MAGDELINE D. COLEMAN, Bankruptcy Judge.
Before this Court for consideration are debtor James C. Fairfield's (the "Debtor") objections to two proofs of claim filed by American Express Bank, FSB ("American Express") for unpaid credit cards debts incurred in connection with the Debtor's use of corporate credit cards maintained by his medical practice. The Debtor objects to the Claims on the ground that he has no direct contract liability for the unpaid debts.
Following an evidentiary hearing and having considered the issues raised by the parties at the hearing and in their post-hearing filings, this Court finds that American Express has met its burden with regard to the Debtor's direct contractual liability. On this basis, the Debtor's objections will be denied.
On January 29, 2010, the Debtor commenced a chapter 13 bankruptcy case. On March 2, 2010, the Debtor filed his schedules. On his Schedule F, he listed several creditors as holding unsecured nonpriority claims. Among the claims listed on his Schedule F, the Debtor identified a claim in the amount of $41,586.28 arising from a debt owed to American Express and a claim in the amount of $17,505.02 arising from a debt owed to American Express Small Business. Both claims were listed as contingent.
The amounts listed by the Debtor in his Schedule F are consistent with the proofs of claim filed by American Express. On February 9, 2010, American Express timely filed two unsecured proofs of claim. The first proof of claim, designated as Claim Number 3 on the Claims Register, evidences a claim in the amount of $41,586.28 arising from unpaid credit card debt incurred pre-petition in connection with the use of a credit card account number ending in 1004 ("Claim No. 3"). The second proof of claim, designated as Claim Number 4 on the Claims Register, evidences a claim in the amount of $17,505.02 arising from unpaid credit card debt incurred pre-petition in connection with the use of a credit card account number ending in 1005 ("Claim No. 4," collectively with Claim No. 3, the "Claims"). Both Claims attached identical copies of a "Business Cash Rebate Credit Card Agreement"
The Debtor opened the credit card accounts on or about January 2005 and September 2006. The parties agree that he opened the accounts in his capacity as the authorizing officer of Central Montgomery Dermatology Associates, LLC ("CMDA"), the Debtor's medical practice, and not in his individual capacity. However, the Debtor does not possess and American Express is unable to produce copies of the original account agreement due to the age of the accounts. Pursuant to American Express' standard business procedures, American Express periodically provided to the Debtor revised account agreements. In connection with its Claims, American Express relies upon the October 2006 account agreement entitled "Business Cash Rebate Credit Card Agreement" that was attached as Exhibit A to the Claims (the "Account Agreement").
On June 17, 2010, the Debtor filed an Objection to Claim No. 3 and an Objection to Claim No. 4 (collectively, the "Objections"). In both Objections, the Debtor asserts that the debts are not owed by him individually. Rather, the Debtor argues that CMDA is solely liable for the debts. In a response dated August 20, 2010 [Docket No. 56] (the "Response"), American Express asserts that by virtue of the express terms of its account agreements, the Debtor is personally liable for the underlying debts even though the debts were incurred in his capacity as an officer of CMDA. American Express argues that the express terms of its account agreements impose upon the Debtor personal liability for any debts incurred as a result of the respective credit card accounts.
In furtherance of its consideration of the Objections and the Response, this Court held a hearing on September 9, 2010, to address the parties' respective arguments. At the close of the hearing, this Court requested that the parties provide post-trial briefing addressing the Debtor's liability. Both parties have since completed their post-trial briefing. The Debtor submitted a Memorandum in Support of its Objections (the "Debtor's Post-Trial Memorandum"). In the Post-Trial Memorandum, the Debtor argued that American Express's admission that the Debtor had opened the accounts in his capacity as CMDA's authorizing officer precluded a finding of personal liability.
On the same day as the Debtor filed the Debtor's Post-Trial Memorandum, American Express filed a Memorandum of Law in Support of its Response to the Debtor's Objections (the "American Express Post-Trial Memorandum"). In the American Express Post-Trial Memorandum, American Express argued that its claims are entitled to prima facie validity pursuant to F.R.B.P. 3001(c) and (f) and that the Debtor had failed to overcome this presumption. In the alternative, American Express argued that the Debtor is bound by the respective cardholder agreements that, by their express terms, establish that the Debtor, regardless of his status of an officer of CMDA, is personally liable for the debts underlying each of the Claims.
Allowance of a proof of claim is governed by 11 U.S.C. § 502(a) and Federal Rule of Bankruptcy Procedure 3001(f). The Third Circuit has defined each party's respective burden in proof of claim litigation.
In re Allegheny Int'l Inc., 954 F.2d 167, 173-74 (3d Cir.1992) (citations omitted).
