Court Opinion

ID: 9742701
Source: CourtListenerOpinion
Date Created: 2023-08-26 21:18:18.095208+00
Date Added: 2024-06-11T07:24:34.825382
License: Public Domain

Currie, J.
(dissenting in part). I respectfully dissent from the holding of the majority that a third party may question the binding effect upon a corporation of a written instrument executed by its president in the corporate name, be it a contract, or a petition addressed to some public body. Furthermore, as applied to the facts relating to the signing of the annexation petitions by the two corporations in question, Evert Container Corporation and Good Hope Investment Company, I deem the result of this holding to be a serious miscarriage of justice.
*221Charles Evert, who subscribed the Corrigan tract annexation petition in behalf of the Evert Container Corporation, is the president and majority stockholder of the corporation. Some of the directors resided outside of Wisconsin and the board of directors and stockholders customarily held only an annual meeting. At this annual meeting of stockholders, they customarily ratified all acts of the officers and directors. Hence, it is clear that Evert Container Corporation established a pattern of conduct which, at least by implication, delegated broad power to the president and clothed him with the apparent authority to represent and bind the corporation in all of its affairs and transactions between annual meetings. There was no evidence that the directors or stockholders ever refused to ratify any act performed by Evert as president during the yearly intervals between meetings. Under rather-similar facts in McElroy v. Minnesota Percheron Horse Co. (1897), 96 Wis. 317, 71 N. W. 652, this court held that even the corporation was estopped to deny its president’s authority to act in a particular matter.
The facts with respect to the Good Hope Investment Company’s signature to the Johnson tract annexation petition are even stronger in favor of barring Milwaukee’s right to challenge such signature. This corporation holds title to the Byrnwood Country Club. President Lewenauer, who subscribed the petition in behalf of the corporation, discussed the matter informally with the other four directors and obtained their oral approval. After the petition was filed, the directors held a meeting and formally ratified the signing. Attorney A. L. Skolnik, one of the five directors, testified that, for the most part, the directors transacted their business on an informal basis. Either President Lewenauer or Secretary Ritz would telephone the other directors and inform them of any proposed corporate action. The directors would then express their opinion for or against the proposal, and the expression of the majority would govern.
*222From these facts it is apparent that each corporation desired to join in the annexation petitions. The general rule is clearly established that a third person may not raise the objection that a corporate officer lacked authority to do an act on behalf of the corporation, and thus void the corporate act, if no objection to the act was raised by the corporation. 2 Fletcher, Cyc. Corp. (perm, ed.), p. 523, sec. 490. The apparent theory behind this rule is that the failure of the corporation to object to an unauthorized act done in its behalf constitutes a tacit ratification, and that the policy of the law favors an interpretation which permits parties to rely on acts taken in behalf of corporations.
The majority attempts to distinguish between business acts and political acts of a corporation, and holds that the validity of the latter may be challenged by interested third parties. I see no basis for such a distinction. It would seem that the rationale of the general rule is just as applicable to so-called political acts as it is to strict business acts. Furthermore, what is a political act? Perhaps the instant action was motivated solely by tax considerations. This would make .it as much a business decision as would be a decision on any other tax matter. Furthermore, a political act certainly cannot be defined as any transaction in which a corporation deals with a governmental unit. For example, a corporation deals with government when it files written objections, pursuant to sec. 70.47 (7), Stats., against the amount or valuation of the assessment made of its property. The filing of written objections is a condition precedent to its right to later bring court action for relief against the assessment. Would the municipality have the right in such court action to question the validity of the written objections, subscribed in the name of the corporation by its president, because the board of directors had not acted by formal resolution, at a regularly held board meeting, or by written informal action, in the manner authorized by sec. 180.91 to authorize the *223president to so act for the corporation? Following the reasoning of the majority opinion, the answer is “Yes.”
The majority attempts to justify its distinction by analogy. It states that Milwaukee could challenge the legal title of a person who signed an annexation petition as an owner of real estate, and thus should be able to challenge corporate ownership in a similar manner. This is certainly true. But the city presently can challenge the corporation’s title to its real estate without attacking its validity to act. Traditionally, the title of a corporation to property may be challenged by one without the corporate structure, while only the corporation, or one acting in its behalf, has the right to challenge the authority of a managing officer to act for the corporation.
Statutory requirements that a corporation must follow a certain specified procedure, in authorizing action by its president, are made for the protection of the corporation and its shareholders, not as a sword to be used by a third party such as the city of Milwaukee in this action.
The majority concludes that the only way informal corporate action may legally be taken is by strict adherence to the provisions of sec. 180.91, Stats. That statute reads in part that: “Any action required ... to be taken at a meeting, may be taken without a meeting if a consent in writing-setting forth the action so taken shall be signed by all . . . entitled to vote with respect to the subject matter thereof.” (Italics supplied.) A reasonable interpretation of this statutory language permits the construction that the consent may be signed after the action has been taken. Such a construction is more in keeping with the practicalities of corporate action and with the realities of present corporation practice. Here each corporation subsequently ratified its president’s act.
The basic decision really boils down to a policy determination. The majority decided in favor of a policy permitting *224interested third parties to attack the authority of corporate officers who have acted on behalf of their corporation, where the action has not been attacked by the corporation. It also decided that the only way such action can be taken is by strict adherence to the statutory formalities. The result of this decision is to impugn the ability of both third parties and members of a corporation to rely on acts of corporate officers. The social utility of definiteness of corporation action outweighs the utility of letting a city utilize every insignificant flaw to avoid an annexation. As technical as annexation proceedings now are, it would seem better to look to substance rather than strictly to form.
The better rule would be that an annexation petition, signed in behalf of a corporation landowner by its chief executive officer, is binding on the corporation, unless attacked by the corporation or its shareholders prior to the expiration of the ninety-day limitation period provided by sec. 62.07 (3), Stats. 1955. Therefore, I would hold that the city of Milwaukee has no right in this action to challenge the signatures to the petitions of Evert Container Corporation and Good Hope Investment Company. This would require that the trial court’s judgment upholding the Johnson tract annexation be affirmed, and that the validity of the Corrigan tract annexation be determined on the other issues mentioned but not passed upon by the majority opinion.
I am authorized to state that Mr. Justice Hallows concurs in this opinion.