Summary
holding that directors are presumed to know the time and place of the annual meeting as set in the corporate bylaws
Summary of this case from Trebilcock v. ElinskyOpinion
No. 29859
Decided June 28, 1944.
Appeal — Questions of law — Appellate court to review judgment on record made in court below — Stipulation presenting questions not passed upon by trial court, not considered, when — Corporations — Yearly salaries fixed by bylaws continue, when — Action of board of directors mere surplusage — Officers have implied authority to perform duties of board of directors, when — Corporation and board estopped to deny authority of treasurer — To execute promissory note payable to president for unpaid salary.
1. An appellate court, on appeal on questions of law, reviews the judgment of the court below upon the record as therein made and is without legal authority to consider a stipulation of facts presenting questions not presented to or passed upon by the trial court.
2. Where the shareholders of a corporation, by resolution fix the yearly salaries of its executive officers, such salaries remain as fixed until the resolution is amended or repealed; any action by the board of directors in connection therewith is mere surplusage.
3. When the board of directors of a corporation fails to function and leaves to the executive officers thereof duties which properly belong to such board and the shareholders acquiesce in that course of conduct, such officers have implied authority to perform those duties which are usual and necessary in the conduct of the business.
4. Under the above state of facts the corporation, the board of directors, any individual member thereof, or any shareholder is estopped to deny the authority of the treasurer to execute a promissory note on behalf of the corporation in lieu of the authorized salary due and payable to its president.
APPEAL from the Court of Appeals of Franklin county.
On October 10, 1940, Erwin D. Kimball, appellee herein, filed an action against Kimball Bros., Inc., in the Court of Common Pleas of Franklin county upon a promissory note which reads as follows:
"October 1, 1940
"On demand after date, for value received we promise to pay to the order of Erwin D. Kimball nine hundred seventy-three and 4/100 dollars with interest, at the rate of 6% per annum at . . . . . . . . . . and . . . . . . . . . . hereby authorize any attorney at law to appear in any court of record in the United States, after the above obligation becomes due, and waive the issuing and service of process and confess a judgment against . . . . . . . . . . . . . . in favor of the holder hereof for the amount then appearing due, together with costs of suit, and thereupon to release all errors and waive all right of appeal.
"Kimball Bros., Inc. (Seal)
"No. . . . . Due On Demand by Robert Kimball, Treas. (Seal)"
On October 10, 1940, an attorney at law, by virtue of the warrant of attorney, entered the appearance of the defendant corporation, waived the issuance and service of summons and confessed judgment against it in the sum of $974.66.
On February 19, 1943, Ida E. Kimball, appellant herein, who claimed to be the majority shareholder, director and vice-president of the corporation was made a party defendant with leave to plead, whereupon she filed a motion to vacate and set aside the judgment aforesaid upon the following grounds: (1) That the note sued upon was not the obligation of the defendant corporation; (2) that the execution of the note was not authorized by the board of directors; (3) that the warrant of attorney was not the act of the corporation and the corporation was not in court; and (4) that the corporation is prevented from filing a motion to set aside and vacate the judgment, by reason of the adverse interests of its two other directors, one of whom is plaintiff and the other the plaintiff's brother who purported to sign the note as treasurer of the corporation.
After hearing and arguments of counsel the court overruled such motion and also overruled a motion for a new trial. An appeal was perfected upon questions of law to the Court of Appeals where the judgment of the Court of Common Pleas was affirmed.
The cause is here following the allowance by this court of a motion to certify the record.
Other facts are stated in the opinion.
Mr. Waymon B. McLeskey, for appellee.
Messrs. Binns Tresemer, for appellant.
In our view this record presents for consideration the question whether the judgment is void or whether there was any irregularity in obtaining the same.
The claim of appellant is based upon four major propositions: (1) That Erwin D. Kimball was an infant at the time he acted as one of the incorporators and as a director and president of Kimball Bros., Inc.; (2) that he was an infant when this suit was commenced and when judgment was rendered; (3) that as an infant shareholder, director and officer he voted in favor of the bylaws and a motion of the board of directors fixing his salary under such circumstances that his vote was necessary in order to adopt such bylaws and motion; and (4) that he secured judgment upon a promissory note with warrant of attorney not authorized by the board of directors and by reason thereof the court never obtained jurisdiction of the defendant corporation.
At the outset it should be observed that this was practically a close corporation. Erwin D. Kimball, Sr., was the father and Ida E. Kimball was the stepmother of Robert R. and Erwin D. Kimball, Jr., who together with Ruth V. Burkett owned all of the shares of the capital stock of Kimball Bros., Inc. Erwin D., Jr., Robert R. and Ida E. Kimball were the incorporators. Under those circumstances it is a fair inference that Ida E. Kimball knew of the infancy of Erwin D. Kimball, Jr., at the time he acted as an incorporator and as director and president of the corporation
No question of the infancy of Erwin D. Kimball, Jr., was raised in the Court of Common Pleas at any time. It was raised first in the Court of Appeals, after he had attained his majority, by stipulation reciting that Erwin D. Kimball, Jr., was born on September 18, 1920. This situation presents this important procedural question: In an appeal upon questions of law may the parties by stipulation raise a question not presented to the trial court?
The appeal was upon questions of law. Under the Appellate Procedure Act, Sections 12223-1 to 12223-49, both inclusive, General Code, effective January 1, 1936 (116 Ohio Laws, 104), appeals upon questions of law superseded proceedings in error (former Sections 12241 to 12282, both inclusive, General Code). We deem it to be elementary that in a proceeding in error under the former statutes, the appellate court reviewed only the judgment of the court below and was confined to a consideration of the errors presented by the record made in the trial court. The parties were without power to raise, by stipulation or otherwise, any question not presented or considered by the trial court and not appearing upon the face of the record under review.
