequently filed for bankruptcy. Wurzburg obtained a note from Coleman, stating the company would pay a specific amount, but Coleman only signed his name, leading to a dispute regarding whether he intended to personally guarantee the debt. The court identifies two primary issues: the admissibility of parol evidence to refute Coleman’s liability on the note and whether Coleman successfully rebutted the presumption of personal liability under Alabama Code 1975, § 7-3-403(2)(b). This provision indicates that an agent who signs without indicating a representative capacity is personally obligated unless established otherwise. The court notes that this interpretation is a matter of first impression in Alabama. Ultimately, the trial court ruled in favor of Coleman, but the appellate court reversed that decision, indicating that the admissibility of parol evidence hinges on the specific conditions outlined in the statute. The applicability of Code 1975, 7-3-403(2)(a) or 7-3-403(2)(b) hinges on whether the statute allows for an examination of the entire instrument's face or just the signature to ascertain who is liable. The statute aims to promote clarity in commercial paper transactions, allowing a taker to readily identify the obligation they hold. While some authorities suggest only examining the signature form for ambiguity, the language of 7-3-403 indicates a broader examination of the instrument's face is permitted. The statute allows for parol evidence if the instrument identifies the represented party but lacks clear indication of the signer's representative role. The trial court correctly admitted parol evidence to clarify the parties' intent, as the burden remains on the signer to prove lack of liability. The trial court determined that the note indicated corporate liability, not personal obligation for Mr. Coleman. Although the trial judge's findings are generally afforded deference, this presumption does not apply if incorrect legal principles are used. The reliance on outdated authority suggesting that a corporate name in a contract absolves personal liability contradicts 7-3-403(2)(b), which states that a signer is liable unless they can prove otherwise. Mr. Coleman failed to meet this burden, offering only his claim of non-intent to be personally bound, which is insufficient to disprove liability under the statute. In Rotuba Extruders, Inc. v. Ceppos, the court considered the liability of Mr. Coleman, a 25% shareholder and president of Coleman American, who was involved in guaranteeing a corporate debt. Evidence indicated that the credit manager and president of Wurzburg Brothers traveled to obtain Coleman's signature due to concerns about Coleman American's potential insolvency. Coleman, an experienced businessman with nearly twenty years in a position of authority, had the responsibility for drafting the note and could have indicated a representative capacity if desired. The court found it reasonable to hold Coleman liable for the corporate debt, emphasizing his business acumen and the absence of unfairness in this determination. The trial court's judgment was reversed and the case was remanded for further proceedings. Concurrence was noted from Justices Torbert, Almon, Embry, and Adams.