Business Associations, Pages 311–314

Robertson v. Levy

District of Columbia Cort of Appeals, 1964

Facts:

Robertson and Levy agreed to form a corporation, Penn Ave. Record Shack, Inc., to purchase Robertson's business. S submitted articles of incorporation and entered a lease, but the articles of incorporation were later rejected on the day Levy began to do business under the name P

A few days after that, Robertson sold his to Penn Ave. Record Shack, Inc. received a promissory note therefrom. The certificate of incorporation was actually issued the next week. One payment was made to Robertson, but Penn Ave. Record Shack, Inc. ceased doing business five months later and ran out of assets. Robertson sued Levy for the balance due on the note and additional expenses incurred with the lease.

Procedural History:

Trial court found that Robertson was estopped to deny the existence of the corporation.

Issue:

Can Levy be held personally liable for the contract entered into before the corporation's incorporation?

Rules:

  • The District of Columbia does not allow the doctrines of de facto corporation or corporation by estoppel.

Reasoning:

Penn Ave. Record Shack, Inc. was not a corporation when the agreements at issue were entered into. Levy is therefore liable for all these agreements because he assumed to act as a corporation without authority to do so.

Holding:

Yes, Levy is personally liable. Reversed.

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