Opinion ID: 2337387
Heading Depth: 2
Heading Rank: 2

Heading: Marcum's Standing to Sue on Behalf of PKT

Text: For their cross-appeal, the Wengerts assert that the trial court erred in denying the Wengerts' motion for judgment as a matter of law on the issue of whether Marcum could prosecute the original lawsuit on behalf of PKT Housing Corporation. During trial, the Wengerts made the motion for judgment as a matter of law, arguing that because Marcum was no longer a member of the board of directors of the PKT Housing Corporation or associated with the fraternity at the time of the filing of the lawsuit, he did not have standing to represent PKT Housing Corporation in its initial lawsuit against the Wengerts. The trial judge denied the motion finding that only PKT Housing Corporation, its board of directors, or its members/shareholders had the authority to challenge Marcum's representation of the housing corporation in the lawsuit. The evidence supports the finding that Marcum continued to act with the permission of the board of directors in pursuing this claim. Under Arkansas law, a corporation has the power to sue and be sued in its corporate name. Ark.Code Ann. § 4-26-204(a)(2) (Repl.1991); Calandro v. Parkerson, 327 Ark. 131, 936 S.W.2d 755 (1997). A corporation is a legal entity which, being distinct from its members, owns the corporate property and owes the corporate debts, is the creditor to sue or the debtor to be sued, has perpetual existence, and can act only through its duly constituted organs, primarily its board of directors. Calandro, 327 Ark. at 136-137, 936 S.W.2d 755 (quoting Arkansas Iron & Metal Co. v. First Nat'l Bank of Rogers, 16 Ark.App. 245, 251, 701 S.W.2d 380, 383 (1985)). Generally, the officers and members of a corporation may not sue or be sued in their own name. See 19 C.J.S. Corporations § 711, at 364 (1990). A corporate officer has no individual right of action against a third party for alleged wrongs inflicted on the corporation, even if the officer is the sole shareholder. Id. § 629, at 277. Arkansas Code Annotated § 4-26-801(a) (Repl.1991) states: (a) All corporate powers shall be exercised by or under the authority of and the business and affairs of a corporation shall be managed under the direction of its board of directors, subject to any limitation set forth in the articles of incorporation. Here, the evidence at trial indicated that at the time Marcum contacted and contracted with the attorneys to look into filing suit for the housing corporation, Marcum was still on the board of directors. It was only after that time that he and Capo disassociated from the housing corporation and from the fraternity, but the evidence indicates that the attorneys had already been hired at the authority of the housing corporation. There is no indication that the housing corporation's continuing board of directors objected to the continuation of Marcum's representation of the housing corporation in the lawsuit. In fact, according to Marcum, the board of directors wanted the lawsuit continued. Certainly, there was no challenge to Marcum's standing to represent the housing corporation by any member of the housing corporation as required by Ark.Code Ann. § 4-26-205 (Repl.1991) entitled Defense of Ultra Vires. Under this statutory provision, the corporations acts are deemed valid even if the corporation lacked the capacity or power to perform the act. Under the statute, only specific people are able to challenge the corporation's acts, and the Wengerts do not occupy any of those positions. We affirm on cross-appeal. We reverse and remand this case to the trial court with instructions to consider awarding reasonable attorney's fees and costs to Marcum and Capo and PKT Housing Corporation under Ark.Code Ann. § 16-22-308 and Rule 54(d) of the Arkansas Rules of Civil Procedure and to award reasonable attorney's fees and costs to PKT Housing Corporation under paragraph sixteen of the lease agreement.