Opinion
NO. 2013-CA-000459-MR
05-01-2015
EDWARD WANANDI APPELLANT v. BRUCE BLACK APPELLEE
BRIEF FOR APPELLANT: Sheryl G. Snyder Theresa A. Canady Louisville, Kentucky BRIEF FOR APPELLEE: David V. Kramer Crestview Hills, Kentucky William Keith Noel Edgewood, Kentucky Tania E. Fuller, pro hac vice Grand Rapids, Michigan
NOT TO BE PUBLISHED APPEAL FROM BOONE CIRCUIT COURT
HONORABLE ANTHONY W. FROHLICH, JUDGE
ACTION NO. 11-CI-00649
OPINION
AFFIRMING IN PART, REVERSING IN PART, AND REMANDING
BEFORE: KRAMER, TAYLOR, AND VANMETER, JUDGES. KRAMER, JUDGE: Edward Wanandi brings this appeal from a December 4, 2012 Judgment of the Boone Circuit Court upon a jury's verdict awarding Bruce Black $2,000,000 in compensatory and punitive damages. We affirm in part and reverse in part.
By way of background, Wanandi was the sole shareholder of Trailmobile Corporation. Trailmobile Corporation was the parent company of Trailmobile Parts & Service Corporation, Trailmobile Parts & Service Canada, LTD, and Trailmobile Canada LTD (collectively referred to as Trailmobile). Black was the former president and chief operating officer of Trailmobile Corporation and was employed by Trailmobile for some 34 years. Black maintained an office in northern Kentucky. Wanandi terminated Black's employment with the corporation in 2008.
Trailmobile Corporation has been dissolved and is no longer in existence.
In 2011, Black filed a complaint against Wanandi individually in the Boone Circuit Court. In the complaint, Black alleged that he and Wanandi executed a Severance and Bonus Agreement in 2006 (2006 Agreement). According to Black, the 2006 Agreement provided that if Wanandi terminated Black's employment for any reason other than gross negligence or a felony conviction Black would be entitled to compensation from Trailmobile and from Wanandi, personally. Thereupon, Black claimed that Wanandi breached the 2006 Agreement by failing to pay Black sums owed under the 2006 Agreement upon Black's termination. However, Black could not produce the original 2006 Agreement or a signed copy. Black averred that Wanandi kept the original 2006 Agreement and that no copies were made. Black also asserted claims of fraud and promissory estoppel. Neither party introduced an executed copy of the 2006 Agreement into evidence at trial or filed a copy of the same in the court record.
Early in the case, Wanandi filed a motion to dismiss for lack of personal jurisdiction, alleging he was a resident of Illinois who had not conducted business in Kentucky. The trial court denied the motion to dismiss and determined that Kentucky could properly exercise personal jurisdiction over Wanandi. Wanandi then filed an answer. Therein, Wanandi denied executing the 2006 Agreement and otherwise denied assenting to the terms of the 2006 Agreement. Alternatively, Wanandi claimed the 2006 Agreement was executed only between Black and Trailmobile; Wanandi alleged that his signatures were in his corporate representative capacities only and not individually. As such, Wanandi asserted that even if he did sign the 2006 Agreement, he was not personally liable for Trailmobile's alleged breach.
Ultimately, the trial court submitted Black's claims of breach of the 2006 Agreement and of fraudulent inducement to the jury. The jury was initially instructed upon whether they believed by clear and convincing evidence that Wanandi did, in fact, sign the 2006 Agreement. The jury found in the affirmative and also found that Wanandi breached the 2006 Agreement. As for fraudulent inducement, the jury likewise found in favor of Black. The jury then awarded $1.6 million to Black in compensatory damages for both claims and awarded $400,000 in punitive damages for which judgment was entered. This appeal followed.
I. BREACH OF CONTRACT
It is apparent from a number of statements Wanandi makes throughout his brief that he takes umbrage with the fact that the jury believed he signed the 2006 Agreement. But, absent from his brief is any argument that the jury's finding to that effect was unsupported; instead, Wanandi's arguments on appeal relating to Black's breach of contract claim focus upon how he signed the 2006 Agreement.
For example, Wanandi writes in his brief: "Black's breach of contract claim was premised on Wanandi's alleged personal guarantee of the corporate obligations set forth in the 2006 Document. But even if a jury believed that the document had been executed . . ." (Emphasis added.) Later, he writes, "Thus, even if Wanandi had executed the 2006 Document—and he did not—he could only have done so in his capacity as a corporate officer." (Emphasis added.)
This Court only reviews "argument[s]" within the meaning of Kentucky Rules of Civil Procedure (CR) 76.12(4)(c)(v), which, among other things, conform "to the statement of Points and Authorities" and have "ample supportive references to the record and citations of authority pertinent to each issue of law[.]" In light of this definition, statements that simply dispute a jury's factual finding, such as those populating Wanandi's brief with respect to the jury's finding that he signed the 2006 Agreement, do not qualify as arguments and, thus, do not warrant review. Likewise, the statement of Points and Authorities in Wanandi's brief is confined to the proposition that he did not sign the 2006 Agreement in his "personal" or "individual" capacity.
Nevertheless, context requires our analysis to begin with a discussion of why, even if Wanandi had effectively raised an argument contesting it, the jury's finding that he signed the 2006 Agreement was appropriate. A. Clear and convincing evidence supports Wanandi signed the 2006 Agreement.
As indicated, Black based his breach of contract claim against Wanandi upon a 2006 agreement of which he could not produce a signed copy. It was accordingly Black's burden to prove the existence and establish the contents of the 2006 Agreement through clear and convincing evidence. See Kentucky Rules of Evidence (KRE) 1008(a) and (c); see also BDT Prods., Inc. v. Lexmark Intl., Inc., 274 F.Supp.2d 880, 895-96 (E. D. Ky. 2003), explaining:
Kentucky law requires that the evidence necessary to establish a lost writing "must be clear and satisfactory." Suter v. Suter, 278 Ky. 403, 128 S.W.2d 704, 706 (1939). Indeed, Kentucky courts have approvingly quoted the early decision of the United States Supreme Court in Tayloe v. Riggs on the same subject:
When a written contract is to be proved, not by itself but by parol testimony, no vague uncertain recollection concerning its stipulations ought to supply the place of the written instrument itself. The substance of the agreement ought to be proved satisfactorily; and if that cannot be done, the party is in the condition of every other suitor in Court, who makes a claim he cannot support. When parties reduce their contract to writing, the obligations and rights of each are described, and limited by the instrument itself. The safety which is expected from them, would be much impaired, if they could be established upon uncertain and vague impressions made by a conversation antecedent to the reduction of the agreement.Arrington v. Sizemore, 241 Ky. 171, 43 S.W.2d 699, 704 (1931) (quoting Tayloe v. Riggs, 26 U.S.(1 Pet.) 591, 600, 7 L.Ed. 275 (1828)).
This Court has also explained that the "clear and convincing" standard "does not mean that it must be established beyond a reasonable doubt, but that the evidence must not be vague, ambiguous, or contradictory, and must come from a credible source. It does not have to be undisputed or uncontradicted." Wehr Constructors, Inc. v. Steel Fabricators, Inc., 769 S.W.2d 51, 54 (Ky. App. 1988) (citing Glass v. Bryant, 302 Ky. 236, 194 S.W.2d 390 (1946)).
