Micciche v. Billings, No. 84SC341

Docket NºNo. 84SC341
Citation727 P.2d 367
Case DateNovember 03, 1986
CourtSupreme Court of Colorado

Page 367

727 P.2d 367
55 USLW 2278
Joe MICCICHE, Petitioner,
v.
David BILLINGS and the Industrial Commission of the State of
Colorado, Respondents.
No. 84SC341.
Supreme Court of Colorado,
En Banc.
Nov. 3, 1986.

Page 368

Gunther & Westlund, P.C., Dennis H. Gunther, Terry Ehrlich, Wheat Ridge, for petitioner.

James A. May, Denver, for petitioner David Billings.

Duane Woodard, Atty. Gen., Charles B. Howe, Chief Deputy Atty. Gen., Richard H. Forman, Sol. Gen., Mary Karen Maldonado, Asst. Atty. Gen., Denver, for respondent Industrial Commission.

QUINN, Chief Justice.

We granted certiorari to review the decision of the court of appeals in Billings v. Micciche, 691 P.2d 1155 (Colo.App.1984), concerning the effect of section 7-3-104, 3 C.R.S. (1973), of the Colorado Corporation Code 1 on the personal liability of a corporate officer for corporate debts and liabilities incurred during a period when the corporation had been suspended from transacting business in Colorado as a result of its failure to file the corporate report required by section 7-10-102(1), 3 C.R.S. (1979 Supp.). The court of appeals construed section 7-3-104 to impose joint and several liability upon the petitioner, Joe Micciche, a vice president and one of three shareholders of Mountain States Welding and Sheetmetal, Inc. (Mountain States), a Colorado corporation, for work-related injuries sustained by the respondent, David Billings, in the course of his employment with Mountain States. We reverse the judgment of the court of appeals and remand the case for further proceedings.

I.

David Billings was employed by Mountain States as a welder and sheet metal worker. On August 21, 1980, Billings sustained a fracture of both knees when a stack of sheet metal fell on him in the course of his employment. He filed a claim for workmen's compensation on October 31, 1980.

Prior to Billings' accident, the secretary of state in 1979 had suspended Mountain States from transacting business as a Colorado corporation due to its failure to file the corporate report required by section 7-10-102. For a time, however, Mountain States continued to transact business in the

Page 369

state without seeking reinstatement of its corporate status under section 7-10-109(4), 3 C.R.S. (1979 Supp.). 2

On December 4, 1980, a hearing officer of the Department of Labor entered a workmen's compensation award in favor of Billings for his medical expenses and disability benefits and also assessed statutory penalties against Mountain States for its failure to timely admit or deny liability and for its failure to carry workmen's compensation insurance. On February 10, 1981, Billings moved to reopen his claim and sought to impose liability on Joe Micciche and two other officer-shareholders of Mountain States, alleging that Mountain States did not exist as a corporation. Billings' claim against the other two officers was subsequently settled.

After several hearings, the hearing officer ruled that the suspended status of Mountain States rendered Micciche, as vice president of the corporation, personally liable for workmen's compensation benefits to Billings. The Industrial Commission reversed the ruling of the hearing officer, concluding that a suspension for failing to file a corporate report did not extinguish the corporate entity and that corporate officers, including Micciche, were not liable for corporate debts. The commission, however, remanded the case to the hearing officer for the purpose of determining whether the corporate entity should be disregarded and liability imposed on Micciche under the equitable doctrine of "piercing the corporate veil."

Both Micciche and Billings appealed the decision of the commission to the court of appeals. The court of appeals held that under section 7-3-104, 3 C.R.S. (1973), Mountain States' transaction of business while under suspension rendered Micciche, as an officer of the suspended corporation, personally liable for the corporation's obligation to Billings. We thereafter granted Micciche's petition for certiorari to consider whether the court of appeals erred in holding that section 7-3-104 authorized the imposition of personal liability for corporate obligations on a corporate officer solely because he was an officer when the obligation was incurred. We conclude that the court of appeals erred in its construction of section 7-3-104, and we accordingly reverse the judgment and remand the case for further proceedings on the unresolved issue of whether personal liability might be appropriately imposed on Micciche by "piercing the corporate veil."

II.

Pertinent provisions of the Colorado Corporation Code and applicable case law provide the legal context for our resolution of the issue before us. Under the Colorado Corporation Code, which was originally enacted as the Colorado Corporation Act of 1958, ch. 32, sec. 1-149, 1958 Colo.Sess.Laws 119-203, corporate existence begins when the certificate of incorporation is issued. § 7-2-104, 3 C.R.S. (1973). Incorporation results in the creation of a new legal entity with an identity separate and apart from the shareholders. H. Henn & J. Alexander, Laws of Corporations 144-46 (3d ed. 1983). Since a validly formed corporation has an independent legal identity, the corporation itself is legally responsible for its own activities, and adverse economic consequences to the shareholders based on obligations are generally "limited to what the shareholder has invested in the corporation." Id. at 130.

