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W.W. Grainger, Inc. v. Laureni

A-555-97T3 (N.J. App. Div. 1998) (Unpublished)

CORPORATIONS; LIABILITY—If the only indicia that a business entity is a corporation is that it pays its bills by corporate check, a creditor that believes the entity to be a partnership can collect from the shareholder(s), personally.

A creditor supplied goods and materials to what became a defunct general contracting business and sued the corporation’s owner personally to collect the debt. At the time the account was opened, the account was listed as “Roland & Roland” with no designation or indication of corporate status. No credit application was filed on behalf of a corporation nor was a guarantee received from an individual as was the creditor’s business practice when selling on credit to corporations. The corporation’s owner asserted that the account was always paid with a corporate check; the creditor received, from the corporation, a Contractor’s Exempt Purchase Certificate for each project; and the creditor was presented with a business card at pick-up indicating that the goods were picked up by a representative of the corporation.

The trial judge found as a matter of fact that credit was extended to the company without the designation “Inc.” Dealing with a company without such a designation would lead a credit extender to believe that it was dealing with a partnership or a sole proprietorship rather than with a corporation, limited liability company or limited liability partnership. Based on that finding of fact and the testimony of the creditor’s witness (who testified that the creditor would extend credit to individuals, but not to a corporation unless the corporate account was accompanied by personal guarantees), the trial judge ruled in favor of the creditor.

In upholding the lower court’s decision, the Appellate Division found the corporate account was at all times in a non-corporate name; in the seller’s mind, credit was extended to a non-corporate entity; and there was a failure to demonstrate proof of receipt of any documentation, except checks, suggesting a corporate status. The Court also held that mere payment by a corporate check is not sufficient to place a creditor on notice that it is dealing with a corporation.

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