Here, much of Black's claim regarding the existence of the 2006 Agreement was undisputed. Wanandi and Black both agreed that Black informed Wanandi in the fall of 2006 that he had received a job offer from a Trailmobile competitor and that he wanted a contract if he was going to remain employed by Trailmobile. Wanandi wanted Black to stay with Trailmobile and told Black to draft an employment contract. Over the course of an approximately thirty-day period in the fall of 2006, Wanandi and Black cooperatively negotiated the terms of what would eventually become the basis of Black's lawsuit (i.e., the aforementioned 2006 Agreement). Wanandi, an experienced businessman, elected not to enlist the aid of an attorney to assist him during this process. Over the course of three separate drafts exchanged during the negotiations, the 2006 Agreement was always entitled "Severance and Bonus Agreement." The unsigned document introduced by Black as evidence of the 2006 Agreement accurately reflected the third of those three drafts. Under the language of any of the three drafts, Black would have been entitled to at least $1.6 million at the time of Wanandi's alleged breach. All three drafts also included the same language, described further below, indicating that Wanandi personally guaranteed payment.
The primary difference among the drafts was in how Black's "continuance bonus" money, discussed further below, was to be paid.
Wanandi and Black also agreed that at all times relevant to this litigation they had maintained a relationship of trust that had formed over the course of working closely with one another for about seventeen years. They also agreed that around October 30, 2006, after their roughly thirty days of negotiations, Black came into Wanandi's office and asked him to sign the 2006 Agreement.
As noted, Black worked for Trailmobile for 34 years. He was continuing to do so when Wanandi purchased the company seventeen or so years prior to this litigation.
What happened next was disputed and was not witnessed by anyone other than Black and Wanandi. Black testified that Wanandi reviewed the agreement; asked Black if he trusted him; and then asked Black if he really needed to sign it. Black testified that he insisted on it; that Wanandi signed it four times; but, that Wanandi only signed one of the two copies of the 2006 Agreement that Black had brought with him. Black testified that Wanandi, in turn, wanted it to be kept confidential; did not want it disclosed to any other executives within Trailmobile and its subsidiaries (none of whom had contracts); and that Wanandi insisted on keeping the only signed copy. Black also testified that because he trusted Wanandi, he did not object to this arrangement.
For his part, Wanandi verified that when Black handed him the 2006 Agreement, he asked Black if he trusted him and told him that there was no reason for him to sign it. Wanandi testified Black probably responded to him by reminding him that he, Wanandi, was a frequent international traveler and that something could happen to him. Wanandi testified Black wanted the safety and security of a signed document. Wanandi testified that Black, at that point, had been insisting upon a signed contract for the previous thirty days.
Nevertheless, Wanandi further testified he then refused to sign the 2006 Agreement. He testified that he had never actually intended to sign any kind of contract with Black. He also testified that he could not remember how Black reacted to his refusal or how their meeting ended, but that Black probably just went back to work.
However, Wanandi verified that he told Black he was keeping the copy of the 2006 Agreement that Black had handed him during their meeting. He testified that he placed it in his desk drawer. He testified that he could not remember why he needed to retain an unsigned copy of the 2006 Agreement. And when Wanandi was directed through discovery to produce the copy of the 2006 Agreement that he had admittedly retained, he failed to do so.
Thereafter, it is undisputed that until his eventual termination in the fall of 2008, Black remained with Trailmobile and did not look for any other source of employment. As to why, Wanandi would later assert (in a separate Illinois lawsuit he filed against Black in May, 2012, the pleadings of which were introduced as evidence in this matter) that sometime after he had refused to sign the proffered 2006 Agreement, Black nonetheless made him a legally binding promise to remain with Trailmobile without any understanding, implicit or explicit, that his employment would be duly compensated. See Wanandi v. Black at 379.
Wanandi argues that the pleadings of his Illinois lawsuit against Black were irrelevant and should not have been admitted into evidence because that matter involved "a claim of promissory estoppel arising out of Black's actions in the fall of 2008" and "makes no reference to the 2006 Document." However, we find no error in the circuit court's decision to find this evidence relevant and accordingly admit it because the claims in the Illinois suit related to the same transaction and offered Wanandi's version of the same event at issue in this matter: the circumstances of Black's departure from Trailmobile. As further discussed by the Appellate Court of Illinois (which ultimately affirmed the dismissal of Wanandi's Illinois suit after determining it should have been asserted as a compulsory counterclaim in Kentucky):
In the Illinois Case, Wanandi alleged that Black made an "extortionate demand" for $1.6 million as a condition of keeping his promise to remain with [Trailmobile] under [a prospective buyer's] ownership. In other words, he alleged that Black wrongfully added a condition to the promise. However, we cannot accede to the suggestion that a person would stay in a job without an understanding, implicit or explicit, that the employment will be duly compensated. Further, a demand for compensation already due cannot be wrongful. Therefore, a central question, and likely the central question, in the Illinois case was whether Black's demand for $1.6 million was based on an existing obligation.
In his Kentucky complaint, Black alleged that $1.6 million was what he was owed under the terms of his employment, specifically the 2006 Agreement. It strains credulity to suppose that the figure that Black allegedly wrongfully demanded— $1.6 million—coincidentally arose from some source other than the 2006 Agreement. The question in the Kentucky litigation thus went to the heart of the Illinois claim.
Wanandi argues that the Kentucky case was about the existence of the 2006 Agreement, an agreement motivated by the possible sale in 2006, whereas the Illinois case was about the 2008 promise, motivated by the possible sale in 2008. This description fails to take into account that the Illinois case had at its heart Black's request or demand for $1.6 million.
We conclude that the existence of Black's right to the $1.6 million was at the heart of both claims. The Illinois complaint might obscure the significance of Black's right, but that does not change the right's centrality. This is exactly the kind of relitigation that the doctrine of res judicata aims to prevent.
However, in 2006, Black was paid a base salary of $300,000 and was given a bonus in the amount of $100,000 during a time when no other Trailmobile executive was paid a bonus. Black was again paid a base salary of $300,000 in 2007. Black testified, and Wanandi did not dispute, that he agreed to allow payment of a $100,000 bonus he had earned in 2007 to be deferred to a later date. Likewise, Black was paid a base salary of $300,000 in 2008. All of these amounts were consistent with the terms of the 2006 Agreement Black introduced as evidence in this matter.
Black testified that he was paid all but $6,000 of the $100,000 bonus amount by March of 2007. As to the remaining $6,000, Black testified he directed it to be paid to another Trailmobile executive whose commute to and from work had been extended due to the relocation of Trailmobile's offices. Consistent with Black's testimony, Trailmobile's financial records demonstrated that Black was paid a bonus amounting to $94,000 by March, 2007, and that the other executive was paid additional compensation of $6,000.
See 2006 Agreement (below), "Definitions" section, paragraph 1(d) (specifying minimum annual salary of $300,000); see also "Definitions" section, paragraph 3 (providing for annual "continuance bonus" of $100,000 for 2006 and 2007).
