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Robertson v. Levy - 197 A.2d 443 (D.C. 1964)

Rule:

The portion of D.C. Code Ann. § 29-921c which states that the certificate of incorporation will be "conclusive evidence" that all conditions precedent have been performed eliminates the problems of estoppel and de facto corporations once the certificate has been issued. The existence of the corporation is conclusive evidence against all who deal with it. Under § 29-950, if an individual or group of individuals assumes to act as a corporation before the certificate of incorporation has been issued, joint and several liability attaches. The impact of these sections, when considered together, is to eliminate the concepts of estoppel and de facto corporateness under the Business Corporation Act of the District of Columbia. 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.

Facts:

Plaintiff seller, Martin Robertson, transferred the assets of his business and assigned a lease to an "association" of which defendant Eugene M. Levy was obstensibly the president, whereby Levy was to form a corporation, Penn Ave. Record Shack, Inc. (Record Shack). The corporation, Record Shack, was to purchase Robertson's business. Levy submitted articles of incorporation and was doing business in the corporate name. Several days after the transfer and assignment were completed, a certificate of incorporation was issued, and one payment was made on the installment note for the assets. When the Record Shack ceased doing business, Robertson brought suit for the balance of the note and the damages incurred in settling the lease. The trial court ruled that Robertson was estopped from denying the existence of the Record Shack, but Robertson appealed, claiming that under D.C. Code Ann.§ 29-950, defendant Levy was liable because Levy had been acting as a corporation without authority. 

Issue:

Can a defendant, the president of an "association" that filed its articles of incorporation, which were first rejected but later accepted, be held personally liable on an obligation entered into by the "association" before the certificate of incorporation has been issued?

Answer:

Yes

Conclusion:

The court held that D.C. Code Ann. § 29-921c, which stated that a certificate of incorporation was conclusive evidence of corporate existence, together with § 29-950, had eliminated the concept of corporations by estoppel, and it was immaterial that the seller Robertson believed he was dealing with a corporation. The association's subsequent incorporation had not relieved it of personal liability under § 29-950 for unauthorized corporate activity, and Robertson was entitled to judgment.

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