Cranson v. International Business Machines Corp. Case Brief Summary | Law Case Explained

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Cranson v. International Business Machines Corp. | 200 A.2d 33 (1964)

Generally, there is no corporation, and no limited liability, until after the certificate of incorporation is filed. But in the interest of fairness, courts may prevent someone from denying that a corporation exists, and, by extension, that limited liability exists, under the doctrine of corporation by estoppel. The Maryland Court of Appeals considered whether this doctrine applied in the nineteen sixty-four case Cranson versus International Business Machines.

In the spring of nineteen sixty-one, Albion Cranson, Jr., agreed to invest in a new business called the Real Estate Service Bureau. He later became its president. The bureau was always supposed to be, and was at all times run as, a corporation. But unbeknownst to Cranson, the bureau’s lawyer made a mistake, and more than six months passed between the time when the certificate of incorporation was signed and the time when it was filed.

After the certificate of incorporation was signed but before it was filed, the bureau purchased electric typewriters from International Business Machines, or I B M. During the typewriter transaction, I B M dealt with the bureau on a corporate basis and gave the bureau credit as a corporation. The bureau ultimately made some payments on the typewriters but then stopped, leaving an unpaid balance of around four thousand three hundred dollars.

I B M sued Cranson personally in Maryland state court. I B M reasoned that Cranson was personally liable for the unpaid balance because the bureau wasn’t a corporation with limited liability when the typewriter transaction occurred. The trial court entered summary judgment in favor of I B M, and Cranson appealed to the Maryland Court of Appeals.

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