Contractor signed on my LLC's behalf

[smutlydog]

Texas
I am a home builder and have no one else listed in the LLC documents. The most important contractor who handles managing all the crews uses one of my credit cards. He has been using the card for 3 years now. Six months ago he let a magazine company talk him into a year contract for advertising. The total was about $6,000 divided by 12 months. The contractor told me he would pay and he did for several months but he finally realized he was scammed and he asked me to change my credit card number which I did. Now a debt collector is threatening a lawsuit. He signed his own name on my company's behalf. I have good credit and don't need this. Where do I legally stand on this? thanks in advance

 

[zddoodah]

I am a home builder and have no one else listed in the LLC documents. The most important contractor who handles managing all the crews uses one of my credit cards. He has been using the card for 3 years now.

So...you are the sole member of an LLC that is a home builder, and you have someone managing your crews whom you regard as a "contractor," rather than an employee. Correct? Why do you believe this person is a contractor, rather than an employee? With respect to the credit card, I assume the credit account is in the LLC's name. Correct?

Six months ago he let a magazine company talk him into a year contract for advertising.

Advertising what? Your business? His business?

The contractor told me he would pay and he did for several months but he finally realized he was scammed and he asked me to change my credit card number which I did.

So...this individual used your LLC's card to pay for advertising, but he was going to pay for it (even though he used your LLC's card)? You were made aware of this and apparently were ok with it, but at some point, you got the credit card issuer to change the account number so that the remaining payments couldn't be charged. Correct?

Where do I legally stand on this?

The legal issue raised by your post is whether this person was an agent of your LLC. Whether he was a contractor or an employee, it sounds like he was - for at least some purposes. Importantly, it sounds like you ratified his actions in making the charges. It's impossible to predict this on a message board, but your post indicates that there is probably a decent chance that, if your LLC were sued, the plaintiff would win. I assume any litigation would happen in small claims court, but the amount at issue wouldn't warrant making too much out of this. I suggest you and your contractor/employee sit down and figure out the most cost-effective way to deal with this.

 

[smutlydog]

So...you are the sole member of an LLC that is a home builder, and you have someone managing your crews whom you regard as a "contractor," rather than an employee. Correct? Why do you believe this person is a contractor, rather than an employee? With respect to the credit card, I assume the credit account is in the LLC's name. Correct?
That particular card is under my original DBA name. I believe he is a contractor because I submit a 1099 form every year.




Advertising what? Your business? His business?
My business




So...this individual used your LLC's card to pay for advertising, but he was going to pay for it (even though he used your LLC's card)? You were made aware of this and apparently were ok with it, but at some point, you got the credit card issuer to change the account number so that the remaining payments couldn't be charged. Correct?
correct but I wasn't exactly ok with it.



The legal issue raised by your post is whether this person was an agent of your LLC. Whether he was a contractor or an employee, it sounds like he was - for at least some purposes. Importantly, it sounds like you ratified his actions in making the charges. It's impossible to predict this on a message board, but your post indicates that there is probably a decent chance that, if your LLC were sued, the plaintiff would win. I assume any litigation would happen in small claims court, but the amount at issue wouldn't warrant making too much out of this. I suggest you and your contractor/employee sit down and figure out the most cost-effective way to deal with this.

 

[adjusterjack]

That particular card is under my original DBA name

Then you are up the creek without a paddle.

YOU made him an authorized user of YOUR credit card. YOU guaranteed payment of YOUR credit card. YOU owe the money to the credit card company.

Whether you ever get if back from the contractor is anybody's guess.

Life lesson from the school of hard knocks.

 

[smutlydog]

Then you are up the creek without a paddle.

YOU made him an authorized user of YOUR credit card. YOU guaranteed payment of YOUR credit card. YOU owe the money to the credit card company.

Whether you ever get if back from the contractor is anybody's guess.

Life lesson from the school of hard knocks.

2 payments came in that the contractor reimbursed me for. He reimbursed me because I wasn't on board with the decision to spend money on that. At some point later he asked me to change my card and said he would deal with the company later. I t6old him it was a scam. Now he knows.

 

[LdiJ]

Texas
I am a home builder and have no one else listed in the LLC documents. The most important contractor who handles managing all the crews uses one of my credit cards. He has been using the card for 3 years now. Six months ago he let a magazine company talk him into a year contract for advertising. The total was about $6,000 divided by 12 months. The contractor told me he would pay and he did for several months but he finally realized he was scammed and he asked me to change my credit card number which I did. Now a debt collector is threatening a lawsuit. He signed his own name on my company's behalf. I have good credit and don't need this. Where do I legally stand on this? thanks in advance

Exactly who did the debt collector threaten? You, the contractor, your LLC, who?

 

[Litigator22]

2 payments came in that the contractor reimbursed me for. He reimbursed me because I wasn't on board with the decision to spend money on that. At some point later he asked me to change my card and said he would deal with the company later. I t6old him it was a scam. Now he knows.

Whether you are "ok with it" or not and regardless of the status of the manager of your crews as either an independent contractor or employee that individual bears no legal responsibility whatsoever for any of said advertising charges placed on "one of your credit cards"!

Your abortive efforts to seek a more favorable opinion from the contributors here by tempering and shading the details with naked improbabilities is piteous!