The Appellate Procedure Act has not disturbed that rule.
Section 12223-21, General Code, provides in part as follows:
"Appeals taken on questions of law shall be heard upon assignments of error filed in the cause or set out in the briefs of the appellant before hearing. Errors not argued by brief may be disregarded, but the court, in its discretion, may consider and decide errors which are not assigned or specified."
Neither the assignment of errors nor the briefs in the Court of Appeals in the instant case raise any question of the infancy of Erwin D. Kimball, Jr., and we therefore conclude that no such question was properly before the court and it was without legal authority to consider the claims based upon that stipulated fact.
This leaves propositions three and four for determination. The claim (proposition three) that Erwin D. Kimball (appellee) voted in favor of the bylaws and a motion passed by the board of directors, fixing his salary as president, under such circumstances that his vote was necessary in order to adopt such bylaws and motion, is fully put at rest by reference to the corporation record.
On July 12, 1939, the incorporators met, signed an acknowledgment of the articles of incorporation, opened books of subscription and received subscriptions to all of the 250 shares of the capital stock, divided as follows: Erwin D. Kimball, Sr., Robert R., Erwin D., Jr., and Ida E. Kimball each 62 shares and Ruth V. Burkett, two shares.
On that date the shareholders held their first meeting (all the shareholders being present) and after electing Erwin D. Kimball, Jr., Robert R. Kimball and Ruth V. Burkett directors, among other things unanimously adopted a resolution fixing the salary of any of the directors who might be chosen an executive officer.
The directors unanimously adopted a code of bylaws, Article IV of which reads as follows:
"The yearly salaries of officers of the corporation are hereby fixed as follows
"President, $2600; Vice-President, $ No Salary; Secretary, * * *; Treasurer, $2600; General Manager, $. . . . . .;
"Said salaries shall be payable monthly on the . . . . . .day of each month"
The resolution was never amended or rescinded.
It is true that in the minutes of the board of directors dated April 1, 1940, we find the following: "A motion was made, seconded and carried that the salaries heretofore paid to the officers of the company be continued for the ensuing year." This complaint is based upon the vote of Erwin D. Kimball in favor of the passage of the bylaws, containing Article IV, and the above-quoted motion passed by the board of directors.
At the shareholders' meeting on July 12, 1939, Erwin D. Kimball, Sr., offered the following resolution, and moved its adoption:
"Resolved, that should either or any of the directors be chosen an executive officer or officers, then the yearly salary of such officers, respectively, are hereby fixed as follows: President $2,600; Secretary and Treasurer $2,600. Seconded by Mrs. Ruth V. Burkett. Roll called. The vote resulted as follows: Ayes all.
"The resolution was therefore declared adopted."
Ida E. Kimball was present at that meeting and voted for this resolution and therefore the bylaw and the motion passed by the board of directors were not necessary to fix the salary and neither added to nor substracted from the action of the shareholders.
The final contention of appellant is that the promissory note with warrant of attorney was not issued or authorized by the board of directors.
We again revert to the record. Article I of the bylaws reads as follows:
"The regular meetings of the board of directors shall be held at the office of the corporation on the second Monday in each month at three o'clock p. m., * * *. At all meetings a majority of the board shall constitute a quorum."
At the shareholders' meeting on April 1, 1940, Ida E. Kimball was present by proxy executed to her attorney, and he at that meeting nominated her for the office of director and she thereupon was elected.
She now complains that she was never notified of or attended any meeting of the board of directors.
It is well established that it is not necessary to give the directors notice of the time and place of the regular and stated meetings of the board as fixed by the bylaws. Each director is presumed to know that, on that day at the time fixed, such meeting will be held. See 10 Ohio Jurisprudence, 663, Section 490, and the cases cited.
Ida E. Kimball never presented herself at the specified time or place for the holding of such meetings nor did she do any act at any time to carry out her duty as a director of the corporation.
There is no evidence that the board of directors ever met as provided by the bylaws, except upon July 12, 1939, April 1, 1940, and April 7, 1941. These were the dates upon which the annual meetings of the shareholders were held at which the directors for the ensuing year were elected and immediately after their election the directors met, elected officers for the ensuing year and adjourned, leaving the entire conduct of the corporate business to the elected officers.
Insofar as this corporation was concerned this constituted a course of conduct upon the part of the board of directors.
It is generally recognized that a promissory note of a corporation must be executed or authorized by its board of directors. It is equally well settled that a corporation may be bound by the act of its agent acting within the apparent scope of his authority and it, like an individual, may become bound by acquiescing in and ratifying an unauthorized act done on its behalf by its agent. See Knowles v. Northein Texas Traction Co. (Tex.Civ.App.), 121 S.W. 232.
The trial court concluded that the board of directors was guilty of a failure to function. We accept that finding. The board of directors by its failure to function and its acquiescence in the conduct of the president, and secretary and treasurer, in the doing of any and all acts necessary to the conduct of the business is now estopped to deny the authority of the treasurer to execute the note upon which this judgment is based.
Ida E. Kimball, being a member of the board of directors during the year beginning April 1, 1940, and ending March 31, 1941, during which time the note was executed, is equally estopped to deny the authority of the treasurer to execute the note.
We have examined the additional claims of error and find none that is prejudicial to the rights of appellants.
The judgment of the Court of Appeals is correct and should be and hereby is affirmed.
Judgment affirmed.
WEYGANDT, C.J., MATTHIAS, HART and ZIMMERMAN, JJ., concur.