Court Opinion

ID: 6759308
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:29:59.380884+00
Date Added: 2024-06-11T16:02:32.947683
License: Public Domain

Douglas, J.,
dissenting. I am compelled to dissent. The position taken by the majority in this case defies logic and any sense of fair play. Ratification by acquiescence, in which no formal action by the board of *60directors is required, has never been meant to provide the means for corporate subterfuge.
At the onset, it should be noted that under the former General Corporation Act, in effect when this court decided Kimball v. Kimball Bros., Inc. (1944), 143 Ohio St. 500 [28 O.O. 425], corporate boards of directors were not authorized to act without a meeting. See G.C. 8623-1 (Am. S. B. No. 11, 112 Ohio Laws 9, and specifically G.C. 8623-46, at 29-30). Thus, in Kimball, unlike this case, this court did not decide the efficacy of the rátification by acquiescence of an unauthorized action taken by the board in a manner inconsistent with formalities required by applicable law. This court ruled at 507 only that where a board of directors fails to function and thereby acquiesces “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,” such board was subsequently estopped, to deny the authority of these officers to execute the note in dispute.
The majority, in its recitation of Fletcher’s treatise on private corporations conveniently fails to set forth one of the major limitations regarding the applicability of the doctrine of ratification. This limitation is as old as the doctrine itself.2 The author notes at 2A Fletcher, Cyclopedia of the Law of Private Corporations (1982) 471, Section 768:
“If it is necessary that authority to do a particular act or enter into a particular contract shall be given in a certain form or mode, either by reason of a mandatory charter or statutory provision, or by reason of a common-law rule, ratification of such an act or contract must be in the prescribed form or mode. A ratification of an act, done by one assuming to be an agent, relates back, and is equivalent to prior authority. When, therefore, the adoption of any particular form or mode is necessary to confer the authority in the first instance, there can be no valid ratification except in the same manner. * * *” (Emphasis added.)
This “formal requisites” limitation is reiterated at 18B American Jurisprudence 2d (1985) 500-501, Corporations, Section 1649:
“As a general rule, ratification by a corporation need not be manifested by any vote or formal resolution of the corporation or board of directors or authenticated by the corporate seal; no higher degree of evidence is required to establish ratification on the part of a corporation than is required in showing an antecedent authorization. * * * However, a *61ratification of an act, done by one assuming to be an agent, relates back, and is equivalent to, a prior authority; where, therefore, the adoption of any particular form or mode is necessary to confer authority on the officer or agent in the first instance, there can be no valid ratification by the corporation of unauthorized acts except in the same manner. * * * [Thus, for example then] a simple majority of the shareholders cannot ratify what the simple majority could not authorize in the first place and thus evade a statutory requirement of three-fourths majority. * * *” (Emphasis added.)
As aptly noted by the majority, “[i]t is uncontroverted that this employment agreement was not expressly approved at a formal meeting of the board of directors.” R.C. 1701.54 clearly states that unless prohibited by the corporation’s articles or regulations:
“* * * [A]ny action which may be authorized or taken at a meeting of * * * the directors * * * may be authorized or taken without a meeting with the affirmative vote or approval of, and in a writing or writings signed by all * * * the directors, * * * which writing or writings shall be filed or entered upon the records of the corporation. * * *” (Emphasis added.)
The plain meaning of this statutory provision is that the original authority to act without a meeting requires an affirmative vote of all of the directors and signed written documentation of any action taken in this manner. Therefore, ratification requires, and certainly should require, the same formalities. It is only logical that a mechanism be provided whereby directors can act on behalf of and in furtherance of a corporation’s business without the necessity of a meeting. However, fair play dictates that any actions taken or decisions made in this informal way be documented so that any interested party can apprise itself of this information. This is clearly the goal of R.C. 1701.54 and pursuant to this statute, the subsequent ratification of unauthorized corporate acts by mere acquiescence is unlawful in Ohio.
The majority would allow the board of directors herein to contract surreptitiously and then to hide any evidence of their actions until some “convenient” future date. In the meantime, the new owners, who did not and could not have known of the liability they would incur with the purchase of this business, are then to have no recourse because by alternative, but equally clandestine means, the board has ratified its prior unauthorized act.3 Although the contract in this case created a debt of only $75,000, the contract could just have easily been one guaranteeing employment for life, or creating indebtedness of one million dollars. Logic certainly requires a different result.
For the foregoing reasons, I would affirm the judgment of the court of appeals and, therefore, I must respectfully dissent as to the majority opinion herein.

 See Dispatch Line of Packets v. Bellamy Mfg. Co. (1841), 12 N.H. 205, 37 Amer. Dec. 203; Meloy v. Central Natl. Bank (1888), 18 D.C. 69; Blood v. La Serena Land & Water Co. (1896), 113 Cal. 221, 45 P. 252; Lochwitz v. Pine Tree Mining & Milling Co. (1910), 37 Utah 349, 108 P. 1128; Marqusee v. Ins. Co. of North America (C.A. 2, 1914), 211 F. 903; Knapp v. Rochester Dog Protective Assn. (1932), 235 App. Div. 436, 257 N.Y.Supp. 356; Stammelman v. Interstate Co. (1934), 112 N.J. Law 342, 170 A. 595; John Paul Lumber Co. v. Agnew (1954), 125 Cal. App. 2d 613, 270 P. 2d 1044; Faber, Coe & Gregg, Inc. v. First Natl. Bank of Chicago (1969), 107 Ill. App. 2d 204, 246 N.E. 2d 96; Fiegelman v. Parmoff Corp. (1969), 435 Pa. 461, 257 A. 2d 575; Kaufman v. Henry (Mo. App. 1975), 520 S.W. 2d 152; Losinski v. American Dry Cleaning Co. (Minn. 1979), 281 N.W. 2d 884.

 See, also, R.C. 1701.60 which, arguably, also applies.