Court Opinion

ID: 9675599
Source: CourtListenerOpinion
Date Created: 2023-08-24 04:58:48.504557+00
Date Added: 2024-06-11T18:16:35.792911
License: Public Domain

ON REHEARING
The statute in the case of Stadium Realty Corp. v. Dill, et al., 233 Ind. 378, 119 N.E.2d 893 is not so similar to our Art. 2.04, subd. A, Texas Corporation Act, as it is similar to our Art. 202A(6), Texas Corporation Act. Nevertheless we think it is appropriate to cite the Dill case in support of our holding in this case for these reasons: (1) the statute in the Dill case prohibited loans by a corporation to any officer or director of the corporation; (2) Dill and partners loaned $60,000 to the corporation; (3) at the time this loan was made Dill knew that the corporation proposed to loan and did loan $50,000 of the money to the corporation’s president; (4) the corporation thereafter contended that the loan by it to its president was ultra vires and therefore void, which prevented Dill and partners from recovering on their loan to the corporation ; (5) the corporation sought to avoid its contract with Dill and partners without making restitution to the partners; (6) *216Dill’s knowledge that the corporation was going to lend the money to its president did not make the loan by Dill and partners void; and (7) the court held that Dill and partners were entitled to recover on their loan to the corporation.
The Trustee says that we were mistaken when we said in our original opinion that the Board of Directors of TexMex took no action to comply with Art. 1351, V.A.C.S. In support of his contention the Trustee says that the Board did not know until January 29, 1960, when Yarber told them, that part of the loan from the Bank had been used to pay Yarber’s debt to the Bank. The bankruptcy proceeding against TexMex was filed December 23, 1960. Therefore, according to the Trustee, we were in error in saying that more than a year had transpired without any action by TexMex through its Board of Directors in compliance with Art. 1351, V.A.C.S.
We find no evidence in the record to show that all or a majority of the members of the Board had actual knowledge prior to January 29, 1960 of the loan by TexMex to Yarber. However, it is certain that Robert M. Cozine, a disinterested officer and director of TexMex, in his official capacity had knowledge of the facts for more than a year prior to December 23, 1960. We shall not pass on the question whether under the circumstances here present the other directors in the proper discharge of their responsibilities as directors should have known of the loan to Yarber long before Yarber himself told them of it. See 19 C.J.S. Corporations § 762, p. 109.
The statute, Art. 1351, V.A.C.S., places the responsibility on the directors to take the prescribed action within one year from the date of violation, (not the date of actual knowledge) otherwise the act shall be considered that of the corporation. The violation occurred November 27, 1959. The proceeding in bankruptcy was filed December 23, 1960 — well over a year after the violation. No action had been taken during that time to comply with Art. 1351, V.A.C.S.
We do not hold that TexMex lost any of its rights against its officers and directors by its failure to act within a year after the violation. But we do hold that so far as Republic National Bank of Dallas is concerned the act became the act of tire corporation under Art. 1351, V.A.C.S. because of the failure of the Board to act within a year from the date of the violation.
The motion for rehearing is overruled.
Overruled.