American Vending v. Morse

881 P.2d 917 (1994)

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American Vending v. Morse

Utah Court of Appeals
881 P.2d 917 (1994)

CS

Facts

Douglas Durbano and Kevin Garn (defendants) entered a contract with Wayne and Diane Morse (plaintiffs) to purchase the Morses’ car wash. Durbano and Garn claimed they represented to the Morses that American Vending Services, Inc. (AVSI), a Utah corporation, would be the purchaser and operator of the car wash. Durbano twice attempted to file articles of incorporation for AVSI before the contract was signed, but both filings were rejected because of a name conflict. AVSI’s articles of incorporation were not successfully filed, and the State of Utah did not issue AVSI a certificate of incorporation, until more than a month after the contract was executed. AVSI encountered financial challenges running the car wash and failed to make any post-closing payments owed to the Morses under the contract. The Morses filed suit, seeking to hold Durbano and Garn personally liable for the unpaid amounts. The trial court awarded damages to the Morses against AVSI but dismissed the claims against Durbano and Garn on the grounds that AVSI was a de facto corporation and a corporation by estoppel at the time the car wash was purchased. Because AVSI had insufficient assets to cover the judgment, the Morses appealed the trial court’s ruling on the issue of Durbano’s and Garn’s personal liability.

Rule of Law

Issue

Holding and Reasoning (Greenwood, J.)

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