## Facts

- Thompson & Green Machinery Co., Inc. sold heavy equipment and financed purchases through promissory notes secured by the equipment.
- Joseph E. Walker was president of Music City Lumber Co., Inc. and Music City Sawmill Co., Inc.
- On January 27, 1982, Walker purchased a wheel loader from Thompson & Green and signed a promissory note for $37,886.30 in the name of “Music City Sawmill, Inc.”
- Unknown to both Thompson & Green and Walker at the time, Music City Sawmill had not yet been incorporated; its incorporation date was January 28, 1982, one day after the transaction.
- The parties conducted business during 1982 as if Sawmill were a corporation.
- Sawmill defaulted; the loader was returned, resold, and a deficiency remained.
- Thompson & Green sued Sawmill and Lumber, then added Walker individually after learning Sawmill did not exist as a corporation on the date of contracting.
- The trial court accepted Walker’s corporation-by-estoppel defense and held Walker not personally liable.

## Issues

1. Whether Tennessee’s General Corporations Act eliminated the common-law doctrines of de facto corporation and corporation by estoppel.
2. Whether a person who signs a promissory note on behalf of an entity that was not yet incorporated can avoid personal liability by asserting corporation by estoppel.

## Decision

- The appellate court reversed the judgment for Walker and remanded.
- The court held that Tennessee’s General Corporations Act displaced the doctrines of de facto corporation and corporation by estoppel.
- Because Sawmill did not legally exist when Walker executed the note, Walker “assumed to act as a corporation without authority” and was personally liable under the statute.

## Legal Principles

- Under Tenn. Code Ann. § 48-1-204, corporate existence begins only upon filing; pre-filing “de facto” corporate status is not recognized.
- Under Tenn. Code Ann. § 48-1-1405, persons who assume to act as a corporation without authority are personally liable, and the statute contains no good-faith or creditor-reliance exception.
- Equitable estoppel cannot be used to defeat statutory personal liability where the legislature imposed liability for pre-incorporation corporate acts.

## Conclusion

Tennessee law imposes personal liability on individuals who contract in the name of a corporation that does not yet exist, and statutory rules on incorporation and promoter liability displace de facto corporation and corporation-by-estoppel defenses.


Thompson & Green Mach. Co. v. Music City Lumber Co., 683 S.W.2d 340 (Tenn. Ct. App. 1984)