Section 7-3-104, 3 C.R.S. (1973), which is central to this case, was originally enacted

Page 370

as part of the Colorado Corporation Act of 1958 and provides as follows:

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

Ch. 32, sec. 140, 1958 Colo.Sess.Laws 119, 202. This statute is identical to section 139 of the 1950 Model Business Corporation Act, which was designed to impose personal liability in those situations in which persons hold themselves out and improperly act as a corporation without having made any good faith effort to achieve corporate status under state law. A 1969 revision of the Model Act renumbered section 139 as section 146. Although the statutory text was not changed in the 1969 revision, the comments were rewritten to indicate that the intention underlying section 139 was to make the issuance of a certificate of incorporation the sole determinant of corporate existence, thereby eliminating the doctrine of de facto incorporation. See 1 Model Business Corp. Act Annot. § 2.04 comment at 135-36 (3d ed. 1985). Because courts, however, continued to permit limited liability in situations where individuals reasonably but erroneously believed that they had authority to act as a corporation, see, e.g., Cranson v. International Business Machines Corp., 234 Md. 477, 200 A.2d 33 (1964); Cantor v. Sunshine Greenery, Inc., 165 N.J.Super. 411, 398 A.2d 571 (1979), the drafters of the Model Act amended section 146 in 1985 in order to reflect the more flexible standard expressed in case law. 1 Model Business Corp. Act Annot. § 2.04 comment at 130-33. The current provision, renumbered section 2.04 and entitled Liability for Preincorporation Transactions, reads: "All persons purporting to act as or on behalf of a corporation, knowing there was no incorporation under this Act, are jointly and severally liable for all liabilities created while so acting." The effect of the 1985 version of section 2.04 is to impose liability only on persons who act as or on behalf of a corporation "knowing" that no corporation exists. Id. 3

The Colorado Corporation Code requires a corporation to file a biennial report with the secretary of state setting forth various matters, including the character of the business in which the corporation is engaged, the names and addresses of corporate directors and officers, and a statement regarding the nature and extent of authorized and issued corporate stock. § 7-10-101, 3 C.R.S. (1973 & 1979 Supp.). If a corporation fails to...

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46 practice notes
  • IN RE AIR CRASH DISASTER AT STAPLETON INTERN., MDL No. 751
    • United States
    • United States District Courts. 10th Circuit. United States District Court of Colorado
    • March 10, 1989
    ...with general common law on the circumstances in which courts will disregard separate corporate identities. See Micciche v. Billings, 727 P.2d 367, 372-73 (Colo.1986); Fink v. Montgomery Elevator Co., 161 Colo. 342, 421 P.2d 735, 739 (1966) (quoting 1 Fletcher, Cyclopedia of Corpo- 720 F. Su......
  • In re Ski Train Fire in Kaprun, Aust. 11/11/2000, 01 Civ. 10776.
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • April 21, 2003
    ...and will hold the shareholders personally responsible for the corporation's improper actions." Id. (citing Micciche v. Billings, 727 P.2d 367, 372-73 Here, plaintiffs allege that WBB designed, engineered and manufactured major parts of the train in question. See Waagner Compl. at ¶¶ 13, 25.......
  • Albright v. Attorney's Title Ins. Fund, No. 2:03CV00517.
    • United States
    • United States District Courts. 10th Circuit. United States District Court of Utah
    • June 25, 2007
    ...materially the same in Utah, Colorado and the federal courts. Compare Prows v. State, 822 P.2d 764, 767 (Utah 1991); Micciche v. Billings, 727 P.2d 367, 372-73 (Colo.1986); NLRB v. Greater Kansas City Roofing, 2 F.3d 1047, 1051 (10th Cir.1993). Accordingly, the Court need not decide the cho......
  • Lowell Staats Min. Co., Inc. v. Pioneer Uravan, Inc., No. 86-2626
    • United States
    • United States Courts of Appeals. United States Court of Appeals (10th Circuit)
    • June 19, 1989
    ...v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Brady v. Hopper, 751 F.2d 329, 332 (10th Cir.1984). In Micciche v. Billings, 727 P.2d 367 (Colo.1986) the Colorado Supreme Court discussed piercing the corporate veil, Generally, a corporation is treated as a legal entity separat......
  • Request a trial to view additional results
46 cases
  • IN RE AIR CRASH DISASTER AT STAPLETON INTERN., MDL No. 751
    • United States
    • United States District Courts. 10th Circuit. United States District Court of Colorado
    • March 10, 1989
    ...with general common law on the circumstances in which courts will disregard separate corporate identities. See Micciche v. Billings, 727 P.2d 367, 372-73 (Colo.1986); Fink v. Montgomery Elevator Co., 161 Colo. 342, 421 P.2d 735, 739 (1966) (quoting 1 Fletcher, Cyclopedia of Corpo- 720 F. Su......
  • In re Ski Train Fire in Kaprun, Aust. 11/11/2000, 01 Civ. 10776.
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • April 21, 2003
    ...and will hold the shareholders personally responsible for the corporation's improper actions." Id. (citing Micciche v. Billings, 727 P.2d 367, 372-73 Here, plaintiffs allege that WBB designed, engineered and manufactured major parts of the train in question. See Waagner Compl. at ¶¶ 13, 25.......
  • Albright v. Attorney's Title Ins. Fund, No. 2:03CV00517.
    • United States
    • United States District Courts. 10th Circuit. United States District Court of Utah
    • June 25, 2007
    ...materially the same in Utah, Colorado and the federal courts. Compare Prows v. State, 822 P.2d 764, 767 (Utah 1991); Micciche v. Billings, 727 P.2d 367, 372-73 (Colo.1986); NLRB v. Greater Kansas City Roofing, 2 F.3d 1047, 1051 (10th Cir.1993). Accordingly, the Court need not decide the cho......
  • Lowell Staats Min. Co., Inc. v. Pioneer Uravan, Inc., No. 86-2626
    • United States
    • United States Courts of Appeals. United States Court of Appeals (10th Circuit)
    • June 19, 1989
    ...v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Brady v. Hopper, 751 F.2d 329, 332 (10th Cir.1984). In Micciche v. Billings, 727 P.2d 367 (Colo.1986) the Colorado Supreme Court discussed piercing the corporate veil, Generally, a corporation is treated as a legal entity separat......
  • Request a trial to view additional results

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