Turning a Debt into A Personal Guaranty

In the case of Orix Financial Services, Inc. v. Leclair (S.D.N.Y. Feb 26, 2007) the court found that under Rhode Island law, an individual who assumes to be acting for a corporation without authority to do so is liable for all debts arising from the action.

Mr. Leclair defaulted under his obligation under a note. The maker of the note was “Brian Leclair DBA T and D Excavating Co.” Unfortunately for Mr. Leclair, the charter for T and D had beeen revoked two year prior to the execution of the note.

Under R.I. Gen. laws Section 7-1.2-1801: “All individuals who assume to act as a corporation without authority so to do are jointly and severally liable for all debts and liabilities incurred or arising as a result of that action.”

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