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May 13, 1999


The opinion of the court was delivered by: Cooper, District Judge.


This matter comes before the Court on the motion by defendant J.W.S. Delavau, Co., Inc. ("Delavau") to dismiss plaintiff's Complaint pursuant to Federal Rules of Civil Procedure 17(b) and 12(b)(1). For the reasons expressed herein, defendant's motion is denied.


Plaintiff Pharmaceutical Sales and Consulting Corporation ("PSCC") filed this action in the New Jersey Superior Court on October 16, 1995. Defendant subsequently removed the action to this Court. Plaintiff and defendant entered into a Sales, Consulting and Confidential Disclosure Agreement ("the Agreement") whereby Delavau was to pay PSCC a commission for sales PSCC brought to Delavau from Lederle Laboratories, Inc. The Agreement was executed on July 1, 1992. PSCC alleges that defendant Delavau failed to pay commissions due and owing to PSCC pursuant to the Agreement. The Agreement was signed by John Sadlon, as president and on behalf of PSCC.

The case proceeded through discovery supervised by Freda L. Wolfson, U.S.M.J. Throughout discovery, PSCC represented that it was a corporation organized under the laws of New Jersey. In November 1998, as part of its preparation for trial in this matter, counsel for Delavau contacted the New Jersey Department of Treasury, Commercial Recording Division, to determine whether PSCC remained a corporation in good standing with the state of New Jersey. Defendant's counsel represents that they were informed for the first time that PSCC was not a New Jersey corporation, nor had it ever been registered as a New Jersey corporation.

Defendant filed the instant motion pursuant to Federal Rule of Civil Procedure 17(b)*fn1 and 12(b)(1).*fn2 Delavau argues that plaintiff lacks capacity to sue defendant on the parties' July 1992 contract because PSCC should not be considered a de facto corporation as of that date. Defendant further maintains in this connection that plaintiff's lack of corporate status as of the date of the parties' contract renders the Agreement invalid and unenforceable. Defendant relies upon the absence of several documents which, in its view, are essential to any claim that PSCC has attained status as a de facto corporation. Defendant also points out that the only documents produced which tend to support plaintiff's de facto corporate status are the following: (1) plaintiff's handwritten certificate of incorporation which bears the notation "mailed 8-14-92"; (2) plaintiff's federal and state tax returns for years 1993 through 1997; (3) checks for payment of those taxes; and (4) certain correspondence with the Internal Revenue Service (advising of change of corporation's address). Defendant maintains, however, that the notation on the certificate of incorporation is "self-serving," and the documents produced do not demonstrate a bona fide attempt to incorporate. (Def.'s Br. in Supp. at 6-7.) Defendant points out that there are inconsistencies in the information supplied in the documents which in fact support defendant's argument in support of dismissal. (Id.)

Plaintiff maintains that this Court should afford PSCC de facto corporate status. John Sadlon, president of PSCC, submitted a certification with exhibits in opposition to defendant's motion to dismiss. Sadlon claims that on or about August 14, 1992, he prepared and mailed to the state of New Jersey a certificate of incorporation for PSCC. (Certif. of John Sadlon in Opp'n to Def.'s Mot. to Dismiss ¶ 1-2.) He claims that he "assumed that the Certificate of Incorporation was filed, as [he] never received notice of the Secretary of State to the contrary." (Id. ¶ 3.) Sadlon states further that in light of his belief that his attempts at incorporation were successful, he prepared an application with the Internal Revenue Service ("IRS") for an employer identification number, sent notice to the IRS of a change of corporate address, obtained a corporate book and seal for PSCC (but never filled them out), filed corporate tax returns for tax years 1993 through 1997, and paid taxes with PSCC checks.

Plaintiff argues in the alternative that even if a de facto corporation is not established, defendant should be estopped from relying upon plaintiff's failure to effectuate incorporation prior to the effective date of the parties' contract based upon the doctrine of corporation by estoppel. (Pl.'s Ltr. Br. in Opp'n at 4-5.) Defendant counters that under general principles of estoppel, plaintiff should not have the benefit of the doctrine of corporation by estoppel because John Sadlon actively misled defendant by signing the Agreement on behalf of PSCC on July 1, 1992 when it was clear that Sadlon had not taken any steps towards incorporating PSCC until August 14, 1992, at the earliest. (Def.'s Reply Br. at 7.) Defendant maintains that throughout the parties' business dealings and this litigation, Delavau was under the mistaken impression that PSCC was a New Jersey corporation. We will address each argument in turn.


A court shall enter summary judgment under Federal Rule of Civil Procedure 56(c) when the moving party demonstrates that there is no genuine issue of material fact and the evidence establishes the moving party's entitlement to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In order to defeat a motion for summary judgment, the opposing party must establish that a genuine issue of material fact exists. Jersey Cent. Power & Light Co. v. Lacey Township, 772 F.2d 1103, 1109 (3d Cir. 1985), cert. denied, 475 U.S. 1013, 106 S.Ct. 1190, 89 L.Ed.2d 305 (1986). A nonmoving party may not rely on mere allegations; it must present actual evidence that creates a genuine issue of material fact. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (citing First Nat'l Bank of Arizona v. Cities Service Co., 391 U.S. 253, 290, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968)); Schoch v. First Fidelity Bancorporation, 912 F.2d 654, 657 (3d Cir. 1990). Issues of fact are genuine only "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. at 248, 106 S.Ct. 2505.

A. De Facto Corporate Status under New Jersey Law

Our research reveals that prior to the codification of the modern New Jersey Business Corporation Act in 1968, (hereinafter "the Act"), several New Jersey cases recognized the concept of a de facto corporation. Those cases found that a de facto corporation exists if the following three elements are present: (1) there is a law under which a corporation with the power assumed might be incorporated; (2) there has been a bona fide attempt to organize a corporation in the manner prescribed by the statute; and (3) there has been an actual exercise of corporate powers. Asplund v. Marjohn Corp., 66 N.J. Super. 255, 264, 168 A.2d 844, 849 (App. Div. 1961); Culkin v. Hillside Restaurant, 126 N.J. Eq. 97, 98, 8 A.2d 173, 174 (N.J.Super.Ct. Ch. Div. 1939); Gallant v. Fashion Piece Dye Works, 116 N.J. Eq. ...

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