Black testified that on two separate occasions between the fall of 2006 and spring of 2008, he and Wanandi went to Wanandi's office, removed the signed 2006 Agreement from Wanandi's desk drawer, and reviewed it to resolve issues relating to Black's compensation for his employment with Trailmobile. While Wanandi testified he did not remember doing this, he did not dispute Black's testimony and he acknowledged that he may have spoken with Black "once or twice" between the fall of 2006 and spring of 2008 regarding the 2006 Agreement.
Black also testified that when Wanandi eventually terminated his employment with Trailmobile on or about October 6, 2008, for a reason unrelated to either a felony conviction or gross negligence, he told Wanandi that it constituted a "triggering event" under the 2006 Agreement. According to Black, the two of them then reviewed the signed copy of the 2006 Agreement Wanandi had retained; Black pointed out the contractual language that entitled him to approximately $1.6 million due to what he characterized as Wanandi's breach of the 2006 Agreement; and, that Wanandi replied by stating he believed that the 2006 Agreement was not binding.
One month afterward, on or about November 7, 2008, Black entered into a "Settlement Agreement and Release" with Trailmobile; Wanandi executed it on Trailmobile's behalf. In relevant part, it provided:
WHEREAS, Bruce Black, is a Kentucky resident (hereinafter referred to as the "Employee"); WHEREAS, Trailmobile Corporation, a Delaware corporation, is referred to as the "Employer".
WHEREAS, Employee entered into a Severance and Bonus Agreement with Employer ("Bonus Agreement");
WHEREAS, Employer terminated the employment of Employee for a reason other than gross negligence in the performance of his duties or his conviction of a felony and by virtue of such employment termination, and Employer acknowledges Employee claims that Employer currently owes Employee $1,600,000.00 pursuant to the Bonus Agreement;
WHEREAS, Employee is willing to accept $425,000 payable in monthly installments of $25,000.00, along with a continuation of employee's prior medical and dental coverage and perquisites, (or the value thereof), and each desires to release the other.
NOW THEREFORE, in consideration for the mutual promises contained herein, and for the good and valuable consideration recited herein, the receipt and sufficiency of which is hereby acknowledged, it is agreed as follows:
1. The recitals contained in the foregoing "Whereas" clauses are acknowledged by the Parties to be true and accurate, and are incorporated herein, and made a part of, this Agreement.
. . . .
5. Contingent upon Employer and Employee fulfilling their obligations under this agreement, Employee, forever discharges the Employer and Employer forever discharges Employee, from any and all charges, complaints, claims, liabilities, controversies, damages, actions, causes of action, suits, rights, demands, costs, lawsuits, debts and expenses of any nature whatsoever, known or unknown, which have arisen since the beginning of the world through the date hereof, including, but not limited to, all claims alleged or that could be alleged in any adversarial proceeding relating to Employee's employment, termination of employment, including all claims that could be alleged that arise from the Bonus Agreement.(Emphasis added.)
At trial, Wanandi testified that this document, properly interpreted, reflected that Trailmobile intended to give Black a "gift" of $425,000. He also testified that this document, along with the "gift" it memorialized, bore no relationship to the 2006 Agreement. In his brief, Wanandi also argues that no claims were ever asserted on the basis of this 2008 "Settlement Agreement and Release" and that it was therefore irrelevant and should not have been admitted into evidence at trial.
However, we find no error in the circuit court's conclusion that the 2008 Agreement was admissible as relevant evidence. As noted, the 2006 Agreement was entitled "severance and bonus agreement." A "severance and bonus agreement" was referenced no fewer than three times in the above "Settlement Agreement and Release." Wanandi, signing on behalf of Trailmobile, verified the truth and accuracy of the statement, "[Bruce Black] entered into a Severance and Bonus Agreement with [Trailmobile]." The only "severance and bonus agreements" that Wanandi was aware of between Black and Trailmobile consisted of the three drafts of the 2006 Agreement Black introduced as evidence. In this 2008 "Settlement Agreement and Release," Wanandi also acknowledged that Black had asserted claims pursuant to the severance and bonus agreement that Black and Trailmobile had entered. A plain reading of its unambiguous terms clearly supported that the 2008 "Settlement Agreement and Release" was not a gift of $425,000. Rather, it was a release of legal claims based upon an executed severance and bonus agreement between Black and Trailmobile at a settlement cost of $425,000.
The 2008 Agreement was, as reflected in its paragraph "5," a "contingent" release of Black's claims against Trailmobile arising from the 2006 Agreement. Specifically, it was contingent upon Trailmobile fulfilling an obligation to pay Black $425,000. Trailmobile undisputedly failed to fulfill that contingency (i.e., it became insolvent). Thus, whatever impediment the 2008 Agreement may have presented to Black's ability to file suit on the basis of the 2006 Agreement was effectively removed. Wanandi offers no argument to the contrary.
Juries are authorized to draw reasonable inferences from the evidence. Here, the evidence reflected that in the 2008 "Settlement Agreement and Release," Wanandi—and no other Trailmobile executive—verified that Black and Trailmobile had entered into a severance and bonus agreement. Neither Wanandi nor Black testified any other Trailmobile executive executed the severance and bonus agreement on Trailmobile's behalf. The jury found Black to be a credible witness, and Black testified Wanandi signed the third and final draft of the 2006 Agreement four times and that Wanandi had directed him to keep the 2006 Agreement confidential. Wanandi did not testify that he informed anyone else of the 2006 Agreement; rather, he testified that he kept the 2006 Agreement in his desk drawer. The parties conducted themselves consistently with the notion that Black was, after October 2006, obligated to maintain his employment with Trailmobile. For a time after October, 2006, Black was paid consistently with the provisions of the 2006 Agreement. Moreover, despite asserting that he had never signed the 2006 Agreement, Wanandi failed to produce his copy of the 2006 Agreement which he had admittedly retained. Under this evidence, it was certainly reasonable for the jury to infer not only that Trailmobile and Black entered the 2006 Agreement that Black put into evidence in this matter, but also that Wanandi, as opposed to some other Trailmobile executive, signed the 2006 Agreement. B. Wanandi signed the 2006 Agreement on behalf of Trailmobile, and also in his individual capacity.
The jury was directed to consider, among other things, the following instruction and question during its deliberations:
INSTRUCTION NO. 2
No person is responsible for the debt of another unless the promise, contract, agreement, representation, assurance, guaranty, or ratification, or some memorandum or note thereof, be in writing and signed by the party to be charged therewith.
QUESTION NO. 1
Do you find by clear and convincing evidence that there was a written contract in October 2006 between Plaintiff Bruce Black and Defendant Edward Wanandi and that the written contract was signed by Defendant Edward Wanandi?
In other words, the jury was asked in plain terms whether Wanandi signed a contract, and whether that contract bound Wanandi and Black. As discussed, the jury was authorized to believe, and did believe, Black's contention that he and Wanandi signed the 2006 Agreement. This, in turn, leads to a discussion of Wanandi's arguments regarding how he signed the 2006 Agreement, and, thus, the significance of Wanandi's signature.
