Perry & Derrick Co. v. King

• Decision Date: 24 June 1970
• Docket Number: Docket No. 7404,No. 3,3
• Citation: 24 Mich.App. 616,180 N.W.2d 483
• Parties: The PERRY & DERRICK COMPANY, Inc., a foreign corporation, Plaintiff-Appellant, v. Dr. Joseph G. KING, Charles R. Nicholas, Defendants-Appellees
• Court: Court of Appeal of Michigan — District of US

Page 483

180 N.W.2d 483

24 Mich.App. 616

The PERRY & DERRICK COMPANY, Inc., a foreign corporation Plaintiff-Appellant, v. Dr. Joseph G. KING, Charles R. Nicholas, Defendants-Appellees.

Docket No. 7404.

Court of Appeals of Michigan, Division No. 3.

June 24, 1970.

Released for Publication Oct. 29, 1970.

Thomas D. Van Hattum, Rhoades, McKee & Boer, Grand Rapids, for appellant.

Clifford J. Murphy, Grand Rapids, for appellee.

Before R. B. BURNS, P.J., and FITZGERALD and LEVIN, JJ.

FITZGERALD, Judge.

The present case is prefaced by an earlier action commenced by plaintiff Perry & Derrick Company, Inc., for an amount due on a contract for goods and services against the Farmer's Exchange and Perfection Flour Mills Company and against Stanley Murawaski, Individually, as surety on a guarantee note. The flour company did not appear and a default judgment was entered against it. A consent judgment was entered against Stanley Murawaski. There was an execution and sale of the property belonging to the flour company which satisfied only part of the judgment.

Subsequent to the above judgments and the execution sale, discovery was had on Stanley Murawaski at which time it was learned that the flour company had failed to comply with the Michigan corporations law and was Illicitum collegium.

In December 1965, plaintiff filed a complaint against the present defendants alleging that they were liable on the original debt as members of a joint venture or partnership because the corporation had never become a legal entity under Michigan law. In their answer, defendants alleged leged affirmative defenses of failure to join a party, splitting a cause of action, and Res judicata. On July 15, 1966, plaintiff brought a motion for summary judgment denying defendants affirmative defenses. The motion was denied and on May 2, 1969, the court rendered a judgment in favor of defendants.

The parties to the present case base much of their respective arguments upon GCR 1963, 203--208, dealing with joinder of claims and parties. In spite of the detailed statement of questions involved and arguments presented, we find that the actual issue is whether the doctrine of Res judicata precludes a party who has received a judgment against a corporation from subsequently suing the officers of that corporation based on the same claim and alleging that they are a partnership or joint venture because the corporation has been voided.

Plaintiff argues that becuase the flour company was voided as a corporation the present defendants are liable, either as a partnership or joint venture. Presumably, this has the effect of making them a different party. However, despite the fact that the flour company was not a De jure corporation, plaintiff is estopped from denying it corporate status. The theory of corporations-by-estoppel is explained in 8 Fletcher Cyclopedia Corporations, § 3964, where it is stated:

'Estoppel to deny the existence of a pretended corporation may arise from a judgment either for or against a corporation. So a person who had sued and recovered judgment against a company as a corporation cannot thereafter maintain a second suit against its members individually or as partners on the same cause of action; nor can he maintain a suit to charge its members as partners with the amount of the judgment, nor for damages for falsely representing that they were a corporation.'

This rule has also been adopted in Michigan and is explained in Estey Manufacturing Co. v.Runnels (1884), 55 Mich. 130, 20 N.W. 823.

The question of whether the present defendants would have been liable as individuals hinges on whether the flour company could have been considered a De facto corporation. See Tisch Auto Supply Co. v. Nelson (1923), 222 Mich. 196, 192 N.W. 600; Berlin State Bank v. Nelson (1925), 231 Mich. 463, 204 N.W. 92; Campbell v. Rukamp (1932), 260 Mich. 43, 244 N.W. 222. However, that issue...