This section is from the book "Popular Law Library Vol8 Partnership, Private Corporations, Public Corporations", by Albert H. Putney. Also available from Amazon: Popular Law-Dictionary.
An association of individuals may be conducting a business under a claim of corporate powers and privileges when there is no legal corporate existence. In such a case the organization is neither a corporation de jure nor a corporation de facto; but is a pseudo-corporation. The members of a pseudo-corporation are liable to its creditors as partners. A person who contracts with a de facto corporation cannot question its existence de jure in a suit on the contract. He is liable; it is liable. The de jure existence is a question for the state under a writ of quo warranto. A de facto corporation is a legal corporate body till the state acts, with full power to contract, to sue and be sued. In order to constitute an organization a corporation de facto there must be -
1st. Some valid constitutional law under which the corporation might have been organized.
2nd. A fulfillment of conditions precedent in the law, especially those pertaining to publicity.
3rd. An apparently honest attempt to meet all the requirements of the law and a user under the law.
A creditor of a corporation may bring suit against the members thereof jointly as partners if he can show a substantial failure in any one of these three particulars.
In Mokelumne Hill Mining Co. vs. Woodbury,12 the court said: There is a broad and obvious distinction between such acts as are declared to be necessary steps in the process of incorporation, and such as required of the individuals seeking to become incorporated, but which are not made prerequisites to the assumption of corporate powers. In respect to the former, any material omission will be fatal to the existence of the corporation, and may be taken advantage of collaterally in any form in which the fact of incorporation can properly be called in question."
In Bigelow vs. Gregory, et al.,13 the court said: "There is a manifest difference where a corporation is created by a special charter, and there have been acts of user, and where individuals seek to form themselves into a corporation under a general law. In the latter case it is only in pursuance of the provisions of the statute for such purpose that corporate existence can be acquired. And there would seem to be a distinction between a case where, in a suit between a corporation and a stockholder or other individual, the plea of nul tiel corporation is set up to defeat a liability which the one have contracted with the other, and the case of a suit against individuals who claim exemption from individual liability, on the ground of their having become a corporation formed under the provisions of a general statute. In the latter case, a stricter measure of compliance with statutory requirements will be required, than in the former."
The failure to file articles of incorporation for record as required by statute is a substantial failure in fulfilling precedent conditions of law.14
12 14 Cal., 424; 73 Am. Dec. 688.
13 73 III., 179.