Wanandi argues that "QUESTION NO. 1" was an erroneous jury instruction because it did not include the additional language italicized below:
Do you find by clear and convincing evidence that there was a written contract in October 2006 between Plaintiff Bruce Black and Defendant Edward Wanandi in his individual or personal capacity and that the written contract was signed by Defendant Edward Wanandi in his individual or personal capacity?Wanandi's argument is without merit, however, because including that additional language would have been needlessly redundant. Wanandi, in his personal capacity, was the only defendant in this matter. INSTRUCTION NO. 2 clearly indicated that Wanandi was not responsible for a debt of the Trailmobile entities unless he, personally, had signed a written agreement to that effect; and, QUESTION NO. 1 clearly asked whether a binding agreement existed between Black and Wanandi, not Black and, on behalf of someone else, Wanandi.
Before reviewing Wanandi's arguments, it becomes necessary to review the relevant portions of the 2006 Agreement itself:
SEVERANCE AND BONUS AGREEMENT
AGREEMENT made this ___ day of ___, 2006, by and between Bruce Black, a Kentucky resident (hereinafter referred to as the "Employee") and Trailmobile Corporation, a Delaware corporation, Trailmobile Parts & Service Corporation, another Delaware corporation, Trailmobile Parts & Service Canada LTD, a Canadian corporation, and Trailmobile Canada LTD, another Canadian corporation, and Edward Wanandi, the sole shareholder of Trailmobile Corporation. Hereinafter, all Trailmobile
entities are collectively referred to as the "Affiliated Group" and individually referred to as an "Affiliate").
WHEREAS, Trailmobile Corporation is the parent company, directly or indirectly, of all other Affiliates and Edward Wanandi is the sole shareholder of Trailmobile Corporation;
WHEREAS, the Employee has rendered valuable services to the Affiliated Group in the past, including acting as President of Trailmobile Corporation;
WHEREAS, it is considered vital to the Affiliated Group's continued success, and therefore, the success of Edward Wanandi, that the Affiliated Group continue to have the services of the Employee until he is retired or otherwise terminated from employment. Such services shall include continuing the performance of his duties as the President of Trailmobile Corporation; and
WHEREAS, Employee has and will continue to forgo other financially rewarding opportunities within the Affiliated Group's industry by continuing his employment as provided herein.
NOW, THEREFORE, in consideration of these premises and the covenants and agreements herein set forth, the parties hereto covenant and agree as follows:
Definitions
Wherever used in this agreement, the following words or phrases shall have the meaning as stated:
1. "Disposition Bonus Trigger" shall mean any of the following events that occur on or before January 1, 2011, or any of the following events that have been contracted to occur on or before January 1, 2011, but not consummated before such date due to the closing of such event being scheduled after January 1, 2011:
. . . .
d. Reduction of the compensation and benefit package currently enjoyed by Employee as of the date of execution of this agreement. The compensation package currently enjoyed by Employee is equal to the minimum current annual salary of $300,000 plus discretionary annual bonus. The minimum current salary, discretionary annual bonus and benefit package in the aggregate is referred to herein as "Minimum Current Compensation."
. . . .
f. Termination of Employee's employment by his employing Affiliate for any reason other than gross negligence in the performance of his duties or his conviction of a felony.
. . . .
2. "Disposition Bonus" shall mean $900,000 payable to Employee within sixty days of a Disposition Bonus Trigger. "Investment Disposition Bonus" shall mean $500,000 payable into a fully vested investment or investment fund to be managed by Edward Wanandi subject to the provision provided for herein.
3. "Continuance Bonus" shall mean $1,000,000 payable to Employee in four equal installments of $100,000 on or before December 31st of each calendar year, commencing with the calendar year ending December 31, 2006, and continuing through the calendar year ending December 31, 2009, with a final fifth installment of $600,000 on or before December 31, 2010.
Current Minimum Compensation and Continuance
Bonus
Employee shall continue his current employment and officer status with the Affiliated Group through December 31, 2010, and shall receive no less than the Current Minimum Compensation plus the Continuance Bonus. Employee shall no longer be entitled to continue to receive his Current Minimum Compensation or the Continuance Bonus in the event (i) Employee voluntarily
terminates his employment, (ii) his employment is involuntarily terminated due to his gross negligence in the performance of his duties or his conviction of a felony before December 31, 2010, or (iii) the death of Employee before December 31, 2010. Employee may not be involuntarily terminated before January 1, 2011, for any reason other than his gross negligence in the performance of his duties or his conviction of a felony.
In the event the Affiliated Group is unable to pay any portion of the Continuance Bonus at the time it is due, such amount shall be accrued as a liability on the financial statements of the appropriate Affiliate, and any such accrued, but unpaid, Continuance Bonus will continue to be payable (without interest) to Employee on or before December 31, 2010, or on the date of a Disposition Bonus Trigger, whichever shall first occur and with no further delay.
Disposition Bonus
In the event of a Disposition Bonus Trigger, Employee shall receive the Disposition Bonus and the Investment Disposition Bonus. The Investment Disposition Bonus shall be invested by Edward Wanandi in an investment or investment fund subject to written approval in advance by Employee. Such investment or investment fund legal and equitable ownership shall be held in the name of Employee. Any subsequent changes in the investment or investment fund shall also be subject to written approval in advance by Employee. At Employee's sole and exclusive discretion or in the event Employee shall not approve of the investment or investment fund at any time before or after the Disposition Bonus Trigger, the Investment Disposition Bonus plus any appreciation and income accruing thereon shall be paid or transferred to Employee. In the event of Edward Wanandi's death or disability, the Investment Disposition Bonus plus any appreciation and income accruing thereon shall be paid or transferred to Employee.
In the event a Disposition Bonus Trigger occurs and the Disposition Bonus and the Investment Disposition Bonus
is paid in accord herewith, then there shall be no further obligation to continue to pay any further Continuance Bonus to Employee, except for any Continuance Bonus accrued and unpaid at the time of the Disposition Bonus Trigger.(Emphasis added.)
Miscellaneous
. . . .
3. This agreement shall be governed by the laws of the Commonwealth of Kentucky, and any dispute related to this agreement shall be brought solely in the Circuit Court for Boone County, Kentucky, or in the event such court does not accept such jurisdiction over the controversy, in some other court of competent jurisdiction.
. . . .
5. This agreement shall be binding upon the beneficiaries, heirs, executors and administrators of the Employee and Edward Wanandi and upon the successors and assigns of the Affiliated Group and each Affiliate.
6. If any action at law or in equity, or any arbitration proceeding is brought to enforce or interpret the terms of this agreement, the prevailing party shall be entitled to reasonable attorney's fees, costs and necessary disbursements in addition to any other relief to which he may be entitled.
7. Edward Wanandi guarantees the performance of the covenants and obligations of the Affiliated Group and its Affiliates hereunder.
8. All signatories to this agreement represent and warrant that he or she has the complete authority and approval to execute this agreement on behalf of the parties.
The 2006 Agreement then concludes with the following set of signature lines:
WITNESS:
__________
__________
Trailmobile Corporation
By: __________, as a duly authorized
officer.
__________
__________
Trailmobile Parts & Service Corporation
By: __________, as a duly authorized
officer.
__________
__________
Trailmobile Parts & Service Cananda
LTD
By: __________, as a duly authorized
officer.
