Kessler Distributing Co. v. Neill

• Decision Date: 26 January 1982
• Docket Number: No. 2-66354,2-66354
• Parties: KESSLER DISTRIBUTING COMPANY, A Corporation, Plaintiff-Appellee, v. Marion NEILL, Defendant-Appellant.
• Court: Iowa Court of Appeals

Page 519

317 N.W.2d 519

KESSLER DISTRIBUTING COMPANY, A Corporation, Plaintiff-Appellee, v. Marion NEILL, Defendant-Appellant.

No. 2-66354.

Court of Appeals of Iowa.

Decided Jan. 26, 1982.

George E. Wright of Napier, Wright & Wolf, Fort Madison, for defendant-appellant.

Marcus V. Hobert, Fairfield, for plaintiff-appellee.

Heard by OXBERGER, C. J., and DONIELSON, SNELL, CARTER and JOHNSON, JJ.

CARTER, Judge.

Defendant Marion Neill appeals the personal judgment entered against him and in favor of plaintiff, Kessler Distributing Company, in an action on an account. The issues on appeal involve the extent to which an officer of a corporation may be personally liable for debts purportedly incurred by the corporation during a period of time when its corporate charter was revoked for failure to file annual reports.

The action having been tried at law, the trial court's findings on the factual issues have the effect of a special verdict and are binding on the appellate court if supported by substantial evidence. Iowa R.App.P. 4. When the evidence is viewed in this light, we believe it supports the following view of the facts.

Big Valley Industries, Inc. (hereinafter called Big Valley) was incorporated under the laws of the State of Missouri on June 7, 1972. Prior to any of the transactions involved in the present action, that corporation had obtained a certificate of authority from the Secretary of State of the State of Iowa to transact business in this state. In January of 1977, Big Valley's corporate charter was forfeited by Missouri officials for failure to file an annual report as required by the laws of that state. This status continued until September 29, 1980, when its charter was reinstated by Missouri officials and the corporation returned to good standing.

The transactions for which recovery is sought in the present action are sales of equipment, equipment rentals, and services, all of which took place between February 9, 1979 and September 4, 1979, during which time Big Valley's corporate charter was revoked, but its Iowa certificate of authority was still in force. ¹ The record does not reflect the circumstances under which the goods and services were ordered from the plaintiff, but the delivery tickets were made out to Big Valley and the goods were receipted for by defendant and two other persons on behalf of Big Valley. Partial payment for the goods and services was made to the plaintiff by checks written on the account of Big Valley Industries, Inc. and signed by the defendant as president of that entity. Discussions over payment of the balance of the account took place between the defendant and representatives of the plaintiff. Defendant came to plaintiff's office for this purpose and indicated that the problem was shortage of money. Other facts which are of significance are related as part of our discussion of the legal issues involved.

I. Does Section 496A.141, The Code, Apply so as to Confer Personal Liability on Defendant ? The first issue on appeal involves the general applicability to the present case of section 496A.141, The Code, which provides:

All persons who assume to act as a corporation without authority so to do shall be jointly and severally liable for all debts and liabilities incurred or arising as a result thereof.

Plaintiff suggests that the effect of this statute is that when a corporation, foreign or domestic, loses authority to act under its charter, then those persons who continue to act under the guise of the corporation become personally liable for liabilities thereby incurred in the name of the corporate entity. Defendant suggests that such liability arises only with respect to corporate promoters or organizers and that there is no proof that he is either. The trial court, although not referring to section 496A.141, concluded that one who acts as president of a corporation which has, prior thereto, forfeited its charter, becomes personally liable for transactions thereby undertaken. We agree with this determination as applied to defendant's acts in the present case. We believe it to be in accordance with general principles of corporate law ² as well as reflecting a proper application of the clear language of section 496A.141, The Code. In so holding, we specifically note that section 496A.104, The Code, provides that a foreign corporation "shall be subject to the same duties, restrictions, penalties and liabilities now or hereafter imposed upon a domestic corporation of like character."

In our application of section 496A.104 and section 496A.141 to the present factual situation, we further hold that defendant's authority to act for the foreign corporation ceased with the revocation of its Missouri charter, notwithstanding the fact that its Iowa certificate of authority continued in force beyond this time. The Iowa certificate of authority merely recognized the grant of authority issued to the corporation by the State of Missouri. Iowa cannot and did not grant greater rights or powers than the state which created the corporation. To hold otherwise would be to provide a foreign corporation more favorable treatment than domestic corporations receive under the laws of this state contrary to the...