Nondisclosure does not negate liability

St. Louis Daily Record & St. Louis Countian, Jul 18, 2003 by Erin Piel

Absent disclosure of a corporate principal's agency identity, a third party dealing with the agent may consider the transaction to be with the agent and the agent deemed to have intended to pledge his personal responsibility, ruled the Missouri Court of Appeals, Southern District, in Unisource Worldwide Inc. vs. Ken Barth. The court reversed and remanded the case to the circuit court in favor of the plaintiff.

Unisource sells paper. Barth Enterprises, a Missouri corporation incorporated on March 23, 1998, was formed for the purpose of purchasing Robinson Printing Inc., a customer of Unisource. Ken Barth is Barth Enterprises' president, secretary and treasurer; he operates the business it acquired from Robinson under the fictitious name of Creative Printing & Design but did not register the fictitious name until Aug. 25, 1999.

When Barth applied for a credit account with Unisource, he did not make known the name of Barth Enterprises to the company, only the fictitious name. Unisource received a commercial credit card application from Barth on March 27, 1998. The application showed the company name as Creative Printing & Design and listed Barth as the company's president. Unisource extended a line of credit to Creative Printing & Design on the basis of the credit application.

Creative Printing & Design purchased merchandise from Unisource using its credit account. At the time of trial, a balance of $35,402.42 was due. An insufficient funds check in the amount of $2,879.56 from Creative Printing & Design signed by Barth was submitted for payment on the account.

Unisource Worldwide Inc. brought suit against Barth, claiming the defendant was indebted to the company as an undisclosed agent for Barth Enterprises Inc. for the unpaid balance of Barth's account.

On appeal, Unisource presented two points. The first, being dispositive, contended that the trial court erred in entering judgment in favor of the defendant because the defendant was liable to the plaintiff as an agent for an undisclosed principal; Barth, through his agents, obtained credit from Unisource but failed to disclose he was acting as the agent of Barth Enterprises.

Judge John E. Parrish wrote the unanimous court opinion. "The general rule with respect to agent liability provides that one who, as an agent for another, enters into a contract with a third party without disclosing his agent status, or discloses his agent status without disclosing the identity of his principal, can be held liable on the contract at the third party's election."

The court cited David vs. Shippy, a 1985 Missouri Court of Appeals, Eastern District, decision, which found that the duty is on the agent to inform the third party of the actual identity of the principal in order to avoid liability: "it is not enough for the agent to disclose or for the third party to know the agent is acting for another." The Eastern District also found that the fact of incorporation does not relieve an agent of his or her burden of disclosing a corporate principal.

The court granted the plaintiff's motion, finding the judgment was not supported by the evidence, and it reversed and remanded the case to the trial court with directions to assess damages and enter judgment for the plaintiff.

"[The case] follows well-established Missouri law, and I'm glad we won," said Richard Rollings Jr., the plaintiff's attorney.

Counsel for the defendant could not be reached for comment.

Chief Judge Nancy Steffen Rahmeyer and James K. Prewitt concurred with Parrish.

Unisource Worldwide Inc., plaintiff/appellant vs. Ken Barth d/b/a Creative Printing & Design, defendant/respondent; No. 25109; handed down July 9.