## Facts

- Pharmaceutical Sales and Consulting Corporation (PSCC) and J.W.S. Delavau Co., Inc. (Delavau) executed a written Sales, Consulting and Confidential Disclosure Agreement dated July 1, 1992.
- Under the agreement, Delavau would pay PSCC commissions for sales PSCC brought to Delavau involving a third-party customer.
- The agreement was signed by PSCC’s principal, John S. Sadlon, as PSCC’s president.
- PSCC sued Delavau for breach of contract, alleging unpaid commissions.
- During discovery, Delavau learned PSCC had not filed a certificate of incorporation as of July 1, 1992.
- Evidence indicated PSCC’s incorporation papers were not mailed until August 14, 1992, after the contract date.
- PSCC produced tax filings and other records reflecting that it later operated in corporate form.

## Issues

1. Whether PSCC qualified as a de facto corporation under New Jersey law on July 1, 1992, despite not filing incorporation papers by that date.
2. If PSCC was not a de facto corporation, whether Delavau was estopped from denying PSCC’s corporate existence because Delavau knowingly contracted with PSCC as a corporation and benefited from the relationship.
3. Whether the asserted lack of corporate status deprived PSCC of capacity to sue on the agreement under Rule 17(b).

## Decision

- The court denied Delavau’s motion to dismiss for lack of capacity.
- The court held PSCC was not a de facto corporation on July 1, 1992 because there was no bona fide, pre-contract attempt to comply with incorporation filing requirements.
- The court held Delavau was estopped from denying PSCC’s corporate existence because Delavau knowingly treated PSCC as a corporation when contracting and performing under the agreement.

## Legal Principles

- De facto corporation status requires at least colorable statutory compliance, including a bona fide attempt to incorporate before exercising corporate powers.
- Failure to show a pre-transaction attempt to file incorporation documents defeats a claim of de facto corporate existence at the relevant time.
- Under corporation-by-estoppel principles, a party that knowingly contracts with an entity as a corporation and accepts the benefits of the contract may be barred from later denying the entity’s corporate status to avoid contractual obligations.
- Capacity-to-sue challenges based on defective incorporation may be rejected where equity supports estoppel and the defendant’s conduct shows it treated the plaintiff as a corporation.

## Conclusion

The court concluded PSCC was not a de facto corporation when the agreement was executed because it had not made a bona fide, timely attempt to incorporate, but it permitted PSCC to proceed because Delavau, having knowingly contracted with PSCC as a corporation and benefited from that relationship, was estopped from disputing PSCC’s corporate existence to defeat the contract claim.


Pharmaceutical Sales & Consulting Corp. v. J.W.S. Delavau Co., 59 F. Supp. 2d 398 (D.N.J. 1999)