Molasky Enterprise, Inc. v. Carps, Inc.

615 S.W.2d 83 (1981)

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Nature of the Case

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Facts

Herbert and Emile Carp, members of the board of directors and president and executive vice-president, of D, applied for a personal loan in the amount of $267,000 from Lindell Trust. Lindell Trust informed Herbert and Emile who were brothers that they would not approve the loan without endorsement. They asked Allan Molasky of Molasky Enterprises to endorse the note. Molasky consented and placed his endorsement on the note after it was executed by Herbert and Emile in their personal capacity and after Herbert Carp had endorsed the note in the name of D. Molasky did not ask for a corporate resolution authorizing the endorsement of D, on the note. Molaky did not inquire from any of the other members of the board of directors whether Herbert as president had authority to bind the corporation. He relied on the oral assurances of the two brothers that they had authority to execute documents on behalf of the corporation. The bank asked for a corporate resolution authorizing this act, but it was processed without a corporate resolution being produced. Further requests were made three or four times before the original demand note was renewed on February 27, 1973. The bank did not check with any of the other directors of D, to determine whether the endorsement was a corporate act. Herbert and Emile defaulted on the last renewal of their demand note. P paid the balance due on the note obligation and at the same time received an assignment from Allan Molasky of all of his rights and interest in the instrument. P has received partial payment from Herbert and Emile, and the parties stipulated at trial that $129,000 remained unpaid. P sued D. The corporation's minute book does not disclose a corporate resolution authorizing the transaction nor does it disclose any ratification of the transaction at any subsequent meeting of the board of directors. No other papers in the case indicate any action by the board of directors. D got the verdict and P appealed.