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In The Matter of Drive-In Development Corp

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Brief Fact Summary. An officer of Drive-In Development Corp., executed a guarantee for the indebtedness of its parent corporation. Drive-In now seeks to be excused from the guarantee.

Synopsis of Rule of Law. A corporation is estopped from denying the guaranty made by an officer of the corporation who had express authority to bind the corporation given to him by a corporate resolution granting such authority.

Points of Law - Legal Principles in this Case for Law Students.

Furthermore, the realities of modern corporate business practices do not contemplate that those who deal with officers or agents acting for a corporation should be required to go behind the representations of those who have authority to speak for the corporation and who verify the authority of those who presume to act for the corporation.

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Facts. National Boulevard Bank of Chicago filed a claim in an arrangement proceeding under chapter XI of the Bankruptcy Act, 11 U.S.C.A. Section:Section: 701-799, in which Drive-In was the guarantor of the debt.
Maranz, an officer of Drive-In, executed a guarantee of payment to induce National Boulevard Bank to make a loan to Drive-In’s parent corporation. Although the guaranty was certified by Drive-In’s corporate secretary, there was no record that such a resolution was considered or formally approved at a Drive-In director’s meeting.
The referee concluded that Maranz did not have “actual or apparent” authority to bind Drive In.

Issue. Whether Drive-In is obligated to a guaranty it made for its parent corporation when the corporate officer who executed the guaranty was given authority to do so by a resolution that was certified by the corporate secretary, but there is no record of the resolution being formally adopted by the board?

Held. Yes. Drive-In is estopped to deny Maranz’ express authority to sign the guaranty binding it’s corporate secretary issued a purported resolution granting Maranz express authority to sign the guaranty.

Discussion. It is the duty of the corporate secretary to keep corporate records and to make proper entries of corporate action and resolutions of the directors. As a result, it is within the corporate secretary’s authority to certify that a resolution was adopted, even if there is no record of the board’s formal adoption of it. Therefore, the resolution granting the express authority to Maranz to sign the guaranty is binding upon Drive-In.

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