Can a corporate officer have individual contract rights separate from the corporation? Orlob v. Wasatch Mngmnt Explained

In Orlob v. Wasatch Management, the Utah Court of Appeals addressed whether a corporate officer who signs a contract both corporately and individually can maintain separate contractual interests from his corporation.

Background and Facts

David Orlob was the sole shareholder and president of Professional’s Control Group (PCG), which provided billing services to physicians. PCG entered into a Combined Agreement to sell all its assets to Wasatch Medical Management. The agreement defined parties as two groups: PCG and Orlob collectively referred to as “Orlob,” and Wasatch and the Jensen partners collectively referred to as “Jensens.” The contract included non-compete covenants and required Orlob to assist in transferring accounts. When the IRS seized PCG’s interest in the contract for unpaid taxes, Orlob sued claiming he had individual contract rights.

Key Legal Issues

The central issue was whether Orlob had an individual interest in the Combined Agreement separate and distinct from PCG’s corporate interest. The district court had concluded that Orlob’s obligations were “inextricably intertwined” with his corporate status and granted summary judgment against him.

Court’s Analysis and Holding

The Court of Appeals applied correctness review to the contract interpretation and summary judgment rulings. Examining the “four corners of the contract,” the court found the agreement unambiguous in including both PCG and Orlob as separate parties. Key evidence included: (1) personal covenants requiring Orlob’s individual performance, (2) signature lines labeled “individual” for Orlob and the Jensens separate from corporate signature lines, and (3) the personal nature of the non-compete obligations. The court emphasized that without Orlob’s personal covenants, the agreement would have little value since PCG’s goodwill was essentially Orlob’s personal reputation.

Practice Implications

This decision clarifies that corporate officers can maintain individual contractual interests when they sign agreements in both capacities and undertake personal obligations. Practitioners should carefully examine signature pages and covenant language to distinguish between corporate and individual responsibilities, particularly in closely-held corporations where personal and corporate interests may overlap.