## Facts

- John A. Goodman, a real estate salesman, contracted to renovate an apartment building sold to Darden, Doman & Stafford Associates (DDS), a general partnership.
- During negotiations, Goodman stated he would form a corporation to limit his personal liability.
- In August 1979, DDS and “BUILDING DESIGN AND DEVELOPMENT INC. (In Formation) John A. Goodman, President” executed a written renovation contract containing an arbitration clause and an October 15, 1979 completion deadline.
- DDS’s partners knew the corporation did not yet exist and testified they never agreed to look solely to the corporation for performance.
- Goodman immediately subcontracted the work; the renovation was not completed on time and was alleged to be defective.
- After the apparent default, Goodman filed articles of incorporation on November 1, 1979; a corporate license issued the next day, and the first board meeting occurred in February 1980.
- DDS made five progress payments between August and December 1979; after Goodman requested payment to the corporation only, DDS issued further checks to the corporation.
- In May 1980, DDS demanded arbitration against both the corporation and Goodman individually; Goodman sought to stay arbitration and dismiss the arbitration demand as to him personally.

## Issues

1. Whether a promoter who signs a contract as “president” of a corporation “in formation” is personally bound by the contract, including its arbitration clause, absent an agreement that the other party will look solely to the future corporation for performance.
2. Whether the evidence supported relieving Goodman of personal status as a party to the arbitration agreement.

## Decision

- The Washington Supreme Court affirmed the Court of Appeals.
- Goodman, as a promoter contracting for a corporation not yet formed, remained personally liable because he failed to prove an agreement that DDS would look solely to the corporation.
- Because Goodman was personally a party to the contract, he was a proper party to arbitration under the contract’s arbitration clause.
- In reviewing the basis for the trial court’s ruling, an appellate court may consult the trial court’s oral decision when written findings do not address a particular issue.

## Legal Principles

- A promoter who contracts for the benefit of a corporation not yet formed remains liable on the contract unless the promoter proves an agreement that the other party will look solely to the corporation for performance.
- Identifying the contracting entity as a corporation “in formation,” without more, does not overcome the inference that the other party intended to contract with the promoter rather than with a nonexistent corporation.
- When written findings omit a particular issue, an appellate court may examine the trial court’s oral ruling to determine the basis for the decision.
- If a promoter is personally bound to a contract, the promoter is generally bound to the contract’s arbitration provision.

## Conclusion

The court held that signing as an officer of a corporation “in formation” does not, by itself, shield a promoter from personal liability; absent proof that the other party agreed to look only to the future corporation, the promoter is personally bound and may be compelled to arbitrate under the contract’s arbitration clause.


Goodman v. Darden, Doman & Stafford Assocs., 100 Wash. 2d 476, 670 P.2d 648 (Wash. 1983)