Although a company is legally considered enough of a “person” to apply for a loan or enter into another type of contract, an actual human being – usually an officer or partner – has to sign his or her name to the document. Can that signature cause the company representative to also be personally liable for the company’s obligations? A Maryland Court of Special Appeals case from earlier this year demonstrates how such a situation may arise.
In Ubom v. SunTrust Bank, No. 2862 (Md. Ct. Special App. Apr. 4, 2011), the Ubom Law Group, PLLC (“ULG”), a Maryland limited liability company, applied for a commercial line of credit in the amount of $100,000 from SunTrust Bank. ULG’s managing partner, Uduak J. Ubom, completed the first page of the credit application on behalf of ULG, and signed his name as “Applicant,” followed by “Managing Attorney.” The second page of the application requested information pertaining to the loan guarantor. Mr. Ubom completed this section of the application, providing his personal identifying and financial information, and signed his name as “Guarantor.” On the guarantor signature line, Mr. Ubom also added “Managing Attorney.”
When ULG defaulted on the loan, SunTrust sued both ULG and Mr. Ubom in his personal capacity as guarantor of the loan. The lower court granted summary judgment in favor of SunTrust. Mr. Ubom appealed only the judgment against him, arguing that he should not be held personally liable for ULG’s debt because (1) he did not write his name in the block for “Legal Name of Guarantor,” and (2) he wrote “Managing Attorney” after his name on the guarantor signature line.
The Court of Special Appeals rejected these arguments and affirmed the circuit court’s grant of summary judgment against Mr. Ubom. The question before the Court was whether Mr. Ubom signed his name in his capacity as an officer of the corporation, or whether it was a personal guaranty. The Court held that Mr. Ubom guaranteed the loan in his personal capacity. The fact that Mr. Ubom included his corporate title next to his name did not relieve him of personal liability. Other factors also proved to the Court that Mr. Ubom signed the application as guarantor in his personal capacity: There were two signature lines – one for “Applicant” and one for “Guarantor.” The most reasonable interpretation of Mr. Ubom’s signature on both lines was that he was signing as guarantor in his personal capacity; it would have added nothing to SunTrust’s security to have ULG, through its Managing Attorney, to guarantee the loan to which it was already bound. The “Guaranty” language in the application unambiguously made the individual signing as guarantor jointly liable for the debt of the applicant. Finally, Mr. Ubom provided his personal information, including social security number and net worth, in the guarantor section of the application.
Thus, be careful what you sign if you intend to sign only in your official capacity. The addition of a corporate title will not always save you from personal liability.