Goodwyne v. Moore

• Decision Date: 15 March 1984
• Docket Number: No. 67122,67122
• Citation: 170 Ga.App. 305,316 S.E.2d 601
• Parties: GOODWYNE v. MOORE, et al.
• Court: Georgia Court of Appeals

Page 601

316 S.E.2d 601

170 Ga.App. 305

GOODWYNE v. MOORE, et al.

No. 67122.

Court of Appeals of Georgia.

March 15, 1984.

Dock H. Davis, Atlanta, for appellant.

E. Lewis Hansen, Atlanta, for appellees.

CARLEY, Judge.

Appellee-plaintiffs instituted this civil action against appellant-defendant, seeking to recover the principal, unpaid interest and attorney fees due on two promissory notes executed on December 15, 1978, and April 3, 1979. Appellant answered, denying liability, and filed a counterclaim. Appellant was granted summary judgment as to the indebtedness evidenced by the promissory note dated April 3, 1979, and, therefore, the subject of this appeal concerns only the promissory note dated December 15, 1978. That note was in the amount of $30,000, and was signed, "C & N Industries, Inc., By Charles Goodwyne, Pres." At trial, appellant denied any individual liability on the promissory note, and raised the defense of corporation by estoppel. The jury returned a verdict in favor of appellees and appellant appeals from the judgment entered thereon.

1. Appellant enumerates as error the denial of his motion for a directed verdict, contending that the doctrine of corporation by estoppel precludes appellees' assertion of a claim against him individually. Appellees, however, deny the applicability of the doctrine of corporation by estoppel in this case, asserting that C & N Industries, Inc. was not in "existence" at the time the promissory note was executed by appellant in the purported capacity of its president.

The evidence adduced at trial shows the following: Prior to the execution of the promissory note, the parties had already established an active financial relationship. Appellee Louise Moore testified that she first approached appellant for the purpose of lending him money, because a mutual friend had informed her that appellant was "trying to get a business started." Over the course of the following years, appellant formed several corporations, and the parties executed numerous promissory notes totaling an amount over $60,000. All of these notes were executed either by "Mobile Home Listing & Locator Service, Inc.," or "Budget Homes, Inc.," followed by appellant's name as president of the respective corporation. Payments on these notes which were made by the corporations were accepted by appellees, as evidenced by receipts issued by appellees to the corporations.

The parties subsequently executed the promissory note at issue. That note was signed, "C & N Industries, Inc. By Charles Goodwyne, Pres." Appellees accepted payments from C & N Industries, Inc. (C & N Industries) and issued receipts to C & N Industries for payments made on the note. Following default on the note, appellees initially filed a complaint against C & N Industries, alleging that the corporation was indebted to them as evidenced by the promissory note. C & N Industries filed a confession of judgment. Appellees only subsequently initiated the instant civil action, alleging appellant's individual liability on the same promissory note, and denying the existence of C & N Industries.

The doctrine of corporation by estoppel is viable in this state. "The existence of a corporation claiming a charter under color of law cannot be collaterally attacked by persons who have dealt with it as a corporation. Such persons are estopped from denying its corporate existence." OCGA § 14-5-4. See Cahoon v. Ward, 231 Ga. 872, 874, 204 S.E.2d 622 (1974). "It is the general rule that a person who has contracted or otherwise dealt with a corporation as such is estopped to deny its corporate existence in any action arising out of or involving such contract. For instance, 'where a person enters into a contract with a body purporting to be a corporation, and such body is described in the contract by the corporate name ... or is otherwise clearly recognized as an existing corporation, such person thereby admits the legal existence of the corporation for the purpose of any action that may be brought to enforce the contract, and in such an action he will not be permitted ... to deny the legality of its corporate existence.' [Cits.]" (Emphasis added.) West v. Flynn Realty Co., 53 Ga.App. 594, 595, 186 S.E. 753 (1936). Appellees in the instant case clearly entered into a contract with a body described therein by a corporate name.

Appellees, however, rely upon Don Swann Sales Corp. v. Echols, 160 Ga.App. 539, 287 S.E.2d 577 (1981), for the proposition that the doctrine of corporation by estoppel is inapplicable to the instant case. In Don Swann, this court held that where an individual purports to act for a non-existent corporation, the doctrine of corporation by estoppel will not be applied. " '[O]ne who assumes to act as agent for a non-existent principal or one having no legal status renders himself individually liable in contracts so made. [Cits.]' [Cits.] Where the evidence supports a finding that the purported corporation is not a valid corporate entity, there is no doubt that the agent is bound by his [execution of a promissory note]." Don Swann Sales Corp. v. Echols, supra at 541, 287 S.E.2d 577.

However, Don Swann, is clearly distinguishable from the instant case. In Don Swann, the corporation in question was not " 'properly' registered with the Secretary of State," and therefore was not in existence until sometime after the occurrence of the transactions at issue between the parties. In the case at bar, the evidence shows that appellant incorporated C & N Bottle Shop, Inc. (C & N Bottle) on October 11, 1978. The articles of incorporation provided that the purpose of the corporation was to operate a retail store selling bottled beverages, "and any other business for profit permitted under the Georgia Business Corporation Code." However, appellant was unable to obtain financing to open a liquor store, and therefore decided instead to establish a salvage operation. On December 11, 1978, a Name Certificate was obtained for C & N Industries. Four days thereafter, the promissory note at issue was executed by C & N Industries. On February 26, 1979, approximately two months after the execution of the note, C & N Bottle filed articles of amendment with the Secretary of State, "changing its name to C & N Industries, Inc."

Thus, unlike Don Swann, a corporate entity was in "existence" at the time the note was executed but was undergoing a name change to C & N Industries. The certificate of incorporation issued by the Secretary of State is "conclusive evidence of incorporation." Cahoon v. Ward, supra 231 Ga. at 874, 204 S.E.2d 622. See OCGA § 14-2-173. The relevant certificate of incorporation was filed on October 11, 1978, well before the execution of the note. Following the issuance of the certificate of incorporation, the corporation merely changed its name from C & N Bottle to C & N Industries. A corporate name change is routinely...