CORPORATION LAW | B2015

CASE DIGESTS
CRANSON v.
INTERNATIONAL BUSINESS
MACHINES CORPORATION
April 30, 1964
Horney, J
Luciano, Noel Christian O.
SUMMARY: Cranson was the ofer o! a or"orat#on an$
transate$% on &eha'! o! the or"orat#on% w#th IB( !or the
")rhase o! * t+"ewr#tes, -owe.er the attorne+ !a#'e$ to
/'e the #nor"orat#on "a"ers so at the t#0e the t+"ewr#ters
were &o)1ht% the #nor"orat#on was not +et e2et#.e, The
or"orat#on !a#'e$ to "a+ the &a'ane, IB( s)es Cranson #n
h#s "ersona' a"a#t+ !or the &a'ane a''e1#n1 that s#ne
there was a $e!et#.e'+ #nor"orate$ asso#at#on% Cranson
#s "ersona''+ '#a&'e, The SC he'$ that Cranson #s not '#a&'e
an$ that #n s"#te o! the $e!et #n #nor"orat#on% IB( #s
esto""e$ !ro0 'a#0#n1 non3#nor"orat#on when #t
transate$ w#th Cranson reo1n#4#n1 the or"orate
e5#stene o! the or"orat#on,
DOCTRINE: Tra$#t#ona''+% 2 $otr#nes ha.e &een )se$ &+
the o)rts to 'othe an ofer o! a $e!et#.e'+ #nor"orate$
asso#at#on w#th the or"orate attr#&)te o! '#0#te$ '#a&#'#t+6
7#rst% the $otr#ne o! $e !ato or"orat#ons8
e'e0ents6 91: E5#stene o! a 'aw a)thor#4#n1 #nor"orat#on8
92: E2ort #n 1oo$ !a#th to #nor"orate )n$er the e5#st#n1
'aw8 9;: At)a' )ser or e5er#se o! or"orate "owers,
Seon$% $otr#ne o! esto""e' to $en+ or"orate
e5#stene, E0"'o+e$ where "erson see<#n1 to ho'$ the
ofer "ersona''+ '#a&'e has ontrate$ or $ea't w#th the
asso#at#on #n s)h a 0anner as to reo1n#4e an$ #n e2et
a$0#t #ts e5#stene as a or"orate &o$+,
There #s a w#$e $#2erene &etween reat#n1 a
or"orat#on &+ 0eans o! the $e !ato $otr#ne an$
esto""#n1 a "art+% $)e to h#s on$)t #n a "art#)'ar ase%
!ro0 sett#n1 )" the 'a#0 o! no #nor"orat#on,
Where there #s a on)rrene o! the ; e'e0ents
neessar+ !or the a""'#at#on o! the $e !ato or"orat#on
$otr#ne% there e5#sts an ent#t+ wh#h #s $e =)re a1a#nst a''
"ersons &)t the state
The esto""e' theor+ #s a""'#e$ on'+ to the !ats o!
eah "art#)'ar ase an$ 0a+ &e #n.o<e$ e.en where there
#s no or"orat#on $e !ato, So e.en #! one or 0ore e'e0ents
o! a $e !ato or"orat#on #s a&sent% th#s $oes not "re')$e
the a""'#at#on o! the esto""e' $otr#ne #n "ro"er ases,
FACTS: A'&#on Cranson was as<e$ to #n.est #n a new
&)s#ness or"orat#on wh#h was a&o)t to &e reate$, -e 0et
w#th #ntereste$ #n$#.#$)a's an$ an attorne+ an$ a1ree$ to
")rhase sto< an$ &eo0e an ofer an$ $#retor o! the
or"orat#on% Rea' Estate B)rea) 9REB:, The attorne+ a$.#se$
h#0 that the or"orat#on was !or0e$ )n$er the 'aws o!
