Allen Steel Supply Co. v. Bradley

• Decision Date: 20 May 1965
• Docket Number: No. 9387,9387
• Citation: 402 P.2d 394,89 Idaho 29
• Parties: ALLEN STEEL SUPPLY CO., Plaintiff-Respondent, v. Guy R. BRADLEY, Defendant-Appellant.
• Court: Idaho Supreme Court

Page 394

402 P.2d 394

89 Idaho 29

ALLEN STEEL SUPPLY CO., Plaintiff-Respondent, v. Guy R. BRADLEY, Defendant-Appellant.

No. 9387.

Supreme Court of Idaho.

May 20, 1965.

Rehearing Denied June 14, 1965.

Petition for Recall of Remittitur Denied July 23, 1965.

Vernon K. Smith, Boise, for appellant, C. H. Higer, Emmett, amicus curiae.

Clemons, Skiles & Green, Boise, for respondent, Allan G. Shepard, Atty. Gen., and Richard E. Weston, Asst. Atty. Gen., Boise, amicus curiae.

McFADDEN, Justice.

Respondent Allen Steel Supply Co., as plaintiff, instituted this action to recover a balance due for certain steel claimed to have been sold to appellant-defendant Guy R. Bradley. Judgment was entered for the respondent, from which judgment the appellant appeals.

Briefly the facts leading to this litigation are as follows: Appellant Bradley and one Kenneth Chattin, in September, 1961, entered into an agreement to sell certain supplies and materials including steel to Alpine Industries, for use in the construction of trailers. Bradley and Chattin contacted the respondent company concerning furnishing the steel. Bradley, a trucker, was well known to Loren Allen, president of respondent company, Bradley having over a period of years performed hauling services for the company.

As a result of the negotiations, respondent agreed to order the requisite steel from mills in Utah, with Bradley to take delivery of the steel on his trucks in Utah, and deliver the steel to Alpine Industries. Respondent was to receive $100.00 per load over and above the cost of the steel. Orders for the steel were placed and periodic deliveries were made under such arrangement from October, 1961, through July, 1962.

Upon delivery of steel to Bradley's truck, the steel mill immediately billed respondent for the load. Immediately following, respondent then billed Mr. Bradley for the cost of the load, plus $100.00. The first four invoices were addressed to Mr. Bradley, at his home address; subsequent invoices were addressed to Mr. Bradley, at P. O. Box 1644, Boise, Idaho, the address of 'Western Industrial Corporation' and other enterprises of Mr. Chattin. This change in address was made at appellant's request. The record is conflicting as to whether at the time appellant had the address changed, he also requested that the billing be changed from him individually to 'Western Industrial Corporation.' Appellant asserts he made such request, which statement is denied by employees of respondent. Nevertheless, respondent continued to bill Bradley, and not Western Industrial Corporation.

The payment for the first shipment of October, 1961, was by check written by Bradley on an account he and Chattin had opened with moneys borrowed from a bank. All subsequent payments were made out of the same account, buty by check of 'Western Industrial Corporation', and signed by either Bradley or Chattin.

All shipments were paid for, except the last three totaling $8,315.91, for which sum this action was instituted against Bradley individually. Appellant Bradley answered the complaint, denying he was indebted to respondent. In his answer he set out an affirmative defense and as a counter-claim alleged that he negotiated the purchase of the steel as an officer of Western Industrial Corporation, and that the steel was sold to such corporation and not to him individually; that the corporation became involved financially because of the insolvency of one of its debtors, and that by reason of wrongfully bringing action against him individually he was damaged in the amount of $6,000. At a pre-trial conference it was discovered that Western Industrial Corporation had not been incorporated until June, 1962, and Bradley withdrew his counter-claim for damages, but amended his answer by adding another affirmative defense. In this latter affirmative defense he alleged that respondent was estopped from denying it was contracting with 'Western Industrial Corporation,' because such organization was a de facto corporation, that respondent had been advised and informed such corporation would be formed, and further that subsequent to November 1, 1961, all payments made on the account were by such corporation.

After the pre-trial conference, appellant requested trial by jury for the first time. This demand was denied and the cause heard by the court sitting without a jury. The trial court entered findings of fact, conclusions of law and judgment for respondent. There is no dispute as to the amount involved, the only other question before the court being whether Bradley was individually liable for the amount due.