__________
__________
Trailmobile Canada LTD
By: __________, as a duly authorized
officer.
WITNESS:
__________
__________
Employee
By: Bruce Black
Wanandi's primary argument on appeal is based largely upon the fact that the 2006 Agreement did not include a separate signature line for him to sign in his "individual" capacity. In his appellate brief, he summarizes his argument as follows:
It is black letter law that corporate officers cannot be held individually liable for contract they make on behalf of their corporations. Potter v. Chaney, 290 S.W.2d 44, 46 (Ky. 1956). And under the express terms of KRS
[Kentucky Revised Statute] 371.065,[] a personal guarantee cannot be valid unless it is signed by the guarantor, specifies the maximum guaranteed amount, and identifies an end date for the guarantee. Here, Black's breach of contract claim was premised on Wanandi's alleged personal guarantee of the corporate obligations set forth in the 2006 Document. [. . .] [T]he 2006 Document cannot be a personal guarantee by Wanandi because it could only have been signed by Wanandi in his capacity as a corporate officer—not by Wanandi as an individual. Accordingly, any contract claim against Wanandi individually fails as a matter of law.
KRS 371.065 provides:
(1) No guaranty of an indebtedness which either is not written on, or does not expressly refer to, the instrument or instruments being guaranteed shall be valid or enforceable unless it is in writing signed by the guarantor and contains provisions specifying the amount of the maximum aggregate liability of the guarantor thereunder, and the date on which the guaranty terminates. Termination of the guaranty on that date shall not affect the liability of the guarantor with respect to:
(a) Obligations created or incurred prior to the date; or(2) Notwithstanding any other provision of this section, a guaranty may, in addition to the maximum aggregate liability of the guarantor specified therein, guarantee payment of interest accruing on the guaranteed indebtedness, and fees, charges and costs of collecting the guaranteed indebtedness, including reasonable attorneys' fees, without specifying the amount of the interest, fees, charges and costs.
(b) Extensions or renewals of, interest accruing on, or fees, costs or expenses incurred with respect to, the obligations on or after the date.
With that said, an officer or shareholder of a corporation generally is not personally liable for a contract he or she has executed on behalf of the corporation. See, e.g., Ping v. Beverly Enters., Inc., 376 S.W.3d 581, 596 (Ky. 2012):
In general, as the Restatement notes, "[w]hen an agent acting with actual or apparent authority makes a contract
on behalf of a disclosed principal, (1) the principal and the third party are parties to the contract; and (2) the agent is not a party to the contract unless the agent and the third party agree otherwise." Restatement (Third) of Agency § 6.01 (2006); see Potter v. Chaney, 290 S.W.2d 44, 46 (Ky.1956) ("After the principal is disclosed, the agent is not liable, generally speaking, for his own authorized acts.").
As with most general rules, however, there are exceptions. And, because the Kentucky Supreme Court has indicated in Ping that the Restatement (Third) of Agency § 6.01 (2006) and its official commentary are consistent with interpretation of this general rule, an exception described in its official commentary warrants attention:
An organizational executive does not become subject to personal liability on a contract as a consequence of executing a document in the executive's organizational capacity or as a consequence of holding that office. An executive's agreement to become a party to a contract made on behalf of the organization may be shown by language in the agreement itself that names the officer individually as a party. Other indicia of intention may also be relevant, such as business records maintained by the third party that indicate whether it was intended that the individual would be a party in addition to or instead of the organization. The nature of the parties' contract may also establish whether an organizational executive agreed to be individually liable.Id., comment d(2) (emphasis added).
Stated differently, the drafters of the Restatement have explained that when the form of an executive's execution of an agreement is inconsistent with contract language imposing a personal obligation on the executive, the former does not simply trump the latter as a matter of law. Rather, this conflict necessitates a closer examination of the agreement as a whole to discern what was intended; or, failing that, it gives rise to an ambiguity, in which case parol evidence of intent becomes admissible.
To the extent that the lack of a signature line for Wanandi in his individual capacity gave rise to any kind of ambiguity in the 2006 Agreement, we disagree with an additional contention that Wanandi raises; namely, that it should be construed against Black because Black was the drafter. That particular rule of construction only applies as a last resort, and never applies where the intention of the agreement is otherwise clearly expressed. See Elliott v. Pikeville Nat. Bank & Trust Co., 278 Ky. 325, 128 S.W.2d 756, 760 (1939). Here, the 2006 Agreement as a whole clearly expresses that Wanandi, in his individual capacity, was a party to it.
This exception is no stranger to Kentucky jurisprudence. Ambiguities with respect to the parties' intent can constitute material issues of fact that preclude the entry of summary judgment. See Cantrell Supply, Inc. v. Liberty Mut. Ins. Co., 94 S.W.3d 381 (Ky. App. 2002). And, this Court has already held that the substance of an agreement rather than the form of the signature block governs the interpretation of a contract. Simpson v. Heath & Co., 580 S.W.2d 505 (Ky. App. 1979), involved a situation in which the president of a corporation signed as guarantor of a contract executed by him as president of the corporation. At issue was whether he was individually liable on the guaranty as a matter of law because he followed his signature on the guaranty with the identifier: "Pres." This Court concluded that the signature created an ambiguity on its face as to whether the parties intended for Simpson to be bound individually. After reviewing the record, we held that the issue was not yet appropriate for summary judgment because there remained a question of fact concerning Simpson's intentions. That case was remanded for further proceedings.
Comment d(2) of the Restatement is particularly relevant here, however, because there is an application of this rule immediately following it (i.e., "Illustration 14") which is strikingly on point in this appeal:
A, the president of P Corporation, executes a lease on behalf of P Corporation as lessee with T as lessor. The body of the agreement states that "in the event the net worth of P Corporation is reduced in excess of ten percent, it is agreed that A shall guarantee P Corporation's obligations hereunder to the extent of the shortfall." The lease is signed "P Corporation, by A, President." A is individually liable as a guarantor to the extent of the shortfall. Although A's signature indicates that A signs in a representative capacity only, limiting the effect of A's signature would nullify the effect of the language in the body of the lease stating that A individually guarantees P Corporation's net worth.
Here, the CEO and sole shareholder of Trailmobile Corporation, Edward Wanandi, executed a personal services contract on behalf of Trailmobile Corporation as employer with Black as employee. The body of the agreement states that "Edward Wanandi guarantees the performance of the covenants and obligations of the Affiliated Group and its Affiliates hereunder." Kentucky law permitted a jury to find—and the jury found—that Wanandi signed the contract. The lines Wanandi signed were to the following effect: "[P Corporation] By: ___, as a duly authorized officer." Accordingly, the facts of this case are functionally identical to the facts described in Illustration 14. And, the drafters of the Restatement would have more reason to apply the rule discussed above to the case at bar because here, unlike the situation described in Illustration 14, the language in the agreement specifically named the officer—Wanandi—as a guarantor and, in its first paragraph, "individually as a party." See id., comment d(2). Indeed, as we have italicized in the quoted sections of the 2006 Agreement above, the 2006 Agreement repeatedly named Wanandi as a party; indicated that Wanandi had a personal stake in the agreement; and personally obligated Wanandi to take certain actions to effectuate it.