(ar+'an$, Cranson therea!ter ree#.e$ a sto< ert#/ate
e.#$en#n1 h#s ownersh#" o! shares,
The &)s#ness was on$)te$ as #! a or"orat#on,
There was a or"orate sea' an$ a 0#n)te &oo<8 or"orate
&an< ao)nts8 a)$#tors 0a#nta#n#n1 or"orate &oo<s8 #t
'ease$ ofe s"ae,
Cranson was e'ete$ "res#$ent o! the o0"an+,
Cranson transate$ w#th "ersons% #n')$#n1 Internat#ona'
B)s#ness (ah#nes Cor", 9IB(:% #n the na0e o! the
or"orat#on, Cranson ne.er #n)rre$ an+ "ersona' o&'#1at#on
or "'e$1e h#s #n$#.#$)a' re$#t to IB(,
D)e to the o.ers#1ht o! the attorne+% the ert#/ate
o! #nor"orat#on 9s#1ne$ "r#or to (a+ 1% 1>?1: was not /'e$
)n$er No., 2@% 1>?1,
Between (a+ 1A an$ No., *% REB ")rhase$ *
t+"ewr#ters !ro0 IB(, REB 0a$e "art#a' "a+0ents &)t 'e!t a
&a'ane o! B@%;;;,@0 )n"a#$,
IB( now s)es REB !or the &a'ane,
D#str#t o)rt he'$ Cranson '#a&'e, Cranson a""ea'e$,
ISSUE: W-ET-ER an ofer o! a $e!et#.e'+ #nor"orate$
asso#at#on 0a+ &e s)&=ete$ to "ersona' '#a&#'#t+ )n$er the
#r)0stanes o! the ase,
CORPORATION LAW | B2015
CASE DIGESTS
HELD: NO% Cranson annot &e he'$ '#a&'e,
RATIO6
I, Cone"ts6
A, Tra$#t#ona''+% 2 $otr#nes ha.e &een )se$ &+ the
o)rts to 'othe an ofer o! a $e!et#.e'+
#nor"orate$ asso#at#on w#th the or"orate
attr#&)te o! '#0#te$ '#a&#'#t+6
1, 7#rst% the $otr#ne o! $e !ato or"orat#ons8
e'e0ents6
a, E5#stene o! a 'aw a)thor#4#n1
#nor"orat#on
&, E2ort #n 1oo$ !a#th to #nor"orate )n$er
the e5#st#n1 'aw
, At)a' )ser or e5er#se o! or"orate
"owers
2, Seon$% $otr#ne o! esto""e' to $en+
or"orate e5#stene
a, E0"'o+e$ where "erson see<#n1 to ho'$
the ofer "ersona''+ '#a&'e has ontrate$
or $ea't w#th the asso#at#on #n s)h a
0anner as to reo1n#4e an$ #n e2et a$0#t
#ts e5#stene as a or"orate &o$+
B, In one '#ne o! ases% the (ar+'an$ Co)rt% #n
$eter0#n#n1 r#1hts an$ '#a&#'#t#es o! a $e!et#.e'+
or1an#4e$ or"orat#on% or 0e0&er or sto<ho'$er
thereo!% $raws a $#st#nt#on &etween 91: ats or
reC)#re0ents on$#t#on "ree$ent to or"orate
e5#stene8 an$ 92: ats "resr#&e$ &+ 'aw to &e
$one a!ter #nor"orat#on
1, I! there was !a#')re to o0"'+ w#th a on$#t#on
"ree$ent% the or"orat#on was not a 'e1a'
ent#t+ an$ was "re')$e$ !ro0 s)#n1 or &e#n1
s)e$
2, These ases ho'$ that s)&stant#a' o0"'#ane
w#th !or0a'#t#es on$#t#on "ree$ent to
or"orate e5#stene was not on'+ neessar+
!or the reat#on o! a or"orat#on $e =)re &)t
was a'so a "rereC)#s#te to the e5#stene o! a
$e !ato or"orat#on or a or"orat#on &+
esto""e'
C, In another '#ne o! ases% the (ar+'an$ Co)rt
$#sre1ar$e$ those reC)#re0ents wh#h are
on$#t#ons "ree$ent an$ those on$#t#ons
s)&seC)ent% on the 1ro)n$s o! esto""e' or
o''atera' atta<
1, In th#s set o! ases% the o)rt a""'#e$ the
esto""e' $otr#ne when there ha$ &een
s)&stant#a' $ea'#n1s &etween the0 on a
or"orate &as#s
D, DS SC6 There #s a w#$e $#2erene &etween
reat#n1 a or"orat#on &+ 0eans o! the $e !ato
$otr#ne an$ esto""#n1 a "art+% $)e to h#s
on$)t #n a "art#)'ar ase% !ro0 sett#n1 )" the
'a#0 o! no #nor"orat#on
1. Note: he !C here, a"ter #iscussin$ the % sets
o" cases, clari&es that 'e nee# to #istin$uish
(et'een a #e "acto corporation an# a
corporation (y estoppel as the cases see) to
(e con"use#
2, Eah #s a $#st#nt theor+ an$ the+ are not
$e"en$ent on one another6
a, Where there #s a on)rrene o! the ;
e'e0ents neessar+ !or the a""'#at#on o!
the $e !ato or"orat#on $otr#ne% there
e5#sts an ent#t+ wh#h #s $e =)re a1a#nst a''
"ersons &)t the state
&, The esto""e' theor+ #s a""'#e$ on'+ to the
!ats o! eah "art#)'ar ase an$ 0a+ &e
#n.o<e$ e.en where there #s no
or"orat#on $e !ato
91: So e.en #! one or 0ore e'e0ents o! a
$e !ato or"orat#on #s a&sent% th#s
$oes not "re')$e the a""'#at#on o!
the esto""e' $otr#ne #n "ro"er ases
CORPORATION LAW | B2015
CASE DIGESTS
II, In th#s ase% we a""'+ the esto""e' $otr#ne, IB( #s
esto""e$ !ro0 'a#0#n1 non3#nor"orat#on
A, IB( ar1)es6
1, 7a#')re o! REB to /'e #ts ert#/ate o!
#nor"orat#on $e&arre$ a'' or"orate e5#stene
B, SC $#sa1rees6 In s"#te o! the !at that the
o0#ss#on 0#1ht ha.e "re.ente$ REB !ro0 &e#n1
e#ther a $e =)re or $e !ato or"orat#on% IB(
ha.#n1 $ea't w#th the REB as #! #t was a
or"orat#on an$ re'#e$ on #ts re$#t rather than o!
Cranson% #s esto""e$ to assert that the REB was
not #nor"orate$ at the t#0e the t+"ewr#ters were
")rhase$,
C, -ene% Cranson #s not '#a&'e !or the &a'ane
DISPOSITIVE6 E)$10ent re.erse$, Cranson not '#a&'e,