 

[Taxing Matters]

Where do I legally stand on this? thanks in advance

As the others have said, LLC card or your card, you authorized the charge. Given the amount of the loan ($6,000) you should have got the agreement with this person in writing. It makes things easier later if you need sue this person for breach of contract. However, he signed the charge on the credit card and made a few payments, so that may be enough to prove the contract with the employee/contractor. You are fortunate to be in Texas where the default rule for legal fees in contract cases is different than almost any other state. In Texas the rule is that the loser pays the winner's legal fees unless they agreed to something different. In pretty much every other state the rule is that each party bears its own legal costs in a contract dispute unless the contract says otherwise. So I'd suggest at least an initial consultation with a lawyer who does contract litigation to see what it will ultimately cost to have a lawyer handle it. There will be some things that are not covered by the rule that the loser pays and you need to know what those are. As the debt is owed to you and not your LLC, you do have the option of proceeding without a lawyer in small claims court too. Here again you are fortunate to be in Texas. The limit for small claims court in Texas is $20,000. If the claim is for more than that, you'd need to go another court where the rules are lot less informal than small claims court. The more common limits for small claims court that I've seen for other states are around $5,000. If you want to go that way, Texas has pretty much all the information about that on its small claims web page.

 

[Taxing Matters]

I suggest you and your contractor/employee sit down and figure out the most cost-effective way to deal with this.

I agree you should attempt to do that before going to court. It never hurts to show the court that you made efforts to resolve this out of court, and it might help you.

 

[smutlydog]

Exactly who did the debt collector threaten? You, the contractor, your LLC, who?

They couldn't get a hold of the contractor so they called me.

 

[adjusterjack]

They don't need to get hold of the contractor. They've got you on the hook.

 

[Litigator22]

It never hurts to show the court that you made efforts to resolve this out of court . . . (?)

Begging your pardon, but that's a disturbing remark coming from an attorney!

How do you explain it in view of the universal exclusionary rule? (For instance, as it is codified in Rule 408 of the Texas Rules of Evidence?)

" Compromise Offers and Negotiations

(a) Prohibited Uses. Evidence of the following is not admissible either to prove or disprove
the validity or amount of a disputed claim:

(1) furnishing, promising, or offering—or accepting, promising to accept, or offering
to accept—a valuable consideration in compromising or attempting to compromise
the claim; and

(2) conduct or statements made during compromise negotiations about the claim."
(Emphasis added)
____________

For anyone interested in knowing the "why" of the Rule. It is because otherwise people would be discouraged from endeavoring to resolve civil disputes out of court in fear of those efforts being offered at trial as admissions of liability.

 

[Taxing Matters]

Begging your pardon, but that's a disturbing remark coming from an attorney!

Ah, but those rules don't apply in small claims court, do they? And if it wasn't clear before, let me clear about it now, I was referring to small claims court. The rules are a lot less formal in at least most states' small claims court because of the fact that litigants are representing themselves are are not lawyers. In that regard, the rules in Texas for small claims court expressly states that the Texas Rules of Evidence (including the rule you cited) do not apply in small claims court. Specifically, § 504 of the Rules of Practice in Justice Courts states:

RULE 504. RULES OF EVIDENCE​

The Texas Rules of Evidence do not apply to justice courts except to the extent the judge hearing the case determines that a particular rule must be followed to ensure that the proceedings are fair to all parties.​

In the states I have resided in small claims courts the judges/magistrates were often interested to know if the parties had made some effort to resolve it. Not the details of the negotiations, simply confirming they made some effort to resolve it before landing in small claims court. Perhaps it's different where you are. In any event, the rule you cited is not applicable to state small claims court

How do you explain it in view of the universal exclusionary rule? (For instance, as it is codified in Rule 408 of the Texas Rules of Evidence?)

The answer to that question then is that those rules don't apply in Texas small claims court actions. Sure, if the case were in some other court where lawyers routinely practice you'll find the more detailed rules of evidence, like the one you cited, would apply. But they do not apply in this instance as it would be a small claims matter. And just so you know, in Texas the limit for small claims in $20,000, so that's where this matter would almost certainly end up.

As for your snarky comment, I suggest you consider leaving those out of your posts. They don't give you a good look.

 

[Litigator22]

Ah, but those rules don't apply in small claims court, do they? And if it wasn't clear before, let me clear about it now, I was referring to small claims court. The rules are a lot less formal in at least most states' small claims court because of the fact that litigants are representing themselves are are not lawyers. In that regard, the rules in Texas for small claims court expressly states that the Texas Rules of Evidence (including the rule you cited) do not apply in small claims court. Specifically, § 504 of the Rules of Practice in Justice Courts states:

RULE 504. RULES OF EVIDENCE​

The Texas Rules of Evidence do not apply to justice courts except to the extent the judge hearing the case determines that a particular rule must be followed to ensure that the proceedings are fair to all parties.​

In the states I have resided in small claims courts the judges/magistrates were often interested to know if the parties had made some effort to resolve it. Not the details of the negotiations, simply confirming they made some effort to resolve it before landing in small claims court. Perhaps it's different where you are. In any event, the rule you cited is not applicable to state small claims court



The answer to that question then is that those rules don't apply in Texas small claims court actions. Sure, if the case were in some other court where lawyers routinely practice you'll find the more detailed rules of evidence, like the one you cited, would apply. But they do not apply in this instance as it would be a small claims matter. And just so you know, in Texas the limit for small claims in $20,000, so that's where this matter would almost certainly end up.

As for your snarky comment, I suggest you consider leaving those out of your posts. They don't give you a good look.

May it be assumed that somewhere within the above lengthy response there's a concession that the "it never hurts" statement should not be taken as categorical?

And that when expressed as an unqualified proposition it has the likelihood of misleading the laity to thinking that such efforts are generally accepted as a feature of normal trial tactics and as evidence of good faith and might curry favor with the court?

I think it has a strong potential to so just that and that is why I find it disturbing. If "unsettling" is deemed less offensive, consider it done.

“Injustice is relatively easy to bear; what stings is justice.” (H. L. Mencken)

 

[adjusterjack]

Get off your high horse. You're not impressing anybody.