With this in mind, the style of Wanandi's signature did not, as a matter of law, simply nullify the effect of the plain language in the body of the contract stating that Wanandi individually guaranteed Trailmobile's performance of its covenants and obligations to Black. It did not end any inquiry regarding the parties' intent regarding his signatory capacity.
Furthermore, while Wanandi adds that he testified he never intended to give a personal guarantee, and that he and Black never discussed the matter of a personal guarantee over the course of their contract negotiations, the jury was free to disbelieve his testimony; presume that he, an experienced businessman, read the 2006 Agreement and only discussed issues of concern or terms he wanted changed; and that in signing it, he understood that the terms of the 2006 Agreement plainly and unequivocally made him a party in his individual capacity and a guarantor. See Cline v. Allis-Chalmers Corp., 690 S.W.2d 764, 766 (Ky. App. 1985) ("a person who has the opportunity to read a contract, but does not do so and signs the agreement, is bound to the contract terms unless there was some fraud in the process of obtaining his signature." (Citation omitted)).
In sum, the jury's finding that Wanandi entered into a contract with Black was supported by the evidence and by the plain terms of the contract itself. Because Wanandi signed and entered into that contract, and because his guarantee was written on that contract, KRS 371.065 has no application and does not render his guarantee unenforceable. Also, Wanandi does not contest that the 2006 Agreement entitled Black to $1.6 million. Therefore, we find no error in the jury's conclusion that, due to Wanandi's enforceable guarantee of the 2006 Agreement, Wanandi is personally liable to Black for that amount.
II. PERSONAL JURISDICTION
The Boone Circuit Court asserted personal jurisdiction over Wanandi on two alternate bases: (1) KRS 454.210, Kentucky's long-arm statute; and (2) the forum selection clause within paragraph "3" of the "miscellaneous" section of the 2006 Agreement. Wanandi argues that the jury's verdict must be vacated because the Boone Circuit Court lacked personal jurisdiction over him. However, his argument regarding why the forum selection clause failed to supply the circuit court with jurisdiction is limited to his contention that he never signed the 2006 Agreement, and that the 2006 Agreement—and every clause within it—was therefore unenforceable. As we have explained at length already, the evidence and findings of both the circuit court and the jury were to the contrary. Therefore, we find no error.
Wanandi concludes his personal jurisdiction argument by adding, "Moreover, the plain language of that clause expressly acknowledges that a court must make an independent determination of whether jurisdiction is appropriate and, thus, it should not be controlling on the jurisdictional issue." To the extent that this qualifies as an argument, we respond by pointing out that the language of the clause itself contains no such language; and, even if it did, the circuit court's decision to enforce the forum selection clause certainly qualified as an independent determination of whether it believed jurisdiction was appropriate.
III. FRAUD
Wanandi next asserts that he was entitled to a directed verdict upon Black's fraudulent inducement claim. A directed verdict is proper only when viewing all facts most favorable to the nonmoving party, a reasonable juror could only conclude that the nonmoving party was entitled to a verdict. Kentucky Rules of Civil Procedure (CR) 50.01; Lee v. Tucker, 365 S.W.2d 849 (Ky. 1963).
In Kentucky, the law as to fraud has been succinctly set forth as follows:
In Kentucky, a party claiming harm resulting from fraud in the inducement must establish six elements of fraud by clear and convincing evidence as follows: a) material representation b) which is false c) known to be false or made recklessly d) made with inducement to be acted upon e) acted in reliance thereon and f) causing injury. United Parcel Service Co. v. Rickert , 996 S.W.2d 464, 468 (Ky.1999). In addition, "a misrepresentation to support an allegation of fraud must be made concerning a present or pre-existing fact, and not in respect to a promise to perform in the future." Filbeck v. Coomer , 298 Ky. 167, 182 S.W.2d 641, 643 (1944). See also, Kentucky Electric Development Co.'s Receiver v. Head , 252 Ky. 656, 68 S.W.2d 1, 3 (1934) ("An accepted rule is, a misrepresentation, to be actional, must concern an existing or a past fact, and not a future promise, prophecy, or opinion of a future event, unless declarant falsely represents his opinion of a future happening."); see also Major v. Christian County Livestock Market , 300 S.W.2d 246, 249 (Ky.1957) ("One may commit 'fraud in the inducement' by making representations as to his future intentions when in fact he knew at the time the representations were made he had no intention of carrying them out [.]")PCR Contractors, Inc. v. Danial, 354 S.W.3d 610, 613-14 (Ky. App. 2011) (citations omitted). And, it must be pointed out that a plaintiff's reliance must be reasonable. Flegles, Inc. v. TruServ Corp., 289 S.W.3d 544 (Ky. 2009).
In his brief, Black summarizes his argument concerning Wanandi's fraud:
Wanandi's fraud existed before Black entered into the 2006 Agreement. Wanandi testified that he never intended to fulfill the obligations under the 2006 Agreement. Wanandi lied to Black so he would remain at Trailmobile. After Wanandi terminated Black's employment, the fraud continued when the only signed copy of the 2006 Agreement disappeared and Wanandi swore under oath it was never signed. . . .
What Wanandi fraudulently misrepresented to Black was that he would fulfill the terms of the agreement (when he never intended to) and that he would preserve the agreement so that it could later be enforced. He lied.
If Wanandi would have truthfully advised Black that he had no intention of fulfilling the 2006 Agreement, Black would have taken the other job, and would have benefited from the lucrative compensation plan and stock sale payoff the competitor offered him. Instead, he relied on Wanandi's false promises.
Here, Wanandi was entitled to a directed verdict upon the fraudulent inducement claim for two reasons. First, Black failed to prove at trial an essential element of his fraudulent inducement claim - detrimental reliance. See Flegles, 289 S.W.3d 544. Black contends that he would have accepted the competitor's employment offer if he had known that Wanandi did not intend to fulfill the 2006 Agreement. However, Black testified at trial that he had already declined the employment offer before beginning negotiations with Wanandi concerning the 2006 Agreement. Accordingly, Black could not have relied upon Wanandi's representation when declining the offer of employment from a Trailmobile competitor that he was considering in 2006. Hence, Black failed to demonstrate the essential element of detrimental reliance, and the trial court erred by submitting the claim of fraudulent inducement to the jury.
Second, irrespective of what Wanandi testified was his intent regarding the 2006 Agreement, we have found no error in the trial court's determination that Wanandi—in his personal capacity—did execute an enforceable contract with Black and, consequently, must fulfill the terms of the 2006 Agreement. In other words, Black sustained no injury due to fraud; rather, he effectively acquired every contract right he believed he had bargained for with Wanandi.
IV. WANANDI'S ABSENCE FROM TRIAL
Wanandi argues that the circuit court erroneously refused to postpone the trial. Alternatively, he argues that the circuit court erred by refusing to permit him to introduce evidence to explain to the jury why he was absent during the trial. Upon review, we find no error.
As discussed below, Wanandi's videotaped deposition was used at trial in lieu of live testimony.
