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Keywords

contractbreach of contractliabilityappealtrialcorporation
contractliabilityappealtrialcorporation

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Duray Development, LLC v. Perrin, 288 Mich.App. 143, 792 N.W.2d 749

Facts

Duray Development, a residential development company, entered into a contract with Carl Perrin and his excavation companies for excavation services on a property called Copper Corners. After discovering that one of the companies, Outlaw, was not a valid limited liability company at the time of the contract, Duray Development sued for breach of contract. The trial court ruled in favor of Duray Development, finding Perrin personally liable, but the Court of Appeals later found that the de facto corporation doctrine could apply to limited liability companies and reversed the trial court's decision.

Duray Development, a residential development company, entered into a contract with Carl Perrin and his excavation companies for excavation services on a property called Copper Corners.

Issue

Whether the de facto corporation doctrine applies to limited liability companies and whether the trial court erred in barring Perrin from presenting witnesses.

Whether the de facto corporation doctrine applies to limited liability companies and whether the trial court erred in barring Perrin from presenting witnesses.

Rule

The de facto corporation doctrine allows a defectively formed corporation to attain the legal status of a corporation if certain requirements are met, and the corporation by estoppel doctrine may be extended to limited liability companies.

The de facto corporation doctrine allows a defectively formed corporation to attain the legal status of a corporation if certain requirements are met, and the corporation by estoppel doctrine may be extended to limited liability companies.

Analysis

The Court of Appeals determined that the trial court incorrectly concluded that the de facto corporation doctrine does not apply to limited liability companies. The court found that all elements of a de facto corporation were present in this case, and thus, Outlaw should be held liable for the breach of contract instead of Perrin. Additionally, the court ruled that the trial court abused its discretion by preventing Perrin from presenting witnesses, as it did not adequately consider the circumstances surrounding the failure to submit a witness list.

The Court of Appeals determined that the trial court incorrectly concluded that the de facto corporation doctrine does not apply to limited liability companies.

Conclusion

The Court of Appeals reversed the trial court's judgment and remanded the case for further proceedings, holding that the de facto corporation doctrine applies to limited liability companies and that Perrin should not have been barred from presenting witnesses.

The Court of Appeals reversed the trial court's judgment and remanded the case for further proceedings.

Who won?

Duray Development, LLC initially prevailed in the trial court, but the Court of Appeals reversed this decision, indicating that Outlaw, not Perrin, was liable for the breach of contract.

Duray Development, LLC initially prevailed in the trial court, but the Court of Appeals reversed this decision.

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