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14 Calif. L. Rev. 486 (1925-1926)
Comment on Cases

handle is hein.journals/calr14 and id is 512 raw text is: Comment on Cases CORPORATIONS: CORPORATIONS BY ESTOPPEL: LIABILITY OF As- SOCIATES-In Baker v. Bates-Street Shirt Company' a petition in bankruptcy was filed against Baker and others, alleged to be partners and holding themselves out as a corporation. Defendants made a bona fide attempt to incorporate but had never filed their certificate with the Secretary of State, nor recorded it in the county where they had their principal place of business. The court held that there was no corporation de jure or de facto because there was not a colorable compliance with the essential statutory requirements, and that the petitioners were not estopped from denying the corporate existence of the organization, although they had dealt with it as a corporation. The stockholders not having actively participated in the conduct of the business of the organization did not become liable as partners in consequence of their failure to comply with the statutory require- ments. The case was remanded to the District Court with directions to dismiss the petition. The courts in general before they will recognize the existence of a de facto corporation, require that there be (1) a valid law under which the association could incorporate2 (2) an attempt in good faith to comply with that law, and (3) a user of the corporate powers.3 Many cases state that an association exercising corporate powers, is a corporation de facto,4 but it is now generally recognized that user alone is not sufficient to give it a de facto corporate existence. To show an attempt in good faith to incorporate, there must be at least a colorable compliance with the statutory requirements.5 The failure of many courts to distinguish between the doctrines as to de facto corporations and as to corporations by estoppel, has caused much confusion. Some of the courts require a showing of de facto existence before there can be an estoppel,6 while others re- L (July 7, 1925) 6 Fed. (2d) 854, C. C. A., 1st Circuit. 2No de facto corporation will be recognized when organized under an unconstitutional law. Brandenstein v. Hoke (1894) 101 Cal. 131, 35 Pac. 562. a Tulare Irrigation District v. Shepard (1901) 185 U. S. 1, 46 L. Ed. 773, 22 Sup. Ct. Rep. 531; Jacques v. Board of Supervisors (1914) 24 Cal. App. 381, 141 Pac. 404. It is not necessary that the user continue for any definite period. Reclamation District No. 765 v. McPhee (1910) 13 Cal. App. 382, 109 Pac. 1106. ,McCann v. Children's Home Society (1917) 176 Cal. 359, 168 Pac. 355; Lakeside Ditch Co. v. Crane (1889) 80 Cal. 181, 22 Pac. 76; Dean v. Davis (1876) 51 Cal. 406. Although no de jure corporation is created, subsequent acts might give the association a de facto existence. Martin v. Deetz (1894) 102 Cal. 55, 36 Pac. 368, 41 Am. St. Rep. 151, but if there is no user of corporate powers there is no de facto corporation. McCallion v. Hibernia Savings and Loan Society (1886) 70 Cal. 163, 12 Pac. 114. Cal. Civ. Code, § 358. 5Hughes Co. v. Farmers' Union Produce Co. (1923) 110 Neb. 736, 194 N. V. 872, 37 A. L. R. 1314; Martin v. Deetz, supra, n. 4; Mokelumne Hill Canal Co. v. Woodbury (1859) 14 Cal. 424, 73 Am. Dec. 658. See also, Westlake Park Inv. Co. v. Jordan (May 19, 1926) - Cal. -, 246 Pac. 807. 0 14 C. J. 245, notes 72, 73, citing cases.

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