As to the first of these two rulings, "[t]he trial court has a broad discretion in granting or overruling a motion for continuance and this Court will not interfere in the exercise of that discretion unless it is clearly abused." Stallard v. Witherspoon, 306 S.W.2d 299, 300 (Ky. 1957). Here, prior to the circuit court's refusal to continue the trial date: (1) Wanandi, with no explanation from his counsel, had failed to attend an evidentiary hearing the circuit court had set regarding a motion Wanandi had filed contesting personal jurisdiction; (2) the circuit court had already accommodated Wanandi's requests to conduct mediation and both of his depositions in Illinois, rather than Kentucky; (3) Wanandi's motion for continuance, which he filed seven weeks before the trial date in this matter (i.e., a trial date he had agreed upon ten months earlier), cited a business trip, rather than any kind of personal or family emergency or physical incapacity, as justification; and (4) during the hearing on Wanandi's motion, when asked by the circuit court whether Wanandi would personally attend trial if the trial was continued, Wanandi's counsel stated "I can't guarantee that anyone else will do anything." In light of the above, there was little reason to believe Wanandi would appear at trial regardless of the trial date. As such, we cannot find the circuit court abused its discretion in denying Wanandi's motion to postpone the trial.
As to the circuit court's second ruling, Wanandi sought to introduce deposition testimony he had offered that was consistent with what he had represented in his motion to postpone the trial. Specifically, Wanandi asked to introduce his testimony that, rather than attending trial, he had traveled to Indonesia
to manage several projects on behalf of International Merchants, LLC. The most critical of these is a project to provide gasification equipment designed to turn bio waste material into a synthetic gas that is a cleaner and cheaper alternative to diesel. Through this process, bio
waste is transformed into a fuel used to generate electricity in the rural areas of Indonesia.
. . . .
To date, International Merchants has invested hundreds of thousands of dollars in the project. The total cost for the two test sites will be in excess of $1 million. International Merchants, LLC, currently has a small group of U.S. Technicians in Indonesia to scout the tests sites and prepare them for installation of the prototype gasifiers.
If the test is successful, the environmental benefits of the venture would be great. In Indonesia alone, up to 4,000 small diesel-powered generators could be converted to use cleaner synthetic fuel and reduce landfill waste. In addition, the United States and Indonesia would both profit from this endeavor. Because the gasifiers are manufactured in [the] United States, this project will create jobs for Americans, while providing affordable electricity to the people living in rural and undeveloped parts of Indonesia.
However, the circuit court excluded Wanandi's testimony because: (1) it was not relevant to the issues presented at trial; and (2) it would have constituted inadmissible evidence of Wanandi's character.
Wanandi now contends that because he was not permitted to introduce this testimony, the jury was prejudiced against him. As evidence, Wanandi points out that during voir dire one of the prospective jurors complained that it did not seem fair that she had to be present at trial while Wanandi did not.
We disagree that any prejudice resulted. During voir dire and after the prospective juror voiced her complaint, Wanandi's counsel was permitted to explore the subject of Wanandi's absence with the prospective jurors at length and asked them questions relating to it in the following manner:
Mr. Wanandi is in Indonesia. He is from Indonesia fulfilling obligations and promises he has made. He asked me, and I asked the court, "Can we postpone this until August or September?" The court has other obligations, the court has to keep things moving, and the court denied my request for a two-month postponement. The court instead said, "Go up to Illinois, take a deposition, videotape it, and you can present that to the jury." The law provides that. So that's what we had to do. The law requires jurors to evaluate videotaped testimony using the same rules and following the same instincts and the same impressions that you have as when the witness is sitting in the witness box in person. That's a challenge. That's a tall order. Even in our television society, our high dosage of information in various media. My question to you is will you do that? Will you give Mr. Wanandi's testimony the same credence that you would if he were sitting here live? Do all the members agree to do that? Will you make me that promise, that you won't take it out against him merely because he can't be with us this week?
The parties have the right to assume that the answers given by potential jurors are complete, candid and truthful. McGaha v. Commonwealth, 414 S.W.3d 1, 6 (Ky. 2013). Jurors are also presumed to follow admonitions. Mills v. Commonwealth, 996 S.W.2d 473, 485 (Ky. 1999). Here, no juror refused to agree with, or to make any of the promises requested by, Wanandi's counsel. Afterward, Wanandi's counsel did not challenge any juror for cause. Therefore, it is apparent that Wanandi, by and though his counsel, believed that the jurors would not draw negative inferences from his absence and that the jurors would give his videotaped testimony the same credence as live testimony. On appeal, Wanandi presents nothing aside from his own speculation indicating that his belief in the jurors' truthfulness was ultimately incorrect. Thus, even if the circuit court erred in excluding Wanandi's testimony regarding why he was absent during trial—and it did not—Wanandi has presented no evidence of prejudice, and any such error was, therefore, harmless and supplies no basis for reversal. See CR 61.01.
V. ATTORNEY'S FEES AND PUNITIVE DAMAGES
Wanandi argues that Black should not have been awarded attorney's fees, punitive damages, and pre- and post-judgment interest.
As it relates to Black's breach of contract claim, Wanandi simply argues that Black's awards of pre- and post-judgment interest "cannot stand" "because the breach of contract verdict must be vacated." For the reasons previously discussed, we have affirmed the contract verdict. And absent any other argument to the contrary, we find no error in the circuit court's decision to award pre- and post-judgment interest in this respect. Additionally, we find no error with the circuit court's award of reasonable attorney's fees for Wanandi's breach of the 2006 Agreement; the 2006 Agreement clearly provided for them.
See 2006 Agreement, "Miscellaneous" section, paragraph "6."
As it relates to Black's fraud claim, we have reversed. Therefore, because Black was awarded punitive damages solely on the basis of fraud, his award of punitive damages is reversed. Any amount of pre- and post-judgment interest awarded due to fraud is reversed. Likewise, Black's award of attorney's fees is reversed to the extent that it encompassed fees relating to the prosecution of his fraud claim. See Kentucky Farm Bureau Mut. Ins. Co. v. Burton, 922 S.W.2d 385, 389-90 (Ky. App. 1996) (where only one of three claims was successful, Court of Appeals remanded for re-computation of attorney's fees for an award of fees only associated with the successful claim). We therefore remand for a computation of an award of the reasonable attorney's fees Black expended in prosecuting his breach of contract action only. In computing the reasonable value of those services, however, the circuit court's considerations should include not only the actual time and effort that was expended on that particular claim, but also whether much of what was done in support of Black's unsuccessful claims had to be done anyway if only the breach of contract claim had been involved. See Hill v. Kentucky Lottery Corp., 327 S.W.3d 412, 429 (Ky. 2010).
VI. CONCLUSION
The judgment of the Boone Circuit Court is AFFIRMED IN PART and REVERSED IN PART as described above. This case is REMANDED to the trial court for entry of an amended judgment in accordance with this opinion.
VANMETER, JUDGE, CONCURS.
TAYLOR, JUDGE, CONCURS IN PART, DISSENTS IN PART, AND FILES SEPARATE OPINION.
TAYLOR, JUDGE, CONCURRING IN PART AND DISSENTING IN PART: I concur with the majority opinion, except as concerns the affirming of the judgment against Wanandi for his personal liability on the guaranty for the corporate indebtedness owed to Black, to which I respectfully dissent.
