160 Market Street Associates v. Arnold Stores Inc.

A-902-97T5 (N.J. Super. App. Div. 1998) (Unpublished)
  • Opinion Date: August 31, 1998

CORPORATIONS; OFFICERS; LIABILITY—A corporate officer who signs a contract after the company’s charter has been revoked may be personally liable for the company’s debts as if the officer were a general partner.

This case arose from an appeal of a grant of summary judgment which held a corporation’s president personally liable for unpaid rent under the lease that he signed as president of the company. The company was incorporated under the laws of New Jersey in 1976. In 1982, its charter was voided by proclamation of the New Jersey Secretary of State for non-payment of taxes. The charter had not been reinstated at the time the lease of commercial real property was signed in 1987. The lease identified the corporation as tenant and was signed by “Arnold Monzon, Pres.”

In 1991, a second corporation was incorporated under the laws of the State of New Jersey. Thereafter, the second company made monthly payments to the landlord. Eventually the tenant defaulted on the lease and the landlord sued the original tenant, the second company (that had been paying the rent), and the president, personally, for costs and unpaid rent. An order was entered granting partial summary judgment in favor of the landlord holding all defendants, including the president in a personal capacity, liable for the unpaid rent.

On appeal, the president argued that, in granting summary judgment, the motion judge (1) erred in piercing the corporate veil and holding him liable for the corporation’s debts, and (2) failed to recognize that the original company was a de facto corporation. In upholding the lower court, the Appellate Division found that the ruling was consistent with case law finding that persons who carry on the business of a corporation after its charter has expired are liable as general partners. The Court found that even though the record clearly showed that the president signed the lease in that capacity, he subsequently carried on the company’s business after its charter was revoked and after the corporation was dissolved. He was therefore properly held liable as a general partner. The fact that the failure to pay taxes was “inadvertent” and “innocent” was not relevant, since the Court found that there could be no innocent failure to pay taxes.