The decision resulted in a $42,816.68 judgment against the individual owner of the company, who had signed a personal guaranty with the rental equipment company years before when he started his company.
HERC Rentals Inc v. Superior Site Services, arises from a dispute over unpaid rental equipment invoices between a rental equipment company and a site contractor. In 2003, the individual owner of the site contractor registered a fictitious name—Superior Site Services—under which to operate the business. The individual listed himself as the sole owner of Superior Site Services
Three years later, while still using the fictitious name, the owner sought to rent equipment from the rental equipment company to use in performing grading and sitework. As part of the application process, the owner of the site contracting company signed a personal guaranty. The guaranty contained the following language:
This document contained a continuing unconditional guaranty in which [the owner] personally promised to pay to [the rental equipment company] all amounts that were either currently owing or “which may hereinafter become owing.” [The owner] also agreed to promptly notify [the rental equipment company] in writing of any change in [site contracting company’s] ownership, form, or structure, acknowledging that if he failed to notify the [rental equipment company] of any such change, he “expressly assumes full responsibility for all charges and/or credit extensions made on this account subsequent to such change.”
A year later, the owner of the company changed the ownership structure of Superior Site Services, and registered a company—C. Lee, Inc with the Division of Corporations. He then made C. Lee Inc. the owner and operator under Superior Site Services. At this same time, he also registered Superior Site Services, Inc. with the Division of Corporations.
Years later, C. Lee Inc was administratively dissolved. The owner never told the rental equipment company about this. Further, Superior Site Services Inc continued to rent equipment from the rental equipment company under the account originally established using the fictitious name Super Site Services.
After nearly 15 years of doing business, Superior Site Services Inc fell behind on its payments to the rental equipment company. When the rental equipment company reached out to the owner, he did not dispute the applicability of the personal guaranty, nor did he advise the rental equipment company of the change in business formation or names.
Eventually, the rental equipment company sued both Superior Site Services Inc, and its owner, personally, for unpaid bills, relying on the original personal guaranty to sue the owner. In response, the owner argued that once C. Lee Inc was dissolved, the personal guaranty was no longer in affect, because the owner of the fictitious name no longer existed and the fictitious name was no longer in use. The trial court agreed with this argument, and declined to enter judgment against the company owner personally.
On appeal, Florida’s Fifth District Court of Appeal reversed the ruling, finding that the owner never sought to revoke the personal guaranty prior to the filing of the lawsuit. Further the court found it important that the owner had owned both companies at issue, had performed site work using both work, and that both corporations had used the name Superior Site Services in doing business. Under these “specific” circumstances, the appellate court reversed the trial court and order that judgment be entered in favor of the rental equipment company and against the company owner personally in the amount of $42,816.68.
The key takeaway from this case is to make sure that your company names are properly registered, and that they match across all documents, applications, and licenses. This is even more critical for contractors, because using fictitious names (or DBAs) to do business when your license is actually connected to a specific LLC or corporation can result in complaints for unlicensed work. It can also create unecessary issues in litigation involving who has or does not have contractual rights. It can take time to make sure all of this is done correctly, but it is absolutely worth it in the end, as illustrated by the case above.