This is a strange and troublesome case where two experienced businessmen in a large corporation have engaged in substantial litigation over a purported 2006 employment agreement for which an executed agreement does not appear in the record or evidence in this case. Black's lawyer drafted the 2006 Agreement which Black asserts was executed by him and Wanandi, on behalf of the corporation, with the further intent of Wanandi to guaranty the corporate obligations to Black. As noted, no signed copy of the agreement was introduced into the record of this case at trial. The 2006 Agreement also has signature lines for "witnesses," who of course are nonexistent in this case, other than Wanandi and Black. And the agreement conspicuously omits a signature line for a personal guarantor, although drafted by an attorney on Black's behalf. Again, for unknown reasons, lacking in both common and business sense, Black failed to retain the original or even a signed copy of the original document. Black is an astute corporate executive and businessman with over thirty years of business experience, who drafted the missing document which is the centerpiece of this litigation. Yet, the jury had to make a decision, with Wanandi personally absent from trial, that Wanandi had signed in his personal capacity, an unsigned employment agreement produced by Black at trial.
Notwithstanding the foregoing, the jury found that Black and Wanandi signed the 2006 Agreement, and Wanandi was personally liable for the corporate debt. For the following reasons, I dissent as to any personal liability by Wanandi as a guarantor of the 2006 employment agreement.
In Kentucky, an officer or shareholder of a corporation generally is not personally liable for a contract executed on behalf of the corporation. Smith v. Isaacs, 777 S.W.2d 912 (Ky. 1989); see also Potter v. Chaney, 290 S.W.2d 44 (Ky. 1956). A corporation functions only through its officers and agents acting in a representative capacity. Har-Bel Coal Co. v. Asher Coal Mining, Co., 414 S.W.2d 128 (Ky. 1966). However, an officer or shareholder may personally guarantee a contract or undertaking of the corporation, but such personal liability must be set forth by a guaranty agreement. Although the 2006 Agreement contains a recitation that Wanandi would guarantee performance of the corporation, he did not execute the agreement in his individual capacity as a personal guarantor and thus accrued no personal liability for the debt, in my opinion.
In Kentucky, under Kentucky Revised Statutes 371.065, a guaranty may be enforceable if written on the instrument being guaranteed and signed by the guarantor.
It is clear that the 2006 Agreement was intended to be an employment contract between Black and Trailmobile Corporation and its corporation affiliates. Black alleges that the 2006 Agreement also included the personal guaranty of Wanandi. The 2006 Agreement contained five signature lines for the parties; one for Black to sign individually and referred to as an employee, and four lines for a representative of the corporations to sign as follows:
__________
Trailmobile Corporation
By:__________, as a duly
authorized officer.
__________
Trailmobile Parts & Service Corporation
By:__________, as a duly
authorized officer.
__________
Trailmobile Parts & Service Canada LTD
By:__________, as a duly
authorized officer.
__________
Trailmobile Canada LTD
By:__________, as a duly
authorized officer.
These signature lines for the corporate designee are clear and unambiguous. And, as noted, there were witness signature lines for each principal who signed, but no witnesses. Again, conspicuously absent is a signature line for Wanandi to personally guarantee the obligations of the corporation, even though drafted by Black's attorney. Wanandi affixed his signature to the 2006 Agreement for Trailmobile only "as a duly authorized officer" thereof.
The 2006 Agreement clearly provides for representatives of Trailmobile and its affiliates to sign only, and Wanandi's signature thereto must be viewed as being binding in a representative capacity only. Any other conclusion ignores the plain language contained on the signature lines of the 2006 Agreement. Had the document's contents clearly and succinctly stated that Wanandi's signature thereon was effective for both his representative and individual capacity as a guarantor, then my conclusion on this issue would be different. In drafting the document, Black only needed to state that Wanandi's signature thereon in any capacity also ratified his personal guaranty. There is no such language in the agreement and without Wanandi's signature in his individual capacity, there is no personal guaranty, in my opinion. Had another corporate officer of Trailmobile, and the affiliates, with authority, executed the employment agreement, there would certainly exist no legal basis or agreement to extend personal liability to Wanandi as a guarantor since his signature would not appear thereon and any reference to a guaranty in the document would be clearly unenforceable. Given the lack of a proper ratification of Wanandi's personal guaranty in the instrument itself, the only legal conclusion that can be reached is that Wanandi executed the employment agreement with Black in his corporate capacity only. See KRS 371.065.
See also the recent opinion of Pannell v. Shannon, 425 S.W.3d 58 (Ky. 2014), where the Kentucky Supreme Court has reemphasized that when a contract states that the agreement is with a corporation, a corporate officer who does not sign the agreement in his or her individual capacity cannot be held personally liable for the debt.
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Additionally, given that Black drafted the 2006 Agreement, had he intended to include a personal guaranty therein for Wanandi, in accordance with Kentucky law, the 2006 Agreement could have easily included a signature line for Wanandi to sign, conspicuously stating that Wanandi was personally signing as a guarantor of the corporate debt, as well as executing in his representative capacity for the corporation. Frankly, this issue looks to me to be a legal matter between Black and his attorney who drafted the agreement, rather than a guaranty dispute with Wanandi. The courts cannot be a refuge for upholding the sloppy draftsmanship of legal agreements.
Even more compelling, after entering into the 2006 Agreement, Black and Trailmobile entered into a Settlement Agreement and Release in November of 2008 for the same alleged claims arising under the 2006 Agreement. Wanandi did not execute the Settlement Agreement individually nor does the Settlement Agreement reference anywhere therein that the debt arising from the 2006 Agreement was also personally guaranteed by Wanandi. This, coupled with the omission of any personal guaranty ratification in the 2006 Agreement, clearly establishes under Kentucky law that Wanandi was not personally liable for the corporate debt as a matter of law, in my opinion. While Black may have intended to get a guaranty from Wanandi on the corporate debt to him, Black failed to obtain a binding guaranty by Wanandi under Kentucky law. And more importantly, the majority's opinion undermines the entire premise of limited liability in Kentucky corporation law and the legal requirement for a properly executed guaranty in Kentucky. I believe this opinion will open the door to substantial mischief in corporate agreements in the future, where essentially anyone with a blank employment agreement can allege it was signed by a personal guarantor and create a fact issue for a jury.
I further believe the trial court erred by submitting the case to the jury with the instruction to determine whether the written contract contained a personal guaranty. A directed verdict in favor of Wanandi on the personal guaranty should have been granted by the trial court because, as a matter of law, Wanandi did not sign the agreement in his personal capacity or otherwise ratify in writing his guaranty. I would reverse and dismiss the claims against Wanandi regarding the personal guaranty. BRIEF FOR APPELLANT: Sheryl G. Snyder
Theresa A. Canady
Louisville, Kentucky
BRIEF FOR APPELLEE: David V. Kramer
Crestview Hills, Kentucky
William Keith Noel
Edgewood, Kentucky
Tania E. Fuller, pro hac vice
Grand Rapids, Michigan
Wanandi v. Black, 2014 IL App (2d) 130948, 13 N.E. 372, 379 (Ill. App. Ct. 2d Dist. 2014).