2021 Georgia Code
Title 14 - Corporations, Partnerships, and Associations
Chapter 5 - Miscellaneous Provisions Relating to Corporations
Article 1 - General Provisions
§ 14-5-4. Corporate Existence Not Subject to Collateral Attack by Person Dealing With Corporation

The existence of a corporation claiming a charter under color of law cannot be collaterally attacked by persons who have dealt with it as a corporation. Such persons are estopped from denying its corporate existence.

(Civil Code 1895, § 1862; Civil Code 1910, § 2226; Code 1933, § 22-714; Code 1933, § 22-5103, enacted by Ga. L. 1968, p. 565, § 1.)

- For survey article on business associations, see 34 Mercer L. Rev. 13 (1982).

JUDICIAL DECISIONS

Editor's notes.

- In light of the similarity of the statutory provisions, decisions under former Civil Code 1895, § 1862; former Civil Code 1910, § 2226; former Code 1933, § 22-714, are included in the annotations for this Code section.

- All who deal with corporation as such are estopped from denying its corporate existence or its right to control as such. Brooke v. Day, 129 Ga. 694, 59 S.E. 769 (1907); Edenfield v. Bank of Millen, 7 Ga. App. 645, 67 S.E. 896 (1910); Dorris v. F & M Bank, 22 Ga. App. 514, 96 S.E. 450 (1918) (decided under former Civil Code 1895, § 1862 and under former Civil Code 1910, § 2226).

- One who has contracted with a corporation as such is estopped to deny its existence as a corporation at the date of the contract, in any suit arising thereunder; and in such case the corporation is designated a corporation. Petty v. Brunswick & W. Ry., 109 Ga. 666, 35 S.E. 82 (1900); Brown v. Atlanta Ry. & Power Co., 113 Ga. 462, 39 S.E. 71 (1901) (decided under former Civil Code 1895, § 1862).

- Allegations that prior to and at the time a lease was executed the defendants held themselves out as a particular corporation, and that plaintiff dealt with them as such corporation, if proven, would authorize the application of the doctrine of corporation by estoppel. Cahoon v. Ward, 231 Ga. 872, 204 S.E.2d 622 (1974).

If sufficient allegations are made in a petition which, if proved, could result in application of the doctrine of corporation by estoppel it is error for a trial court to hold as a matter of law that a lease is void merely because on the date the lease was signed the lessee was not a de jure corporation. Cahoon v. Ward, 231 Ga. 872, 204 S.E.2d 622 (1974).

The doctrine of corporation by estoppel is viable in Georgia. Goodwyne v. Moore, 170 Ga. App. 305, 316 S.E.2d 601 (1984).

The trial court was incorrect in applying the doctrine of corporation by estoppel when it was undisputed that the corporation was not in existence at the time that the transactions in question took place. Don Swann Sales Corp. v. Echols, 160 Ga. App. 539, 287 S.E.2d 577 (1981).

The doctrine of corporation by estoppel should not be applied to an individual purporting to act for a nonexistent corporation who attempts to escape liability on a contract by defending on the basis of the nonexistent corporation. Don Swann Sales Corp. v. Echols, 160 Ga. App. 539, 287 S.E.2d 577 (1981).

An individual purporting to act for a nonexistent corporation cannot escape liability on a contract by defending on the basis of the nonexistent corporation. In that situation the doctrine of corporation by estoppel does not apply; however, if there is a corporation in existence, although with a different name, corporation by estoppel would be applicable. Guernsey Petro. Corp. v. Data Gen. Corp., 183 Ga. App. 790, 359 S.E.2d 920, cert. denied, 183 Ga. App. 906, 359 S.E.2d 920 (1987).

- Doctrine of corporation by estoppel is inapplicable to transactions occurring prior to issuance of certificate of incorporation. Echols v. Vienna Sausage Mfg. Co., 162 Ga. App. 158, 290 S.E.2d 484 (1982).

The doctrine of corporation by estoppel does not permit an individual to escape liability for obligations undertaken as an agent for a corporation which has not yet been "registered" (i.e., issued a certificate of incorporation) by the Secretary of State. Video Power, Inc. v. First Capital Income Properties, Inc., 188 Ga. App. 691, 373 S.E.2d 855 (1988).

- When a person enters into a contract with an entity purporting to be a corporation, and such entity is described in the contract by its corporate name, such person admits the legal existence of the corporation with reference to any action brought to enforce the contract, and for the purpose of that action will not be allowed to question the legality of the corporate existence. Cahoon v. Ward, 231 Ga. 872, 204 S.E.2d 622 (1974); Goodwyne v. Moore, 170 Ga. App. 305, 316 S.E.2d 601 (1984); Pinson v. Hartsfield Int'l Commerce Ctr., Ltd., 191 Ga. App. 459, 382 S.E.2d 136, cert. denied, 191 Ga. App. 923, 382 S.E.2d 136 (1989).

