Court Opinion

ID: 9633017
Source: CourtListenerOpinion
Date Created: 2023-08-22 11:31:33.57525+00
Date Added: 2024-06-11T13:03:21.356098
License: Public Domain

REGNAL W. GARFF, Judge
(concurring):
I concur with the reasoning of Judge Greenwood in all but that part of the opinion dealing with corporation by estoppel, wherein I concur in the result only.
I do not believe corporation by estoppel exists in Utah because Utah Code Ann. § 16-10-51 (1989) clearly states that corporate existence does not begin until the certificate of incorporation is issued. Because this wording is unambiguous, there is no justifiable reason to conclude that the legislative intent was otherwise.
*928The comment section to the Model Business Corporation Act that pertains to sections 51 and 189 of the Utah Act states, as noted by the majority, that “[ujnder the unequivocal provisions of the Model Act, any steps short of securing a certificate of incorporation would not constitute apparent compliance. Therefore a de facto corporation cannot exist under the Model Act.” Although the comment is silent as to corporations by estoppel, there is no reason to assume that estoppel would not be included in the incontrovertible language of the statute. In other words, there is no compliance without the certificate. There is no authority to act unless the rather simple, straightforward procedures are followed.
I agree with the courts of appeal of the District of Columbia and Tennessee, whose statutes are- substantially similar to those of Utah and the Model Act. Those courts rejected the concept of corporation by estoppel.
No longer must the courts inquire into the equities of a case to determine whether there has been “colorable compliance” with the statute. The corporation comes into existence only when the certificate has been issued. Before the certificate issues, there is no corporation de jure, de facto or by estoppel.
It is immaterial whether the third person believed he was dealing with a corporation or whether he intended to deal with a corporation. The certificate of incorporation provides the cut off point; before it is issued, the individuals, and not the corporation, are liable.
Robertson v. Levy, 197 A.2d 448, 446-47 (D.C.App.1964).
The General Assembly ... saw fit to place statutory liability upon those who assume to act as a corporation without authority_ No exceptions are contained in [the statute]. For this Court to hold that under the circumstances here Mr. Walker is not liable, it would be necessary that this Court rewrite the Tennessee General Corporations Act and hold that the Act does not mean what it says....
We are of the opinion that the doctrine of corporation by estoppel met its demise by the enactment of the [Act].
Thompson & Green Mach. v. Music City Lumber Co., 683 S.W.2d 340, 345 (TenmApp. 1984).
Judge Greenwood relies on Harry Rich Corp. v. Feinberg, 518 So.2d 377 (Fla.App. 1987) to create corporation by estoppel in Utah in those .limited situations where the individual seeking to avoid liability had no constructive or actual knowledge that the corporation did not exist. However, there is one significant difference between Florida and Utah: Florida has codified the doctrine of corporation by estoppel wherein private litigants are estopped from asserting the nonexistence of the corporation if they have, by conduct or words, affirmed or relied on its existence.
“Estoppel. — No body of persons acting as a corporation shall be permitted to set up the lack of legal organization as a defense to an action against them as a corporation, nor shall any person sued on a contract made with the corporation or sued for an injury to its property or a wrong done to its interests be permitted to set up the lack of such legal organization in his defense.”
In other words, the corporation may sue and be sued as if it existed if the parties to the contract behaved as if it existed.
Id. at 379 (quoting Fla.Stat. § 607.401). The Florida court went on to say,
[I]n states such as Florida, where corporation by estoppel (which allows recovery from the corporation) is retained alongside a statute imposing liability on an individual who assumes to act as a corporation, recovery from the individual should be permitted only where the individual acts with actual or constructive knowledge that no corporation exists.
Id. at 381 (emphasis added). Thus, Florida law recognizes corporate liability by estoppel, but conditions individual liability on knowledge.
Thus, I conclude that the Florida ease is not applicable in Utah and should not be relied on to establish corporation by estoppel. *929I would rely on the clear, unambiguous language of the Utah statute.
I agree with the majority that Durbano and Garn are personally liable. However, I do so on the basis that the Business Corporation Act eliminated the doctrines of de facto corporations and corporations by estoppel.