## Facts

- In 2001, W.P. Media, Inc. and “Alabama MBA, Inc.” executed an operating agreement to form and operate a joint venture, Alabaster Wireless MBA, LLC, to provide wireless Internet services.
- The operating agreement contemplated reciprocal contributions: Alabama MBA would contribute $79,300 in capital, and W.P. Media would contribute proprietary technology of equivalent value and would build a wireless network and provide technical support.
- Hugh W. Brown, Jr. signed the operating agreement on behalf of Alabama MBA as its “chairman of the board,” although Alabama MBA had not yet filed articles of incorporation.
- In 2002, Brown filed articles of incorporation for Alabama MBA; several corporate formalities were not completed until years later, and Brown personally paid various expenses during the interim.
- In 2005, Brown and Alabama MBA sued for breach of the operating agreement, alleging W.P. Media failed to construct the required wireless network.
- The trial court ultimately entered summary judgment for W.P. Media on the operating-agreement claim based on Alabama MBA’s alleged lack of capacity and real-party-in-interest status; other motions (arbitration and venue) were treated as moot.
- Brown and Alabama MBA appealed.

## Issues

1. Whether the operating agreement was void as a matter of law because Alabama MBA was not yet incorporated when Brown signed the agreement in its name.
2. Whether Alabama MBA’s delayed or incomplete corporate formalities deprived it of real-party-in-interest status to sue on the operating agreement.
3. Whether W.P. Media, having treated the agreement as valid, could avoid liability by asserting Alabama MBA’s nonexistence or incapacity at the time of contracting.

## Decision

- The Supreme Court of Alabama reversed the summary judgment for W.P. Media and remanded.
- The Court held the operating agreement was not void as a matter of law solely because Alabama MBA was not yet formally incorporated when the agreement was signed.
- The Court concluded that principles of post-incorporation adoption could support enforcement of the agreement and precluded summary judgment on the capacity defense.
- The Court rejected summary judgment based on the claim that Alabama MBA was not a real party in interest due to delayed corporate formalities.
- The Court determined W.P. Media was not entitled to judgment as a matter of law on defenses grounded in Alabama MBA’s corporate status.

## Legal Principles

- A contract executed in the name of a corporation to be formed is not necessarily void; after incorporation, the corporation may adopt the contract and assert rights under it.
- Defects or delays in internal corporate formalities do not automatically negate an incorporated entity’s ability to sue as the real party in interest.
- A party that has treated a contracting entity as valid and acted under the agreement may be estopped from later denying the entity’s existence or capacity to avoid contractual obligations.
- Summary judgment is improper where material factual and legal questions remain regarding corporate formation status, adoption of pre-incorporation agreements, and estoppel.

## Conclusion

The court ruled that W.P. Media was not entitled to summary judgment based on Alabama MBA’s non-incorporated status at signing or later corporate irregularities, because the agreement could be adopted after incorporation and W.P. Media’s conduct could bar reliance on those defenses; the breach-of-contract claim was remanded for further proceedings.


Brown v. W.P. Media, Inc., 17 So. 3d 1167 (Ala. 2009)