Business Law and the Regulation of Business 11th Edition by Richard Mann, Barry Roberts

تمرين 16

FACTS Plaintiffs Mark Line Industries, Inc., Mark Line Industries, Inc. of Pennsylvania, and Mark Line Industries of North Carolina, LLC (collectively ''Mark Line'') filed a complaint against defendants Murillo Modular Group, Ltd. (''MMG'') and Salvador V. Murillo (''Murillo'') alleging that the defendants had failed to pay the balances due on two promissory notes that they had given to Mark Line. The promissory notes, dated September 18, 2009, were for $3,802,532.00 and $743,297.50 respectively. The terms of the notes provided that they would mature on the date of whichever was sooner-November 15, 2009, or upon the date(s) when certain conditions were satisfied. Mark Line alleges that defendants did not pay the balance due by November 15, 2009. Mark Line further alleges that it received a payment of $79,549.51. Of this payment, $14,175.47 was applied towards accrued interest and the remaining $65,374.04 was applied to reduce the remaining principal balance.
Both notes include the following explanation for ''Maker/Borrower'': ''Maker/Borrower: Murillo Modular Group Ltd, Salvador Murillo and Nick Mackie, (collectively and severally the Maker or Makers or Borrower through Murillo Modular Group, Ltd.). The Makers/Borrowers shall be jointly and severally liable.''
At the end, both notes state: ''IN WITNESS WHEREOF, the Maker/Borrower understands that it is liable for all obligations arising under this Note and has caused the same to be signed and delivered as of the date first written above.''
The form of signature then says ''Murillo Modular Group, Ltd., Maker/Borrower.'' Murillo's signature appears above the signature block, ''By: Salvador Murillo, Owner'' on the first note and ''By: Salvador Murillo, Partner'' on the second note. Nick Mackie has also signed the first note as ''owner'' and the second note as ''partner.'' The notes then say ''Accepted: Mark Line'' and are signed by ''L. Michael Arnold, CEO.''
The parties have agreed to dismiss, without prejudice, the claim against Murillo for failure to pay the balance on the second promissory note. The defendants argue that the first promissory note for $3,802,532.00 shows only that Murillo signed the note in his representative capacity for MMG-not that he signed it in his individual capacity. They argue that Murillo is not individually liable because the ''form of his signature shows unambiguously'' that he signed as a representative of MMG.
DECISION The motion to dismiss made by the defendants Murillo Modular Group and Murillo is denied.
OPINION : Moody, J. Mark Line's pleadings show two different plausible theories for Murillo's individual liability for the note. First, under [UCC 3-402(a)], Murillo may be liable on the promissory note as a matter of contract law. This part of the statute provides:
If a person acting, or purporting to act, as a representative signs an instrument by signing either the name of the represented person or the name of the signer, the represented person is bound by the signature to the same extent the represented person would be bound if the signature were on a simple contract. If the represented person is bound, the signature of the representative is the ''authorized signature of the represented person'' and the represented person is liable on the instrument, whether or not identified in the instrument.
[UCC 3-402(a).] So, for example, if Person A agreed to have Person B act as his representative as a matter of agency law, and Person B signed his own name or Person A's name to an instrument, Person A is bound to the instrument as a matter of contract law. This is because as the authorized representative of Person A, Person B's signature is an authorized signature of Person A.
The promissory note at issue states that MMG, Murillo, and Mackie are ''collectively and severally the 'Maker or Makers or Borrower' through Murillo Modular Group, Ltd.''.) The phrase ''through Murillo Modular Group, Ltd.'' could mean that MMG was authorized to act on behalf of Murillo for this note, so that MMG was acting as Murillo's representative on the promissory note and Murillo was the represented person. In this way, Murillo could still be liable on the note even if he only signed in his representative capacity as the owner of MMG. It could be that MMG signed the note, through Murillo in his representative capacity, as Murillo's representative. Thus, the allegations paint a plausible story that MMG acted as the representative of Murillo under agency law, and by signing the note, it bound Murillo ''to the same extent [he] would be bound if the signature were on a simple contract.'' [UCC 3-402(a).]
Second, Murillo may be liable on the note under [UCC 3-402(b)]. [UCC 3-401(a)] states that a person is not liable on an instrument unless he has signed the instrument or his agent or representative has signed the instrument. [UCC 3-402(b)(1)] provides that a representative signing his name to an instrument as an authorized signature of a represented person is not liable on an instrument if the ''form of the signature shows unambiguously that the signature is made on behalf of the represented person.'' [UCC 3-402(b)(1).] If the form of signature ''does not show unambiguously that the signature is made in a representative capacity,'' ''the representative is liable on the instrument to a holder in due course that took the instrument without notice that the representative was not intended to be liable on the instrument.'' [UCC 3- 402(b)(2).] As to any other person ''the representative is liable on the instrument unless the representative proves that the original parties did not intend the representative to be liable on the instrument.'' [UCC 3-402(b)(2).]
In this case the form of signature is ambiguous. *** The U.C.C. provides three examples of when the form of signature is ambiguous. One example of this is when the agent signs as an agent, but fails to identify the represented person. UCC § 3-402 cmt. 2. That is similar to the situation as alleged here because the form of signature does not clearly identify MMG as the represented party. The note identifies MMG as the ''Maker/Borrower'' in the form of signature. However, the note defines ''Maker/ Borrower'' as MMG, Murillo, and Mackie ''through Murillo Modular Group.'' It then says that the ''Makers/ Borrowers shall be jointly and severally liable.'' It could be argued that if MMG was the only Maker or Borrower, this definition would not make any sense because there would be no one for it to be jointly and severally liable with. Therefore the definition of ''Maker/Borrower'' in the contract confuses the identity of the represented person and makes the form of signature ambiguous.
Further, the form of signature is also ambiguous because both Murillo and Mackie signed for MMG. As described above, the signature line on the promissory note *** states: ''Murillo Modular Group, LTD, Maker/ Borrower.'' Beneath that was ''By: Salvador Murillo, Owner'' with Murillo's alleged signature and ''By: Nick Mackie, Owner'' with Mackie's alleged signature. It could be argued that if they were signing only in their representative capacities for MMG, only one of them would have needed to sign the note. So this also causes some ambiguity in the form of signature.
In sum, at this point, Mark Line has plead plausible theories for Murillo's individual liability on the note ***.
INTERPRETATION When the agent signs as an agent but fails to identify the represented person, the agent is liable on the instrument to a holder in due course without notice that the agent was not intended to be liable.
CRITICAL THINKING QUESTION To whom and when should an agent be liable when signing a negotiable instrument?