Hill v. County Concrete Company, Inc., 672 A.2d 667 (Md. App. 1996)

Facts

Hill and Newman decided to start a concrete pouring business.  They wanted to form the corporation under C & M Builders.  An attorney advised the name was available and Hill and Newman began creating letterhead, business cards, etc.  The application was not timely filed and when it was filed, C & M was gone.  They instead filed under H & N Construction, Inc.  Hill and Newman continued to use C & M as its trade name.  County Concrete received an order from C & M and opened an account, which was defaulted on.

Procedural History

County Concrete sued C & M and filed for summary judgment.  A default was entered against Newman and summary judgment was granted against C & M.  County Concrete argued Hill was personally liable because C & M was not validly formed.  Hill argued it was a de facto corporation, which the judge rejected.

Issue(s)

Did the trial judge err in holding C & M was not a valid corporation and thus holding Hill personally liable?

Holding(s)

No.

Reasoning/Analysis

Hill argued C & M was a de facto corporation based on County Concrete knowing it was dealing with a corporate entity and not with an individual.  Hill relied on Cranson, which laid out the factors for determining a de facto corporation as: (1) a law authorizing corporations, (2) a good faith effort to incorporate, and (3) the use or exercise of corporate powers.  Hill did not act in good faith after knowing C & M was not available but continued to use that corporate entity.

Judgment/Outcome

The Court affirmed the judgment of the trial court.