## Facts

- SGL Carbon, LLC (SGL) owned an approximately 22-acre industrial property.
- Edward Payer negotiated with SGL for a purchase-and-sale agreement; early discussions contemplated Payer as the buyer in his individual capacity.
- During negotiations, Payer instructed SGL to change the named buyer to “Transition Metals Technology, Inc., a New Jersey corporation” (TMT).
- In December 2002, the parties executed the purchase agreement; Payer signed the agreement and a promissory note as “CEO” of TMT and later signed an amendment as TMT’s “President.”
- At the time Payer executed these documents, TMT had not been incorporated; Payer did not incorporate TMT until roughly 18 months later, and more than a month after suit was filed.
- The transaction required satisfaction of multiple contingencies before closing.
- SGL asserted it satisfied its contingency obligations and repeatedly attempted to close; Payer and TMT asserted SGL failed to complete required contingencies and breached the agreement.
- SGL treated the agreement as canceled and sought to sell the property to other purchasers (the “Williams defendants”).
- Payer and TMT filed suit seeking specific performance and filed notices of pendency (lis pendens) against the property, which prevented the later sale from closing.
- In testimony described in secondary summaries, SGL’s president stated he would not have negotiated differently if Payer individually, rather than TMT, had been the buyer, except for documentation clarifications.

## Issues

1. Whether a contract naming a corporation as buyer can be specifically enforced by that corporation when the corporation did not exist at the time the contract was signed.
2. Whether Payer, who directed that the buyer be a corporation and signed only in a representative capacity, could obtain specific performance in his individual capacity.
3. Whether the failure of the specific-performance claim required cancellation of the notices of pendency filed against the property.
4. Whether plaintiffs’ pursuit of the action warranted Rule 11 sanctions.

## Decision

- The U.S. District Court for the Western District of New York (Elfvin, J.) granted SGL’s motion for partial summary judgment against plaintiffs’ specific-performance claim.
- The court granted relief eliminating the basis for the notices of pendency tied to the specific-performance claim.
- The court denied SGL’s motion for Rule 11 sanctions.
- The court denied as moot the Williams defendants’ summary-judgment motion and dismissed plaintiffs’ claims against the Williams defendants without prejudice under Rule 41(a)(2).
- The court granted plaintiffs’ counsel’s motion to withdraw and provided time for plaintiffs to obtain new counsel or proceed pro se.

## Legal Principles

- A corporation generally cannot be a contracting party, in its own name, before it exists; the nonexistence of the named corporate buyer at execution can bar that entity’s effort to enforce the agreement as written.
- When an individual directs that the buyer be a corporation and signs only as an officer of that corporation, the individual may lack personal contractual rights necessary to obtain specific performance.
- Specific performance of a real-property contract requires an enforceable agreement and a plaintiff with contractual standing; defects in the identity or existence of the contracting party can defeat equitable relief.
- A notice of pendency must be supported by a viable claim affecting title; if the claim for specific performance fails, the notice of pendency should be canceled.
- Rule 11 sanctions are not imposed merely because a party loses; sanctions require a showing that the filing lacked a legally and factually supportable basis.

## Conclusion

The court granted partial summary judgment for SGL on plaintiffs’ demand for specific performance because the contract identified a corporate buyer that did not exist when the agreement was executed and Payer’s representative-only signatures did not supply a basis for personal enforcement, leading to cancellation of the lis pendens; the court nonetheless denied Rule 11 sanctions and disposed of the related claims against the later purchasers without prejudice.


Payer v. The SGL Carbon, LLC, 2006 WL 2714190 (2006)