American Vending Services, Inc. v. Morse, 881 P.2d 917 (Utah Ct. App. 1994)

Facts

Morse entered into a contract with Durbano and Garn, acting as officers of AVSI, to purchase a carwash.  Durbano had not filed the Articles of Incorporation before the contract was executed.

Procedural History

Morses filed suit against Durbano and Garn for enforcement of the promissory notes.  They alleged the corporation did not legally exist when the parties entered into the contract.  Trial court held that AVSI was a corporation by estoppel.

Issue(s)

Did the trial court err in holding AVSI was a corporation by estoppel?

Holding(s)

Yes.

Reasoning/Analysis

The Court found that there is dispute in the jurisdictions on the characteristics of a corporation by estoppel.  But given the ease of incorporating, the Court was hesitant to carve exceptions to the statutory grounds of holding individuals who assume to act as a corporation before the corporation exists jointly and severally liable.  Durbano and Garn had actual knowledge AVSI did not exist and thus neither of them can invoke the doctrine of corporation by estoppel.

Judgment/Outcome

The Court reversed the judgment of the trial court.