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Conflict of Laws Keyed to Brilmayer
Paper Products Co. v. Doggrell
Citation:
195 Tenn. 581, 261 S.W.2d 127 (1953)Facts
Van E. Whitaker, Jr., Doggrell, and Konz formed a corporation under the name Forrest City Wood Products, Inc. (Forrest City), and were the sole stockholders. Forrest City’s principal office was to be located in St. Francis County, Arkansas. Doggrell and Konz, both Tennessee residents, left Forrest City’s management entirely to Whitaker, an Arkansas resident.
Arkansas state law requires the articles of incorporation to be filed with the Secretary of State and in the office of the County Clerk of the county in which the corporation’s principal place of business is to be located. Whitaker was directed by the Memphis attorney who prepared Forrest City’s charter to file it with the Secretary of State and with the Clerk of the County of St. Francis County. Whitaker inadvertently failed to file the charter with the County Clerk. It was not filed until after the events that gave rise to the present action occurred. Doggrell and Konz did not know that the charter had not been filed as required by Arkansas statute, and neither received any dividends or profits from the corporation. Whitaker was adjudged by an Arkansas court to be liable for a debt made by Forrest City before the charter was filed with the County Clerk. In that case, the court did not render judgment against Doggrell and Konz because they were never served.
Whitaker purchased goods in Forrest City’s name from Plaintiff, Paper Products Company. In this transaction, Paper Products dealt with Forrest City, not Doggrell or Konz personally. Doggrell and Konz did not know about the account with Paper Products. Forrest City became bankrupt, and a substantial balance of its note issued to Paper Products remained unpaid. As a result, Paper Product brought suit in Shelby County Tennessee Circuit Court against Defendants, Doggrell and Konz. Paper Products sought recovery against them individually because Arkansas state law holds stockholders personally liable as partners for accounts made by a corporation whose charter was not filed with the County Clerk. The trial court found that Doggrell and Konz were not liable individually or as partners for Forrest City’s obligation to Paper Products, concluding that the Arkansas rule was penal in nature and would not be enforced in Tennessee. Paper Products appealed, arguing that the Arkansas rule was not penal in nature and that the rule should be applied.
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