Curry Auto Leasing, Inc. v. Byrd
In Curry Auto Leasing, Inc. v. Byrd, 683 S.W.2d 109 (Tex. App.--Dallas 1984, no writ), a corporation entered into a motor vehicle lease on December 1, 1980. See Byrd, 683 S.W.2d at 110. Before the relevant forfeiture date, the lessee corporation breached the lease, and the lessor terminated the lease and repossessed the leased vehicle. See id.
After the forfeiture date, the lessor sold the vehicle, resulting in a deficiency amount, for which the lessor sued the lessee and its officers. See id. at 111.
The Fifth Court of Appeals had to decide whether the lessors' damages constituted a debt that was created or incurred after the forfeiture date for the purposes of the version of Chapter 171 that was then in effect. See id. at 110-11.
The Byrd court stated that "the statute does not impose liability on the officers of the lessee corporation if the obligations . . . that create or incur the debt in question pre-existed the forfeiture." Id.
The Byrd court then concluded "that performance or implementation of the contractual provisions relate back to and are authorized at the time of execution of the contract." Id.
Though the Byrd court noted that the lessee breached the lease and the lessor terminated the lease before the forfeiture date, the court emphasized that the debt in question related back to the execution of the lease on December 1, 1980 and therefore was created and incurred before the forfeiture date. See id.
The Court considered the application of section 171.255(a) to a breach of contract claim. Curry Auto Leasing, Inc. (Curry Auto), the plaintiff, and Physicians Accounting Services, Inc. (PAS) entered into a motor vehicle lease agreement on December 1, 1980. Id. at 110.
PAS failed to pay the monthly rental due beginning in May 1982, and Curry Auto terminated the lease. Id. Curry Auto repossessed the leased vehicle on September 10, 1982. Id.
On September 15, 1982, the corporate privileges of PAS were forfeited by the comptroller. Id.
The lease provided that, if it was terminated, the leased vehicle was to be sold. Id. at 111. "Promptly" after the sale, Curry Auto was required to deliver to PAS a statement showing the amount of profit or loss from the sale. Id.
A final settlement between the parties was required to be made within fifteen days of the delivery of the statement. Id.
In October 1982, Curry Auto sold the repossessed vehicle for a loss of $6,499.82. Id. It also paid, after repossessing the vehicle, $27 in storage fees and charged PAS a $10 late payment fee for September when rent was not paid on September 1st. Id.
"These items were all ascertained, paid, or charged after Curry Auto exercised its option to terminate the rental contract and after PAS's corporate privileges had been forfeited." Id
Curry Auto asserted the loss incurred when it sold the leased vehicle, the storage fees, and the late payment fee were debts of PAS that were created or incurred after its corporate privileges were forfeited and, therefore, were recoverable under section 171.255 from each of PAS's officers. Id.
The Court disagreed, first noting the statute did not impose liability on the officers of PAS "if the obligations, circumstances, conduct, or transactions that create or incur the debt in question pre-existed the forfeiture." Id. at 112.
The Court concluded that "performance or implementation of the contractual provisions relate back to and are authorized at the time of the execution of the contract." Id.
Because the debt Curry Auto sought to recover from the officers of PAS was authorized by the leasing agreement, it "was brought into existence, caused by, resulted from, or arose out of the performance or implementation of the provisions of the rental contract at the time Curry Auto opted to terminate the contract." Id.
These items related back to PAS's promise to pay that was made in the rental contract executed before its corporate privileges were forfeited. Id.
Accordingly, no debt was created or incurred after the forfeiture for which the corporate officers were liable. Id.