The Community Youth Center (CYC) Corporation failed to pay its annual registration fee in 2000 and was automatically dissolved by the State Corporation Commission. CYC continued to operate as a corporation. In fact, in 2005, it obtained a loan from the First Community Bank to finance a swimming pool at its facility. The loan was signed by officers of the corporation and was secured by property owned by CYC. CYC defaulted on the loan and First Community Bank foreclosed on the CYC property that was subject to the mortgage. First Community purchased the property at a foreclosure sale.
CYC challenged the foreclosure on the grounds that the president, vice president, and treasurer of CYC had no authority to enter into the 2005 loan agreement because CYC’s corporate status had been terminated and it no longer existed as a corporation. The bank responded that CYC had continued to hold itself out as a corporation and that it relied on that existence in making the loan. What should the court hold in this case and why? [First Community Bank, N. A. v. Community Youth Center, 2010 WL 8696179 (Va. Cir. Ct. 2010).]