HANEWALD V. BRYAN'S INC.
429 N.W.2d 414 (1988)
NATURE OF THE CASE: Hanewald (P), creditor, appealed a judgment that held the Bryan's (D)
incorporators were not personally liable for their corporation's breach of a lease agreement
and failure to pay a promissory note. The judgment did hold that the corporation was liable
to P.
FACTS: On July 19, 1984, Keith and Joan Bryan incorporated Bryan's Inc. (D1) to engage in
and operate a general retail clothing and related item store. Keith was elected as president
and Joan as secretary-treasurer. George Bryan was elected vice-president, appointed
registered agent, and designated manager of the prospective business. One hundred shares of
common stock were issued with a par value of $1,000 per share. Keith and Joan each received
50 shares without payment or other consideration. Ds did loan $10,000 cash to D1 and
personally guaranteed a $55,000 loan from a bank. With these funds, D1 purchased inventory
and assets from Hanewald (P). They bought the inventory, furniture, and fixtures of the
business for $60,000, and leased the building for $600 per month for a period of five years.
D1 paid P $55,000 in cash and gave him a promissory note for $5,000, due August 30, 1985. D1
operated at a loss for four months, after which time it closed and Keith and Joan attempted
to rescind its lease with P. They packed and removed the remaining inventory and delivered
it for resale to other stores in Montana operated by the Bryan family. All creditors of D1,
including Keith and Joan, were paid off except for P. P sued D1 and Ds for breach of the
lease agreement and the promissory note. Ds counterclaimed, alleging that P had fraudulently
misrepresented the business's profitability in negotiating its sale. The trial court entered
judgment against D1 for $38,600 plus interest. It did not hold Ds liable. P appealed.
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
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