Menard, Inc. v. Dage-Mti, Inc.

726 N.E.2d 1206 (Ind. 2000)

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Nature of the Case

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Facts

D is a closely held Indiana corporation. D was governed by a six-member board of directors ('Board'), consisting of Ronald and Lynn Kerrigan, Louis Piccolo (a financial consultant retained by Ronald Kerrigan), Arthur and Marie Sterling, and William Conners. Arthur Sterling ('Sterling') had served as president of D for at least 20 years at the time of the trial on this matter. Sterling operated D without significant input from or oversight by the Board. Kerrigan took steps to subject D's management to Board control. Kerrigan hired Piccolo to assess the company's performance. Kerrigan also retained New York attorney Gerald Gorinsky to represent his interests concerning D. During a board meeting, Sterling first informed other directors that P had expressed interest in purchasing a 30-acre parcel of land owned by D. P forwarded a formal offer to Sterling pertaining to the purchase of 10.5 acres of the 30-acre parcel. Sterling forwarded the offer to all the D directors with a cover note acknowledging that Board approval was required to accept or reject the offer. The offer was rejected. This rejection was communicated to Sterling, and he let the offer lapse. Sterling called Kerrigan and informed him that P would make a second offer for the entire 30-acre parcel. Sterling was told that any offer from P would require Board review and acceptance, and he instructed Sterling to forward any offer to the Board for approval or rejection. Sterling drafted a new resolution, which stated that he was authorized 'to take such actions as are necessary to offer for sale our 30-acre parcel . . . for a price not less than $1,200,000.' P forwarded a second proposed purchase agreement to Sterling. This agreement contained the same provisions found objectionable in the first but was for the purchase of the entire 30-acre parcel for $1,450,000. Sterling negotiated several minor changes and then signed the revised offer on behalf of D without any kind of board approval. Under Paragraph 5(c)(I) of the agreement, Sterling, as president of D, represented as follows: 'The persons signing this Agreement on behalf of the Seller are duly authorized to do so, and their signatures bind the Seller in accordance with the terms of this Agreement.' After learning of the deal, the Board instructed Sterling to extricate D from the agreement. Later, the Board hired counsel to inform P of its intent to question the agreement's enforceability. P filed suit to require D to specifically perform the agreement and to secure the payment of damages. The trial court ruled in favor of D. The Court of Appeals affirmed, finding that Sterling did not have the express or apparent authority to bind the corporation in this land transaction.