PIERCE CONCRETE v. Cannon Realty & Const. Co.

335 S.E.2d 30 (1985)

PIERCE CONCRETE, INC. v. CANNON REALTY & CONSTRUCTION CO., INC., and Clayton Cannon d/b/a Cannon Construction Company.

No. 853DC169.

Court of Appeals of North Carolina.

October 15, 1985.

Henderson, Baxter & Alford by Benjamin G. Alford, New Bern, for plaintiff-appellee.

Bennett, McConkey, Thompson & Marquardt by Thomas S. Bennett and James Q. Wallace, III, Morehead City, for defendant-appellant.

EAGLES, Judge.

The question presented is whether summary judgment was appropriate, i.e., was there a genuine issue of material fact as to whether the unpaid account constituted an indebtedness of the suspended corporation or an individual indebtedness of Clayton Cannon. On this record we conclude that the trial court was correct in allowing summary *31 judgment against Clayton Cannon personally for the amount of the account.

The purpose of summary judgment is to prevent unnecessary trials when there are no genuine issues of fact and the defenses are frivolous, and to separate any issues that are present. Kidd v. Early, 289 N.C. 343, 222 S.E.2d 392 (1976). Even though issues of fact may exist, summary judgment should be granted if those factual issues are not material. Nasco Equipment Co. v. Mason, 291 N.C. 145, 229 S.E.2d 278 (1976). Once the movant has established its right to summary judgment, the non-movant may not rest upon conclusory allegations but must come forward with affidavits showing that a material factual dispute exists. Id. Assuming arguendo that defendant has raised a legitimate factual issue, we conclude that that issue is not material.

When a corporate charter has been suspended for failure to pay franchise taxes, as here, the corporation loses its state-granted privileges. G.S. 105-230. Purported corporate acts performed during the period of suspension are generally invalid and of no effect. G.S. 105-231. The effect of G.S. 105-231 is not absolute, Parker v. Life Homes, Inc., 22 N.C.App. 297, 206 S.E.2d 344 (1974) (approving purchase and sale of property by suspended corporation), but it certainly prevents corporations from continuing to conduct their business as usual. R. Robinson, N.C. Corporation Law and Practice 29-16 (3d ed. 1983); see G.S. 55-114(b) (dissolved corporation remains in existence only to wind up affairs). Defendant admits that the corporate charter was suspended, yet argues that he is not personally liable for these purchases because they were made by the corporation.

Defendant admitted that he and his agents received the supplies; he contends, however, that they acted on behalf of the corporation. Even if we were to assume that the suspended corporation could take delivery and enter into an agreement to pay, individual defendant, to the extent he was involved, was acting in his capacity as president and agent of the corporation. G.S. 55-34; Burlington Industries, Inc. v. Foil, 284 N.C. 740, 202 S.E.2d 591 (1974). His authority as agent of the corporation extended only to matters within the ordinary scope of the corporation's business. Id. As discussed above, the suspended corporation had no statutory right to conduct as part of its ordinary business the August 1982 and later transactions which are at issue here. G.S. 105-231. Nothing in this record suggests any course of dealing between plaintiff and the corporation which would charge plaintiff with knowledge that the corporation would not honor defendant's promises. See Stansell v. Payne, 189 N.C. 647, 127 S.E. 693 (1925). Here defendant acted outside the scope of his authority and would be personally liable even if we were to accept his contention that he was acting on behalf of the suspended corporation. See Whitten v. Bob King's AMC/Jeep, Inc., 30 N.C.App. 161, 226 S.E.2d 530 (1976) (president had no authority to contract, liable personally unless specifically relieved by language of contract), rev'd on other grounds, 292 N.C. 84, 231 S.E.2d 891 (1977); Borbein, Young & Co. v. Cirese, 401 S.W.2d 940 (Mo.App.1966) (affirming directed verdict that officers of corporation which continued to do business after charter forfeiture personally liable); 19 Am.Jur.2d Corporations Section 1348 (1965). In Borbein the court applied Missouri statutes, mandating that the officers were trustees for the corporation even after charter forfeiture, and found personal liability accordingly. While corporate officers in North Carolina are not trustees, their fiduciary duty to the corporation is a high one. G.S. 55-35; Meiselman v. Meiselman, 309 N.C. 279, 307 S.E.2d 551 (1983). This includes a duty not to continue to incur ordinary business obligations on behalf of the corporation when they have knowledge that the corporation's charter *32 has been suspended. The law will not permit a corporate officer to create obligations in the name of the corporation, knowing the acts are without authority and invalid, and then be permitted to use the corporate name as shield against the creditors.

If defendant did not act on behalf of the corporation, he acted in his own behalf. Defendant has raised no defense to his personal liability. Defendant admitted that the goods had been received, that the prices were reasonable, and that payment had been duly demanded and none made. The amount of the debt was not disputed. No issue of fact whatsoever appears on this point.

Regardless of whether the supplies were delivered to the corporation, through its agent, defendant, or to defendant personally, plaintiff properly showed that it was entitled to payment from defendant. Defendant raised no material issue of fact requiring further litigation. Summary judgment for plaintiff was proper and the court's order is therefore

Affirmed.

WHICHARD and COZORT, JJ., concur.