Paper Products Company v. Doggrell

Doggrell and Konz (defendants) were Tennessee resident. Doggrell and Konz formed a corporation with an Arkansas resident named Whitaker. They formed the corporation in Arkansas and called it Forrest City Wood Products, Inc. (FCWP). The principal place of business for FCWP was in St. Francis County, Arkansas. Doggrell and Konz left the day-to-day operation of the business to Whitaker and returned to Tennessee. Arkansas law provided that a corporation’s existence began upon filing the articles of incorporation with the Secretary of State but also required that the documents be filed with the county clerk. Whitaker filed with the Secretary of State but forgot to file the documents with the county clerk. FCWP later went bankrupt. A creditor, Paper Products Company (Paper Products) (plaintiff), filed suit in Arkansas state court against Doggrell, Konz, and Whitaker. Paper Products obtained a judgment against Whitaker under an Arkansas statute making stockholders personally liable for corporate debts when the corporate charter is not filed with the county clerk. No judgment was entered against Doggrell or Konz. Paper Products then filed suit separately against Doggrell and Konz in Tennessee state court seeking recovery under the Arkansas law. The trial court denied recovery to Paper Products, holding that the Arkansas law was penal in nature and contrary to the public policy of Tennessee. Paper Products appealed, and the Supreme Court of Tennessee granted certiorari to review.