## Facts

- Ira Feinberg became an officer and then president of Young Sophisticates Warehouse, a business he believed had been incorporated.
- Feinberg was told the business had been formed as a corporation by an attorney.
- On November 15, 1984, Feinberg signed a contract as “president” to purchase carpeting on credit from Harry Rich Corporation for the business.
- Later in November 1984, while attempting to update corporate documents, Feinberg learned the business had never been incorporated.
- By December 5, 1984, Feinberg caused the business to be incorporated.
- Harry Rich sued the corporate entities and, after learning the business was unincorporated when the contract was signed, added Feinberg individually, seeking personal liability under § 607.397, Florida Statutes (1983).
- After a bench trial, the court held the corporate defendants liable but found Feinberg had no actual or constructive knowledge of the nonexistence of the corporation at contracting and that Harry Rich did not rely on Feinberg’s personal credit; it entered judgment for Feinberg.
- Harry Rich appealed the judgment in Feinberg’s favor.

## Issues

1. Whether § 607.397, Florida Statutes (1983), imposes personal liability on a person who signs a contract for a business that was not incorporated at the time, when the signer lacked actual or constructive knowledge of the non-incorporation.
2. Whether the creditor’s lack of reliance on the signer’s personal assets or credit supports denying individual liability under § 607.397.

## Decision

- The appellate court affirmed the judgment for Feinberg.
- The court upheld the factual findings that Feinberg lacked actual or constructive knowledge that the corporation did not exist when he signed the contract and that the creditor did not rely on Feinberg personally.
- Based on those findings, the court agreed that § 607.397 did not impose individual liability on Feinberg for the contract.

## Legal Principles

- Under § 607.397, liability for acting “as a corporation without authority” requires, at minimum, that the actor have actual or constructive knowledge that the corporation does not exist.
- A good-faith belief that the corporation exists, coupled with prompt incorporation upon discovery of the defect, weighs against imposing personal liability for pre-incorporation contracting.
- The creditor’s lack of reliance on the individual’s personal credit or assets supports treating the obligation as corporate rather than personal for purposes of § 607.397.

## Conclusion

The court held that § 607.397 did not make Feinberg personally liable for a contract signed on behalf of an unincorporated business because he lacked actual or constructive knowledge of the non-incorporation and the creditor extended credit without relying on Feinberg individually.


Harry Rich Corp. v. Feinberg, 518 So. 2d 377 (Fla. Dist. Ct. App. 3d Dist. 1987)