One who deals with a corporation as such cannot, in the absence of fraud, deny the legality of the corporate existence for the purpose of holding the owner liable. Amason v. Whitehead, 186 Ga. App. 320, 367 S.E.2d 107 (1988).

- Considering Ga. Code § 2226 (1910) as a whole, it is apparent that the principle which the codifiers had in mind was that persons who have dealt with a corporation as such are estopped from denying its corporate existence; however, In this case it is not denied and could not be, that the plaintiffs, whose lands were sought to be condemned, were strangers to the condemnors. They had in no way dealt with or recognized the condemnors as a corporation and so had the legal right to attack the power of the condemnors on the ground that they were not a corporation, and for that reason could not exercise the power of eminent domain. Huey v. National Bank, 177 Ga. 64, 169 S.E. 491 (1933) (decided under former Code 1933, § 22-714).

- An insurance company that issues a policy of liability insurance to a purported corporation, pending its application for corporate charter, and receives from the applicants a premium for such policy, cannot, in an action on the policy for a claim arising after the issuance of the policy but before the grant of the charter, set up the want of corporate existence in the insured at the time of the issuance and delivery of the policy or at the time of the accident giving rise to the claim. Rogers v. McKinley, 52 Ga. App. 161, 182 S.E. 805 (1935) (decided under former Code 1933, § 22-714).

Those who have dealt with a corporation as such cannot deny its corporate existence; one who has contracted with a corporation as such cannot in an action to enforce the contract set up the invalidity of its corporate existence. Rogers v. McKinley, 52 Ga. App. 161, 182 S.E. 805 (1935) (decided under former Code 1933, § 22-714).

If a person enters into a contract with a body purporting to be a corporation, and such body is described in the contract by the corporate name or is otherwise clearly recognized as an existing corporation, such person thereby admits the legal existence of the corporation for the purpose of any action that may be brought to enforce the contract, and in such an action that person will not be permitted, by a plea of nul tiel corporation or otherwise, to deny the legality of its corporate existence. West v. Flynn Realty Co., 53 Ga. App. 594, 186 S.E. 753 (1936) (decided under former Code 1933, § 22-714).

Because plaintiff knowingly contracted with a corporation, plaintiff was estopped from denying its corporate existence in an effort to avoid the mandatory arbitration clause in the contract. Litland v. Smith, 247 Ga. App. 277, 543 S.E.2d 468 (2000).

- Because the plaintiff dealt with the defendants not as promoters but as officers of a corporation, plaintiff bought stock from them not as individuals, but from the corporation. Having thus dealt with the corporation as such plaintiff is estopped to deny the legality of its organization. Orr v. McLeay, 6 Ga. App. 417, 65 S.E. 164 (1909) (decided under former Civil Code 1895, § 1862).

- A plaintiff who proceeds against a defendant as a corporation is estopped to deny its corporate existence, and is bound by the terms of the charter as to the principal office of the corporation. Etowah Milling Co. v. Crenshaw, 116 Ga. 406, 42 S.E. 709 (1902); Richmond County v. Richmond County Reformatory Inst., 141 Ga. 457, 81 S.E. 232 (1914) (decided under former Civil Code 1895, § 1862 and former Civil Code 1910, § 2226).

Cited in Siplast, Inc. v. Inland Container Corp., 172 Ga. App. 341, 323 S.E.2d 187 (1984); Skipper Sams, Inc. v. Roswell-Holcomb Assocs., 247 Ga. App. 237, 543 S.E.2d 765 (2000).

OPINIONS OF THE ATTORNEY GENERAL

Office of Secretary of State not estopped to deny that corporation dissolved.

- Whether or not the office of Secretary of State has dealt with a corporation dissolved by the expiration of its charter, as a corporation, it is not estopped to deny that the corporation has been dissolved. 1980 Op. Att'y Gen. No. 80-20.

RESEARCH REFERENCES

Am. Jur. 2d.

- 18A Am. Jur. 2d, Corporations, §§ 184 et seq., 188 et seq.

- 18 C.J.S., Corporations, § 92 et seq.

- Form of pleading necessary to raise issue of corporate existence, 55 A.L.R. 510.

Estoppel of defendant to deny plaintiff's corporate existence by filing counterclaim or cross action against it, 51 A.L.R.2d 1449.

Disregarding corporate entity in settling accounts between close corporation and its stockholder or stockholders, 100 A.L.R.2d 385.