In The Matter Of Drive-In Dev. Corp.

371 F.2d 215 (7th Cir. 1966)

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Nature of the Case

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Facts

Drive-In (D) was one of four subsidiaries controlled by Tastee Freez Industries, Inc., a holding company that conducted no business of its own. Each of the subsidiaries performed one part of the operation of an integrated business which franchised and supplied soft ice-cream stores and mobile units. Harlee franchised the trademark. D leased or purchased sites and then subleased or sold the sites to the operators. Freez King manufactured and sold equipment by conditional sales contracts. Allied Business financed the operations by purchasing the conditional sales contracts and discounting them to lending institutions. Tastee Freez, the parent, was incorporated in 1960. Maranz owned or controlled a majority of the stock of Harlee, Freez King, Allied Business, and D. When Tastee Freez was created, Maranz became its president; he is an officer or director of each subsidiary. Tastee Freez estimated that it would need in excess of seven million dollars to meet its financial requirements for the calendar year. Tastee Freez turned to P for assistance. Allied Business entered into a contract with D that set forth the terms by which conditional sales contracts would be assigned to P. Allied Business agreed to a repurchase guarantee of any paper which was more than 90 days in default. Two days later Tastee Freez, Harlee, Freez King, Carrols, and D executed an instrument whereby they jointly and severally guaranteed Allied Business' obligations under its contract with P. P requested a copy of the resolution by the board of directors of each of the guarantors authorizing the execution of the guaranty. D's copy was certified, with the corporate seal. No such resolution was contained in D's corporate minute book. On September 4, 1963, Tastee Freez and each of its subsidiaries, filed voluntary petitions under chapter XI of the Bankruptcy Act. P filed a claim against D before the referee, asserting the guaranty executed on April 11, 1962, as the basis for it. The referee concluded that Maranz, who signed the guaranty on behalf of D, had no authority, 'either actual or implied or apparent,' to bind D. This appeal resulted.