## Facts

- Timberline Equipment Company, Inc. leased equipment under written rental agreements to “Aero‑Fabb” through Davenport.
- Bennett, Davenport, and Gorman initially operated as partners under the name “Aero‑Fabb Co.”
- On January 22, 1970, Bennett signed articles of incorporation, but they did not satisfy statutory requirements, and no certificate of incorporation issued.
- Timberline’s equipment leases were executed, the equipment was used, and the rental obligations accrued before June 12, 1970.
- A certificate of incorporation for Aero‑Fabb issued on June 12, 1970, after corrected articles were filed.
- Timberline sued the individuals for unpaid rentals; Bennett argued Aero‑Fabb was a de facto corporation during the interim period and that Timberline was estopped to deny corporate existence.
- The trial court entered judgment for Timberline and held Bennett personally liable; Bennett appealed.

## Issues

1. Whether the Oregon Business Corporation Act permits de facto corporate status to shield individuals from liability for obligations incurred before a certificate of incorporation issues.
2. Whether a creditor is barred by corporation-by-estoppel from denying corporate existence when the creditor allegedly dealt with the enterprise as a corporation.

## Decision

- The Oregon Supreme Court affirmed the judgment for Timberline.
- The court held that, under the Oregon Business Corporation Act, corporate existence begins only upon issuance of the certificate of incorporation; de facto corporate status does not protect against private claims for pre-certificate obligations.
- The court held Timberline was not estopped to deny corporate existence because the record did not show Timberline actually relied on a belief that it was contracting with a corporation.
- Bennett was personally liable for the equipment rental obligations incurred before the certificate of incorporation issued.

## Legal Principles

- Under the Oregon Business Corporation Act, corporate existence begins upon issuance of the certificate of incorporation, and the certificate is conclusive evidence of incorporation except in specified state-initiated proceedings.
- In private disputes, the statutory scheme displaces common-law de facto corporation doctrine; absent a certificate, the entity has no corporate existence for purposes of avoiding personal liability.
- Persons who assume to act as a corporation before it legally exists may be personally liable for obligations incurred during that period.
- Corporation by estoppel requires proof that the creditor actually relied on the purported corporate status when extending credit or entering the transaction.

## Conclusion

Because no certificate of incorporation existed when the leases were made and the rentals accrued, the enterprise had no corporate existence for purposes of avoiding liability, and Bennett could not shift the debt to a purported corporation; estoppel likewise failed without proof that Timberline relied on an assumption of corporate status.


Timberline Equip. Co. v. Davenport, 267 Or. 64, 514 P.2d 1109 (1973)