Here, the parties do not dispute whether American Express executed and filed the Claims in accordance with its Rule 3001(f) burden by filing the Claims with a copy of the Account Agreement and a copy of each account's current account statement. See Fed. R.B.P. 3001(c) (stating that "when a claim ... is based on a writing, the original or duplicate shall be filed with the proof of claim."). Instead, the Debtor's Objections attempt to negate the prima facie validity of the Claims. The Debtor argues that he is not personally liable for the Claims because he executed the original account agreements in his capacity as an officer of CMDA.
This Court finds that the Debtor's Objections are sufficient to refute the Claims' initial validity. See In re Martin, 413 B.R. 12, 15 (Bankr.D.N.H.2008) (finding evidence that creditor's claim was against a non-debtor entity that maintained a separate corporate existence to be sufficient to shift the burden to the creditor to prove its claim by a preponderance of the evidence); In re Garberg, Bky. No. 05-19589, 2006 WL 1997415, at *3 (Bankr.E.D.Pa. Jun. 7, 2006) (finding that debtor's argument that he never signed a credit card account application to be sufficient to rebut prima facie validity of credit card issuer's claim). Therefore, the burden rests with American Express to prove its Claims by a preponderance of the evidence. This Court will now consider whether American Express met its burden with regard to proving that consistent with applicable Utah law contractual liability extends to the Debtor personally.
The Debtor does not dispute the amount of the Claims. Rather, the Debtor's only argument is whether, as a matter of law, he may be held personally liable. The Debtor argues that because the original account applications are the only documents signed by the Debtor and that those applications were signed by the Debtor in his capacity as an officer of CMDA, he may not be held personally liable for the
Typically, a corporate officer may not be held liable for debts arising from a contract between the corporation and a third party unless the officer expressly assumes individual liability. See Param Technologies, Inc. v. Intelligent Home Solutions, Inc., Civ. No. 04-1348, 2005 WL 2050446, at *6 (E.D.Pa. Aug. 25, 2005); Leslie v. Phila. 1976 Bicentennial Corp., 332 F.Supp. 83, 93 (E.D.Pa.1971). Here, the applicable Account Agreements contained express language extending to the Debtor liability for the debts in his individual capacity. Cases from other jurisdictions generally have found the individual to be bound by the agreement if the contract includes a clause extending liability to all persons named on the card or to whom the card issuer issued the card. Heiges v. JP Morgan Chase Bank, N.A., 521 F.Supp.2d 641, 647 (N.D.Oh.2007) (despite signing the credit card agreement in his corporate capacity, holding language in corporate credit card agreement was sufficient to render arbitration clause enforceable against the party personally); see also Baker v. American Express Travel Related Servs. Co Inc., Civ. No. 02-26, 2002 WL 1205065, at *2 (W.D.Ky. May 28, 2002) (finding that American Express extended credit to individual personally by virtue of individual's use of corporate credit card); In re Adams, Bky. No. 03-30172, 2007 WL 1702511 (Bankr.M.D.Ala. Jun. 11, 2007) (finding debtor personally liable for charges incurred with corporate credit card); In re Garberg, Bky. No. 05-19589, 2006 WL 1997415, at *2 (Bankr.E.D.Pa. Jun. 7, 2006) (concluding that husband is liable for credit card charges relating to account taken out by his wife with cards issued in both spouses' names).
Such principles are consistent with the Utah law—the law governing the agreements. Utah Code § 25-5-4(2)(e) provides that an unsigned credit card agreement may be enforced against the user of a credit card who has been provided a written copy of the agreement and the written agreement provides that use shall constitute acceptance.
In relevant part, the Account Agreement reads:
Account Agreement (emphasis added).
Utah law provides that to relieve an individual of liability based on the fact that the individual executed the document in the individual's capacity as a corporate representative, "the signer's corporate capacity must be clear from the form of signature." DBL Distributing, Inc. v. Cache, L.L.C., 147 P.3d 478 (Utah App. 2006) (holding that allegation that corporate president signed corporation's credit applications in his personal capacity rather than his corporate capacity was sufficient to state a claim of personal liability). The Debtor has provided no evidence that he was named in such a way as to make clear he was named in his corporate capacity.
This Court finds that American Express has established that the Debtor, James C. Fairfield, may be held personally liable pursuant to the terms of each Account Agreement for the debts in the total amount of $59,091.30 that arose from unpaid credit cards charges incurred in connection with his use of each corporate credit card maintained by Central Montgomery Dermatology Associates, LLC. For this reason, the Debtor's Objections are
It is hereby
1. The Objections are dismissed.
2. Claims Number 3 and 4 are allowed in the amounts filed.
Utah Code § 25-5-4(2)(e).