There are some twenty-four assignments of error; the twenty-fourth contains some fourteen sub-assignments of error directed to insufficiency of the evidence to sustain the judgment. For the purpose of this opinion these assignments of error have been grouped into three headings: (1) refusal of the trial court to admit certain exhibits offered by appellant, which were offered to prove that respondent was doing business with a de facto corporation; (2) insufficiency of the evidence; and (3) the invalidity of the Idaho Rules of Civil Procedure, and specially as to the invalidity of IRCP 16, dealing with pre-trial conferences, and IRCP 38(b) and (d) dealing with respondent's demand for a jury trial.

During the course of the trial appellant offered into evidence a certified copy of the bankruptcy file of Alpine Industries, Inc., including the claim of Western Industrial Corporation; appellant also offered deposit slips, cancelled checks, telephone bills, check book, invoices, bills, and statements, all of which showed use of the name 'Western Industrial Corporation.' The trial court refused to admit these exhibits into evidence. Appellant contends that these exhibits show that others treated the organization at least as a de facto corporation, and asserts that respondent was doing business with Western Industrial Corporation, as a de facto corporation.

In order to determine whether error was committed by refusal to admit these exhibits into evidence, under appellant's theory, it becomes necessary to examine the essential elements of a de facto corporation.

It is generally held that for an organization to be considered as a de facto corporation, the following essentials must be found to exist:

1. A valid law under which a corporation with the power assumed might be incorporated;

2. A bona fide attempt to organize a corporation under such law;

3. An actual exercise of corporate powers.

18 Am.Jur.2d 595, Corporations § 51; 8 Fletcher Private Corporations § 3777 p. 73 (Revised and Perm.Ed.1931). See also: Pickett v. Board of Commrs., 24 Idaho 200, 133 P. 112; Marshall-Wells Co. v. Kramlich, 46 Idaho 355, 267 P. 611.

I.C. § 30-108 requires the filing of articles of incorporation with the Secretary of State of the State of Idaho, and issuance by him of a certificate of incorporation; I.C. § 67-910 establishes the fees to be paid the Secretary of State for filing of articles of incorporation.

While there is a divergency of opinion as to whether failure to file articles of incorporation with the proper officials and to pay the necessary fee absolutely prohibits a de factor corporation from coming into existence, (Annot.: 22 A.L.R. 376, 37 A.L.R.1319;) in Marshall-Wells Co. v. Kramlich, supra, this court has aligned itself with the line of authority holding that there can be no de facto corporation when articles of incorporation have not been filed; therein this court stated:

'The Leader, Hardware Company, Limited, was not, at the time the guaranty was signed, even a corporation de facto, because it had not filed its articles of incorporation, or attempted to do so, as required by law. (Citations)'

In the instant action articles of incorporation were prepared in November, 1961, by an attorney acting for Bradley and Chattin, yet they were not filed with the Secretary of State until June 20, 1962, with certificate of incorporation being issued that date. Thus appellant's contention that Western Industrial Corporation was a de facto corporation is not correct.

I.C. § 30-110 provides:

'1. A corporation formed under this act shall not incur any debts or begin the transaction of any business, except such as is incidental to its organization, or to the obtaining of subscriptions to or the payment for its shares until a triplicate original of the articles of incorporation has been filed for record in the office of the county recorder as provided in section 30-108.

'2. If a corporation has transacted any business in violation of this section, the officers who participated therein and the directors, except those who dissented therefrom and caused their dissent to be filed at the time in the registered office of the corporation, or who, being absent, so filed their dissent upon learning of the action, shall be severally liable for the debts or liabilities of the corporation arising therefrom.'

The record fails to disclose any compliance with I.C. § 30-110, by way of filing articles of incorporation with the county recorder; even if such had been done, it could only have been complied with after date of issuance of the certificate of incorporation.

Appellant was one of the organizers of the corporation. He could not be discharged from his liability under I.C. § 30- 110 as a corporate officer except by way of novation or estoppel.

As concerns novation or estoppel, the trial court entered the following finding of fact:

'Throughout the whole period, the defendant Bradley was the buyer of the steel and plaintiff at no time agreed to substitute another debtor for defendant, nor was plaintiff ever notified that defendant intended to do business as a corporation.'

This finding is amply supported by the record. All billings and statements were made in the name of and directed to the appellant personally. The mere fact that the periodic bills were paid for by the checks of 'Western...