Beck v. Stimmel

| Ohio Ct. App. | Aug 17, 1931

of the Eighth Appellate District, sitting by designation in the Second Appellate District.

The parties appear in this court in an order the reverse of that held in the court below. In the trial court defendant in error Wilber L. Stimmel was plaintiff and brought suit against W.D. Beck and others, who were defendants.

The petition alleged that W.D. Beck, Evelyn Brenner, and one Collis G. Lane, on November 28, 1928, duly filed articles of incorporation in the secretary of state's office for Columbus Warehouses, Inc., and that the incorporators associated with themselves F.D. Woolary, who became manager of the business proposed to be conducted by the corporation at the old Kroger warehouse, 228 West Broad street; and it alleged that no further steps were taken to perfect the incorporation; no subscriptions to shares taken, no first meeting of shareholders held, no regulations adopted, no board of directors elected, no business of any kind or character transacted, and the specified capital of $1,400 not paid in; that no stock was issued, and that defendants at the time stated were partners in the transaction of the business.

It is also alleged that plaintiff came into the building on business and fell into an unlighted and unguarded elevator shaft; that in maintaining such shaft defendants violated Section 1027 of the General Code.

The defendants filed their joint answer, in the second defense of which they alleged that a bona fide attempt to organize a corporation under the laws of Ohio was made; that the corporation was in fact completed, all of the requirements of the statute complied with, and that the general warehouse and storage business conducted by them was operated under the corporate powers; that therefore a suit against them as individuals could not be maintained.

The jury returned a verdict in favor of Stimmel in the sum of $7,500. A remittitur was ordered by the court reducing the same to $5,000.

From the arguments of counsel and the briefs submitted, there seems to be no issue raised as to the negligence of whoever was responsible for the maintaining of the shaft, and the sole question dealt with was the individual liability of the plaintiffs in error.

Plaintiffs in error claimed that the business was conducted by a corporation and not by individuals. Defendant in error claims that, because of the failure of the defendants, who were the incorporators, to proceed with the organization of the corporation, and because of their proceeding jointly to operate the business, individual liability attaches to them for any violation of law or wrongdoing or negligence in carrying on said business.

Plaintiffs in error submitted interrogatories which the jury was required to answer, all of them dealing with the question of whether the corporation was actually organized. They are as follows:

"Interrogatory No. 2. Do you find from the evidence that 14 shares of the capital stock of the Columbus Warehouses, Inc., were subscribed for prior to February 1st, 1929? No.

"Interrogatory No. 3. Do you find from the evidence that the shareholders of the Columbus Warehouses, Inc., held their first meeting of shareholders prior to February 1, 1929, and elected a Board of Directors? No.

"Interrogatory No. 4. Do you find from the evidence that the shareholders of the Columbus Warehouses, Inc., adopted a Code of Regulations prior to February 1st, 1929? No.

"Interrogatory No. 5. Do you find from the evidence that the Directors of the Columbus Warehouses, Inc., elected officers prior to February 1st, 1929? No.

"Interrogatory No. 6. Do you find from the evidence that $1400 of the capital stock of the Columbus Warehouses, Inc., was paid in on or before February 1st, 1929? No.

"Interrogatory No. 7. Do you find from the evidence that the Columbus Warehouses, Inc., did business prior to February 1st, 1929, as a corporation? No."

It seems to us that the claim of plaintiffs in error that the corporation was a de facto corporation, and that it would be deemed a corporation for all purposes, so as to subject it to a liability for wrongdoing or misconduct in its business, is untenable, in view of the answers of the jury to the interrogatories submitted to it by plaintiffs in error.

In our opinion the mere existence of a legal entity, or the mere fact of corporate existence, upon the filing of articles of incorporation, does not absolve from liability those who transact business for an incompleted corporation.

Under Section 8623-7 the incorporators are authorized to act in the corporate name in doing all acts which are necessary to obtain subscriptions for shares and effect the company's organization. The incorporators have no authority to carry on business in the corporate name until the corporation is legally completed. The incorporators have no interest in the corporate estate, nor have they any rights in it. Their sole function is to bring into existence the corporation which in fact consists of the body of shareholders. When the incorporators proceed beyond the function contemplated by law, namely, to bring the corporation into real existence, they are exceeding their authority. If the incorporators, before the corporation has been legally completed, proceed to manage a business in the name of the corporation, they are deemed to be doing it as individuals engaged in a joint enterprise or partnership.

The necessary legal steps to complete the corporation were not taken, as appears from the answers of the jury to the interrogatories submitted by counsel for plaintiffs in error. Plaintiffs in error proceeded nevertheless to manage the business in the name of the corporation, and they are therefore deemed to have engaged in it as individuals bound together in a joint enterprise or partnership.

We find no error in the judgment, and it will therefore be affirmed.

Judgment affirmed.

ALLREAD, P.J., and HORNBECK, J., concur.